Global connections anytime, anywhere

Common Terms

Global connections anytime, anywhere

NOTE: AXISnet Global Ventures makes no warranties, express or implied, regarding the use of this SAMPLE document. In no event shall AXISnet Global Ventures be liable to anyone for any problem, claim, or loss arising out of the use of this SAMPLE document . Certain parts of this document have been purposely omitted . Your final document should be reviewed by a lawyer before use. AXISnet Global Ventures is not engaged in practicing law nor provide legal advice. This is just part of AXISnet Global Ventures’ ongoing contributions towards a better understanding and implementation of proper international trade documentation . Certain variations of the document should be expected .

Commonly Used Terms in International Trade

Banking instruments

LC
(Letter of Credit) - Issued and guaranteed by the bank for the full amount of the contract . Follows ICC UCP500 guidelines.

DLC (Documentary Letter of Credit) - Issued and guaranteed by the bank for the full amount of the contract, each shipment paid separately.

RLC (Revolving Letter of Credit) - Issued in the amount of each shipment at a time.

ARLC (Automatic Revolving Letter of Credit) - Automatically reinstated and guaranteed successively in the amount of each shipment for a pre-set schedule, as decided between buyer and seller.

SBLC (Standby Letter of Credit) - Issued for the full amount of the contract, but negotiable after all deliveries have been made,

BCL - Bank Clearance Letter/  Bank Comfort Letter/  Bank Capability Letter

KTT (Key Tested Telex) - Secure way for banks to communicate to each other.

PBG ( Prime Bank Guarantee) - Will guarantee payment from a prime world bank.

BG - Bank Guarantee

PB - Performance Bond



1) LOI = Letter of Intent
This is a letter by which the Buyer expresses its intent to buy the product. It describes the name of the product, the product specifications and country of origin, quantity, term of the purchasing contract, desired price, terms of transaction (FOB, CFR, CIF, etc.), desired shipment date, method of payment and validity period of LOI.
On the other hand, the Seller's side will sometimes ask for disclosure of the Buyer's bank's name, bank account number, etc. and for its understanding of a "soft probe" so as to investigate the Buyer's ability to pay. A "soft probe" means the procedure of contacting the Buyer's bank through the Seller's bank to briefly investigate the Buyer's ability to pay.


2) BCL = Bank Comfort Letter (Bank Capability Letter)
This is a letter issued by the Buyer's bank to the Seller and certifies that the Buyer has sufficient ability to pay for the transaction in question. The BCL may be demanded by the Seller at the stage of the LOI, the time of signing the contract, etc. Several cases are possible.


3) FCO = Firm Corporate Offer (Full Corporate Offer)
This is a formal offer by which the Seller proposes details of the transaction and the final price. If the Buyer accepts these terms, it signs the offer and returns it to the Seller. Next, the Seller sends a draft of the contract.
Depending on the transaction, the two parties will sometimes enter negotiations on concluding the contract directly without going through the FCO process.


4) POP = Proof of Product
In the same way as the Seller thinks the Buyer's ability to pay is important, the Buyer finds it important to determine if the Seller really owns the products in question or has the right to deal in them. A document proving the ownership or right of trade of the product is called a "POP".
Specifically, this includes an export license issued by an official organization, a warehouse receipt and certification of results of inspection by an independent third party certification organization. However, it is essential to determine if the documents are genuine.
Further, as a method to ensure a more reliable progress in the process, sometimes a POF (Proof of Funds/document proving the Buyer's ability to pay) and POP are exchanged between the Seller's and the Buyer's banks.


5) BG = Bank Guarantee, SBLC = Stand By Letter of Credit, PB = Performance Bond

- A BG is, as the name implies, a bank guarantee. The bank guarantees that the Buyer will pay the debt to the Seller.
- An SBLC differs from a usual L/C (Letter of Credit) in that it is a special letter of credit with no terms requiring attachment of a bill of lading (type of clean letter of credit) and is considered a bank guarantee issued in the form of a letter of credit.
- In the event the Buyer defaults on its debt, in both a BG or SBLC, the issuing bank guarantees payment to the Seller.
- A PB is a proof of performance. It guarantees payment to the Buyer of a fixed percentage of the export price (for example, 2%) in the event of the Seller defaulting on the contract to export to the Buyer as contracted for. Due to this, if the Seller defaults on the contract, the Buyer can be compensated for the expenses required up to that point. Specifically, this is set by the Seller for the Buyer in the form of a BG or SBLC.
 

Common Export and Shipping Terms

A/C - Account
ASWP - Any Safe World Port
ASSP - Any Safe Suitable Port
AWB - Air Way Bill
B/L - Bill of Lading
C&F or CNF - Cost & Freight ( not in INCOTERMS 1990)
CIF - Cost, Insurance & Freight
CIF&C - Cost, Insurance, Freight & Commission
CKD - Completely Knocked Down
C/O - Certificate of Origin
COD - Cash On Delivery
D/O - Delivery Order
EDI - Electronic Data Interchange
ETA - Estimated Time of Arrival
ETD - Estimated Time of Departure
FCL - Full Container Load
FCO - Firm Corporate Offer (Full Corporate Offer)
FO - Free out
FOB - Free on Board
GSP - Generalised System of Preferences
IQF - Individually Quick Frozen
IWP - Internal Waters Processing
LOI - Letter Of Intent
NCND - Non Circumvention Non Disclosure
PFO - Pro Forma Offer
POA - Place Of Acceptance
POP - Proof of Product
QTY - Quantity
RO/RO - Roll-On/Roll-Off
SGS - Society General de Surveillance SA - International Commodity Inspection Agency
SHEX - Sundays and Holidays excepted
SHINC - Sundays and Holidays included
SITC - Standard International Trade Classification
SWIFT - Society For Worldwide Interbank Financial Telecommunications - for interbank transfers
TT - Telegraphic Transfer
 


INCOTERMS 2000

The thirteen Incoterms are split into four distinct groups:

Group E - where the goods are made available to the buyer at the seller's premises;

Group F - where the seller must deliver the goods to a carrier appointed by the buyer;

Group C - where the seller must contract for the carriage of the goods without assuming risk of loss of, or damage to the goods or additional costs due to events occurring after shipment;

Group D - where the seller has to bear all costs and risks required to bring the goods to the place of destination.

The following is a list of all of the Incoterms, the group to which they belong and a brief outline of responsibilities under that Incoterm. However, it should be remembered that this is just a brief outline and is not a substitute for reading and understanding Incoterms 2000 itself. Additionally it has been noted whether the term is suitable for any mode of transport or just conventional maritime and inland waterway transport.



Group E Departure

EXW - Ex Works
Named place - Any mode of transport.
The seller must place the goods at the disposal of the buyer at the seller's premises or another named place not cleared for export and not loaded on any collecting vehicle.



Group F Main Carriage Unpaid

FCA - Free Carrier
Named place - Any mode of transport.
The seller must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place.

FAS - Free Alongside Ship
Named port of shipment - Maritime and inland waterway transport only.
The seller must place the goods, cleared for export, alongside the vessel at the named port of shipment.

FOB - Free on Board
Named port of shipment - Maritime and inland waterway transport only.
The seller delivers the goods, cleared for export, when they pass the ship's rail at the named port of shipment.



Group C Main Carriage Paid

CFR - Cost and Freight
Named port of destination - Maritime and inland waterway transport only.
The seller delivers the goods when they pass the ship's rail in the port of shipment and must pay the costs and freight necessary to bring the goods to the named port of destination. The buyer bears all additional costs and risks after the goods have been delivered (over the ship's rail at the port of shipment).

CIF - Cost Insurance and Freight
Named port of destination - Maritime and inland waterway transport only.
The obligations are the same as under CFR with the addition that the seller must procure insurance against the buyer's risk of loss of, or damage to the goods during carriage.

CPT - Carriage Paid To
Named place of destination - Any mode of transport.
The seller delivers the goods to the nominated carrier and must also pay the cost of carriage necessary to bring the goods to the named destination. The buyer bears all additional costs and risks after the goods have been delivered to the nominated carrier.

CIP - Carriage and Insurance Paid To
Named place of destination - Any mode of transport.
The obligations are the same as under CPT with the addition that the seller must procure insurance against the buyer's risk of loss of, or damage to the goods during carriage.



Group D Arrival

DAF - Delivered at Frontier
Named place - Any mode of transport.
The seller must place the goods at the disposal of the buyer on the arriving means of transport not unloaded, cleared for export but not cleared for import, at the named point and place at the frontier.

DES - Delivered Ex Ship
Named port of destination - Maritime and inland waterway transport only.
The seller delivers when the goods are placed at the disposal of the buyer on board the ship, not cleared for import, at the named port of destination.

DEQ - Delivered Ex Quay
Named port of destination - Maritime and inland waterway transport only.
The seller delivers when the goods are placed at the disposal of the buyer, not cleared for import, on the quay at the named port of destination.

DDU - Delivered Duty Unpaid
Named place of destination - Any mode of transport.
The seller must deliver the goods to the buyer, not cleared for import, and not unloaded at the named place of destination.

DDP - Delivered Duty Paid
Named place of destination - Any mode of transport.
The seller must deliver the goods to the buyer, cleared for import, and not unloaded at the named place of destination.


As can be seen this list runs from the term where the buyer has most of the responsibility (EXW) through to that where the seller has the majority of the responsibility (DDP).

It is worth noting that in Incoterms 2000 the only term that requires the buyer to clear the goods for export (including obtaining any export licence necessary) is EXW and the only term that requires the seller to clear the goods for import (including obtaining any import licence necessary) is DDP.

 

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