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GLOSSARY OF SHIPPING TERMS A bill of lading is a document issued by a carrier (trucking company) which serves as a receipt for the goods to be delivered to a designated person or to his order. The bill of lading describes the conditions under which the carrier accepts the goods and details that nature and quantity of the goods, identifying marks and numbers, destination, etc. The person sending the goods is the "shipper" or "consignor," the company transporting the goods is the "carrier", and the person for whom the goods are destined is the "consignee". Bills of lading may be negotiable or non-negotiable. If negotiable (i.e., payable to the shipper's order and properly endorsed) title to the goods passes upon delivery of the bill of lading. A Canada Customs Invoice is a form or document, required by Canadian Customs officials to verify the value, quantity, and nature of the shipment, describing the shipment of goods and showing information such as the consignor, consignee, and value of the shipment. The Canada Customs Invoice is required on all export shipments passing through customs en route to Canada. Commercial shipments to Canada, which are valued at more than $1,600 (Canadian funds), may be subject to duties and sales taxes and must be accompanied by a Canada Customs Invoice. The invoice can be prepared either by the exporter/importer or their agents. A Certificate of Origin form is a document, required by foreign governments, declaring that goods in a particular international shipment are of a certain origin. Even though the commercial invoice usually includes a statement of origin, some countries require that a separate certificate be completed. Customs offices will use the Certificate of Origin form to determine whether or not a preferential duty rate applies on the products being imported and whether a shipment may be legally imported during a specific quota period. A Certificate of Origin is a signed statement as to the country of origin of the exported products for a particular shipment. The country of origin is NOT the country from where the product is shipped. The country of origin is the country where the product was manufactured or last underwent a substantial change or modification, for WTO members, goods can be considered originating if there is a shift of at least two chapters in the harmonized code. For example, the country of origin for 100% cotton, knit shirts that are manufactured in China and then shipped to the U.S. and have a logo or slogan placed on them, and are then exported to Canada, would be China. However, if the cotton knit fabric was manufactured in China and then shipped to the U.S. and the fabric was transformed into shirts and are then exported to Canada, the country of origin would be considered the U.S. A commercial invoice is a form identifying the seller and buyer of goods or services, identifying numbers [invoice number] date, shipping date, mode of transport, port of entry, delivery and payment terms, and a complete listing and description of the goods or services sold including, quantities, prices, discounts. The commercial invoice form is considered the most important document in international trade, because merchandise is not allowed to clear customs at the destination without one. That is even true if the goods are samples and have no commercial value. This document is usually the one that all the service providers first look to for information about your shipment. It is important to prepare the commercial invoice as clearly and accurately as possible to avoid problems with your shipment. The Commercial Invoice is a Customs requirement, not a transportation requirement. When someone is engaged in international trade, Customs requires a Commercial Invoice form. You will need two copies of the Commercial Invoice. One must accompany the freight from the point of pickup to the point of customs clearance, the other should be attached to the Bill of Lading. Customs Broker A person or firm licensed by an importer's government and engaged in entering and clearing goods through customs. The responsibilities of a broker include preparing the entry form and filing it; advising the importer on duties to be paid; advancing duties and other costs; and arranging for delivery to the importer. The U.S. Customs Service defines the importer of record as the owner or purchaser of the goods; or, when designated by the owner, purchaser, or consignee, a licensed Customs broker. Import shipments moving into or through the United States or Canada which have not cleared Customs at the border and therefore travel under a Customs (Treasury) bond, and are identified as in-bond shipments. NAFTA (North American Free Trade Agreement) which entered into force in January 1994, is a free trade agreement comprising Canada, the United States and Mexico. NAFTA exceeds 360 million consumers and a combined output of $6 trillion --approximately 20 percent larger than the European Community. NAFTA's consumer population is slightly smaller than the European Economic Area which has over 380 million consumers. The Agreement: Progressively eliminates almost all U.S.-Mexico tariffs over a 10-year period, with a small number of tariffs for trade-sensitive industries phased out over a 15-year period. Mexico-Canada tariffs are also phased out over a 10-year period. Tariff reduction schedules between the United States and Canada negotiated in the Canadian Free Trade Agreement are retained. Eliminates other barriers to trade such as import licensing requirements and Customs user fees. Establishes the principle of national treatment, for ensuring that NAFTA-origin products trade between NAFTA countries will receive treatment equal to similar domestic products. Guarantees service providers of the three countries equal treatment in the NAFTA area, including the right to invest and the right to sell services across borders. Establishes five basic principles to protect foreign investors and their investment into the free trade area: (a) nondiscriminatory treatment, (b) freedom from performance requirements, (c) free transference of funds related to an investment, (d) expropriation only in conformity with international law, and (e) the right to seek international arbitration for a violation of the agreement's protections. The NAFTA Agreement contains special provisions for sensitive economic sectors, including agriculture, automotive products, energy, and textiles and apparel. The Agreement also created a Border Environment Cooperation Commission and a North American Development Bank. Tariff A tax assessed by a government on goods entering or leaving a country. The term is also used in transportation in reference to the fees and rules applied by a carrier for its services. A temporary import bond or TIB ("Temporary Importation under Bond") is required when goods are brought into the United States or Canada without payment of duty, by posting a bond to guarantee that they will be exported. The amount of the bond is usually double the estimated duties. Goods imported under a temporary import bond can remain in either country without the payment of duty for up to a year. These goods must be brought back to the country of export before the expiration of the bond period to avoid the assessment of liquidated damages in the amount of the bond. If the goods are not exported, the bond is forfeited, usually in the amount of twice the value of the customs duties that would have been payable on the products. The one year period for exportation can be extended upon application to the port director. The importer will want to enter merchandise using a temporary import bond under the following circumstances: importing samples for testing, inspection, for making a purchasing decision, or to display a sample at a trade fair or other sales show; or an importer may wish to import merchandise and to further manufacture it and then export the finished product. Please contact your customs broker to obtain a listing of goods that may be admitted into the United States or Canada under a Temporary Import Bond / TIB. The U.S. Customs Service defines "value for Customs purposes only" as the value submitted on the entry documentation by the importer which may or may not reflect information from the manufacturer but in no way reflects Customs appraisement of the merchandise. Bill of Lading (B/L) A document that establishes the terms of a contract between a shipper and a transportation company. It serves as a document of title, a contract of carriage and a receipt for goods. - Amended B/L: B/L requiring updates that do not change financial status; this is slightly different from corrected B/L. - B/L Terms & Conditions: the fine print on B/L; defines what the carrier can and cannot do, including the carrier's liabilities and contractual agreements. - B/L's Status: represents whether the bill of lading has been input, rated, reconciled, printed, or released to the customer. - B/L's Type: refers to the type of B/L being issued. Some examples are: a Memo (ME), Original (OBL), Non negotiable, Corrected (CBL) or Amended (AM) B/L. - Canceled B/L: B/L status; used to cancel a processed B/L; usually per shipper's request; different from voided B/L. - Clean B/L: A B/L which bears no superimposed clause or notation which declares a defective condition of the goods and/or the packaging. - Combined B/L: B/L that covers cargo moving over various transports. - Consolidated B/L: B/L combined or consolidated from two or more B/L's. - Corrected B/L: B/L requiring any update which results in money or other financially related changes. - Domestic B/L: Non-negotiable B/L primarily containing routing details; usually used by truckers and freight forwarders. - Duplicate B/L: Another original Bill of Lading set if first set is lost. also known as reissued B/L. - Express B/L: Non-negotiable B/L where there are no hard copies of originals printed. - Freight B/L: A contract of carriage between a shipper and forwarder (who is usually a NVOCC); a non-negotiable document. - Government B/L (GBL): A bill of lading issued by the U.S. government. - Hitchment B/L: B/L covering parts of a shipment which are loaded at more than one location. Hitchment B/L usually consists of two parts, hitchment and hitchment memo. The hitchment portion usually covers the majority of a divided shipment and carries the entire revenue. - House B/L: B/L issued by a freight forwarder or consolidator covering a single shipment containing the names, addresses and specific description of the goods shipped. - Intermodal B/L: B/L covering cargo moving via multimodal means. Also known as Combined Transport B/L, or Multimodal B/L. - Long Form B/L: B/L form with all Terms & Conditions written on it. Most B/L's are short form which incorporate the long form clauses by reference. - Memo B/L: Unfreighted B/L with no charges listed. - Military B/L: B/L issued by the U.S. military; also known as GBL, or Form DD1252. - B/L Numbers: U.S. Customs' standardized B/L numbering format to facilitate electronic communications and to make each B/L number unique. - Negotiable B/L: The B/L is a title document to the goods, issued "to the order of" a party, usually the shipper, whose endorsement is required to effect is negotiation. Thus, a shipper's order (negotiable) B/L can be bought, sold, or traded while goods are in transit and is commonly used for letter-of-credit transactions. The buyer must submit the original B/L to the carrier in order to take possession of the goods. - Non-Negotiable B/L: See Straight B/L. Sometimes means a file copy of a B/L. - "Onboard" B/L: B/L validated at the time of loading to transport. Onboard Air, Boxcar, Container, Rail, Truck and Vessel are the most common types. - Optional Discharge B/L: B/L covering cargo with more than one discharge point option possibility. - "Order" B/L: See Negotiable B/L. - Original B/L: The part of the B/L set that has value, especially when negotiable; rest of set are only informational file copies. Abbreviated as OBL. - Received for Shipment B/L: Validated at time cargo is received by ocean carrier to commence movement but before being validated as "Onboard". - Reconciled B/L: B/L set which has completed a prescribed number of edits between the shippers instructions and the actual shipment received. This produces a very accurate B/L. - Short Term B/L: Opposite of Long Form B/L, a B/L without the Terms & Conditions written on it. Also known as a Short Form B/L. The terms are incorporated by reference to the long form B/L. - Split B/L: One of two or more B/L's which have been split from a single B/L. - Stale B/L: A late B/L; in banking, a B/L which has passed the time deadline of the L/C and is void. - Straight (Consignment) B/L: Indicates the shipper will deliver the goods to the consignee. It does not convey title (non-negotiable). Most often used when the goods have been pre-paid. - "To Order" B/L: See Negotiable B/L. - Unique B/L Identifier: U.S. Customs' standardization: four-alpha code unique to each carrier placed in front of nine digit B/L number; APL's unique B/L Identifier is "APLU". Sea-land uses "SEAU". These prefixes are also used as the container identification. - Voided B/L: Related to Consolidated B/L; those B/L's absorbed in the combining process. Different from Canceled B/L. How significant is the form of a bill of lading or an air waybill? The form of a bill of lading or an air waybill instructs the carrier on how to handle or disburse the goods that the carrier is transporting when the carrier reaches its destination. If the bill of lading is in negotiable form, i.e. "order of the shipper", the carrier will hold the goods until it receives an original bill of lading that has been endorsed by the shipper (seller). If the bill of lading is in non-negotiable or straight form and consigned to the buyer, the carrier will release the goods to the buyer upon presentation of the buyer's identification. If, on the other hand, the bill of lading is in non-negotiable or straight form and consigned to a third party, such as the buyer's bank, the carrier will release the goods as instructed by the third party consignee in a "release" (steamship guarantee or airway release) issued by the third party consignee to the carrier. What is a pro forma invoice? A pro forma invoice is a sales quotation drafted in the form of an invoice. What is a clean bill of lading? A clean bill of lading is a bill of lading that is issued by a carrier when a shipment is received in good order. What is a transshipment? Transshipment is a Customs procedure under which goods are transferred under Customs' control from the importing means of transport to the exporting means of transport within the area of a Customs' office that is the office of both importation and exportation. What is duty drawback? Drawback is a refund or remission (up to 99%, in some cases) of a customs duty paid on imported goods, that are then exported overseas. Which international payment methods are most commonly used by exporters and importers? Cash in advance, confirmed letter of credit, advised letter of credit, documents against payment, documents against acceptance, and open account. From an exporter's perspective how do the most commonly used international payment methods rank in terms of the most secure to the least secure? Cash in advance, confirmed letter of credit, advised letter of credit, documents against payment, documents against acceptance, and open account. From an importer's perspective how do the international payment methods rank in terms of the most secure to the least secure? Open account, documents against acceptance, documents against payment advised letter of credit, confirmed letter of credit, and cash in advance. What is a confirmed letter of credit? A confirmed letter of credit is a formal written undertaking issued by a bank in the buyer's country (issuing bank) and guaranteed or confirmed by a bank in the seller's country (confirming bank) in accord with which both banks agree to pay a seller (the letter of credit beneficiary) a specified amount on behalf of a buyer (the letter of credit applicant/account party), if the seller complies with the terms and conditions that are specified within the letter of credit. How do the banks involved in a confirmed letter of credit transaction function? The bank that issues a confirmed letter of credit (the issuing bank) assumes the role of the foreign buyer, whereas the bank that confirms the letter of credit (confirming bank) assumes the role of the foreign issuing bank. By functioning in this manner, the issuing bank effectively eliminates payment risk associated with the foreign buyer whereas the confirming bank effectively eliminates payment risk associated with the issuing bank. International Payments In what types of situations is a confirmed letter of credit typically used? A confirmed letter of credit is a desirable (albeit expensive) payment method for a company buying a product internationally, and a desirable (albeit expensive) payment method for a company that is selling product internationally. The buyer who uses this payment method can feel comfortable that two banks are assessing the seller's performance under the letter of credit which has been issued on behalf of the buyer. Likewise, the buyer can feel comfortable that the seller will not be paid if the seller does not perform exactly as the confirmed letter of credit requires. The seller, on the other hand, should also feel comfortable with a confirmed letter of credit transaction in that the seller knows that it will be paid in the U.S. by a U.S. bank if it performs in accordance with the terms and conditions that are specified by the letter of credit. What is an advised (or unconfirmed) letter of credit (L/C)? An advised (or unconfirmed) letter of credit is a formal written undertaking issued by a bank in the buyer's country (issuing bank) and conveyed to the seller/exporter (letter of credit beneficiary) by a bank in the seller's country (advising bank). The issuing bank agrees to pay the seller a specified amount on behalf of a buyer (the letter of credit applicant/account party), if the seller complies with the terms and conditions that are specified within the letter of credit. In what types of situations is an advised letter of credit typically used? An advised letter of credit is a desirable (albeit expensive) payment method for a company that is buying a product internationally, and a desirable (albeit expensive) payment method for a company that is selling a product internationally. The buyer who uses this payment method can be assured that the issuing bank will assess the seller's performance before the issuing bank pays the seller under the letter of credit. Consequently, the buyer can feel comfortable that the seller will not be paid under the letter of credit if the seller does not perform exactly as the letter of credit requires. The seller, on the other hand, should also feel comfortable with an advised letter of credit transaction in that the seller knows that it will be paid under the letter of credit if it performs in accordance with the terms and conditions that are specified by the letter of credit. What is a documentary letter of credit? A documentary letter of credit (also known as a commercial letter of credit or a merchandise letter of credit) is a letter of credit that is issued for the purpose of making payment to a specified beneficiary if the beneficiary performs as required. Documentary letters of credit are called documentary letters of credit because the banks involved in the letter of credit transaction deal in documents as opposed to goods. The terms and conditions specified in a documentary letter of credit generally involve the presentation of specific documents within a stated period of time. What is a standby letter of credit? A standby letter of credit is a letter of credit that is issued in favor of the standby letter of credit beneficiary for the purpose of "backing-up" certain specified obligations of the standby letter of credit applicant. A standby letter of credit requires the beneficiary's presentation of documents that indicate the applicant has not met these obligations. How does a documentary letter of credit differ from a standby letter of credit? The principal difference between a documentary letter of credit and a standby letter of credit is the fact that a documentary letter of credit is an active payment instrument under which payment is intended if the terms and conditions prescribed by the letter of credit are met, whereas a standby letter of credit is a passive payment instrument under which payment is not intended and will occur only if the standby letter of credit applicant fails to meet its obligations as specified by the standby letter of credit. How many banks are typically involved in a letter of credit transaction? At least two separate banks are involved in a letter of credit transaction, i.e. the issuing bank in the applicant's country and the advising/confirming bank in the beneficiary's country. What is a documentary collection? A method of effecting payment for goods whereby the seller/exporter ships goods to the buyer, but instructs his bank to collect from the buyer/importer payment of a certain sum or the promise to pay a certain sum in exchange for transferring to the buyer/importer title, shipping and other documentation that enable the buyer/importer to take possession of the goods. What are the two types of documentary collections? The two types of documentary collection are documents against payment (also referred to as cash against documents) and documents against acceptance. What is a draft? A draft, also known as a "bill of exchange," is a written demand for payment issued by the seller or the seller's designate (drawer) against the buyer or the buyer's designate (drawee). What is factoring? Factoring is the discounting of an account receivable in order to receive immediate payment. In international trade, this does not involve a draft. The exporter transfers title of its foreign accounts receivable to a factoring house for cash at a discount from the face value. Factoring is often done without recourse to the exporter. What does electronic funds transfer (EFT) mean? "Funds Transfer" means the series of transactions, beginning with the originator's payment order, made for the purpose of making payment to the beneficiary of the order. The term includes any payment order issued by the originator's bank or an intermediary bank intended to carry out the originator's payment order. A funds transfer is completed by acceptance by the beneficiary's bank of a payment order for the benefit of the beneficiary of the originator's payment order. What is a FedWire? "FedWire" is an acronym for the Federal Reserve Wire Network, which is owned and operated by the twelve Federal Reserve banks in the United States. In the early days of the Federal Reserve, financial and administrative messages were sent between the system's offices by telegraph. What is CHIPS? CHIPS is an acronym for the Clearing House Interbank Payment System operated by the New York Clearing House Association. It is an automated communications network and settlement clearing facility that processes, for the most part, international funds transfers among members although it does handle some domestic transfers as well. What is S.W.I.F.T.? S.W.I.F.T. is an acronym for the Society for Worldwide International Financial Telecommunication organized under Belgian law as a nonprofit cooperative company. It is an international communications system for messages among its member institutions in most of the countries in the Americas, Europe, Japan, and certain countries in Asia. Its member institutions are banking organizations engaged in transmitting international financial messages (and certain non-banking institutions). TITLE 49 > SUBTITLE X > CHAPTER 801 > § 80104 § 80104. Form and requirements for negotiation (a) General Rules.— (1) A negotiable bill of lading may be negotiated by indorsement. An indorsement may be made in blank or to a specified person. If the goods are deliverable to the order of a specified person, then the bill must be indorsed by that person. (2) A negotiable bill of lading may be negotiated by delivery when the common carrier, under the terms of the bill, undertakes to deliver the goods to the order of a specified person and that person or a subsequent indorsee has indorsed the bill in blank. (3) A negotiable bill of lading may be negotiated by a person possessing the bill, regardless of the way in which the person got possession, if— (A) a common carrier, under the terms of the bill, undertakes to deliver the goods to that person; or (B) when the bill is negotiated, it is in a form that allows it to be negotiated by delivery. (b) Validity Not Affected.— The validity of a negotiation of a bill of lading is not affected by the negotiation having been a breach of duty by the person making the negotiation, or by the owner of the bill having been deprived of possession by fraud, accident, mistake, duress, loss, theft, or conversion, if the person to whom the bill is negotiated, or a person to whom the bill is subsequently negotiated, gives value for the bill in good faith and without notice of the breach of duty, fraud, accident, mistake, duress, loss, theft, or conversion. (c) Negotiation by Seller, Mortgagor, or Pledgor to Person Without Notice.— When goods for which a negotiable bill of lading has been issued are in a common carrier’s possession, and the person to whom the bill has been issued retains possession of the bill after selling, mortgaging, or pledging the goods or bill, the subsequent negotiation of the bill by that person to another person receiving the bill for value, in good faith, and without notice of the prior sale, mortgage, or pledge has the same effect as if the first purchaser of the goods or bill had expressly authorized the subsequent negotiation.
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