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Glossary of Trade Terms

An adjustment factor incorporating the bunker and currency adjustments.
This is an adjustment of the freight rate caused by a significant change in the relative exchange rates in the shipping line’s basket of currencies between quotation of the rate and shipment date. This may be a positive (surcharge)or a negative (rebate) adjustment.
A demand for payment under a loan or guarantee. In the case of demand guarantees, the abusive resort to the guarantee (i.e. in the absence of non compliance by the principal) is sometimes referred to as an unfair call.
Case of Need
The drawer of a bill, and any endorser, may state the name of a party to whom the holder may resort in case of need, i.e. in case the bill is dishonoured by non-acceptance or non-payment. Such a party is called the referee in case of need.
Cash Against Documents(CAD)
Indicated invoice amount to be paid by the buyer/importer at sight on presentation of relative commercial documents e.g. bill of lading, insurance certificate, etc.
Cash before delivery
Certificate of inspection (also,certificate of quality)
A document certifying the quality, quantity and/or price of a given shipment of goods. The inspection certificate is often required by buyers, especially those paying via documentary credit, from sellers, in order to assure that the goods are of contract quality. Generally, the buyer designates a neutral,independent inspection company.
Certificate of origin
A certificate that is usually issued by a local Chamber of Commerce. It establishes the country where the merchandise was produced or manufactured.
It is often required by the customs authorities of a country as part of the entry process, for instance to grant preferential tariff treatment on imports of goods originating in a particular country.
c&f (C&F)
Cost and freight. Warning! This is a common but non-standard version of the Incoterm ‘CFR’.
Cost and Freight.
Charter Party
A contract under which a charterer agrees to rent/hire the use of a ship or part of a ship from the ship owner. The charterer in some cases is empowered to issue their own bill of lading, known as charter party bills of lading, subject to the conditions of the original charter party contract. the charter party itself is not a bill of lading, but rather a contract between the ship owner and charterer under which the ship owner hires out all or part of their ship for a given period to the charterer.
Cash in Advance
CIF (also c.i.f.)
Cost, Insurance and Freight. The exporter must procure and pay for insurance for the benefit of the importer. A documentary credit application necessarily reflects the insurance obligation, and the seller must present an insurance document in order to receive payment.
CIF & CI (also CIF&C or (CIF&I)
Cost, insurance, freight, and commission (C) and/or interest (I). Warning! These are variants on the standard Incoterms 2000 term ‘CIF’, so the additional abbreviations are not covered by international standard definitions. Traders may, therefore, wish to inquire and expressly stipulate as to the precise requirements implied by the additional ‘C’, ‘I’ or ‘CI’.
Carriage and Insurance Paid To... (named point).
UN Convention on Contracts for the International Sale of Goods (Vienna 1980).
Claused Bill of Lading
A claused, or foul bill of lading contains notations or remarks as to defects in lading the goods and/or packaging.
Cleared (through customs).
Clean bill of lading
A bill of lading indicating that the goods were received in apparent good order and condition. A clean bill is one which contains no notations of defect, damage or loss, and is signed by the carrier or its authorised representative. Note that a clean bill does not have to have any positive affirmation or mention to the effect, e.g. ‘clean bill’ or ‘merchandise in good order’. If a bill does contain a notation of damaged or missing merchandise, the bill of lading is called ‘claused’, ‘foul’ or ‘dirty’.
Clean Bills
Bills of Exchange (drafts, cheques, etc.) drawn payable overseas and which are not accompanied by commercial documents.
International road transport convention.
Collecting Bank
In a documentary collection, the bank acting as an agent for the seller’s bank in collecting payment or acceptance of a time draft from the buyer to be forwarded to the seller’s bank (the remitting bank).
Commercial Invoice
A document containing a record of the transaction between a seller (exporter) and a buyer (importer), containing information such as a complete listing and description of the goods including prices, discounts and quantities, and the delivery and payment terms. A commercial invoice is often used by government’s to determine the true value of goods for the assessment of Custom duties, and must therefore conform to the regulations of the importing country.
Commission Agent
A foreign sales representative who is paid a percentage of the sales they generate.
Common Carrier
In some jurisdictions, a legal term referring to carriers who offer transport services to the general consumer or business public. In contrast, for example, to carriers who may work as employees, sub-contractors or agents of the manufacturer/shipper.
Compound Duty
A combination of both a specific rate of duty and an ad valorem rate of duty. Whereas specific duties are based on factors such as weight or quantity, ad valorem duties are based on the value of the goods.
(also steamship conference, shipping conference) A group of steamship companies or shipping lines which have associated to offer regular service on specific routes at publicly-announced prices. Conferences generally offer specific rebates for regular or high-volume shipments. Shipment by conference lines is sometimes referred to as liner shipping and the freight rates are referred to as ‘liner terms’. Shipping lines which are not members of a conference for a particular route are known as outsiders, independent lines, or non-conference liners.
Confirmation of Documentary Credit
If the beneficiary, upon receipt of a documentary credit in their favour, has any doubts as to the standing of the issuing bank or the economic stability of the buyer’s country, they may request their local bank to confirm that credit. Additionally requests to confirm a credit can be incorporated into the documentary credit terms and conditions by the issuing bank. If the local bank is agreeable to add its confirmation, it adds its own separate engagement (normally under authority from issuing bank) to the credit and by this engagement it undertakes that correct drawings under the credit will be honoured. Thus the local bank adds to the credit its own backing in addition to that of the issuing bank.
Confirming Bank
In documentary credit transactions, the bank which adds its own irrevocable bank undertaking for payment in addition to that given by the issuing bank. The confirming bank is usually located in the exporter’s country.
In international export transactions: the intended receiver of a cargo shipment. The named person or legal entity having the right to claim the merchandise from the carrier at destination, and generally recognised as the legal owner for customs purposes. In international representation or distributorship relations (viz. consignment sales): the holder and re-seller of merchandise, who receives payment in the form of commission or a discount as and when sales are made but does not have to purchase the goods in advance.
This is a method of financing trade. When goods are shipped on a consignment basis, related shipping documents are despatched either directly to the importer or through their bank, which is instructed to deliver them, free of payment, against a form of receipt under-taking payment when the merchandise is sold, or within a specified time.
Payment is usually made when the goods are sold, or within a specified time thereafter, and title to the goods remains with the exporter until they are sold by the consignee.
Consular Declaration
A description of goods to be shipped, made in official form to a consulate.
Consular Invoice
An invoice covering a shipment of goods certified by the consul of the country for which the merchandise is destined. The invoice is used bycustoms officials of the country to verify the value, quantity and nature of the merchandise imported to determine the import duty. In addition, the export price may be examined to ensure that dumping is not taking place.
Contingency Insurance (ordifference in conditions)
Insurance coverage taken out by one party to an international transaction to complement and fill in any gaps in the coverage taken out by the counterparty. Thus, the open account exporter on FOB Incoterms does nothave an obligation to insure the goods during the main international transport, but may wish in any event to take out contingency insurance so that if the goods are lost or damaged there is no loss to the buyer (such a loss might lead to disagreements or disruption of commercial relations with the buyer, even if the seller was not legally at fault).
Contract of Carriage
This is an agreement between the shipper and the carrier (or their agent). Incoterms are not embedded in the contract.
Contract of Sale
This is an agreement between the seller and the buyer. Incoterms are embedded in the contract.
Correspondent Bank
A bank which performs certain operations on behalf of another bank, usually in a different country. Correspondent banks hold deposits with each other, and accept and collect items on a reciprocal basis. It is through networks of correspondent banks that trade banks are able to service and support international business transactions.
Counter- Purchase
Counter purchase is the agreement of an exporter to purchase a quantity of unrelated goods or services from a country in exchange for and approximate in value to the goods exported.
All foreign trade transactions resulting from exporters’ commitments to take products from the importers or from their respective countries in full or part payment for their exports. Countertrade is typical of trade with East European and less developed countries, which often suffer from a lack of foreign exchange and/or credit facilities. untertrade transactions include barter, buy-back or compensation, counterpurchase, offset requirements, and swap.
This is the French term for brokerage; brokerage fee.
Term given to describe the Bank’s procedure to protect itself from the risk of adverse fluctuations in foreign exchange dealings.
Cover Note
An insurance document indicating coverage of a particular shipment under an open cover policy. To be distinguished, particularly as regards presentation under a documentary credit, from an insurance policy or an insurance certificate. Also known as a ‘banker’s cover note’.
Carriage Paid To... (named point).
Credit Risk Insurance
An exporter’s insurance against non-payment by the importer.
Cross Rate
In calculating a spot or future price between two currencies, reference to their respective quotations in a third currency determines the cross rate.
Container service charge.
Currency Adjustment Factor(CAF)
This is an adjustment of the freight rate caused by a significant change in the relative exchange rates in the shipping line’s basket of currencies between quotation of the rate and shipment date. This may be a positive (surcharge) or a negative (rebate) adjustment.
Currency Future
A contract for the future delivery of a commodity, currency or security on a specific date. In contrast to forward contracts, futures contracts are for standard quantities and for standard periods of time and are primarily traded on an Exchange. Forward transactions enable importers and exporters who will have to make, or will receive, payment in a foreign currency at a future time, to protect themselves against the risk of fluctuations in the spot rate.
Currency Option
The contractually-agreed right to buy (call option) or to sell (put option) a specific amount of a foreign currency at a predetermined price on a specific date (European option) or up to a future date (American option).
Customer Foreign Currency Account CFCA)
These accounts record overseas currency funds held by the Bank on behalf of a customer.
Customs Broker
Licensed agent or broker whose funct goods through customs for importers.
Customs Duty
Tax levied by the government on goods crossing the customs border, usually a tax imposed on imports. Duties, or tariffs, are either based on the value of the goods (ad valorem duties), some other factors such as weight or quantity (specific duties), or a combination of value and other factors (compound duties).
Customs Union
An association between two or more countries whereby they eliminate tariffs and other import restrictions on each other’s goods and establish a common tariff on the goods from all other countries. The European Community is the best known example of a customs union.
Cash with order.
Hundredweight; unit of measurement.