- AFFIDAVIT
This is a sworn statement issued by the seller confirming their allocation from the manufacturer for the required product and quantity.
- ASWP – Any Safe World Port
This is not an official incoterm, but is often used in sellers’ quotes as, e.g. “CIF ASWP”, and is widely accepted. CIF ASWP in a quote implies that CIF shipment would cost the same for delivery to any safe port in the world, whatever the distance from source.
- ATB – Authority To Board
Used for oil shipments – issued by the seller, it provides the authority to enable the buyer to board the vessel to confirm cargo availability, quantity and quality.
- ATL – Authority To Load
Authority to load buyer’s vessel
- AWB – Air Way Bill
The air freight equivalent of a B/L (BOL)
- BCL – Bank Comfort Letter
Also known as a Bank Capability Letter, or Bank Confirmation Letter, this is a letter from the customer’s bank confirming his ability to meet a certain level payment requirements. It should however be understood that this does not imply any guarantee of payment.
- BG – Bank Guarantee
This is a guarantee from the buyer’s bank for a short period of time (usually 1 or 2 months) covering payment for shipment of product if there is a problem with the principal LC.
- BOL – Bill of Lading
This is the receipt given by the shipping company when goods are loaded on board the vessel. This is an important document and gives title to the goods. It is needed by the buyer to obtain the goods from the port.
- BPU – Bank Payment Undertaking
- Broker/Agent/Mediator
The introducing party(s) coordinating the transaction between the buyer and the seller.
- Buyer
The company/institution/private party purchasing the product.
- CFR – Cost and Freight
The price includes the cost of the goods, loading, and freight to the named Destination Port. This does not include unloading charges. e.g. CFR Rotterdam.
- C&F, CNF
Same as CFR. These are old terms and should not be used. The correct term to use is CFR (see INCOTERMS).
- CIF – Cost, Insurance and Freight
This is the same as CNF, but also includes insurance to the named Destination Port. e.g. CIF Conakry.
- COO, CO or C/O – Certificate of Origin
A documentary statement signed by the exporter and attested to by a local Chamber of Commerce/Consulate, attesting the country of origin (normally the exporter’s) of the goods being shipped. Some countries have different types of CO (e.g. Singapore has ‘Ordinary’ and ‘Preferential’)
- CPA – Charter Performance Agreement
- DDP – Delivered Duty Paid
Delivered, all duty paid, to the named Destination (which can be customer’s works) e.g. DDP Madrid. All delivery charges and duties to the named destination are paid by the exporter.
- DLC – Documentary Letter of Credit
(see L/C)
- Draft Contract
This is the contract issued from the seller to the buyer detailing all the terms of the transaction. Once this is agreed and signed by both parties, it becomes the final contract.
- E&OE – Errors and Omissions Excepted
This is often found on invoices and quotations, and denotes that the author does not take responsibility if there are errors or missing text. Documents should therefore be thoroughly checked.
- EXW – Ex-Works
The buyer pays all costs of transport from pickup at the suppliers premises. e.g. EXW Delhi.
- FAS Free Alongside Ship
The supplier pays costs only to the port of loading. Loading and shipment are then the responsibility of the buyer. However the supplier must clear the goods for export. e.g. FAS Port Klang.
- FCA – Free Carrier
The supplier must deliver the goods, cleared for export, to the carrier nominated by the buyer at the named place.
- FCL – Full Container Load
The goods fill a container, no other purchaser’s goods will share the container. Often suppliers will not supply less then one full container. LCL would denote less than one container load. The goods do not fill the complete space of a container. Often containers are consolidated, i.e. they are filled with goods from different suppliers for different buyers in order to make efficient use of space.
- FCO – Full Corporate Offer
An official offer from the seller to the buyer which includes product details, allocation and specifications.
- FOB – Free on Board
This means that the supplier pays only to the point where the goods are loaded on board the carrying vessel. The seller must clear the goods for export. As soon as the goods are over the ship’s rail they become the responsibility of the buyer. e.g. FOB Cape Town.
- ICPO – Irrevocable Corporate Purchase Order
However this acronym can also mean Irrevocable Commission Payment Order (the meaning Irrevocable Confirmed Payment Order has also been quoted).
- IMFPA – Irrevocable Master Fee Protection Agreement
This is an agreement between the broker/agent/mediator and the seller/mandate stating any introductory commission payable once the transaction commences.
- INCOTERMS – International Commercial Terms
A set of import/export related shipping terms devised and published by the International Chamber of Commerce (ICC). These terms (Incoterms 2000) are internationally accepted and should always be used in order to avoid misunderstandings between trading partners.
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- LC or L/C – Letter of Credit
A Letter of Credit is a document issued by a bank which guarantees the payment of a buyer’s drafts for a specified period of time and up to a specified amount, under specified conditions. Effectively it is a method of payment where the buyer’s bank guarantees payment to the supplier. L/C are almost always irrevocable, can (if required) be transferable, and subject to terms (e.g. on SIGHT, 30 days, 60 days, etc.). For regular shipments a Revolving L/C is often utilised. The various types can be defined as follows:
- IL/C (Irrevocable Letter of Credit)
An Irrevocable Letter of Credit cannot be amended or cancelled without the consent of the issuing bank, the confirming bank (if confirmed), and the beneficiary. The payment is guaranteed by the bank if the credit terms and conditions are fully met by the beneficiary. The words Irrevocable Documentary Credit or Irrevocable Credit may be indicated in the L/C. It means that once the buyer’s conditions in the letter have been agreed to by the seller, they constitute a definite undertaking by the buyer’s bank and cannot be revoked without the seller’s agreement.
- Revocable Letters of Credit are rarely used as the terms of the credit can be canceled or amended by an overseas buyer at any time without notice to the seller.
- RL/C (Revolving Letter of Credit)
When a letter of credit (L/C) is specifically designated a Revolving Letter of Credit, the amount involved when utilized is automatically reinstated, that is, the amount becomes available again without issuing another L/C and usually under the same terms and conditions within a period of time (usually several months to one year). This saves administration when multiple shipments are involved.
- SL/C or SBLC (Stand-by Letter of Credit)
Is a financial guarantee or performance bond issued by a bank on behalf of a buyer. i.e. a written obligation of the issuing bank to pay a sum to a beneficiary on behalf of their customer in the event that the customer himself does not pay the beneficiary. The SL/C is regulated by the ICC-500 rules.
- RDLC Revolving Documentary Letter of Credit
The LC needs to be in a documentary format issued by the bank.
- LOI – Letter OF Intent
A letter from the buyer to the seller stating their intent to purchase a specific product. This letter will include buyer details, product and specification, payment instrument, shipping details and destination.
- Manufacturer
The company/factory which manufactures the product for sale.
- NCNDA – Non Circumvention Non Disclosure Agreement
This is an agreement by all parties in the transaction that they will not circumvent each other or disclose any sensitive information to any party outside the agreement with regards to the transaction.
- PB – Performance Bond
This is a form of guarantee provided by the seller which ensures they will deliver as per the schedule in the contract. If they fail to deliver, this percentage of the PB guarantee of the total value of the shipment becomes payable. The monthly PB value is the total value of the contract divided by the number of months agreed in the contract.
- POF – Proof Of Funds
A note from a buyer’s bank to the seller/seller’s bank that money is available to complete the proposed transaction. That buyer has the financial capability to carry out the transaction.
- POP – Proof Of Product / MT799:
This is provided by the seller’s bank and guarantees the products exists and is allocated to the buyer. The method by which the POP is provided is MT799 which is a bank message from the seller’s bank to the buyer’s bank confirming the existence and allocation of the product.
POP is often requested by customers or agents who believe it will give them some guarantee of the existence of the product and ability of the supplier to deliver. In practice many POPs are produced which are false. In practice it offers no proof at all, because once a POP has been drafted it is automatically out of date – the product could have been sold to another buyer and therefore no longer exists. Nevertheless, a POP is still occasionally requested as apparent proof that a seller/broker has the product, which is possibly not the case.
A POP for large quantities is often not genuine as it is unlikely that a manufacturer has stockpiled possibly millions of tonnes of a product. Large quantities of a products are made to order to match the terms of a specific contract, in this case a proof of allocation would be more relevant. A POP without a contract reference is also worthless, a POP with a contract reference can and will only be issued once a financial instrument has been put in place, so is therefore superfluous.
A POP is realistically provided only when the buyer’s bank issue a Bank Confirmation Letter (BCL) to the seller’s bank via SWIFT. Then the seller’s bank can check the availability of funds in the buyer’s bank and issue a POP to the buyer’s bank within an agreed time period (e.g. 5 days). In reality, the best and only real proof of product is when the seller can demonstrate the products in his possession at the dock side.
- RWA – A banking term meaning Readiness, Willingness and Availability of funds for a particular transaction.
- SBLC – Standby Letter of Credit
See LC or L/C
- Seller / Mandate
The company/private party officially representing the manufacturer to sell its product.
- SGS – Societe General de Surveillance
This is a market leading globally recognized company providing product inspection, verification and certification services. Their services are generally accepted and used as in many industries. Once the product is inspected and certified by SGS at the port of loading, payment will need to be drawn from the LC.
There are other companies (such as Bureau Veritas) who also provide inspection and certification services however SGS is the most commonly used due to its high profile global presence and general acceptance of quality.
- Soft Offer
A preliminary offer from the buyer to the seller which outlines the price and quantity of product, financial instrument requirements and shipping information.
- Soft Probe Authorization
This is an authorization from the buyer to the seller to contact the buyer’s bank to verify the buyer has the financial capability to carry out the transaction.
- SPA – Sale and Purchase Agreement.
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