Trading Vocabulary

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.

ATSC -Authorization to Sell and Collect

ATL-Authority To Load: Authority to load buyer's vessel

ATV-Authority to Verify

AWB -Air Way Bill

The air freight equivalent of a 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

BOL / BL-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

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.

CI : Commercial Invoice

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

DOA -Deed Of Agreement

DLC- Documentary Letter of Credit (see L/C)

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.

DTA -Dip Test Authorization / Direct Transfer Agreement

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 supplier’s 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.

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.

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.
FCO -Full Corporate Offer
A FCO usually starts with a clause similar to the following

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).

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.
All terms in this glossary are Incoterms.

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 utilized. The various types can be defined as follows :

CL/C (Confirmed Letter of Credit)

A letter of credit, issued by a foreign bank, with validity confirmed by a First Class
(usually US or European) bank. A seller with CL/C terms is assured of payment even if
the foreign buyer or the foreign bank defaults.

DL/C or DLC (Documentary Letter of Credit)

A document issued by a bank which guarantees the payment of a buyer's drafts for a
specified period and up to a specified amount. The Documentary Letter of Credit
provides a more secure means of carrying out transactions in import-export trade than by
documentary bills collection (see Bill of Exchange). A letter of credit when transmitted
through a bank, usually in the seller's country, becomes the means by which the seller
obtains payment. The necessary documents, correctly completed, are presented to a bank
by an agreed date. If the terms of the credit are met, a seller can receive payment from a
bank immediately.

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 cancelled 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

LCL -Less than a Container Load

LCL denotes 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.

LOI -Letter of Intent

A document by which the buyer states that he intends to enter into a transaction.

NCNDA-Non-Circumvention & Non-Disclosure Agreement

Secures Commissions for all involved parties

PB-Performance Bond

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.

POP-Proof of Product
A Proof of 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.

RDLC-Revolving Documentary Letter of Credit (see L/C)

RWA -(Ready, Willing, and Able)

A banking term meaning Readiness, Willingness and Availability of funds for a
particular transaction.

SCO-Soft Corporate Offer

SGS (formerly Société Générale de Surveillance)

This is an international company (SGS Group) who are the definitive
quality/specification testing agency for many commodities. Their certificates are
internationally accepted.

SPA- Sale and Purchase Agreement

TSA-Tank Storage Agreement/ Trans-Pacific Stabilization Agreement

TSR (Tank Storage Receipt)

TTM -Table Top Meeting

Sometimes required for large transactions - where the parties physically meet at a
prescribed location, usually involving the exchange of documents.

TTT-Tanker to Tanker Transfer

(relates to a method of consignment for Crude Oil)

TTO-Tanker Take Over

(relates to method of consignment for Crude Oil)

TTT-Tank to Tank

TTV- Tank to Vessel

VTV- Vessel to Vessel

Dip Test- The test that is done to verify the specifications of the product being delivered

Mandate-Buyer or Seller intermediary broker

Steps of a Usual Procedure Documents:
1. Buyer issues LOI (Letter of Intent)
2. Seller issues FCO (Full Corporate Offer) or SCO (Soft Corporate Offer)
3. Buyer issues ICPO (Irrevocable Corporate Offer) in response to number 2
4. Seller issues CI (Commercial Invoice)
5. Seller issues SPA (Sales Purchase Agreement)
6. All Involved Parties sign an NCNDA (Non-Circumvention & Non-Disclosure
Agreement) to secure commissions for all intermediaries.

Sample Transaction Procedure from FCO:

1- Buyer Issues ICPO
2- Seller Issues FCO To Buyer; Buyer Accept And Sign Seller’s Electronic FCO
3- Sellers Issues Commercial Invoice And Send It To The Buyer For Confirmation.
4- Within 48 Hours, Buyer Send DLC Draft With Confirmation Of His Bank, For
Seller Bank Confirmation Or 10% Deposit. (Format To Be Shared By Seller)
5- The Seller And Buyer Sign NCNDA/IMFPA/SPA.
6- After Verifying DLC, The Seller Issues The Following Documents:
- Ship Schedule.
- Statement Of Product Availability
- Certificate Of Origin
- Company Registration Certificate
- Product Passport/ (Dip Test)
- Injection Report.
7- The Product Is Loaded To The Ship And Moves To The Port Of Destination.
8- As Soon As Each Shipment Arrive At The Destination Port, Buyer Pay 100% Of
Shipments Via MT103/ To Seller's Account In 48 Hours After SGS Conducted On
Board Of The Ship. Any Delay And Demurrage At Discharge Port Due To Delay In
Payment Or Conduct Of SGS Upon Arrival Will Be On Account Of Buyer.
9-Item Number 8 Will Be Repeated Until The Contract Is Completed.
LOI Sample Document
FCO Sample Document
ICPO
CI