THE TRADE TERMS OF INTERNATIONAL CHAMBER OF COMMERCE (INCOTERMS)

There are thirteen (13) standard internationally recognize trading terms use globally by procurement, purchase, and suppliers in foreign trade basically on import and export of products.

S/N Terms Meaning of Terms

1 DDU Delivered Duty Unpaid

2 DDP Delivered duty Paid

3 DES Delivered Ex Ship

4 DAF Delivered Alongside front

5 DEQ Delivery Ex Quay

6 CFR Cost And Freight

7 CIP Carriage And Insurance Paid To

8 CIF Cost, Insurance, And Freight

9 CPT Carriage Paid To

10 FOB Free On Board

11 FAS Free Alongside Ship

12 FCA Free Carrier

13 EXW Ex Wor

NOTE: These above Incoterms are divided into two:

·        “Shipment Contract Terms” which is transportation at buyers cost and risk.

·        “Destination Contract Terms” which is transportation at sellers cost and risk.

Other abbreviations and acronyms used in international trade

A

 AN - Arrival Notice

AR – All Risks

AS – At Sight

AWB – Air Waybill

B

B/D – Bank Draft

B/E – Bill of Exchange

BFO – Best and Final Offer

B/L – Bill of Lading

C

CAC – Currency Adjustment Charge

CUF – Commercially Useful function

CBL – Combine Transport Bill of Lading

CET – Common External Tariff

CLD – Cleared (through customs)

COA – Certificate OF Analysis

COD – Cash On Delivery

COI – Conflict of Interest

CS – container shipment

CSC – Container Service Charge

CTD – Combined Transport Document

CW – Commercial Weight

CWO – Cash with Order

CCVO – Combined Certificate of Value and Origin

D

DAP – Delivered at Place

DAT – Delivered at Terminal

D/D – Delivered

DDC – Delivered Destination Charge

DK – Dock

D/R – Dock Receipt

E

EOI – Expression of Interest

EDI – Electronic Data Interchange

E & OE – Error and Omission Excluded

ETD – Estimated Time of Departure

ETA – Estimated Time of Arrival

v EO – Executive Order

F

FCL – Full Container Load

FCR – Forwarder Certificate Receipt

FCT – forwarder Certificate Transport

F&D – Freight and Demurrage

FO – Free Out

FOR – Free On Rail

FMEA – Failure Mode and Effects Analysis

I

ITO – Invitation To Offer

ITT – Invitation To Tender

ICPO – Irrevocable Corporate Purchase Order

L

LC – Letter of Credit

LCCS – Low Cost country Sourcing

LOI – Letter Of Intent/Indemnity/Introduction

LCL – Less than Container Load

LTL – Less than Truck Load

LPO – Local Purchase Order

M

MA – Master Agreement

MPA – Master Purchase Agreement

MAWB – Master Airway Bills

MSA – Master Service Agreement

MM – Master Memo

M/T – Metric Ton

N

N/A – Not Applicable

NCB – Non competitively Bid contract Justification

NOC – No Objection Certificate

NVOCC- Non Vessel Operating Common Carrier

P

PD – Procurement division

PO – Purchase Order

PCC – Public Contract Code

PE – Purchase Estimate

PCO – Procurement And Contracting Officer

POD – Proof of Delivery

PR – Price Request

R

RFI – Request for Interest/ Request for Information

RFO – Request for Offer

RFP – Request for Proposals

RFQ – Request for Quotations/Qualifications

S

SC – State Contract

S/O – Shipping Order

SIC – Standard Industrial Classification

SPS – State Price Schedules

SLAs – Service Level Agreement

SWIFT – Society for Worldwide Inter-bank Financial Telecommunications

T

T&Cs – Terms and Conditions

TACPA – Target Area Contract Preference Act

TEC – Travel Expenses Claim

TDO – Terminal Delivery Order

TIN – Tax Identification Number

T/T – Telegraphic Transfer

Important definitions OF DOCUMENTS in international trade

QUOTATION: This is an offer to sell goods and should state clearly the price, details of quality, quantity, trade terms, delivery terms and payment terms.

NB: This is prepared by the exporter.

SALES CONTRACT: This is an agreement between the buyer and the seller stipulating every detail of the transaction

NB: This is prepared by Exporter and Importer.

PROFORMA INVOICE: This is an invoice provided by a supplier prior to the shipment of merchandise, informing the buyer of the kinds, and quantity of goods to be sent, their value, and importation specifications (size, weight, and similar characteristics).

NB: This is prepared by the exporter.

COMMERCIAL INVOICE: This is a formal demand not for payment issued by the exporter to the importer for goods sold under a sales contract.

NB: This is prepared by the exporter.

PACKING LIST: This is a list with detailed packing information of goods shipped. The packing list is intended to tell transport agencies, government authorities, and customers know the content of the package. Also, It could be called shipping list or waybill or packing slip and it is also known as BILL OF PARCEL.

NB: This is prepared by the exporter.

INSPECTION CERTIFICATE: This is a report issued by an independent surveyor (i.e Inspection Company) or the exporter on the specification of shipment, including quality, quantity, and / or price require by certain buyers and country.

NB: This is prepared by Inspection Company or exporter.

INSURANCE CERTIFICATE: This is a certificate that certifies that the shipment has been insured under a given open policy and is to cover loss of or damage to the Cargo while on transit.

NB: This is prepared by the Insurer/Insurance agent/Insurance broker

SHIPPING ORDER: This is a document with details of the cargo and shippers requirements, and is the basic document for preparing other transport documents such as bill of lading, air waybill, etc.

NB: This is prepared by shippers or transport companies.

DOCK RECEIPT OR MATE’S RECEIPT: This is a receipt to confirm the receipt of cargo on quay or warehouse pending shipment. It has no legal role and it is used as document to prepare a bill of lading.

NB: This is prepared by Shipping Company.

BILL OF LADING: This is an evidence of contract between the shipper of the gods and the carrier. The customer usually needs the original as proof of ownership to take possession f the goods.

NB: This is prepared by the Shipping Company.

TRANSACTIONAL TERMS BANK USE IN INTERNATIONAL TRADE

BILL FOR COLLECTION: This is one of the conventional methods of payment in international trade whereby the seller forward financial and/ or commercial documents to the buyer against cash payment or acceptance of a bill of exchange.

COMMERCIAL LETTER OF CREDIT (LC): This is a bank issued document (requested by the customer) to a specified beneficiary by which the bank substitutes its credit for that of the customer. The bank makes payments to the beneficiary under the conditions specified on the LC.

COMMERCIAL INVOICE: This is a document that details the transaction between a seller and a buyer. It generally, contains the name and the address of the seller and the buyer, date of sale, description of the goods, quantities, term of sale, unit price, and amount due under the Letter of credit and currency type.

CONSIGNOR: This is the company that delivers the merchandise; also refers to as the shipper on the bill of lading.

DRAFT: This is a written order from one person (the drawer) to another (the drawee) specifying the term (time and amount) of when payment for the shipment is due (also referred to as bill of exchange).

DRAFT ON: This term is referring to the party on who the draft is drawn or the party who has the unconditional Obligation to pay the holder of the draft when it is done.

LASTEST SHIPPING DATE: This is the last date which the exporter can ship the merchandise and still be in compliance with the terms of the LC, usually stated on the shipment transport document.

TRANSSHIPMENT: This is the transfer and reloading of merchandise during the shipping process, either with two or more of the same mode of transport or from one mode of transport o another mode of transport.

TIME DRAFT: This is payable at a fixed or determinable future date.

ISSUE METHOD: This is the method by which LC will be transmitted overseas.

Incoterms and safe mode of transportation

There is no sure way of transporting goods in international trade of import and export, but there are safe way to make sure that precautionary means are taking by the importer and exporter. As an individual with Mathematics background, I have devised a code easy to learn, of the thirteen Incoterms standard; which is: 5D, 4C, 3F, 1E.

See diagrammatic expression of safe ways to move goods below:

MODE OF TRANSPORT

TRADE TERM AIR ROAD RAIL SEA COMBINED TRANSPORT CONTAINER

DAF o  o  o  o  o  o  

DES o  o  o  ü o  o  

DDU ü ü ü ü ü ü 

DDP ü ü ü ü ü ü 

DEQ o  o  o  ü o  o  

CFR o  o  o  ü o  o  

CIF o  o o  ü o  o  

CPT ü ü ü ü ü ü 

CIP ü ü ü ü ü ü 

FCA ü ü ü ü ü ü

FAS o  o  o  ü o  o  

FOB o  o  o  ü o  o  

EXW ü ü ü ü ü ü 

NB: The use of trade terms in connection with different modes of transport in export and import of goods is described above where this represents:

Recommended = ü 

Not Recommended = o  

Inclusion, knowing these terms and how to apply them in communication with foreign business partners or suppliers, or as an exporter or importer will make you more efficient and accurate in communicating with your supplier, buyers, and bank as either procurement or purchase Manager.

EMECHE LOUIS IKECHUKWU.                                   27/04/2018.