Home » Uncategorized » Trade Business Terms

Trade Business Terms

Trade Business Terms are a set of meaningful words related to Foreign Trade Business. Foreign Exchange is a process of buying and selling currency in a defined marketplace within the same currency or different currency. This process involved a series of operations between buyers and sellers in a market platform or through banks.

There are many trade business terms in foreign trade business that’s are used commonly.

Some Important Trade Business Terms

Acceptance

A time draft that the drawee (the payer) has accepted and acknowledged in writing the unconditional obligation to pay it at maturity.

Advising Bank

A bank, which receives a letter of credit, issued by the applicant’s bank and forwards it to the beneficiary after verification of authenticity.

Air Way bill

A transport document or bill of lading, which serves as a receipt for goods and contract to transport the goods by air.

Applicant

The buyer/importer/account party who applies to its bank to issue a letter of credit in favor of the beneficiary/seller/exporter.

Assignment of Proceeds

Legal mechanism by which the beneficiary of a letter of credit may pledge the proceeds of future drawings to a third party

At Sight

The tenor of a draft or availability term of a credit indicating that payment is due upon presentation or demand.

Back-to-Back Documentary Credit

A documentary credit issued on the basis of another documentary credit will constitute security for the back-to-back credit. B2B is very important in Trade Business Terms.

Bank guarantee

Undertaking given by a bank on behalf of a customer to pay the guaranteed party a sum of money if the customer cannot or will not pay/perform.

Beneficiary

The person or company in whose favor a letter of credit is issued. Usually the beneficiary is the seller/exporter.

Bill of Entry

A declaration by an importer or exporter of the exact nature, precise quantity and value of goods that have landed or are being shipped out. BE is very important in Trade Business Terms.

Bill of Lading

A transport document, which serves as a receipt for goods contract to transport using ocean mode.

Bonded Warehouse

A warehouse authorized for storage of good on which payment of duty is deferred until the goods are removed from the warehouse.

Certificate of Analysis

A certificate issued regarding the quality and composition of food products or pharmaceuticals.

Certificate of Inspection

A document certifying that merchandise was in good condition immediately prior to its shipment.

Certificate of Origin

A document, often issued by a Chamber of Commerce, certifying the origin of the goods being shipped. It is used to satisfy import regulations and to determine customs duties.

Certified Invoice

An importer may require a certified invoice, which is an invoice bearing a singed statement by someone in the importer’s country who have inspected the goods and found them in accordance with those specified in the contract.

Charter party

An agreement wherein the ship owner hires his vessel to the charterer subject to certain conditions.

CIGS

It is a Contracts for the International Sale of Goods.(UN convention on contracts for the international sale of goods).

Clean Bill of Lading

A receipt for goods issued by a carrier with no indication that the goods or the packaging were in damaged condition when received.

Clean Transport Document

A transport document that bears no clause or notation that indicates that goods were received in apparent good order and were not or had other irregularities

Collecting Bank

Banks involved in the collection of a draft and/or documents

Commercial Invoice

A document issued by a seller listing goods being sold to a named buyer including the price and shipping terms. Commercial Invoice is very important component in Trade Business Terms.

Confirmation of a documentary Credit

Adding an additional undertaking in the LC other than that of the issuing bank.

Consignee

The person or firm named in a freight contract to whom merchandise is to be delivered.

Consular Invoice

A commercial invoice that has been reviewed by the Consulate of the buyer’s country to ensure that no indigenous laws or regulations are being broken.

Contract of Carriage

This is an agreement between the shipper and the carrier.

Country Risk

The risks inherent in doing business in a foreign country over and above commercial risks, which are generally beyond the local company’s ability to control.

Deferred Payment

Payment a set time after shipment or presentation of shipping documents, as opposed to immediately or at sight.

Demand Guarantee

A guarantee usually issued by a bank, under which the beneficiary is only required to make a demand in order to receive payment.

Discrepancy

Error or defect, according to the bank, in the presented document

Dock Receipt

A receipt for goods issued by an ocean carrier or their agent at their dock or warehouse; does not cover the loading on a vessel.

Documents Against Acceptance (DA)

Instructions given by a shipper to his compared with the documentary credit, UCP 600 and ISBP or her acceptance bank that the documents attached to a time draft for collection are deliverable to the drawee/payer against his or her acceptance of the draft.

Documents Against Payment (DP)

Instructions given by a shipper to his or her bank that the documents are deliverable to the drawee/payer only against his or her payment of the draft.

Draft

An unconditional order in writing from drawer (exporter) to drawee (importer) directing the drawee to pay a specific amount of money to the payee on demand or at a fixed or determinable future date.
Drawback A repayment of duty on the exportation of goods previously imported.

Drawee

The person, company or bank upon which a draft is drawn.

Drawer

The person, company or bank that creates the draft and is generally entitled to receive payment.

Duty

A tax on imported goods imposed by the customs authorities in that country.

Entre-pot Trade

It means export of any imported goods into a third country with minimum 5% value addition.

Exchange Rate

The value or price of one currency when used in relation to its value in another currency.

Expiry Date

Last date on which documents may be presented or corrected in order to comply with a letter of credit.

Export credit insurance

Special insurance coverage of exporters to protect against commercial and political risks for making an international sale.

Feeder Ship

Vessel used in short sea trade to serve ports at which deep-sea container ships do not call.

Force Majeure

Conditions such as floods, earthquakes, hurricanes or other events beyond the control of various parties involved in transporting good.

Foreign Exchange

Foreign Exchange is a process of exchange of currency of a foreign country and/or the conversion from one currency to another.

Forwarder’s Cargo Receipt

Document issued by a freight forwarder or freight consolidator indicating goods have been received from the seller and are being held on behalf of the buyer.

Forwarding Agent

The agent or firm arranging transport on behalf of the seller.

Free (Foreign) Trade Zone

An enclosed and secured area usually designated by a port into which goods may be taken and customs duties may be deferred or waived until such time as the goods are removed for domestic distribution or re-exported.

Freight Forwarder

A private company that arranges cargo space on a carrier a well as the logistics for delivering the goods to the carrier (e.g. ship, airplane etc.)

GATT

“General Agreement on Tariffs and Trade.” A multilateral treaty designed to reduce trade barriers and to provide a forum for resolution of trade disputes.

Groupage B/L

Forwarding agents are permitted to group together or consolidate consignments from individual consignors and dispatch them as one consignment.

Hague Visby Rules

Set of rules amending the Hauge rules, published in 1968 which have not been implemented by as many countries as the predecessor Hague Rules.

House bill of lading

A bill of lading issued by freight forwarder.

Insurance certificate

Document giving details of insurance cover for a consignment. The certificate will cross-reference a master insurance policy and must be counter signed.

Insurance cover note

Insurance document evidencing that insurance cover for a consignment has been taken out, but not giving full details.

Insurance policy

Document setting out full details of insurance in force

International Chamber of Commerce (ICC)

ICC founded to promote free trade, private enterprise, and to represent business interests at the national and international level.

Issuing Bank

The bank that issues a letter of credit; also called the opening bank.

Inspection certificate

A certificate generally issued by a respected independent agency that generally verifies the quality, quantity or specifications of the good shipped is in conformity with the sales contract.

Latest shipment date

Date on a letter of credit by which the goods must have been shipped.

Liner Party BL

Liner B/Ls are issued by shipping companies in respect of goods carried on regular line vessels with scheduled runs, and reserved berths at destination.

Maturity date

Date at which payment is due under a term bill of exchange

Mate’s Receipt

When the goods are handed over to the agent of the shipping company for shipment by a specified vessel and the agent contracts to do so, it issues a receipt known as Mate’s Receipt.

Marine Risk Insurance

Insurance covering loss or damage while goods are at sea.

Marks of Origin

Physical markings on a product indicating the country where the merchandise was produced.

Multimodal Bill of Lading

Bill of lading covering shipment of goods by more than one means of transportation but including one ocean leg.

Nominated Bank

The bank with which the credit is available or any bank in the another country the lowest tariff rates or the most favorable nontariff policies. than one means of transportation but including an ocean leg.

Notify party

The party who is to be notified when goods arrive at their destination.

ON Board B/L

It is issued after the goods have been shipped on board. A credit requiring B/L must indicate that the goods have been shipped on board

Open Insurance Policy

A marine insurance policy that applies to all shipments over a period of time rather than on a single shipment

Packing List

A document that lists the various packages or cartons being shipped and their contents.

Partial Shipment

A shipment under a Letter of Credit representing only part of the goods covered by the Letter of Credit.

Payee

Party to whom payment is due.

Phytosanitary Certificate

A certificate typically issued by a country’s agricultural department to satisfy import regulations certifying that specified perishable food weed and plant items are free from contamination, pests and plant diseases.

Pre Shipment Finance

The finance required for the period before goods have been shipped.

Pre-shipment Inspection

An inspection of contract goods prior to shipment to ascertain their quality, quantity, or price

Post Shipment Finance

The finance required for the period after goods have been shipped before payment is received by the exporter

Presenting Bank

The Collecting Bank making presentation to the Importer (drawee), usually the Importer’s bank.

Principal

Party entrusting a draft and/or documents to a bank for collection of payment; usually the seller of goods

Pro-Forma Invoice

A draft or sample of what the final invoice will look like which is used by sellers in the negotiating process with a potential buyer in order to ensure that all parties understand what costs are included in the quoted price.

Promissory Note

Financial document in which the buyer agrees to make payment to the seller at a specified time.

Red Clause Credit

A red clause credit allows pre-shipment advances to be made to the exporter at the risk and expense of the applicant.

Remitting Bank

The bank that the Exporter authorizes to carry out the collection on its behalf.

Revolving Credit

The revolving credit is one, which under the terms and condition its behalf thereof provides for restoring the credit to the original amount after it has been utilized.

Short Form/Blank Back BL

BL in which the detailed conditions of transportation are not listed in full (on the back of the BL).

Sight Draft

A draft is payable by the drawee at the time of presentation.

Straight BL

B/L issued to the name of a certain party and which cannot be transferred by endorsement.

Stale BL

A BL that has been presented later than 21 calendar days after the date of shipment.

Standby Letter of Credit

Letter of credit issued to back an obligation of the applicant but typically not intended to be the primary method of payment.

SWIFT

Society for Worldwide Interbank Financial Telecommunication; an
organization that operates the major interbank electronic communication system for the financial message. SWIFT is very important in Trade Business Terms.