Glossary

Air Waybill: A bill of lading for air transportation. Air waybills specify the terms under which the air carrier is agreeing to transport the goods and contain limitations of liability. They are not negotiable.

Arrival Notice: A notification by the steamship, railroad, or over-the-road trucker. It informs the consignee of the arrival of the goods and usually indicates the pickup location and the allowed free time before storage charges begin.

ATA Carnet: An international customs document that may be used in lieu of national customs entry documents and as security for import duties and taxes to cover the temporary admission and transit of goods.

Bill of Lading (B/L): A document issued by a carrier (railroad, steamship or 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 goods are accepted by the carrier and details the nature and quantity of the goods, name of vessel (if shipped by sea), identifying marks and numbers, destination, etc. The person sending the goods is the “shipper” or “consignor,” the company or agent 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.

Bonded Warehouse: A warehouse in which goods subject to excise taxes or customs duties are temporarily stored without the taxes or duties being assessed. A bond or security is given for the payment of all taxes and duties that may eventually become due. Operations in the warehouse may cover assembly, manipulation or storage but usually not manufacturing.

Certificate of Insurance: A document containing certain terms of a full-length insurance policy. A one-page document, it is evidence that there is insurance coverage for a shipment. Beneficiaries of open cargo or blanket insurance policies are authorized to issue their own certificates of insurance.

Cost and Freight (CFR): The seller must pay the costs and freight required in bringing the goods to the named port of destination. The risk of loss or damage is transferred from seller to buyer when the goods pass over the ship’s rail in the port of shipment. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.

Cost, Insurance and Freight (CIF): The seller has the same obligations as under CFR however he is also required to provide insurance against the buyer’s risk of loss or damage to the goods during transit. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.

Carriage and Insurance Paid (CIP): The seller has the same obligations as under CPT but has the responsibility of obtaining insurance against the buyer’s risk of loss or damage of goods during the carriage. The seller is required to clear the goods for export however is only required to obtain insurance on minimum coverage. This term requires the seller to clear the goods for export and can be used across all modes of transport

Carriage Paid To (CPT): The seller pays the freight for the carriage of goods to the named destination. The risk of loss or damage to the goods occurring after the delivery has been made to the carrier is transferred from the seller to the buyer. This term requires the seller to clear the goods for export and can be used across all modes of transport.

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.

Delivered at Terminal (DAT): May be used for all transport modes.
Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the disposal of the buyer at a named terminal at the named port or place of destination. “Terminal” includes quay, warehouse, container yard or road, rail or air terminal. Both parties should agree the terminal and if possible a point within the terminal at which point the risks will transfer from the seller to the buyer of the goods. If it is intended that the seller is to bear all the costs and responsibilities from the terminal to another point, DAP or DDP may apply.

Responsibilities

  • Seller is responsible for the costs and risks to bring the goods to the point specified in the contract
  • Seller should ensure that their forwarding contract mirrors the contract of sale
  • Seller is responsible for the export clearance procedures
  • Importer is responsible to clear the goods for import, arrange import customs formalities, and pay import duty

If the parties intend the seller to bear the risks and costs of taking the goods from the terminal to another place then the DAP term may apply.

Delivered at Place (DAP): May be used for all transport modes.
Seller delivers the goods when they are placed at the disposal of the buyer on the arriving means of transport ready for unloading at the named place of destination. Parties are advised to specify as clearly as possible the point within the agreed place of destination, because risks transfer at this point from seller to buyer. If the seller is responsible for clearing the goods, paying duties etc., consideration should be given to using the DDP term.

Responsibilities

  • Seller bears the responsibility and risks to deliver the goods to the named place
  • Seller is advised to obtain contracts of carriage that match the contract of sale
  • Seller is required to clear the goods for export
  • If the seller incurs unloading costs at place of destination, unless previously agreed they are not entitled to recover any such costs

Importer is responsible for effecting customs clearance, and paying any customs duties.

Delivered Duty Paid (DDP): The seller is responsible for delivering the goods to the named place in the country of importation, including all costs and risks in bringing the goods to import destination. This includes duties, taxes and customs formalities. This term may be used irrespective of the mode of transport.

Drawback: Import duties and taxes refunded by a government, in whole or in part, when the imported goods are re-exported or used in the manufacture of exported goods.

Duty: The tax imposed by a customs authority on imported merchandise.

Entry: The formal process by which goods are imported into a country, consisting of filing of documents with the importing country’s customs service and the payment of customs duties. Various types of entries are used in different circumstances such as consumption entries, warehouse entries, immediate transportation entries, and transportation and exportation entries.

Examination: The process by which the customs authorities of an importing country inspect the goods identified in the customs entry documents and confirm whether the goods are the same as described in the documents and whether the goods are eligible for entry.

Export License: A permit required to engage in the export of certain commodities to certain destinations. In the United States such controls are usually determined by the Department of Commerce, Bureau of Export Administration; the Department of State, Office of Defense Trade Controls; or Department of Treasury, Office of Foreign Assets Control. Controls are imposed to implement U.S. foreign policy, ensure U.S. national security, prevent proliferation, or protect against short supply.

Free Alongside Ship (FAS): The seller has fulfilled his obligation when goods have been placed alongside the vessel at the port of shipment. The buyer is responsible for all costs and risks of loss or damage to the goods from that moment. The buyer is also required to clear the goods for export. This term should only be used for sea or inland waterway transport.

Free On Board (FOB): Once the goods have passed over the ship’s rail at the port of export the buyer is responsible for all costs and risks of loss or damage to the goods from that point. The seller is required to clear the goods for export. This term should only be used for sea or inland waterway transport.

Freight Forwarder: An entity that dispatches shipments via common carriers and books or otherwise arranges space for those shipments on behalf of shippers and processes the documentation or performs related activities incident to those shipments.

Freight Prepaid: An agreement between the seller and a buyer that the seller will pay for the transportation charges before delivery to the transportation carrier.

Harmonized Tariff System: The system adopted by most of the commercial countries of the world in 1989, classifying products manufactured and sold in world commerce according to an agreed-upon numerical system. Common international classifications facilitate balance of trade statistics collection, customs classification, and country of origin determination.

In Bond: The transportation or storage of goods in a condition or location which is exempt under the customs laws from the payment of customs duties for the time period which is allowed by law for transportation or storage. Transportation or storage in bond may be affected by transportation carriers or warehouses that have posted a bond with customs authorities guaranteeing payment of all customs duties in the event that the goods are improperly released with out the payment of customs duties by the owner of the goods.

Liquidations: U.S. Customs term describing the official and final determination made by customs authorities of the classification and value of the imported merchandise. For example, many importers, by posting a customs bond, may obtain immediate delivery of merchandise by classifying the imported product and paying customs duties at the time. The importer’s classification and value, however, is not binding on the U.S. Customs Service, and within an additional period time, for example, three to six months, the Service will make its own analysis of the goods and determine whether or not they agree with the classification, value, and duties paid.

Pro Forma Invoice: An abbreviated invoice sent at the beginning of a sale transaction, usually to enable the buyer to obtain an import permit or a foreign exchange permit or both. The pro forma invoice gives a close approximation of the weights and values of a shipment that is to be made.

Shipper’s Export Declaration: A form required by the Commerce Department for shipments over $2500 ($500 for mail shipments) to all countries except Canada. It is completed by a shipper or its freight forwarder showing the value, weight, consignee, designation, schedule B number, etc. for the export shipment.

Shipper’s Letter of Instructions: A document issued by an exporter or importer instructing the freight forwarder to effect transportation importation and exportation in accordance with the terms specified in the letter of instructions.

Tariff: A duty (or tax) levied upon goods transported from one customs area to another. Tariffs raise the prices of imported goods, thus making them less competitive within the market of the importing country.

Value-Added Tax (VAT): An indirect tax on consumption that is levied at each discrete point in the chain of production and distribution, from the raw material stage to final consumption. Each processor or merchant pays a tax proportional to the amount by which he increases the value or marks up the goods he purchases for resale.

World Trade Organization (WTO): The World Trade Organization consists of 123 signatory countries. The Uruguay Round of negotiations resulted in the formation of the WTO and in numerous agreements relating to the reduction of tariffs and non-tariff barriers to trade. The WTO supercedes GATT, but a number of agreements reached under GATT, such as the Valuation Code, the Antidumping Code, the Subsidies Code, and Agreement on Government Procurement, continue in revised form under the WTO.