E-Commerce Business Solutions

International Trade Terms You Must Know 2024

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The following definitions can serve as your own personal translator whenever you encounter jargon that you are not familiar with while sourcing products. This resource covers terms for sourcing, international trade, the wholesale industry, packing and shipping.

Sourcing Terms

MOQ (Minimum Order Quantity):

  • Definition: MOQ is the fewest number of units a supplier or manufacturer is willing to sell to a customer at once.
  • Purpose: It ensures that the supplier can turn a profit on a particular order.
  • Example: If a widget supplier has an MOQ of 100 units (or at least $10,000), they won’t sell fewer than that quantity to a single customer.

Request for Quote (RFQ) 

  • Request for Quote (RFQ) is a business process where a company or public entity solicits price quotes from suppliers for specific products or services. Here are the key points:
  • Purpose:
    • An RFQ seeks competitive quotes from potential vendors or contractors.
    • It’s especially useful when the quantity needed for a standard product is known and requirements are ongoing.
  • Comparison with RFP (Request for Proposal):
    • RFQ: Focuses on comprehensive price quotes.
    • RFP: Used for unique, niche projects with unknown quantities and specifications.
  • Process:
    • Preparation: The company defines its requirements and prepares the RFQ.
    • Processing: Vendors submit their quotes based on the specified terms.
    • Awarding: The contract is awarded to the vendor meeting criteria and presenting the lowest bid.
    • Closing: Finalize the agreement with the selected vendor.
  • Advantages of RFQ:
    • Efficiency: Reduces procurement time by targeting specific vendors.
    • Security: Receives bids only from preferred vendors.
    • Uniform Format: Easy comparison of quotes within the company.

International Trade Terms

Let’s explore the definitions of the terms related to trading and international business:

  1. Acceptance:
    • The formal agreement by the drawee (usually a bank) to pay a bill of exchange or draft at maturity.
    • It signifies the acceptance of the obligation to pay the specified amount.
    • Commonly used in international trade transactions.
  2. Acceptance Draft:
    • A type of bill of exchange that the drawee has accepted and is legally obligated to pay at maturity.
    • Often used in trade finance and international transactions.
  3. Airway Bill (AWB):
    • A document issued by an airline or air freight carrier as a receipt for goods shipped by air.
    • It serves as evidence of the contract of carriage and includes details about the shipment.
  4. All-Risk Clause:
    • An insurance provision that covers all risks of loss or damage to the insured property, except for specific exclusions.
    • Commonly used in marine cargo insurance.
  5. ATA Carnet:
    • An international customs document that allows duty-free and tax-free temporary importation of goods for specific purposes (e.g., exhibitions, trade shows).
    • Simplifies customs procedures for temporary exports and re-imports.
  6. Authority to Pay (ATP):
    • A document authorizing a bank or financial institution to make payments on behalf of a client.
    • Often used in trade finance and letters of credit.
  7. Balance of Trade:
    • The difference between a country’s exports and imports of goods.
    • A positive balance indicates a trade surplus, while a negative balance indicates a trade deficit.
  8. Beneficiary:
    • The party (individual or entity) who receives the benefits or proceeds from a financial instrument or transaction.
    • For example, in a letter of credit, the beneficiary is the exporter or seller.
  9. Bill of Exchange:
    • A written order from one party (drawer) to another (drawee) to pay a specified amount to a third party (payee) at a future date.
    • Used in international trade for payment and financing purposes.
  10. Bill of Lading (B/L):
    • A document issued by a carrier (ship, airline, or trucking company) acknowledging receipt of goods for shipment.
    • It serves as evidence of the contract of carriage and title to the goods.
  11. Bounded Warehouse:
    • A secure storage facility where imported goods can be stored without payment of customs duties or taxes.
    • Goods can remain in the bounded warehouse until they are re-exported or released for domestic consumption.
  12. Brussels Tariff Nomenclature:
    • An international classification system for goods, used to determine customs duties and tariffs.
    • Also known as the Brussels Nomenclature or the Harmonized System (HS).
  13. Buying Agent:
    • An intermediary who assists buyers (often from different countries) in sourcing products from suppliers or manufacturers.
    • Helps negotiate prices, quality, and terms.
  14. C & F (Cost and Freight):
    • A trade term indicating that the seller is responsible for the cost of goods and freight charges to the named port of destination.
    • The buyer is responsible for unloading and other costs.
  15. Carrier:
    • The party (shipping company, airline, or trucking company) responsible for transporting goods from one location to another.
    • Can refer to both physical carriers and carriers of information (e.g., shipping documents).
  16. Certificate of Free Sale:
    • A document issued by a government authority or regulatory agency certifying that a product is freely sold in the country of origin.
    • Often required for exporting certain goods.
  17. Certificate of Inspection:
    • A document issued by an independent inspection agency verifying the quality, quantity, and compliance of goods with specified standards.
    • Used in international trade to assure buyers of product quality.
  18. Certificate of Manufacture:
    • A document issued by the manufacturer or producer certifying the origin and production details of goods.
    • Often required for customs clearance.
  19. Certificate of Origin:
    • A document that certifies the country of origin of goods.
    • Used for customs purposes and to qualify for preferential trade agreements.
  20. CFR (Cost and Freight) and CIF (Cost, Insurance, and Freight):
    • Trade terms specifying the seller’s responsibility for costs and risks up to a certain point (usually the port of destination).
    • CFR includes freight costs, while CIF includes freight and insurance costs.

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