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Terms in international trade

International trade

International trade is a system of international commodity-money relations, consisting of foreign trade of all countries of the world.

International trade arose in the process of the birth of the world market in the XVI—XVIII centuries.

In the XII century  Antonio Margaretti, an Italian economist and author of the economic treatise "The Power of the Masses in the North of Italy" first used the term international trade.

The number of entries in this glossary is 16.
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Glossaries

Term Definition
PROFORMA INVOICE

ProformaInvoice this is an invoice containing preliminary data about the product: price, volume or number of pieces.  Provided by the seller of the goods before shipment to provide the buyer with information and the value of the goods, the buyer may need to obtain an import permit or a letter of credit.

The data specified in the proforma invoice  these are preliminary data, they may change after the final agreement of the contract.

Pro Forma-invoiceit is the basis for issuing an invoice or a commercial invoice, which is already an invoice and a final document.

The amount indicated in the proforma invoice is not an invoice or a payment request, it is only information for the importer. On the basis of this document alone, it is impossible to receive payment for the goods. However, if there are payment details in the preliminary invoice, you can pay for it.

In some countries, customs accepts this document from importers. In particular, the Russian Customs.

Synonyms- Preliminary invoice
INVOICE

INVOICE orCOMMERCIAL INVOICE this is the invoice that the seller issues to the buyer.Invoiceit contains a list of goods and services, their quantity and the price at which they are delivered to the buyer, formal features of the goods, delivery conditions and information about the sender and recipient.

The invoice is a mandatory document for customs clearance.

The invoice does not have an established form, most of the participantsForeign economic activityThey use the forms recommended by the UN Economic Commission for Europe in 1983.

The invoice must contain the following data:

  • Number and date of compilation;
  • Seller's details required for payment
  • Buyer's details;
  • Contract number and date;
  • Quantity, product name, main characteristics, country of origin;
  • The price of the goods specified in the contract currency;
  • Terms of delivery;

The document is drawn up in a language understandable to both parties to the transaction, mainly in English. Compilation in two or more languages is possible.

Synonyms- Invoice,COMMERCIAL INVOICE,Commercial invoice
FRANCO

A trade term denoting a certain place designated in the contract of sale, for the delivery of goods to which all responsibility and costs fall on the seller. After delivery of the goods to this place, all costs and responsibility forproductthe buyer begins to bear it.

The "free" price is the wholesale price, taking into account the transport costs of delivering the goods to the place of reception by the buyer.

Synonyms- FREE, Franco
FOB

The term means that under this condition, the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment, or ensures the provision of the goods delivered in this way.Riskthe loss or damage of the goods passes when the goods are on board the ship, and from that moment the buyer bears all costs.

The seller is obliged either to deliver the goods on board the vessel, or to ensure that the goods delivered in this way are provided for shipment. The indication of the obligation to 'provide' takes into account the numerous sales along the chain, which are often used in commodity trading.

FOBrequires the seller to perform customs formalities for export, if applicable.

Synonyms- Free on Board
FCA

'Free Carrier' ('

" >Franco carrier') means that the seller transfers the goods to the carrier or to another person nominated by the buyer at his premises or at another stipulated point.

The parties are advised to identify the item most clearly at the named place of delivery, since the risk passes to the buyer at this point.

If the parties intend to transfer the goods at the seller's premises, they must indicate the address of this premises at the agreed place of delivery. If the parties believe that the goods should be transferred elsewhere, they must determine this place of transfer.

According toFCAthe seller is required to perform customs formalities for export, if any.

This term can be used regardless of the chosen mode of transport, as well as when using more than one mode of transport.

Synonyms- Free Carrier
FAS

The term means that the seller is considered to have fulfilled his obligation to deliver when the goods are placed along the side of the vessel nominated by the buyer (i.e. on the berth or barge agreed in the contract) at the agreed port of shipment. The risk of loss or damage to the goods passes when the goods are located along the side of the vessel, and from that moment the buyer bears all costs.

This term is to be used only for sea and inland waterway transport.

Synonyms- Free alongside ship
EXW

This term can be used regardless of the chosen mode of transport, as well as when using more than one mode of transport.

Means that the seller delivers when he places the goods at the disposal of the buyer at his premises or at another agreed place (i.e. at the enterprise, warehouse, etc.), the term is suitable for domestic trade.EXW('Free factory') (short. from the English.Ex Worksletters'. from the place of work; German - ab Werk), Russian 'pickup' is also used.

It is not necessary for the seller to load the goods on any vehicle, he is also not obliged to perform the formalities necessary for export, if any.

Synonyms- EX WORKS, FREE FACTORY
DPU

The term means that the seller delivers the goods, and the risk passes to the buyer when the goods unloaded from the arriving vehicle are placed at the disposal of the buyer at a named destination or at an agreed point in such a place, if such a point is agreed.

The seller bears all risks associated with the delivery of the goods and its unloading at the named destination. Therefore, in this termIncoterms delivery and arrival at the destination are the same.DPU- the only Incoterms term that requires the seller to unload the goods at the destination.

Synonyms- Delivered at Place Unloaded, Delivery at destination in unloaded state
DDP

The term means that the seller delivers when the buyer is provided with goods cleared of customs duties required for importation on an arriving vehicle ready for unloading at the named destination. The term imposes maximum obligations on the seller. The seller bears all costs and risks associated with the delivery of the goods to the destination, and is obliged to perform customs formalities necessary not only for export, but also for import, pay any fees charged during export and import, and perform all customs formalities.

Synonyms- Delivered Duty Paid, Delivery with payment of duties
THAT

The term means that the seller delivers when the goods unloaded from the arriving vehicle are placed at the disposal of the buyer at an agreed terminal at a named port or destination. '" >Terminal" in this case, it is any place, closed or not, such as a berth, warehouse, container, automobile, railway or air cargo terminal. The seller bears all risks associated with the delivery of the goods and their unloading at the terminal at the named port or at the destination.

Synonyms- Delivered at Terminal, Delivery at the terminal
DAP

The term means that the seller delivers when the goods are placed at the disposal of the buyer on the arriving vehicle, ready for unloading, at the agreed destination. The seller bears all risks associated with the delivery of the goods to the named place. It is recommended that the parties determine the point at the agreed destination as accurately as possible, since the risks up to this point are borne by the seller. It is recommended that the seller provide contracts of carriage that accurately reflect this choice.

Synonyms- Delivered at Place, Delivery at destination
CPT

With the development of the world transport system, the concept of freight has spread to air (English air freight) and land (English land freight) transport.

" >Freight/freight paid to - international trade term Incoterms, which applies to all modes of transport, including multimodal transport. The seller bears the costs of transportation to the destination, including freight. The buyer pays for cargo insurance. The risks are transferred at the time of delivery of the cargo to the first carrier.

When using this term, the seller is obliged to conclude a contract of carriage and bear the transportation costs necessary to deliver the goods to the agreed destination. When using the term CPT, the seller transfers the goods to the carrier or another person nominated by the seller at an agreed place (if such a place is agreed by the parties and fulfills its delivery obligation. 

The term contains two critical points, since risk and costs are transferred in two different places. 

Synonyms- Carriage paid to, Carriage paid to
COMMERCIAL INVOICE

the same as INVOICE

CIP

The term means that the seller is obliged to conclude a contract of carriage and bear the transportation costs necessary to deliver the goods to the agreed destination and conclude an insurance contract with minimal coverage covering the risk of loss or damage to the goods during transportation.

When using the termsCIPthe seller fulfills his delivery obligation when he delivers the goods to the carrier, or another person nominated by the seller, at an agreed place (if such a place is agreed by the parties), and not when the goods have reached their destination.

Synonyms- Carriage and Insurance Paid to, Cost and insurance paid to
CIF

The term means that the seller has delivered when the goods are loaded onto the vehicle at the port of shipment, and the sale price includes the cost of the goods, freight or transportation costs, as well as the cost of insurance during transportation. The risk of loss or damage to the goods passes when the goods are on board the ship.

This term should be used only for sea or inland waterway transport.

Synonyms- Cost and Insurance and Freight,cost and Insurance and freight
CFR

The term means that the seller delivers the goods by water transport to the customer's port. The importer takes care of further organizational issues. This includes unloading of goods, customs clearance, delivery to a warehouse, store or end customer.

The seller is obliged to conclude a contract and pay all costs and freight necessary for the delivery of the goods to the named port of destination.

The risk of loss or damage to the goods passes when the goods are on board the ship.

This term should be used only for sea or inland waterway transport.

Synonyms- Cost and Freight, Cost and freight