Glossary of International Trade Terms

A-B

• Advance payment
  A trade payment method in which the buyer pays the seller in full or in part before goods are shipped. It is the most secure option for the seller and the most risky for the buyer. Also called cash in advance or prepayment.
• Anti-dumping duty (ADD)
  An additional import tariff levied by an importing country on goods that the exporting country's producers are selling below normal value (i.e. below their home-market price or below cost of production).
• AQL (Acceptance Quality Limit)
  A statistical sampling standard used in pre-shipment inspection to determine the number of units to inspect in a production batch and the maximum acceptable number of defective units.
• AWB (Air Waybill)
  A non-negotiable freight document issued by an airline or freight forwarder for air cargo. It is a receipt for the goods, evidence of the contract of carriage, and a delivery instruction.
• Bank Telegraphic Transfer (TT)
  See SWIFT transfer.
• Bill of Lading (B/L)
  A document issued by a shipping carrier to acknowledge receipt of cargo for shipment. It serves three functions simultaneously: (1) a receipt for goods; (2) evidence of a contract of carriage; and (3) a document of title - the holder of a negotiable B/L is entitled to claim the goods.

C

• CAF (Currency Adjustment Factor)
  A shipping surcharge applied by carriers to compensate for fluctuations in exchange rates, particularly when freight rates are denominated in a currency different from the carrier's operating currency.
• Certificate of origin (CO)
  A document certifying the country in which goods were produced, manufactured, or substantially transformed.
• CFR (Cost and Freight)
  An Incoterms® 2020 rule for sea and inland waterway transport only. The seller pays for freight to the destination port, but risk transfers to the buyer when goods are loaded on board the vessel at the port of origin. The seller does not arrange insurance - the buyer bears the risk of loss during the voyage even though the seller has paid for freight.
• CIF (Cost, Insurance and Freight)
  An Incoterms® 2020 rule for sea and inland waterway transport only. The seller pays for freight and a minimum level of insurance (ICC Clause C) to the destination port. Risk transfers to the buyer on loading at the port of origin.
• CIP (Carriage and Insurance Paid To)
  An Incoterms® 2020 rule usable for any mode of transport. The seller delivers goods to the first carrier at an agreed point, pays freight to the named destination, and must arrange insurance coverage. Risk transfers to the buyer at the first carrier handover.
• Confirmed letter of credit
  A letter of credit to which the advising (seller's) bank has added its own payment guarantee. 
• Consignment 
  Payments deferred until goods sold.
• Container (20GP / 40GP / 40HC)
  Standardised intermodal shipping containers used for sea freight. A 20GP (20-foot general purpose) container has approximately 33 CBM capacity and is the benchmark "TEU" unit. A 40GP has approximately 67 CBM; a 40HC (high cube) has approximately 76 CBM with extra height. containers.
• CPT (Carriage Paid To)
  An Incoterms® 2020 rule usable for any mode of transport. The seller delivers goods to the first carrier and pays freight to the named destination. Unlike CIP, no insurance is required under CPT. Risk transfers to the buyer at the first carrier handover.
• Currency risk (FX risk)
  The risk that changes in exchange rates between the time a contract is signed and the time payment is received will affect the value of the transaction.
• Customs broker
  A licensed professional or company that acts as an agent for importers and exporters in customs clearance matters, including lodging import/export declarations, classifying goods, calculating duties, and managing customs queries and inspections. 
• Customs value
  The value of goods used as the basis for calculating import duties.

D

• DAP (Delivered at Place)
  An Incoterms® 2020 rule for any mode of transport. The seller delivers goods to the named destination (e.g. buyer's warehouse) ready for unloading, but the buyer arranges import customs clearance and pays import duties. Seller bears all freight costs and risk through delivery.
• DDP (Delivered Duty Paid)
  An Incoterms® 2020 rule representing the maximum obligation for the seller. The seller delivers goods cleared through import customs, with all duties paid, at the named destination. DDP is effectively a domestic purchase from the buyer's perspective. Not recommended when the seller is unfamiliar with import duties and VAT obligations in the destination country.
• Demurrage
  A charge levied by a shipping line or terminal operator when a container remains inside the port terminal beyond the agreed number of free days.
• Denied party screening (DPS)
  The process of checking all parties to a trade transaction against government-maintained watchlists of restricted, sanctioned, or blacklisted entities.
• Detention (shipping)
  A charge levied by a shipping line when an importer retains the shipping company's container outside the port terminal beyond the agreed free days.
• Documentary collection
  A trade payment method in which the seller's bank sends shipping documents to the buyer's bank with instructions to release them either against payment or against acceptance of a time draft. Less secure than a letter of credit — the bank provides no payment guarantee — but simpler and cheaper to arrange.
• DPU (Delivered at Place Unloaded)
  An Incoterms® 2020 rule similar to DAP, except the seller is also responsible for unloading the goods at the named destination. DPU is the only Incoterm that requires the seller to unload goods at the destination.
• Dual-use goods
  Products, software, or technology that have both legitimate civilian applications and potential military or weapons-related uses. Dual-use goods are subject to export controls in most developed countries and may require an export licence depending on the destination country and end user.

E-F

• Escrow
  Using independent 3rd party to hold buyer payment and release it to seller upon successful delivery.
• EXW (Ex Works)
  The Incoterms® 2020 rule representing the minimum obligation for the seller. Goods are made available at the seller's premises; the buyer is responsible for all costs and risks from that point, including export clearance, loading, freight, insurance, and import clearance. Not recommended when the buyer cannot legally arrange export clearance in the seller's country.
• FCL (Full Container Load)
  A shipping arrangement in which an importer or exporter fills and seals an entire container.
• FCA (Free Carrier)
  An Incoterms® 2020 rule for any mode of transport. The seller delivers goods to the carrier or another named party at a named place. The seller handles export clearance; the buyer arranges the main carriage.
• Forfaiting
  A form of post-shipment trade finance in which an exporter sells medium-term trade receivables at a fixed discount to a forfaiter in exchange for immediate cash.
• FOB (Free On Board) 
  The Incoterms® 2020 rule where the seller delivers the goods loaded onto the vessel at the agreed port of shipment. Once the goods are onboard, risk transfers from seller to buyer.
• Forward contract (FX)
  An agreement between a company and a bank to exchange a specified amount of one currency for another at a predetermined rate on a future date.
• Freight forwarder
  A company that organises shipments of goods on behalf of exporters or importers. Services typically include booking cargo space with carriers, preparing and checking shipping documents, coordinating customs clearance, and arranging inland transport.
• FTA (Free Trade Agreement)
  A legally binding treaty between two or more countries that reduces or eliminates tariffs, quotas, and other trade barriers between member countries.

G-L

• GSP (Generalised System of Preferences)
  A unilateral trade preference scheme under which developed countries grant reduced or zero import tariffs on products from developing countries without requiring reciprocal concessions.
• Harmonised System (HS)
  An internationally standardised product nomenclature maintained by the World Customs Organization (WCO), used to classify all traded goods. HS codes are six-digit numbers at the international level, extended to 8–10 digits by individual countries. The HS code determines applicable import duty rates, licensing requirements, and eligibility for preferential tariff treatment under trade agreements.
• HS code
  A numeric code assigned to a specific product under the Harmonised System. The six-digit international code is structured as a two-digit chapter, four-digit heading, and six-digit subheading.
• International Commercial Terms (Incoterms)
  A set of 11 standardised trade terms published by the International Chamber of Commerce (ICC) that define the allocation of costs, risks, and responsibilities between buyers and sellers in international (and domestic) contracts of sale. 
• LCL (Less than Container Load)
  A shipping arrangement in which a shipper's goods are consolidated with cargo from other shippers into a single container.
• Letter of credit (LC)
  A written undertaking issued by a bank (the issuing bank) at the buyer's request to pay the seller a specified sum, provided the seller presents documents that strictly comply with the conditions stated in the LC within the specified time.

M-R

• MFN (Most Favoured Nation) rate
  The standard import tariff rate a WTO member country applies to imports from all other WTO members.
• NVOCC (Non-Vessel Operating Common Carrier)
  A freight forwarder that issues its own bills of lading (House B/Ls) to shippers and acts as a carrier from the shipper's perspective, while itself contracting with actual vessel operators (Master B/L).
• Open account
  A trade payment method in which goods are shipped and delivered before payment is due.
• Phytosanitary certificate
  An official document issued by a national plant protection organisation (NPPO) certifying that plants, plant products, or other regulated articles meet the phytosanitary requirements of the importing country.
• Pre-shipment inspection (PSI)
  A quality control inspection conducted when at least 80% of a production batch is complete, before goods are packed and shipped.
• Rules of origin (RoO)
  Criteria defined in a free trade agreement or preference scheme that determine whether goods qualify as "originating" in a member country, and therefore eligible for preferential tariff treatment.

S-Z

• Sanctions
  Economic and trade restrictions imposed by a government or international body against targeted countries, entities, or individuals, typically for foreign policy or national security reasons.
• Sea waybill
  A non-negotiable sea freight transport document that serves as evidence of the contract of carriage and a receipt for goods. 
• Supply chain finance (SCF)
  A financing arrangement (also called reverse factoring) in which a large buyer establishes a program with a bank or fintech platform enabling their suppliers to receive early payment on approved invoices. The buyer retains extended payment terms; the supplier accesses cheaper, faster financing.
• SWIFT transfer
  An electronic bank-to-bank payment instruction sent through the Society for Worldwide Interbank Financial Telecommunication (SWIFT) network.
• TEU (Twenty-foot Equivalent Unit)
  The standard unit of measurement for container capacity - equivalent to one 20-foot standard shipping container. A 40-foot container equals 2 TEU. Global shipping capacity, port throughput, and container volumes are typically expressed in TEUs.
• THC (Terminal Handling Charge)
  A charge levied by the terminal operator (or the shipping line on behalf of the terminal) for handling the container at the port terminal.
• Trust receipt
  A banking instrument that allows an importer to take possession of shipping documents (and therefore the goods) from their bank without immediate full payment, in exchange for a written undertaking (the trust receipt) to hold the goods or the proceeds of their sale in trust for the bank.