Obligate the seller to incur all costs related to delivery of the shipment to the foreign destination. There are 5 D terms and all require the seller to incur all costs and the risk of damage up to the destination port. 

The seller is responsible for transportation and incurs the risk of damage to the named point at the place of delivery at the frontier of the destination country. DAF, Laredo, Texas indicates the seller is responsible for making the goods in Laredo, Texas and the buyer is responsible for customs duties and clearance into Mexico. DAF is used in ALL MODES. 

Used in Water transportation. Both terms require the seller to pay for the main carriage. The risk of damage is transferred when the goods are made available to the buyer on board the ship un-cleared for import at the port of destination. The buyer is responsible for customs clearance. 

Used in Water transportation. Both terms require the seller to pay for the main carriage. The risk of damage is transferred to the buyer when the goods cleared for import are unloaded onto the quay at the named port of destination. 

Available for ALL MODES. Requires the seller to incur all cost, except import duties, the named place in the country of importation. Risk of damages passes to the buyer when the goods are made available, duties unpaid, at the named place. Similar to DES.

Available for ALL MODES. Requires the seller to incur all cost, except import duties, the named place in the country of importation. Risk of damages passes to the buyer when the goods are made available, duties unpaid, at the named place. This also includes additional responsibility of clearing the goods for import and paying the customs duties. Similar to DEQ.

Required for commodities and destinations deemed important to national security, foreign policy, and items in short supply. SALES DOCUMENT

A document issued by the seller to acquaint the importer/buyer and the importing country’s government authorities with the details of the shipment. SALES DOCUMENT

FORMS OF PAYMENT AND LEVEL OF RISK TO SELLER

Cash in Advance

FORMS OF PAYMENT AND LEVEL OF RISK TO SELLER

Letter of Credit

FORMS OF PAYMENT AND LEVEL OF RISK TO SELLER

TradeCard

FORMS OF PAYMENT AND LEVEL OF RISK TO SELLER  

Documentary Collect 

FORMS OF PAYMENT AND LEVEL OF RISK TO SELLER  

Credit Card

FORMS OF PAYMENT AND LEVEL OF RISK TO SELLER  

Open Account (Credit)

CURRENCY RISKS AND WHO IS AT RISK
Use Exporter’s Currency

IMPORTER AT RISK

CURRENCY RISKS AND WHO IS AT RISK

Use Importer’s Currency

EXPORTER AT RISK

CURRENCY RISKS AND WHO IS AT RISK

3rd Country Currency

BOTH PARTIES AT RISK

CURRENCY RISKS AND WHO IS AT RISK

SDR (Artificial Currency) 

Characteristics of International Payment Issues

Credit Information

Characteristics of International Payment Issues

Lack of Personal Contact

Characteristics of International Payment Issues

Collections are difficult and expensive

Characteristics of International Payment Issues

No Easy Legal Resource

Characteristics of International Payment Issues

Higher Litigation Costs 

Characteristics of International Payment Issues

Mistrust

Commercial Risk

The probability of not getting paid by a certain creditor, because this creditor does not have the funds to pay the debt or because the creditor refuses to pay the debt.

Country Risk or Political Risk

The probability of not getting paid by a certain creditor, because the creditor’s country does not have the funds to pay the debt (insufficient foreign exchange reserves) or because the creditor is not legally allowed to pay the debt (political embargo). 

Exposure

The relative consequence of a particular risk for an exporter; the risk of a $50,000 loss would represent a greater exposure for a small exporter than for a large exporter. 

Cash in Advance

The exporter requests that the customer provide payment in advance, before the shipment of the goods can take place. 

Open Account

The exporter conducts international business in a manner similar to the way it conducts domestically. The exporter sends an invoice to the importer along with the shipment and trusts the customer to pay within a reasonable amount of time, typically 30-90 days. 

Credit Insurance

An insurance policy under which commercial risk is covered; in exchange for a premium paid by the exporter, the insurance company will bear the risk of nonpayment by the importer, deducting a slight percentage of the receivable. 

Letter of Credit

A document in which the importer’s bank essentially promises to pay the exporter if the importer does not pay. 

Issuing Bank

The bank providing the Letter of Credit. Should the importer be unable to pay, and should the exporter provide all the necessary documents, has the contractual obligation to pay the beneficiary. 

Beneficiary

The firm named in a letter of credit as the firm to whom the bank is insuring payment if the importer does not pay. Usually this is the exporter. 

Applicant

The firm asking the Issuing Bank for a Letter of Credit. Typically, this is the importer.

Term of Trade

An element in a contract of sale that specifies the responsibilities of the exporter and the responsibilities of the importer. 

Term of Sale

An element in a contract of sale that specifies the method of payment to which an importer have agreed. 

Currency

The monetary unit used in a particular country for economic transactions. 

Hard Currency

A currency that can easily be converted in another currency. 

Convertible Currency

A currency that can be converted into another currency.

Soft Currency

A currency that cannot be easily converted into another currency. 

Inconvertible Currency

A currency that cannot be converted into another currency. 

Special Drawing Right (SDR)

An artificial currency of the International Monetary Fund. Its value is determined by the value of a basket of four currencies: euro, yen, U.S. Dollar, and British Pound. 

Euro

The common currency of twelve of the twenty-five countries of the European Union, developed in the late 1990s and placed in circulation on January 1, 2002.

Direct Quote

The value of a foreign currency expressed in units of the domestic currency. Direct Quote for the U.S. Dollar and the euro would be $1.28/1 Euro

Indirect Quote

The value of the domestic currency expressed in units of the foreign currency. Yen to U.S Dollar is 113.47 Yen/ 1 U.S. Dollar

Spot Exchange Rate

The exchange rate of a foreign currency for immediate delivery (within 48 Hours). 

Forward Exchange Rate

The exchange rate of a foreign currency for delivery in 30, 90, or 180 days from the date of the quote. 

Outright Rate

The exchange rate of a foreign currency for delivery in 30, 90, or 180 days from the date of the quote. The outright rate is the rate at which a commercial customer would purchase the currency. 

Swap Rate

The exchange rate of a foreign currency for delivery in 30, 90, or 180 days from the date of the quote. The swap rate is the difference between the current spot rate and the rate at which a commercial customer would purchase the currency. It is express in points that must be subtracted or added to the spot rate. 

Points

In a forward exchange rate, the difference between the outright rate and the swap rate. Points are not fixed units; their value depends on the way a currency is expressed, but is the smallest decimal value in which that currency is traded. 

Commercial Invoice

The invoice sent by the seller to the buyer, detailing the goods purchased and the amount due. In International trade, commercial invoices should be detailed and have all relevant information. 

Pro-Forma Invoice

A quote provided by the exporter to the importer for the purpose of the importer obtaining a Letter of Credit. Very common in International Trade. 

Consular Invoice

A commercial invoice that is printed on stationery provided by the Consulate of the country in which the goods will be imported. 

Visa

A process by which the Consulate of the country in which the goods will be imported reviews and approves the Consular invoice for a fee. A visa shows on the Consular invoice as a rubber stamp or a seal.

Commodity Control List

A List, maintained by the Bureau of Industry and Security, which details which products cannot be exported from the United States without the express authorization of the U.S. Government.

Destination Control Statement

A formal statement, which an exporter has to print on its invoice and on the Shipper’s Declaration if the goods shipped are subject to a validated export license. 

Certificate of End-Use

A document required by some export governments in the case of sensitive exports, such as ammunition, to ensure that the product is used for acceptable purposes. 

Export Quota

A limit, set by the exporting country’s government, on the quantity of a specific commodity that can be exported in a given year. 

Certificate of Manufacture

A document provided by the exporter’s Chamber of Commerce that attests that the goods manufactured from the country in which the exporter is located.

Duty

The amount of tax paid on an imported good; the duty is calculated using the tariff rate and the value of the goods. 

Classification

The process of determining what the correct Harmonized System Number is for an import. 

Valuation

The rules used to determine the country of origin of a particular product. 

Tariff

The rate at which an import is taxed; the tariff rate is dependent on the classification of the goods, as well as their country of origin. Also known as duty rate. Generally a percentage of the import value , but it can also be calculated with some other method, based on the number of units shipped or weight. 

Tariffs are paid depending on: 

Goods Classification

1. Value of Goods

   2. Country of Origin

Assist

An item provided by the importer (customer) to the exporter (seller) so that the exporter can manufacture goods. 

Value-Added Tax (VAT)

A tax perceived by many countries that is very similar to a sales tax, but that is collected whenever the product’s value is increased. The Value-Added Tax on imports is collected at the point of entry in the country. 

A limit, set by the importing country’s government, on the quantity of a specific commodity that can be imported in a given year. 

Entry

The process by which an importer notifies Customs that is has imported a particular product.

Cleared

The term used to signify that goods were imported in a country and that the imported paid the duty that was due on those goods: The goods were released by the Customs authorities. 

Liquidated Entry

An entry that has been successfully reviewed by Customs authorities and for which duty has been paid. 

Protest

In a Customs transaction in the United States, the formal request by an importer to have Customs reconsider its classification, its valuation, or its determination of a country or origin. 

Informed Compliance

A standard of behavior, set and enforced by the United States Customs Office, that is expected of importers if they want their Customs entries to be cleared quickly and if they want to keep Customs inspections at a minimum. 

Reasonable Care

A standard of behavior, set and enforced by the United States Customs Office, that is expected of importers if they want their Customs entries to be cleared quickly and if they want to keep Customs inspections to a minimum. 

For-Hire Carrier

A carrier that provides transportation service to the public on a fee basis.  

TL

A shipment weighing the minimum weight or more. Carriers give a rate reduction for shipping a TL-size shipment. 

LTL

A less-than-truckload shipment, one weighing less than the minimum weight a company needs to use the lower truckload rate.    

Pickup and Delivery (PUD)

The act of collecting freight from shippers or delivering freight to consignees.

Line-Haul Shipment

A shipment that moves between cities and over distances more than 100 to 150 miles in length. 

Peddle Run

A truck operation where many pickups or deliveries are made while the vehicle travels over a preset route

Stem Time

The time consumed by a truck to reach its first delivery after leaving the terminal and the time consumed by the truck to return to the terminal after making its last pickup.

Relay Terminals

A motor carrier terminal that facilitates the substitution of one driver for another who has driven the maximum number of hours permitted

Slip Seat

A motor carrier relay terminal operation in which a carrier substitutes one driver for another who has accumulated the maximum driving time hours. 

Driving Time Regulations

U.S. Department of Transportation rules that limit the maximum time a driver may drive in interstate commerce; the rules prescribe both daily and weekly maximums. 

Major Carriers

Annual Revenues of more than $1 Billion. Major populated areas such as LA, Chicago, and New York. These are Delta, United, and Spirit.

National Carriers

Annual Revenues of $100 Million to $1 Billion. Large, regional areas. I.E: JetBlue, Frontier

Regional Carriers

Annual Revenues of less than $100 Million. Very Regional, such as New England area or the Plains. PSA and Air Midwest are examples.

All-Cargo Carrier

Cargo only air carrier. Examples: USPS and FedEx Air

Commuter

An exempt for-hire air carrier that publishes a time schedule on specific routes; a special air taxi.

Private Air

A carrier that provides transportation service to the firm that owns or leases the airplane and does not charge a fee. 

Excess Capacity

When carriers lower prices to fill seats. I.E RedEye Flights

Frequency and Timing

Airlines attempt to schedule flights when consumer’s prefer to fly. 07:00-22:00.

No-Frills Service

Charging fares that are lower than full-service air carriers but the passengers receive limited snacks and drinks. 

Commodities

Mail, Clothing, Equipment, Automobiles, etc.

High-Density Routes

New York to Chicago. Routes that are very popular amongst passengers.    

Charter Airplane

An aircraft that is leased for a single voyage under a wet lease. 

Passenger Airplane

A type of airplane that is designed to carry passengers on the main deck of the plane; it can also carry cargo below the main deck, it its “belly”, but the size and type of cargo are restricted. 

On-Board Courier (OBC)

A passenger on a regularly scheduled flight who relinquishes his or her baggage allocation, allowing companies to ship extremely urgent cargo. 

Combo Airplane

A type of airplane that is designed to carry both passengers and cargo on the main deck of the plane. 

Roller Deck

The configuration of the deck of an aircraft when it is designed to accept cargo shipments; the deck is equipped with rollers and bearings that allow cargo to be moved in any direction without much friction. 

Coal

Railroads are the primary haulers of coal, accounting for 43.8% of the total tonnage transported in 2001. 

Farm Products

Second largest commodity group hauled by Railroads. 2.7 millions carloads. 

Chemicals

Third largest commodity group hauled by Railroads. Safest way to move chemicals.

Transportation Equipment

Fourth largest commodity group hauled by Railroads. Low-Value, High-Volume bulk. 

Boxcar (Plain)

Standardized roofed freight car with sliding doors on the side used for general commodities. 

Boxcar (equipped) 

Specially modified boxcar used for specialized merchandise, such as automobile parts. 

Hopper Car

A freight car with the floor sloping to one or more hinged doors used for discharging bulk materials. 

Covered Hopper

A hopper car with a roof designed to transport bulk commodities that need protection from the elements. 

Flat

A freight car with no top or sides used primarily for TOFC service machinery and building materials. 

Refrigerator Car

A freight car to which refrigeration equipment has been added for controlled temperature. 

Gondola

A freight car with no top, a flat bottom, and fixed sides used primarily for hauling bulk commodities. 

Tank Cars

Specialized car used for the transport of liquids and gasses. 

3R Act of 1973

A law passed by Congress in response to the bankruptcies of the Penn Central and other railroads. Conrail was created from this law to operate the lines of 6 Northwestern U.S. Railroads.

4R Act of 1976

Help the railroads obtain funds for capital investment and to allow the railroads more freedom concerning decisions on mergers, abandonments, and rate making.

Staggers Rail Act

Helped the railroads financially and avoided deterioration of the industry by giving more regulations and control

ICC Termination Act of 1995

Eliminated the ICC and transferred economic rail regulation to the Surface Transportation Board (STB).

Regulated Water Carriers

Common or contract carriers. Economic regulation is administered by the STB. 

Internal Water Carriers

Carriers that operate over the inland navigable waterways. 

Coastal Carriers

Operate along the coasts serving ports on the Atlantic or Pacific Oceans or the Gulf of Mexico. 

Barge

A water vessel that is powerless and is towed by a tugboat. Very low rates and flexible. Commonly seen by internal waterway carriers. 

Liner

A ship that operates on a regular schedule, traveling from a group of ports to another group of ports. 

Tramp

A ship that does not operate on a regular schedule and is available to be chartered from any voyage, from any port to any port. 

Dead-Weight Tonnage

The maximum weight that a ship can carry.

Bunker

The amount of fuel that a ship carries on board that it needs for travel. 

Stores

All the supplies that a ship carriers and that it needs to function. 

Bale

The end result of a packaging technique that consists of taking a commodity and unitizing it by compressing it and placing it into a bad or encircling it with string, metal, or plastic bands. 

Gross Tonnage

The total volume of a ship’s carrying capacity, measured as the space available below deck, and expressed in hundreds of cubic feet. 

Net Tonnage

Obtained by subtracting the volume by the engine room and the spaces necessary for the operation of the ship from the gross tonnage. 

Displacement Tonnage

The total weight of the ship, when fully loaded, measured by using the weight of the water being displaced. 

Light Tonnage

The total weight of the ship, when empty, measured by using the weight of the water being displaced. 

Panamax

A ship of the maximum size that can enter the locks of the Panama Canal.

Post-Panamax

A ship whose size it too large to enter the locks of the Panama Canal. 

Wet-Bulk Cargo

Liquid cargo that is loaded directly into the hold of a ship, without any form of unitization. 

Dry-Bulk Cargo

Dry cargo that is loaded directly in the hold a ship, without any form unitization.

24- Hour Rule

A rule first instituted by the U.S. Customs and Border Protection Agency, which requires that carriers send Customs the manifest of all cargo destined for the United States 24 hours prior to the cargo being loaded in the port of departure. 

Custom-Trade Partnership Against Terrorism (C-PAT)

A program instituted by the U.S. Customs and Border Protection Agency, through which customs gives preferential treatment to companies that have implemented a number of security measures in their supply chains.

Container Security Initiative

A program instituted by the U.S. Customs and Border Protection Agency, through which Customs agents are sent to the port of departure to inspect containers bound for the United States. 

Foreign Port Program

A program instituted by the U.S. Customs and Border Protection Agency, under which ports abroad purchase container-scanning equipment and agree to inspect cargo that the CBP considers suspicious. 

Liquid-Bulk Container

A tank designed to hold liquids is placed inside a frame that has the same outside dimensions as a twenty-foot unit. 

Dry-Bulk Container

Designed to hold dry-bulk products, such as grain or pellets. Allows for fewer handlings when the cargo is strictly bulk or is packaged in drums or bags. 

Open-Top Container

Designed to hold cargo that is too large to fit through the door of a regular container and must be loaded from the top.

Extended-Length Container

Designed to hold cargo that does not fit in a standard 40-foot container.

Flat Rack

Designed to hold cargo that is less than eight feet wide, but would not fit in a standard container, which has inside dimensions of 92.5 Inches. 

Refrigerated Container

Designed to hold cargo at a constant temperature during the voyage. 

Refrigerated Container

Designed to hold cargo at a constant temperature during the voyage. 

High Cube Containers

Designed to hold cargo that is 9.5 Feet tall. Can hold excess Cargo than the average. 

Hanger Container

Designed to hold garments “on hanger”. Steel bars on which clothes or items can be hung. 

Land Bridge

A term coined to describe the practice of shipping goods from Asia to Europe through the United States by using railroads. 

Commodities Hauled

Oil and Oil Products, Natural Gas, Coal, and Chemicals.

Competition

 Sparse, due to less than 100 carriers

Rates: Very Low