Knowing Incoterms 2000
The
Incoterms were drafted for the first time in
1936 by the International Chamber of Commerce
(CCI / ICC) in order to homogenise / standardise
the vocabulary in the trade and exchange and
thus avoid the legal disputes between sellers
and buyers. The latest revision of Incoterms
dates back to the end of 1999. According to
the choice of Incoterm, one may know who does
what while transporting the merchandise; who
pays for transport; who insures the merchandise
and at which geographical point. There are 13 Incoterms
selected by the CCI/ ICC. These can be classified
in different ways. The first classification
can be done according to the mode of transport
selected.
-
1 exclusively territorial Incoterm (DAF)
-
6 exclusively maritime Incoterms (FAS, FOB,
CFR, CIF, DES, DEQ)
-
6 Incoterms valid for any means of transport
(Ex-Works, FCA, CPT, CIP, DDU, DDP)
Another
classification that is frequently found is based
on the transfer of responsibility from the seller
to the buyer while starting from his minimum
obligation (EXW) up to his maximum (DDP).
It
is very important to give geographical details
which help avoid serious misunderstandings between
the buyer and the seller: for instance, "ex-factory":
in this case of a factory in Nigeria or of a
factory established abroad by the same Nigerian
firm. The Incoterms are going to define the
place of transfer of responsibility between
the seller and the buyer.
Analysis
"
EXW "
Incoterm
EXW
= EX WORKS = At The Factory Gate
The
single responsibility of the seller is to hand
over the merchandise to the buyer. The revision
2000 of Incoterms recognizes a very widespread
practice: the seller takes in his charge and
is responsible for loading of merchandise on
to the vehicle of the buyer (on condition of
indicating EXW loaded). The buyer incurs all
the expenses inherent in transport right from
departure from the factory until arrival at
the destination
Group
of “F” = Free
FCA=
FREE CARRIER
The
buyer selects the mode of transport as well
as the transporter and he pays for the main
transport. The transfer of expenses and risks
is effected at the time when the transporter
takes charge of the merchandise. In the case
of truck, wagon, and full container it is the
seller who does the loading. The passage of
export through custom is the responsibility
of the seller. "the FCA premises of the
seller were officialised by the revision of
Incoterms 2000.
FAS
= FREE ALONG SIDE SHIP
The
obligations of the seller are henceforth fulfilled
when the merchandise is taken out of the customs
and place along side the ship on the quay or
on the barges. From this point onwards, the
buyer incurs all the expenses and risks. The
buyer also indicates the ship and pays the freight.
FOB
= FREE ON BOARD
The
merchandise is placed on board the ship by the
seller. The buyer indicates the ship and pays
the freight. Transfer of expenses and risks
is effected at the time when the merchandise
passes from the slings of the ship. The export
formalities devolve upon the seller.
Group
of "C" = Cost and Carry
CFR
= COST AND FREIGHT
The
seller selects the ship and pays the freight
up to the agreed port. Loading on board the
ship devolves upon the seller along with shipping
formalities. The transfer of risks is the same
as in the case of FOB.
CIF = COST, INSURANCE AND FREIGHT
The
terms are identical to those of CFR with an
additional obligation of the seller to supply
maritime insurance policy against risk of loss
or damages to the merchandise. It is the FAP
insurance policy (free of any special damage)
for 110 % of the value. The seller pays the
insurance premium, and the merchandise travels
at the risk and peril of the buyer. This is
the Incoterm which is very much used in practice
for, it tends to divide the expenses and risks
in a fair manner. The buyers appreciate this
Incoterm, for, they are freed from the logistical
formalities.
CPT
= CARRIAGE PAID TO
The
seller selects the transport and pays the freight
up to the place indicated. The risks of damage
or loss as well as escalation of eventual costs
are at the cost of the buyer starting from the
moment when the merchandise were handed over
to the first transporter.
CIP
= CARRIAGE AND INSURANCE PAID TO
CIP
is identical to CPT, but, the seller must supply
additionally a transport insurance. The seller
signs a transport contract pays the freight
and insurance premium.
Group
of “D” = DELIVERED
DAF
= DELIVERED at FRONTIER
The
seller pays the freight and undergoes risks
up to the frontier which must be defined.
He assumes responsibility for custom formalities
for export and the buyer for import. The two
parties must agree for taking charge of the
insurance policy covering the entire route of
shipment. According to the 2000 revision, the
buyer takes in to his charge the expenses of
unloading from the means of transport near the
frontier except when said otherwise.
DES
= DELIVERED EX SHIP
The
seller selects the ship, pays freight and accepts
transport risks. Transfer of expenses
and risks is effected on board the ship at the
time of unloading at the port of arrival.
DEQ
= DELIVERED EX QUAY
The
seller places the merchandise at the disposal
of the buyer, ensures his passage through custom
on to the quay at an agreed port. The
passage through customs of the import is henceforward
put to the charge of the buyer.
DDU
= DELIVERED DUTY UNPAID
The
seller puts the merchandise at the disposal
of the buyer, at an agreed place in the country
of import, including the unloading. The buyer
is responsible for custom formalities, duties
and charges. The novel feature of 2000 revision
consists of a condition relating to unloading
from the vehicle used for transport up to the
destination which is hence forward charged to
the buyer. DDU is a new Incoterm which is very
much offered in trade and strengthens the position
of the seller, for, the merchandise is transported
at the risk and expense of the seller up to
the premises of the buyer.
DDP
= DELIVERED DUTY PAID
The
seller has in this case maximum obligation,
transfer of expenses and risks being done at
the point of delivery on the buyers premises
and the unloading belongs to his responsibility
( except when stated to the contrary ).
TAKE
CARE:
The
American FOBs are interpreted in a different
manner: one must obligatorily state the conditions
of delivery when your correspondent is American.
The present trend in international trade takes
shape by the fact that the buyer is discharged
of all the pre occupations with logistics. This
strengthens the positions of the exporters.
It is necessary to properly negotiate the terms
and conditions of the contract during the first
shipment and especially in the case of countries
having risk where a credoc (credit document)
as a means of payment will be advised.
===============================
GLOSSARY OF BUSINESS
TERMINOLOGY:
Acceptance
bank
A Bank that promises to pay a bill of exchange
in return for a fee.
ACP / ACP
The ACP (African, Caribbean, and Pacific) countries
signed an agreement of association with the
European Community on 15th December 1989 at
Lome. The ACP States comprise 69 countries.
Under the Agreement, certain types of products
are exempted from customs duties and enjoy preferential
tariffs.
Act of god
An unexpected event such as a storm, a flood,
an earthquake, etc. mentioned in some insurance
contracts as a cause of loss or damage.
Ad valorem
That is calculated as a percentage of the value
of the goods.
Advance (advance bill)
Money (bill) paid (written) before the goods
have been sent off.
Advance in export currency
Bank financing of cash flow for exporters who
grant their foreign buyers a term of payment.
If the foreign currency advance is granted in
the billing currency of the commercial contract,
it also serves as a means of covering exchange
risks.
Advance in import currency
Bank financing of cash flow for importer, allowing
them to pay foreign sellers in cash. If the
foreign currency advance is granted in the billing
currency of the commercial contract, it also
serves as a means of covering exchange risks.
Advising bank
In the context of documentary credit, this is
the intermediary bank that transfers the documentary
credit to the beneficiary following a request
by the issuing bank. The advising bank, however,
does not offer any guarantees to the beneficiary
and merely conveys the information.
After-sale service
The care of a product provided by the supplier
after it has been sold.
Agency
The work carried out by a person (the agent)
chosen to act on behalf of another (the principal).
Airway bill
An airway bill of lading is a contract of transport
issued in triplicate by the shipping agent for
an air shipment.
Air container
Container adapted to the standards for air navigation.
A.M.: Air mail.
American selling price (ASP)
A charge made by US customs on an imported product
to make it the same price as a similar product
produced in the US.
ANSI
The American National Standards Institute is
the American standardization body. It publishes
American standards and informs companies about
the standards in force in the United States.
Arrival notice
A note sent by the carrier to the receiver (the
consignee) saying that goods have arrived.
ASAP
As soon as possible.
ATA carnet
An ATA carnet is an international customs document
instituted in 1961 by the Brussels Convention.
The Convention allows an exporter to transit
his goods temporarily through several successive
countries without having to make a customs declaration
at each frontier.
ATM: Automatic teller machine, cash point.
ATR
An ATR is a certificate for the movement of
goods within the framework of EC/Turkey relations.
This document allows exporters to benefit from
the free movement or preferential systems. The
ATR document has to be stamped by the customs
authorities of the exporting state.
At warehouse
Said of a price of goods which includes delivery
and loading.
AWB (Airway bill)
An airway bill of lading is a
contract of transport issued in triplicate by
the shipping agent for an air shipment.
BAF-CAF
BAF and CAF are two kinds of adjustment that
either increase or decrease the basic freight.
BAF (Bunker Adjustment Factor) is a rectification
that depends on fuel price trends. CAF (Currency
Adjustment Factor) is a rectification that depends
on the exchange rate trends of the currency
in which the tariff has been established.
Baltic exchange (the) An
international exchange for freight and shipping
in London.
Bank acceptance (B) A
A bill of exchange that is accepted by a bank
for a fee.
Base
Base for levying a tax.
Bill
Written unconditional order whereby a natural
or legal entity (the drawee) makes a commitment
to pay a certain sum to another natural or legal
entity (the drawer) at sight or after a defined
period.
Bill of exchange, (b/e)
A signed document, such as a cheque, that orders
a person or an organization, such as a bank,
to pay a fixed sum of money on demand or on
a certain date to the person specified.
Bill of lading (clean / dirty)
The Bill of lading is a sea transport contract.
Billing Currency
The choice of payment (billing) currency (local
or foreign) should take into account commercial
considerations (complexity and exchange risk
for buyers in case of local currency), and the
economic viability of the operation (exchange
risk involved for sellers who invoice in foreign
currency).
Board Member
Private individual or corporate body, appointed
from among the shareholders. As members of the
Board of Directors, the task of the board members
is to manage the company collectively. They
are invested with wide-ranging powers to act
on behalf of the company.
Bond note, Bonded goods ,Bonded Warehouses
Bonded
Warehouses. These are zones under Customs control
that permit the storage of goods prior to customs
clearance.
Branch
A company which depends legally upon its parent
company but enjoys a certain level of autonomy.
Brand
Distinctive sign which serves to identify a
product or an enterprise and to differentiate
it from the competition.
Broker
Brokers are commercial agents who are legally
independent of the companies for which they
work. They deal with their clients for each
brokerage transaction without being bound by
a long-term contract.
Business assets
All tangible movable assets (equipment, machinery,
etc.) and intangible assets (customers, goodwill,
corporate name, sign, lease right, licences
and authorisations, etc.). It is important to
note that this never includes the building(s)
in which the business is being run.
Buying group
Body which centralises purchases in order to
obtain the best possible prices.
CAD
Abbreviation for cash against documents. The transit documents
are handed over to a bank with instructions
to release them to the importer only against
payment.
CAIRNS
Group of 14 exporting countries practising free
trade in agricultural products. It was established
in 1987 in Cairns, Australia; its purpose is
to voice the common interests and concerns of
its members in international negotiations on
agriculture. The Group is composed of Argentina,
Australia, Brazil, Canada, Chile, Colombia,
Fiji, Indonesia, Malaysia, New Zealand, the
Philippines, Thailand and Uruguay.
CAP
The Common Agricultural Policy enacted in 1962
aims at modernising the agricultural sector.
The CAP is also designed to guarantee a decent
income to farmers while maintaining price stability
in the market. The goal of the CAP is three-fold:
free movement of agricultural products within
the EU, setting of prices in Europe and preference
for the Community (EU) products.
Carriage forwards
A condition of sale where the cost of transporting
goods is paid by the receiver.
Cash on delivery (COD)
Cash on delivery
Cash price
The price a seller will accept if payment is
made immediately.
CCT (Common Customs Tariffs)
The Common Customs Tariff is a codification
which determines customs duties at Community
level.
Central and East European Countries
Acronym employed principally in the framework
of Community agreements or programs to refer
to the following 10 States: Bulgaria, Estonia,
Hungary, Latvia, Lithuania, Poland, Romania,
the Czech Republic, Slovenia and Slovakia
Centralised account
This is a current account opened in the books
of a foreign bank wherein all settlements, transfers
or cheques are centralised in the country in
which the foreign bank is located.
CET (Common External Tariff)
The Common External Tariff is a full
tariff applicable to imported goods.
Certificate of loss
It is a means by which the damage
or average surveyor establishes the nature and
scale of damages and losses, in a written report.
Certificate of origin
This certificate proves the origin of the goods.
It is usually stamped by the chambers of commerce.
A certificate of origin is often required for
export or import purposes, as goods of a certain
origin enjoy the advantages of a preferential
system. A certificate of origin is frequently
necessary within the framework of documentary
credit.
Chain store
One of a number of similar shops belonging to
the same company.
Chartering
In Maritime law, it is a contract by which a
ship owner undertakes, in return for a fee,
to make a ship available to a charterer for
transportation of goods or persons.
CIM
International Convention for the transportation
of Goods.
CIS (Confederation of Independent States)
The Confederation of Independent States brings
together Armenia, Azerbaijan, Belarus, Georgia,
Kazakhstan, the Kirghiz Republic, the Republic
of Moldova, the Russian Federation, Tadzhikistan,
Turkmenistan, the Ukraine and Uzbekistan.
Claim
Right of a person (the creditor) to claim something
from someone (debtor), usually an amount of
money.
Clearance sale
An event held by a trader to dispose of old
stock, usually at reduced prices, to make way
for new stock.
COD
Cash On Delivery is a system of payment wherein
the carrier collects the amount due and ensures
its repatriation. This system is to be used
only if the exporter is sure that the buyer
will accept the goods and if the consignments
are packages with a low unit value.
Combined transport
Intermodal transport where the main leg is by
rail, navigable waters or sea and where the
initial and/or final legs of the journey take
place by road over the shortest possible distance.
Commercial Court
It is a non-criminal specialised
jurisdiction of the first degree with judges
and a court clerk. The "consular magistrates"
(tradesmen acting as judges) have a voluntary
mandate and are responsible for judging disputes
between partners, traders or those relating
to commercial laws.
Community goods
This expression refers to goods: either obtained
entirely from the Community's customs jurisdiction,
with no input of goods imported from countries
or territories outside the Community's customs
jurisdiction, or imported from countries or
territories outside the Community's customs
jurisdiction but found in a free zone.
Company
Contract - and, by extension, the legal entity
itself created by this contract - whereby two
or more entities agree to allocate to a common
enterprise their goods or services with the
objective of sharing the profits or the economies
that may arise there from. It can also be constituted
by an act of law, or by the will of one individual.
Consignee
A person or an organization intended to receive
goods sent.
Consolidation (Consolidated Shipment)
Shipment for which an agent (forwarding agent
or other) consolidates several individual shipments
to make a single shipment in order to benefit
from preferential prices.
Consumer
Person who uses goods, resources or services
to satisfy his needs.
Consumer Price index (CPI)
A set of figures showing the movement of prices
of everyday goods and bought by the public over
a period of time.
Consumption
Total
value of goods and services purchased by consumers
over a given period of time.
Container
A very large wooden or metal box into which
a number of goods may be packed before being
transported.
Container
Means of maritime or multimode transport for
the phases that precede or follow carriage by
sea.
Convenience food
Food specially made and packed so that it can
be cooked quickly and easily.
Corporate name
Name under which a company exercises his business.
It can be a patronymic name, or a pseudonym,
or a brand. It is one of the elements of the
assets of a business.
Cost and freight
A condition of sale for goods carried by sea
where the seller pays for loading and transporting
goods but the buyer pays the insurance costs
once the goods have been loaded.
Cost insurance freight
A condition of sale for goods carried by sea
where the seller pays for loading and transporting
the goods and arranges marine insurance.
COTIF
Convention concerning International Carriage
by Rail.
Counterfeiting
Counterfeiting involves reproducing a product
or copying a (successful) invention.
Credit sale
An arrangement where a buyer takes goods that
he / she will pay for by an agreed date in the
future.
Customs agent
A customs agent is an authorised customs clearance
professional. A forwarding agent can also act
as a customs agent.
Customs airport
Airport opened by the competent technical authority
for public and international air traffic. The
airport has a customs house or a sub-station
that functions either on a permanent or a temporary
basis.
Customs bond
Customs or excise document in which a bonder
undertakes to fulfil the obligations relating
to the specific rules applicable to goods.
Customs classification
The customs classification is also called the-HS
code. The classification is a codification with
12 digits that determine the customs duty rate
applicable to the product type.
Customs house
Place where all or some customs formalities
(submission of customs declarations etc.) take
place. In France, a customs house is the equivalent
of a custom collector's office where duties
and taxes (customs and indirect taxes) are levied.
Official name of a customs house: "Office
of the Customs Collector and of Indirect taxes".
Customs procedures
Destination for customs purposes given to goods
by submission of a customs entry and which determines
its situation as regards the regulations.
Customs value
The customs value is the value of goods at the
Community border. This value serves as a basis
for the calculation of customs duties.
CWO
Cash with order.
Damage
Loss of or damage to goods transported.
Dealership
Form of partnership based on the contractual
franchising of a brand. The franchise contract
essentially involves the hiring out of a trade
name and the guarantee of territorial exclusivity
for the dealer.
Debit note
A document that informs a customer of money
owed to a company for goods or services supplied.
Declarant
Natural or legal person who effects a customs
entry: - in his name and on his own behalf (own
account declarant); - in his name and on behalf
of an economic operator, importer and/or exporter
(indirect representation declarant); - in the
name of and on behalf of an economic operator,
importer and/or exporter (direct representation
declarant).
Del credere agent
A person who sells goods for another and who
agrees to pay for them if the customer fail
to do so.
Delivery note
A document sent with goods to a customer that
gives detail of the goods; the customer signs
the delivery note to say that he / she has received
the goods.
DP
DP signifies "delivery permit". A
DP is a document issued by the customs and allows
importers to take delivery of the goods.
Desk research
A form of market research using existing information.
Despatch - dispatch
The sending of goods to destination.
Destination customs house
Customs office where goods are presented after
a transit operation.
Developing countries
This notion brings together countries with an
average standard of living, which are not yet
at par with the industrialised countries (for
instance, India, Uruguay, Romania, etc.).
DIN
The Deutsches Institut fόr Normung (DIN)
is the German standards body.
Direct export
A way of selling goods straight to a customer
overseas without using an agent.
Discount
This form of retailing, invented in the United
States, consists mainly of selling at the lowest
possible price. The low prices are achieved
by reducing margins, making grouped purchases
and cutting down overheads (the sales premises
often resemble warehouses). This form of retailing
has recently become very popular everywhere
in the EU.
Any dispute that is likely to be brought before
a court. All the litigation within the competence
of a court.Dispute
Distribution network
Set of persons and companies involved in the
distribution of a product, from the producer
to the consumer.
Distributor
A person or an organization that supplies goods
for a producer or manufacturer to shops, etc.
DIY superstore
Do-it-yourself outlet.
Documentary letter of credit
Banking technique which gives a guarantee to
the exporter that he will be paid for the sale
and to the importer that he will receive the
goods as agreed in the commercial contract.
It is a commitment by the importer's (or the
buyer's) bank following a request made by him
and on his behalf to pay a certain amount, determined
by the commercial contract, to the exporter
(or seller) against documents representative
of the goods dispatched.
DP (Delivery Permit)
DP signifies "delivery permit". A
DP is a document issued by the customs and allows
importers to take delivery of the goods.
Dumping
Selling goods in a foreign market at very low
prices.
Duty-free Purchase
Purchase exclusive of “value-added tax"
(VAT) that any foreign (third country) resident
can make subject to certain conditions relating
to his/her person, to the type of goods and
to compliance with certain formalities.
DV1
DV1 is a customs document specifying the customs
valuation. It is used in cases of import of
goods from non-Community countries.
Eastern Standard
Time (EST)
The time used in the Eastern states of the USA
and Eastern Canada.
EBA
European Bank Association. This association
of banks was initially set up to enable the
settlement of transactions in ECU, via the E.C.S.
(Euro Clearing System). The system has since
been modified to deal with transactions in Euros.
The EBA manages the E.C.S., which allows its
62 member banks to exchange flows. Net settlements
are carried out in cash at the end of the day,
on the EBA account, held in European Central
Bank pounds.
EBRD
The European Bank for Reconstruction and Development,
set up in 1991, is a financial institution whose
goal is to assist the economic reconstruction
of Central and East European countries.
EC / CE
The EC acronym represents the European Union's
trademark. The EC trademark proves that a product
fulfils the health, safety and technical requirements.
The EC trademark is only valid in the European
Union framework.
ECB
The European Central Bank lays down the Euro
zone policy in the field of interest rates and
exchange policies with other countries. Its
chief task is to maintain price stability within
the Euro zone. It is independent of national
governments and has taken the place of the E.M.I
(European Monetary Institute), which was established
as a forerunner of the E.C.B.
ECS
Euro Clearing System.
ECSC
The European Coal and Steel Community was established
in April 1951 according to the Schumann Plan,
by which France, Italy, Germany, Belgium, the
Netherlands and Luxembourg undertook to abolish
customs duties, quotas and monetary restrictions
affecting intra-Community trade in steel, coal
and iron. Member countries ratified the agreement
for a period of 50 years. The ECSC Institutions
served as models for the EEC Institutions with
which they were merged in 1957.
Economic and Monetary Union (EMU)
A set of institutions and arrangements set up
under the 1992 Maastricht Treaty to create a
single European currency.
EFTA
The European Free Trade Association (EFTA) refers
to 4 countries: Iceland, Norway, Switzerland
and Liechtenstein. These countries signed a
free trade agreement with the EEC in 1992. The
agreement came into force on 1st January 1994
and led to the establishment of the European
Economic Area.
EIB
The European Investment Bank is the European
Community's financial institution. It collects
savings from capital markets and directs them
towards the funding of investment projects.
The loans granted by the EIB are meant to bolster
the most underprivileged regions.
Embargo
A government order to stop trade with another
country.
Embarkation
Getting onto a ship or an aircraft.
EONIA
The Euro Over Night Index Average replaces the
ONIA (Over Night Index Average). The EONIA is
the reference of the day to day rate of the
Euro, which is calculated by the Central European
Bank on the basis of the panel of banks participating
in the definition of EURIBOR.
EPO European Patent Office.
ESBC
European System of Central Banks comprises the
ECB and the 15 national central banks of each
Member State. Its role is to enforce the decisions
of the ECB in each State.
ESC
The European Standards Committee is a European
body responsible for setting European standards.
The ESC enables companies to bring their products
in line with European standards (EC trademark).
It is composed of 160 European organisations.
Escape clause
A condition in a contract that frees the parties
from carrying out the terms of the contract
in certain specified circumstances.
ETA (Estimated Time of Arrival)
Estimated time of arrival.
EUR2 - EUR1
EUR documents are movement certificates, which
are the equivalent of certificates of origin
used in preferential trading between the EU
and associate countries. EUR 2, used for postal
shipment only, is not stamped by the customs
house, unlike EUR 1.
Euro
Since 1st January 1999, the Euro (EUR) has become
the official currency of Belgium with the Belgian
Franc becoming a non-decimal expression of the
Euro. The Euro is a full-fledged currency but
it existed only as bank money until January
1st 2002, when coins and notes replaced the
national currencies only in 2002, at the end
of the so-called transition period. The value
of the Euro was fixed definitively on 1st January
1999: 1 Euro = 40.3399 Belgian Francs.
EURIBOR
Euro Interbank Offered Rate is the rate at which
euro interbank term deposits within the euro
zone are offered by one prime bank to another
prime bank. It has replaced the national indices
of the European Union States.
European Commission
A European Union administration to make routine
decisions and propose new laws.
European Community
An organization of European countries that developed
from the European Economic Community and makes
law on a wide variety of public policy areas.
European Union (EU)
An organization of 15 European countries defined
under the 1992 Maastricht Treaty. It makes laws
on a wide variety of public policy areas and
aims for cooperation between member countries
in foreign and security policy, justice and
home affairs.
Exchange of goods declaration
Monthly
declaration used within the framework of intra-Community
trade relations (acquisition/delivery) that
the operator having acquired or dispatched Community
goods is obliged to make. The exchange of goods
declaration makes it possible to monitor collection
of VAT and to compile national foreign trade
statistics.
Export licence (import licence)
The licence is an administrative document to
control external trade, authorising the import
or export of certain products subject to the
quota regime.
Ex quay
Is said of a price for goods where the seller
pays for all costs up to delivery to a named
port, including unloading onto the quay and
onto road or rail vehicular.
Ex works
Is said of a price where the buyer pays for
transporting the goods away from the factory.
Excise Tax
Indirect consumer tax on certain categories
of products.
Export
To send an item, a service, an idea or a person
from one country to another to be sold.
Export credit
This technique covers all the financing mechanisms
to which an exporter may use. The different
types of export credit are the so-called administered
credits, purely secured credit and open credit
(simple bank credit). These different types
of credit can be divided into two groups: buyer's
credit, which is a form of credit granted to
the buyer to allow him to settle his debt in
cash; and supplier credit, which is a discount
on the debt held by the buyer who has granted
a term of payment to his buyer.
Factoring
Combines the characteristics of a debt recovery
procedure, a technique to cover payment risks
and a means to finance debts. The factor settles
the seller's receivables in advance. This is
not a discount but a payment by subrogation
with a subrogate receipt.
Fast moving consumer goods (FMCG)
Cheap every day items that are bought and used
up quickly.
FCR
A Forwarder's Cargo Receipt is a document issued
by a forwarding agent, who testifies that the
goods have been taken over from the seller and
thereby advising that the exporter has placed
the goods at the disposal of the buyer.
Feeder
Ship that brings freight from medium sized ports
to ports served by large capacity ships.
Force majored
Standard clause found in transport contracts
enabling parties (in particular the carrier)
to disclaim all responsibility in case of damage
to or loss of goods for reasons beyond his control
(e.g. a natural disaster or war).
Forfeit financing
Forfeiting or forfeit financing is a discount-based
financing technique based on Del credere discounts
(against the exporter) of short-term and long-term
export credit, evidenced by commercial papers
endorsed or guaranteed by a bank acceptable
to the forfeiting banker.
Forward exchange rate
Technique to hedge against exchange risks, which
allows the bank to guarantee to its client the
rate at which it will sell him foreign currency
(futures buying) or buy it from him (futures
sale), at a future date.
Forwarding agent (Forwarder)
The forwarding agent is a professional who organises
the carriage of the goods from departure to
arrival at destination.
Free Movement
One of the principal characteristics of the
domestic European market: the movement of goods
between Member States of the European Union
should take place without obstacles of any nature,
be they quantitative, tariff-related, fiscal
or normative. This principle has, in fact, been
enshrined as an objective in other free trade
and Customs Union agreements.
Free on truck (FOT)
A condition of sale where the seller pays to
deliver the goods to a specified transport depot
and ensures that they are loaded onto trucks
or lorries ready for transportation
Franchised trade Franchised
trade involves forming groups of traders in
order to increase their individual purchasing
capacity and to strengthen their position between
upstream wholesalers and downstream consumer
associations. There are three main forms of
franchised trade: groups of retailers, voluntary
retail buying chains and franchises.
Franchising
Franchising is a concept first developed in
the United States. It defines a form of long-term
contractual cooperation between two legally
independent entities (the franchiser and the
franchisee) with a view to marketing goods,
services or techniques. The franchiser pledges
to help the franchisee in the technical, commercial
or accounting fields. In return, the franchisee
pays an entry fee and royalties on an annual
basis. He is also obliged to comply with quality
standards laid down by the franchiser and to
participate in promotional operations organised
by the latter. For the franchiser, this type
of contract is a good means of breaking into
a market without having to pay real-estate costs.
The franchisee, for his part, can implement
a sophisticated trade concept without having
to pay for all the development costs.
Franco
A term in an export sales contract to show that
goods will be delivered free of transport costs
to a place specified by the buyer.
Free on bord (FOB)
A condition of sale where the seller pays for
transportation and insurance of the goods until
they are loaded onto the ship.
Free on rail (FOR)
A condition of sale where the seller pays to
deliver the goods to a railway station and ensures
that they are loaded onto wagons ready for transportation.
Free trade
A situation where there are no restrictions
(tariffs) on the import and export of goods.
Freeport
Zone where goods can be stocked without
payment of any taxes and charges till they have
crossed the border.
GDP
Gross Domestic Product.
General average
Damages of this kind are specific to sea and
inland waterway transport and are caused by
an event that would jeopardise the ship and
its cargo if the captain were not to take any
initiative in the common interest (e.g. part
of the cargo is sacrificed to avoid a shipwreck).
In such a scenario, the extraordinary expenses
incurred and the value of the goods sacrificed
will be paid for by all those who benefit from
the action.
General terms of sale
The General Terms of Sale help to legally identify
the conditions of the sale.
Geomarketing
Geographical information system to mark out
geographical micro-zones in order to work on
or adjust investments in these areas, on the
basis of the characteristics of the individuals
who constitute it.
GSP (Generalized System of Preferences)
The GSP constitutes the tariff-related preferences
for developing countries. These tariffs translate
into exemptions or reductions in customs duties.
Harmonised
System (HS)
System, under the aegis of the World Customs
Organisation, for the designation and codification
of goods, adopted in an international convention,
in force since 01.01.1989. It comprises a six-digit
classification of products, general rules for
interpretation and classification notes.
Head office
Specific
place given in a company's statutes, which constitutes
its address and determines, in most cases, its
nationality.
Health certificate (Phytosanitary Inspection
Certificate)
This certificate is issued by an official department
of agriculture and attests that the plants and
plant products are free from parasites or toxic
substances.
HS (Harmonised System)
Harmonised system of designation and codification
of products, for customs purpose.
Hub
Nodal Point for collection, dispatch and redistribution
in an entire geographical area.
IATA
International Air Transport Association.
IBRD
The International Bank for Reconstruction and
Development, established in 1945, under the
Breton Woods agreements, finances reconstruction
projects and grants loans aimed at stimulating
growth in deficit countries.
ICC
The International Chamber of Commerce advises
companies with regard to their international
trade policies. In addition, it defends the
interests of business in international trade.
IEC
The International Electrotechnical Commission
is the technical industry's international standards
body. The IEC sets international standards in
the fields of electronics and telecommunications.
IMF
The International Monetary Fund is an international
organization which grants loans to countries
facing balance of payments difficulties.
Import
To bring in goods, services, ideas or peolple
from one country into another.
Incoterms
Abbreviation of International Commercial TERMS.
These are international definitions for a common
understanding of the clauses in international
Trade. They have been fixed by the International
Chamber of Commerce, which first published them
in 1936. They were last updated on 1st January
2000.
Interest economic grouping (IEG)
Grouping of natural or legal persons having
a unique legal status, distinct from a company
or an association. Its purpose is to facilitate
the carrying out of an economic activity run
together by its members, by pooling certain
aspects of this activity: sales counter, import
or export services, research laboratory, etc.
The grouping is a legal entity and has to be
registered.
Invoice
A list of goods sold or services received that
states how much you must pay for them.
Intermodal transport
Carriage of goods using various modes of transport
but in the same containers, without a break
in load. The container may be a road vehicle
or an intermodal unit of transport.
IOU
An abbreviation for "I owe you".
Issuing bank
This is the bank that has issued the documentary
credit. It is under an obligation to pay if
the documents submitted are in accordance with
documentary credit requirements.
ITU
Intermodal Transport Unit.
Land container
Container that meets the standards set by the
International Railways Union (IRU) for optimal
use mainly in the case of a combination of road
and rail carriage.
Large capacity container
Container that respects ISO standards in length
and width but has an unconventional height (9'6"
i.e. 2.90m instead of 8' - 2.44m). At the moment,
only 40' containers come into this category.
LDC
Least developed countries: This abbreviation
includes some 36 of the poorest countries of
the world, listed by the United Nations to be
the "least developed" of the developing
nations. Most of these countries are situated
in Africa, while some are in Asia. Haiti is
the only one to be found in the northern hemisphere.
Legal entity
The notion expresses the autonomy of the company
or group from its partners or management. A
"legal entity" has the same attributes
as a private individual: a name (registered
name), an address (corporate address), duration,
a nationality, etc. and is entitled to certain
rights and obligations independent of the members
that form it.
Legal redress
Legal process applicable to traders, artisans,
farmers and private law corporations defaulting
on payments, in order to bail out the company,
continue its business, keep its employees on
and clear its liabilities.
Lease management
Contract whereby the owner or the management
of a business grants total or partial rights
to an individual to run it on his account and
at his own risk in exchange for the payment
of a rent or a share in the profits.
Letter of credit
A letter from one bank to another bank, by which
a third party, usually a company, is able to
obtain money.
List price
The manufacturer's recommended retail price
for an item.
Loading track
Track on which the loading, unloading and transhipment
of ITUs (Intermodal Transport Unit) are carried
out. The transhipment can be from wagon to wagon
or from wagon to road vehicles and vice-versa.
Loading Unit
Container or swap body.
Mail-order (MO) sale
Mail order selling is a type of distribution
where there is no physical contact between the
seller and the buyer. The products are sold
through a printed or soft-copy catalogue and
sent by mail.
Manifest
Marine (or air) transport document which lists
all the goods loaded at a port (or airport)
to be sent to another port (or airport).
Manifest
A list of all the cargo or passengers carried
by a ship or aircraft.
Maritime container
Container conforming to the standards set by
the International Standards Organisation for
use in cellular marine transport.
Marketing
Set of techniques to detect the consumer/user
needs and to continuously adapt production and
sales accordingly. Marketing tries to determine
the product to be sold, its price, the appropriate
distribution network and the promotion required
for it.
Markings
Markings serve to describe the nature of goods
by way of various symbols identifying the type
of goods (toxic products: poison, dangerous
products: inflammable alcohol, etc.).
MERCOSUR
Free-trade area between Argentina, Brazil, Paraguay
and Uruguay. Chile and Bolivia are associate
members.
Memorandum of association
An official document that, by law, shows that
a company exists. It states the name and address
of the company, the amount of authorized share
capital and how it is divided, a statement of
limited liability, the purposes for which the
company was formed, etc.
MFA
The Multi-fibre Arrangement is an international
agreement in the textile sector. The Arrangement
is a follow-up to negotiations on import quotas
for textiles from developing countries. The
MFA brings together 42 countries, including
Turkey.
MFN
The Most-Favoured Nation clause forms part of
the first principle of the World Trade Organisation
and is one of "non-discrimination".
This clause aims at putting an end to the advantages
granted to a country as compared to the others.
This clause obviously applies to the signatories
of the treaty.
Middle man
A person or organization that buys goods from
the producer and sells them to the customer,
with a profit.
Minority protection
Regulations that protect minority shareholders.
MRP
Manufacturer's recommended price.
Multimodal Terminals
Installation for exchange of intermodal transport
units from one mode to another where other technical
and commercial operations linked to combined
transport can also be carried out.
Multimodal transport
Carriage of goods by at least two different
modes of transport.
NAFTA
North American Free Trade Area: a common market
composed of the United States, Canada and Mexico.
NIC
Newly Industrialised Countries: Group of countries,
principally from South-East Asia, which have
undergone a phase of intensive industrialisation
during the 70s and the 80s and are enjoying
today a standard of living very similar to that
of the developed countries (for e.g.: South
Korea, Singapore, Malaysia etc.).
Non-tariff barriers
Entire set of non-tariff restrictive measures
implemented by a country seeking to protect
its market from foreign competition. The most
common examples are quotas, technical or health
standards or any enactment favouring domestic
companies.
Non-monetary transaction
This is a technique available to the exporter
when his buyer does not want to or is not in
a position to financially settle his dues. The
settlement is made in the form of the provision
of products or services of a value equivalent
to that of the goods exported. The different
kinds of non-monetary transactions include barter,
counter purchase, and buy back, clearing and
offset contracts.
Ocean bill of lading ς
This is a contract for shipping goods by sea.
OECD
The Organisation for Economic Cooperation and
Development includes countries such as EU countries,
the United States of America, Canada, Japan,
etc. The main objective of the OECD is to study
the economic situation and to help economically
disadvantaged countries. The OECD also analyses
the various restrictions linked to international
trade.
Office for Harmonisation of the Internal Market
Office for Harmonisation of the Internal Market.
Offset
To balance something or compensate for something.
On Board
On Board signifies "embarked". The
words "on board" signify that the
goods have been placed properly on board the
aircraft or ship. This marking is almost indispensable
for documentary credit.
OPEC
Organisation of Petrol Exporting Countries:
An organisation gathering 13 oil-producing countries
whose aim is to coordinate production and market
prices.
Open door policy On Board
A system of importing goods with no or very
few restrictions or import duties.
Order form
A printed form to be used by a customer requesting
goods or a service.
Organised trade
Term encompassing all types of networked organisations
(store chains, dealerships, franchises, cooperatives,
voluntary retail buying chains, etc.).
Origin
Goods are considered to originate from a country
if they are obtained entirely in that country
or have undergone there final processing or
substantial value addition, which is economically
justified, in an enterprise equipped to that
effect, such that this operation creates a new
product or constitutes a significant stage of
production. In matters of origin, the European
Community usually constitutes a single country.
Outlet
A store that sells goods for a company.
Overpanamax
Ship with one of its parameters exceeding 295
m (length), 32.25 m (external width) or 13.25
m (maximum draught). These ships cannot navigate
through the Panama Canal.
Packaging
Material used to wrap, contain and protect products.
Packing list
The packing list is a document that itemizes
in detail the contents of a particular package
or shipment. The packing list must necessarily
be part of the set of documents.
Pallet
Generally in wood, a pallet allows for easier
handling of goods. The standard dimensions are:
100 mm x 1200 mm (ISO) and 800 mm x 1200 mm
(CEN).
Panamax
Ship whose parameters permit navigation through
the Panama canal: maximum length 295 m, maximum
external width 32.25 m and maximum draught 13.5
m.
Part-payment
A payment of part of a larger sum to be paid
later.
Particular average
Damage of this kind, in the sphere of transport,
concerns the goods themselves. It may be in
the form of losses, missing items; damage suffered
during transport or during handling prior to
or after carriage of goods
Payment Guarantee
A guarantee is a commitment given by a bank
to pay a sum of money in accordance with the
terms and conditions set out in the operation
guarantee text.
Payroll
The list of the people employed by the company,
and the amount to be paid.
PCT
Patent Co-operation Treaty.
Perils of the sea
This term refers to all the risks likely to
occur during transport by sea.
Piggyback)
Combination of rail and road transport.
Political risk
This is the risk of non-payment due to the responsibility
of the State. This risk can be covered by credit
in
