Export Terms: A Comprehensive Guide to International Trade

International trade is a complex engine driving the global economy, involving a myriad of terms, contracts, and financial instruments. This article aims to demystify some of the most common terms in international trade, particularly those related to export, providing a clear understanding of their meaning and application.

Common Export Terms

ASWP (Any Safe World Port)

"Any Safe World Port" is a clause often used in export contracts, allowing the buyer to choose the delivery port they consider most convenient and safe for receiving the goods.

BG (Bank Guarantee)

A "Bank Guarantee" is a payment commitment issued by a bank on behalf of its client, assuring the beneficiary of the fulfillment of financial obligations. If the client fails to make a payment, the beneficiary can claim the guarantee to receive the funds.

BG 100% Payable Instrument

This type of bank guarantee must be issued by a top-tier bank, be irrevocable, accepted, and transferable, covering the full contract amount and payable at sight upon presentation of recognized documents.

Bill of Lading (B/L)

The "Bill of Lading" is a crucial document in international trade, acting as a transport contract and a receipt for shipped goods. It proves that the carrier has received the cargo and commits to delivering it to the recipient.

BCL (Bank Comfort Letter)

The "Bank Comfort Letter" is a statement from the buyer's bank, indicating that the buyer has sufficient funds to complete the purchase. Although not a payment guarantee, it's an important indicator of the buyer's solvency.

CIA (Cash In Advance)

Payment made before the goods are shipped. While it offers security to the seller, it poses a risk to the buyer, who pays without having the guarantee of receiving the goods.

CIF (Cost Insured Freight)

"Cost Insured Freight" indicates that the seller is responsible for the cost of transportation and insurance until the product reaches the destination port. This term is standard in many international transactions.

Commodities Exchange

Commodity exchanges are organizations that establish the rules for commodity trading. Knowing these rules is crucial for operating successfully in the international market.

Confirming Bank

A "Confirming Bank" is one that, in addition to the issuing bank, guarantees the fulfillment of a letter of credit, providing an additional layer of security for the seller.

DC (Draft Contract)

A "Draft Contract" is an initial version of the contract sent by the seller to the buyer for review and adjustments until both parties agree on the terms.

FCO (Full Corporate Offer)

A "Full Corporate Offer" is a document detailing the sale conditions, issued by the seller after preliminary negotiations have been concluded.

FOB (Free On Board)

Indicates that the seller is responsible for delivering the goods on board the ship at the buyer's chosen port, transferring the risks to the buyer from that point onward.

Formal (Final) Contract

The formal contract is drafted and signed by both parties after negotiation phases are complete, officially establishing the transaction terms.

GOST Certification

GOST certification is essential for exporting to Russia, ensuring that products meet Russian quality standards.

ICPO (Irrevocable Corporate Purchase Order)

An irrevocable purchase order issued by the buyer, detailing the specifications and conditions of the desired purchase.

LC/LOC (Letter of Credit)

A "Letter of Credit" is one of the safest payment instruments in international trade, guaranteeing payment to the seller, provided the specified terms are met.

LOI (Letter Of Intent)

A "Letter of Intent" expresses the buyer's interest in negotiating the purchase of goods, serving as a starting point for negotiations.

Additional Terms

Ocean Bill of Lading

A variation of the Bill of Lading specifically for sea transport. It serves as a contract between the cargo owner and the carrier, detailing the terms under which goods are transported from the origin port to the destination.

POF (Proof of Funds)

A document proving the buyer's financial capacity to make the purchase. It's often used in the early stages of negotiation to assure the seller that the buyer has the necessary resources to complete the transaction.

PB (Performance Bond)

A "Performance Bond" is a security deposited by the seller to guarantee to the buyer that the contract terms will be fulfilled. If the seller fails to deliver as agreed, the buyer can claim the bond to compensate for losses.

Prime Bank

Refers to the top 25 banks in the world, considered as highly reputable and reliable financial institutions. Transactions involving these banks are seen as more secure and are preferred in international trade.

Revolving Letter of Credit

A "Revolving Letter of Credit" allows for multiple withdrawals up to a certain limit, within a specified period. It's useful for contracts requiring regular deliveries, allowing the seller to draw funds for each shipment without the need for a new letter of credit for each transaction.

RWA (Ready Willing and Able)

A document issued by the buyer's bank confirming that the client has sufficient funds and is ready, willing, and able to proceed with the transaction. It's a preliminary guarantee before formalizing contracts or issuing letters of credit.

SBLC (Standby Letter of Credit)

A "Standby Letter of Credit" acts as a payment guarantee from the buyer's bank to the seller. Unlike a traditional letter of credit, it's used only as a last resort if the buyer fails to meet their financial obligations.

Sight LOC (Sight Letter of Credit)

This letter of credit requires payment to be made immediately upon the presentation and verification of the required documents. It's one of the fastest payment methods in international trade, ensuring the seller receives funds as soon as the documentation is accepted by the bank.

### SWIFT (Society for Worldwide Interbank Financial Telecommunication)

A global organization that facilitates communication and fund transfers between banks worldwide. Most international payments are conducted through the SWIFT network.

### SGS Inspection

An inspection conducted by Société Générale de Surveillance (SGS), one of the most respected inspection companies globally. SGS inspections ensure that products meet quality standards before shipment, providing peace of mind to the buyer.

Soft Probe

A banking procedure that allows the seller to discreetly verify the buyer's financial capacity without affecting the buyer's credit or reputation. It's a way to confirm the existence of sufficient funds for the transaction.

SONCAP (Standard Organisation of Nigeria Conformity Assessment Programme)

A mandatory conformity assessment program for all imports to Nigeria, ensuring that products meet Nigerian regulations and quality standards. Compliance with SONCAP is essential to avoid rejections or delays in imports to Nigeria.

Swift MT 799/MT103/MT-760

- MT 799: A free-format SWIFT message used for communication between banks, confirming the availability of funds or guarantees.

- MT 103: A standard SWIFT transfer used for international payment instructions between banks.

- MT-760: A bank guarantee or payment guarantee issued through the SWIFT network, locking the funds in the issuer's account until the transaction is completed.

Transferable Letter of Credit

A letter of credit that allows the beneficiary (seller) to transfer part or all of the credit to a third party, commonly used when the seller is an intermediary and needs to pay their final suppliers.

Understanding these terms is essential for navigating the complexities of international transactions, minimizing risks, and maximizing opportunities. Each term carries specific nuances that influence the structure and security of commercial operations, highlighting the importance of a deep understanding of the vocabulary of international trade. By mastering this language, businesses and professionals can optimize their trade operations, reduce risks, and maximize success on the global stage.

The landscape of international trade is ever-evolving, with new regulations, market dynamics, and financial instruments emerging regularly. Staying informed and adaptable is key to navigating this complex environment successfully. The terms and concepts outlined in this article provide a foundational understanding, but continuous learning and consultation with trade experts are essential for staying ahead in the competitive world of international commerce.

In conclusion, whether you are a seasoned trader or new to the field of international trade, understanding these export terms and how they apply to your transactions can significantly enhance your ability to conduct business across borders efficiently and securely. The global market offers immense opportunities for growth and expansion, and with the right knowledge and strategies, businesses can unlock their full potential in the international arena.