Export Terminology
A
Additional
costs: the price you negotiate with overseas
customers also needs to include some additional
costs. For example, transportation costs may include
the cost of special packaging and labelling, while
the detailed documentation you generally need may
involve extra costs.
Ad valorem:
according to value (see Duty).
Advising
bank: bank operating in an exporter's country
that handles letters of credit (see Letter of credit)
for a foreign bank by notifying the exporter that
the credit has been opened in its favour. The advising
bank lets the exporter know exactly what the conditions
of the letter of credit are but isn't necessarily
responsible for payment.
Air waybill:
a bill of lading (see Bill of lading) that covers
both domestic and international flights carrying
goods to a specified destination.
Anti-dumping:
if a company exports a product at a price lower
than the price it normally charges in its home market,
it's said to be dumping the product. Member countries
of the World Trade Organisation may be able to impose
certain measures on other members that dump products
on their markets.
Asian dollars:
US dollars deposited in Asia and the Pacific Basin.
ATA:
admission temporaire or temporary export, used in
conjunction with the term carnet.
B
Bill of
exchange: written document in which a supplier
is guaranteed payment of a specified amount by a
drawee by a fixed date. The drawee is generally
the customer but is likely to be the customer's
bank if the bill of exchange is used with a term
letter of credit (see Letter of credit). The bill
can request immediate payment ("at sight"
or "on demand"). It can specify payment
at a later date ("the term"). Drawees
become legally liable for payment once they accept
(agree to pay) the bill.
Bill of
lading: document generally issued by a shipper
which acts as a receipt for goods received for carriage.
In addition it provides evidence of the terms of
contract between a shipper and a transport company
under which goods are moved between specified places
for a specified charge. And a bill of lading also
acts as a transferable document of title to goods
- meaning goods can be bought and sold simply by
exchange of the bill. Bills of lading are used for
all modes of transport - they're known as air waybills
for airfreight. See also Air waybill.
Bonded warehouse:
warehouse authorised by Customs for storing goods
on which payment of duty is deferred until the goods
leave the warehouse.
British
International Freight Association (BIFA): body
representing the UK international freight services
industry. BIFA can provide you with a list of freight
forwarders (see Freight forwarders) and customs
clearing agents. See the the BIFA website for
more information.
British
Trade International: Government body operated
by the Department of Trade and Industry and the
Foreign and Commonwealth Office to promote trade
development and promotion in the UK. Through UK
Trade & Investment, it offers free and impartial
advice to businesses which trade abroad, both online
and through its information centre. See the UK
Trade & Investment website for more information.
C
Carnet:
Customs document which allows you to carry or send
goods temporarily into certain countries for display
or demonstration purposes without paying duty or
posting a bond.
Cash in
advance (CIA): full payment for exported goods
before shipment is made.
Cash with
order (CWO): the buyer pays for goods when ordering.
The transaction is binding on both supplier and
customer.
Certificate
of inspection: document certifying that certain
types of goods (such as perishable items) were in
good condition before shipment.
Certificate
of insurance: shows insurance cover has been
arranged for goods being exported. It should detail
the degree of cover and list the policy number and
all other relevant details.
Certificate
of manufacture: statement (often legalised by
a notary) in which a producer of goods certifies
that manufacture has been completed and the goods
can be bought.
Certificate
of origin (C/O): statement on the origin of
goods. You may need one if you're exporting to a
number of countries. They're available from your
chamber of commerce for goods of EU origin.
CFR:
cost and freight. This is an Incoterm - see the
Incoterms 2000 website for more information. The
seller clears the goods for export and meets the
cost of carriage to the port in the destination
country. But the buyer bears all risks after delivery,
which occurs when goods pass over the ship's rail
in the port of shipment. The buyer also bears any
extra costs caused by events that happen after delivery.
CIF:
cost, insurance and freight. This is an Incoterm
- see the Incoterms 2000 website for more information.
The seller clears goods for export and meets the
cost of carriage to the port in the destination
country, including insurance. But the importing
buyer bears all risks, except marine insurance,
after delivery. Delivery occurs when goods pass
over the ship's rail in the port of shipment. The
buyer also bears any extra costs caused by events
that happen after delivery.
CIP:
carriage and insurance paid to (named place of destination).
This is an Incoterm see the Incoterms 2000 website
for more information. The seller clears the goods
for export and pays for delivery to the named destination.
The goods are delivered when the seller passes the
goods to its carrier. From this point the buyer
takes responsibility for all costs and risks. But
the seller must also take out insurance to cover
the buyer's risk during transport.
Commercial
agent or sales agent: person or organisation
appointed by exporter to sell and distribute goods
in a foreign country. (See Distributor).
Commercial
invoice: bill listing the goods and prices shipped
by an exporter.
Confirmed
letter of credit: letter of credit issued by
an overseas bank but also confirmed by a UK bank.
Under these circumstances you'll be paid by the
UK bank even if your buyer or the other bank defaults,
providing the terms of the letter are met fully.
(See Letter of credit).
Consignment:
when goods are exported subject to consignment,
the exporter only receives payment on completed
sales. Any unsold items may be returned to the exporter,
usually at their expense. This is a high-risk method
of payment for an exporter.
Consolidator:
company issuing bills of lading (see Bill of lading)
for the carriage of cargo on vessels or aircraft.
Containerised/containerisation:
the packing of goods for transport in sealed containers.
Convertible
currency: a currency that can be bought and
sold for other currencies at will.
Correspondent
bank: bank that handles in its own country the
business of a foreign bank.
CPT:
carriage paid to (named place of destination). This
is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export and pays for delivery to the named destination.
The goods are delivered when the seller passes the
goods to its carrier. From this point the buyer
takes responsibility for all costs and risks.
Credit-risk
insurance: insurance for exporters designed
to cover risks of non-payment for delivered goods.
(See Export Credits Guarantee Department).
Customs
and Excise: UK Government department with responsibility
for collecting VAT and other taxes and customs duties.
It's also charged with preventing illegal imports
of drugs, alcohol and tobacco smuggling and VAT
and duties fraud.
Customs
commodity code: eight-digit commodity code required
for exports outside the EU. It needs to be entered
on your customs export declaration. Sometimes known
as the "first eight digits of the Customs Tariff
number" or "CN (Customs nomenclature)
code", it's also used as the basis for the
import declaration in the country of destination.
For more information read Customs Notice 600 on
the Customs and Excise website.
Customs
Freight Simplified Procedures (CFSP): electronic
declaration methods that simplify customs procedures
for clearing non-EU imported goods either at a frontier
or upon removal from a free zone or customs warehouse.
See the Customs and Excise website for more information.
D
DAF:
delivered at frontier (named place). This is an
Incoterm - see the Incoterms 2000 website for more
information. The seller clears the goods for export
and pays for delivery. The goods are delivered -
not unloaded or cleared for import - when they arrive
at the named place at the frontier of the importing
country but outside the customs border. The buyer
clears the goods for import and is responsible for
all costs and risks from this point.
Dangerous
goods note: document required when shipping
hazardous or potentially hazardous goods.
DDP:
delivered duty paid (named place of destination).
This is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export and pays for delivery to the named destination.
The seller meets all the costs and risks of clearing
the goods for import, though the buyer may agree
to bear some of the costs. The goods are delivered
when they arrive, cleared for import but not unloaded,
at the named destination.
DDU:
delivered duty unpaid (named place of destination).
This is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export and pays for delivery. The goods are
delivered when they arrive at the named destination
place, not cleared for import or unloaded. The buyer
is responsible for clearing the goods for import
and the associated costs and risks, though the seller
can agree to bear some of these costs.
DEQ:
delivered ex quay (named port of destination). This
is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export and pays for delivery. The goods are
delivered when they're placed on the quay at the
named port of destination. The buyer is responsible
for clearing the goods for import and the associated
costs, unless agreed otherwise.
DES:
delivered ex ship (named port of destination). This
is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export and pays for delivery. Delivery occurs
when the goods are placed at the disposal of the
buyer on board the ship at the named port of destination.
From this point the buyer bears the costs and risks
of clearing the goods for import and unloading.
Distributor:
overseas agent which sells for a supplier directly
and maintains an inventory of the supplier's products.
(See Commercial agent or sales agent).
Documentary
collection: where you draw up a bill of exchange
(see Bill of exchange), which allows you to keep
control of your goods and raise additional finance.
An overseas bank, acting on your bank's behalf,
will only release the documents necessary for your
customer to take possession of goods once formally
accepts the terms of the bill. Documentary collections
are typically used for exports outside the EU to
customers you have an established relationship with.
Documentary
credits: letters of credit are the most secure
method of payment (other than payment in advance).
Your customer arranges a letter of credit with its
bank which pays a corresponding bank in the UK -
the advising bank - once you submit all the necessary
documentation. An accurate and authentic "irrevocable"
letter of credit, verified by your bank, carries
little credit risk. Documentary credits are typically
used for exports to customers you have not sold
to before, and for customers and countries that
present particular credit risks.
Duty:
you may be required to pay import duty if you are
bringing goods into the UK. There is no duty on
goods that are in free circulation (see Free circulation)
within the EU.
For goods that are imported from outside the EU,
the rate of duty depends on the product and the
country of origin. Duty is based on the cost, insurance
and freight value (ad valorem duties) of the goods.
Rates of duty can vary suddenly and without warning
and can have a significant effect on the value of
the goods.
E
EFTA: European Free Trade
Association. Members are Iceland, Norway, Liechtenstein
and Switzerland.
Eurodollars: US dollars deposited
in Europe.
Export Cargo Shipping Instruction
(ECSI): issued by exporters to the freight forwarder
or carrier, telling them what the goods are, the
terms and conditions for movement of the goods and
cost allocation.
Export Credits Guarantee Department
(ECGD): the UK Government's official export
credit agency. It helps UK manufacturers and investors
trade overseas by providing them with insurance
and backing for finance to protect against non-payment.
For more information visit the Export Credits Guarantee
Department website.
Export invoice: part of the
documentation needed if you ship your goods abroad.
It should contain a full description of your goods,
their price, weight and country of origin.
Export house: intermediary
organisation between an exporter and a buyer.
Export licence: government
document legally required for the export of certain
goods such as pharmaceuticals, chemicals and munitions.
It's the exporter's responsibility to obtain a licence
if necessary.
Export packing list: this
is attached to the outside of the package to be
shipped and specifies the weight, volume and type
of cargo.
Export preferences: preferential
rates of duty charged on certain goods exported
from the UK, in effect allowing the buyer to benefit
from a lower or zero rate of Customs duty.
To be eligible, your goods must satisfy a number
of rules. You can find out more on the Customs and
Excise website.
EXW: ex work. This is an
Incoterm - see the Incoterms 2000 website for more
information. The seller makes the goods available
to the buyer at their own premises or another named
place. The buyer assumes all the costs and risks
of loading and transporting the goods.
F
FAS: free alongside ship.
This is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export. Delivery takes place when the goods
are placed alongside the relevant ship at a named
port. From this point the buyer bears all costs
and risks.
FCA: free carrier. This is
an Incoterm - see the Incoterms 2000 website for
more information. The seller is responsible for
clearing the goods for export and delivering them
to a specified place. This could be the seller's
premises or those of a carrier or freight forwarder.
The place of delivery determines who is responsible
for loading or unloading the goods. Once the goods
are delivered the buyer bears all costs and risks.
FOB: free on board. This
is an Incoterm - see the Incoterms 2000 website
for more information. The seller clears the goods
for export and delivers when the goods are passed
over the ship's rail at the specified port. From
this point on the buyer bears all costs and risks.
Foreign and Commonwealth Office (FCO): government
department responsible for foreign affairs. With
the Department of Trade and Industry, the FCO manages
British Trade International to support international
trade by UK exporters and boost inward investment
by overseas firms in Britain.
Foreign-currency accounts:
it may be more convenient for you to set up foreign-currency
bank accounts if you frequently issue foreign-currency
invoices. In particular, a euro bank account gives
you flexibility in trading with businesses in eurozone
countries.
Foreign-exchange risk: you're
particularly at risk if you hold or receive a foreign
currency which is volatile or very weak. Some currencies
present extra difficulties - for example, there
may be exchange controls requiring government approval
before you can exchange a particular currency.
Forwarding agent: most smaller
importers use a forwarding agent to handle customs
clearance for goods coming into the UK from outside
the EU.
Forward foreign exchange contract:
exporters can hedge against the risk of adverse
exchange rate movements by using a forward foreign
exchange contract. You agree to sell the bank a
particular foreign currency at a fixed future date
for a price that is set now.
Free circulation: goods are
in free circulation in the EU if they originate
from an EU country or have already been imported,
all customs charges paid, into an EU country.
Free trade zone: port designated
by a country's government for duty-free entry of
non-prohibited goods.
Freight forwarder: if you
want to send goods overseas you'll normally need
the services of a freight forwarder. The forwarder
quotes for freight costs and other charges, prepares
most of the freighting and customs documents, arranges
marine insurance and attends to other freighting
details.
G
Groupage: this allows exporters
of small consignments to gain the benefits of containerisation.
A freight forwarder undertakes to group together
different exporters' consignments to fill a whole
container for a particular destination.
I
Import licence: some countries
may require import licences for certain or all goods.
As an exporter it's normally your customer's responsibility
to comply with import procedures, but it's a good
idea to check they're doing so.
Import paperwork: goods in
free circulation within the EU generally require
minimal documentation. But if your imports exceed
£221,000 you must provide Intrastat (see Intrastat)
declarations to Customs for statistical purposes.
And some goods need special documentation. Goods
imported from outside the EU require a range of
import documentation and may also need an import
licence. For more information, see our guide on
handling logistics and paperwork.
Incoterms (International Commercial
Terms): agreed rules which set out the delivery
terms for goods which are traded internationally.
They allow the buyer and seller to agree responsibilities
for the carriage of the goods, customs clearance
and a division of costs and risks. The current version
of Incoterms, agreed in 2000, contains 13 terms.
They are grouped into categories covering various
modes of transport. See the Incoterms 2000 website
for more information.
Inspection certificate: sometimes
required by the importer's country to confirm that
the shipped goods meet its national specifications.
Insurance policy: should
cover goods for at least their full value (110 per
cent is common), and include details of quantity
and route. Where necessary, it should also provide
for time extensions and transhipments.
Intrastat: system for collecting
statistics on the physical trade in goods (ie the
actual movement of goods) between the member states
of the European Union (EU). Businesses which import
or export goods worth more than a fixed threshold
must complete Intrastat supplementary declarations.
For more information, see the guide to Intrastat
on the UKTradeInfo website (PDF).
Inward processing relief (IPR):
if you intend to re-export goods you've imported
after processing them, you can apply for inward
processing relief. This means VAT and duty only
become payable if you decide to sell your goods
in the UK or if you fail to meet the conditions
of the scheme.
L
Letter of credit: banking
mechanism that allows importers to offer secure
terms to exporters. (See Documentary credits).
M
Marking: letters, numbers
and other symbols placed on cargo to enable it to
be identified more easily.
Marine insurance: warehouse-to-warehouse
insurance that covers exporters transporting goods
overseas for losses they can't legally recover from
the carrier. Despite its name, it covers all transport
modes. (See also Credit-risk insurance).
Movement certificate: required
where goods are being exported from the EU to a
country covered by EU trade agreements. These certificates
ensure preferential rates of duty on an exporter's
goods.
MTS (Multilateral Trading System):
the processes through which large numbers of countries
agree to trade with each other. The World Trade
Organisation is part of this system.
N
NCTE: Customs and Excise's
new computerised transit system, introduced in 2003.
NES: Customs and Excise's
new export system, introduced in 2002.
O
Open account: a trade arrangement
under which goods are shipped by an exporter without
guarantee of payment. This is similar to offering
credit to a UK customer, with the exporter bearing
all the risks of offering credit. Open account payment
should only be used if you have an established relationship
with the buyer and is typically for exports within
the EU.
Open General Import Licence (OGIL):
available from the Department of Trade and Industry,
this allows the import of most goods from outside
the EU without licensing formalities. But some goods
require a special licence and are listed in a schedule
to OGIL.
Open insurance policy: marine
insurance policy that applies to all shipments made
by an exporter over a period of time rather than
a single shipment. (See Marine insurance).
P
Payment in advance: an exporter
may be able to negotiate these terms for all or
part of its shipment. The exporter bears no risks
or financing costs. Payment or part-payment in advance
is typically used for low-value sales to individuals
or new customers.
Pre-shipment inspection (PSI):
a few countries require goods and documents to be
examined before export by an independent agency.
In some countries it's optional but can be requested
by the customer. Usually, countries where PSI applies
have appointed one dedicated agency to perform the
pre-shipment inspection. Normally, your freight
forwarder or customer will be able to advise on
the necessary arrangements.
Pro forma invoice: invoice
provided by an exporter to an import customer before
shipping. Typically used when the importer has to
organise foreign exchange or get an import licence.
Q
Quota: quantity of a particular
type of goods that a country allows to be imported
before levying duty or restrictions.
Quotation: offer to sell
goods at a stated price and under specified conditions.
R
Reduced rates of duty: some
goods can be imported into the UK at a nil or reduced
rate of customs duty because they originated in
a preference country or are from a non-EU country
and qualify for a temporary suspension of customs
duty. You can get more information on which countries
get preference and temporary suspension of customs
duty on the Customs and Excise website. (See also
Tariff quotas).
Re-exports: goods temporarily
imported into a country and then exported again.
Because they are only imported temporarily, the
importer or agent is usually permitted to reclaim
some or all of the import duty and VAT paid on the
goods. Usually the importer must comply with special
customs control procedures, such as specific warehousing
regulations. (See also Inward processing relief).
S
Single Administrative Document
(SAD): also known as the C88, this document
must be completed for all exports, imports and goods
crossing the EU. See the Customs and Excise website
for more information.
SITPRO (formerly The Simpler
Trade Procedures Board): public body which aims
to help businesses trade more effectively across
national borders and cut the red tape associated
with international trade. See the SITPRO website
for more information.
Standard industrial classification
(SIC): standard numerical code used by the UK
Government to classify products and services.
Standard international trade
classification (SITC): standard numerical code
system developed by the United Nations to classify
commodities used in international trade.
Standard shipping note: document
completed by the exporter which tells destination
ports and container depots how the goods should
be handled. A dangerous goods note must also be
sent with hazardous goods.
T
Tariff: customs duties on
imports of goods. They give price advantages or
parity to similar locally produced goods and raise
revenues for the government that levies them.
Tariff quotas: European Union
(EU) system to allow the importation of limited
amounts of certain goods (sometimes from specified
countries) at a rate of duty lower than would otherwise
apply.
Terms of delivery: cover
the division of responsibility for the costs of
an export or import sale and for the risk of loss
or damage in transit.
TIR: transports internationaux
routiers. International system that allows goods
to be packed in a container under customs inspection
at point of origin. The container can then pass
across all national frontiers without being opened
by customs officers.
U
UNCTAD: United Nations Conference
on Trade and Development. Main arm of the United
Nations General Assembly dealing with trade, investment
and development issues.
V
VAT: value added tax - in
general terms VAT is payable on all imports at the
same rate that would apply to the product or service
if supplied in the UK. Many exports are zero-rated
for VAT. There are complex rules surrounding VAT
on imports and exports, and businesses should seek
advice from the Customs and Excise website or Tel
0845 010 9000.
W
World Trade Organisation (WTO):
intergovernmental organisation set up in 1995 to
negotiate and administer trade agreements, handle
trade disputes and monitor national trade policies.
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