Common Foreign Trade Terms
Comprehensive guide to foreign trade English abbreviations and terminology
FOB- Free On Board
Definition:
The seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment.
Usage:
Used when the seller is responsible for costs and risks until goods are loaded onto the ship.
Example:
FOB Shanghai - Seller pays for transport to Shanghai port and loading costs.
CIF- Cost, Insurance and Freight
Definition:
The seller pays for the costs, insurance, and freight necessary to bring goods to the port of destination.
Usage:
Commonly used in international trade where seller handles shipping and insurance.
Example:
CIF New York - Seller pays all costs including insurance to New York port.
EXW- Ex Works
Definition:
The seller makes goods available at their premises. The buyer bears all costs and risks from that point.
Usage:
Minimum obligation for the seller, maximum responsibility for the buyer.
Example:
EXW Factory - Buyer collects goods from seller's factory and handles all transport.
DDP- Delivered Duty Paid
Definition:
The seller delivers goods to the buyer, cleared for import and ready for unloading at the destination.
Usage:
Maximum obligation for seller, minimum risk for buyer.
Example:
DDP warehouse - Seller handles all costs including customs clearance to buyer's warehouse.
CFR- Cost and Freight
Definition:
The seller pays for the costs and freight necessary to bring goods to the port of destination.
Usage:
Similar to CIF but without insurance coverage from seller.
Example:
CFR Hamburg - Seller pays freight to Hamburg but buyer arranges insurance.
DAP- Delivered at Place
Definition:
The seller delivers when goods are placed at the disposal of the buyer on the arriving means of transport.
Usage:
Seller bears all risks of bringing goods to the named place.
Example:
DAP warehouse - Seller delivers to buyer's warehouse but buyer handles unloading.
L/C- Letter of Credit
Definition:
A financial document issued by a bank guaranteeing payment to the seller upon meeting specified conditions.
Usage:
Provides security for both buyer and seller in international transactions.
Example:
Irrevocable L/C at sight - Payment guaranteed upon document presentation.
T/T- Telegraphic Transfer
Definition:
Electronic transfer of funds from one bank account to another.
Usage:
Common payment method for international trade transactions.
Example:
30% T/T in advance, 70% T/T before shipment.
D/P- Documents against Payment
Definition:
Documents are released to the buyer only upon payment of the draft.
Usage:
Provides some security for seller while allowing buyer to inspect documents.
Example:
D/P at sight - Payment required immediately upon document presentation.
D/A- Documents against Acceptance
Definition:
Documents are released to the buyer upon acceptance of a time draft.
Usage:
Allows buyer to receive goods before payment but commits to pay at a future date.
Example:
D/A 60 days - Buyer accepts to pay 60 days after document acceptance.
B/L- Bill of Lading
Definition:
A document issued by a carrier acknowledging receipt of cargo for shipment.
Usage:
Serves as receipt, contract of carriage, and document of title.
Example:
Clean B/L - Bill of lading without remarks about damaged goods.
AWB- Air Waybill
Definition:
A document issued by an airline for air cargo shipment.
Usage:
Non-negotiable transport document for air freight.
Example:
Master AWB - Issued by airline to freight forwarder.
C/O- Certificate of Origin
Definition:
A document certifying the country where goods were manufactured or produced.
Usage:
Required for customs clearance and preferential tariff treatment.
Example:
GSP C/O - Certificate for Generalized System of Preferences benefits.
P/I- Proforma Invoice
Definition:
A preliminary invoice sent before goods are delivered, showing estimated costs.
Usage:
Used for quotation purposes and customs declaration.
Example:
P/I valid for 30 days - Quotation expires after 30 days.
S/C- Sales Contract
Definition:
A legally binding agreement between buyer and seller outlining terms of sale.
Usage:
Establishes rights and obligations of both parties.
Example:
S/C No. 2024001 - Contract number for reference.
MOQ- Minimum Order Quantity
Definition:
The smallest quantity of goods a supplier is willing to sell in a single order.
Usage:
Helps suppliers maintain profitability and efficiency.
Example:
MOQ: 1000 pieces - Minimum order is 1000 units.
OEM- Original Equipment Manufacturer
Definition:
A company that manufactures products that are sold under another company's brand.
Usage:
Common in manufacturing where one company produces for another's brand.
Example:
OEM service available - Can manufacture products under your brand.
ODM- Original Design Manufacturer
Definition:
A company that designs and manufactures products that are sold under another company's brand.
Usage:
Provides both design and manufacturing services.
Example:
ODM solutions - Complete design and manufacturing service.
QC- Quality Control
Definition:
The process of ensuring products meet specified quality standards.
Usage:
Essential for maintaining product quality and customer satisfaction.
Example:
QC inspection before shipment - Quality check before goods are sent.
QA- Quality Assurance
Definition:
The systematic process of ensuring quality standards are met throughout production.
Usage:
Preventive approach to quality management.
Example:
QA system certification - Certified quality assurance processes.
Category Overview
Incoterms
6 terms
Payment Terms
4 terms
Shipping Documents
3 terms
Commercial Documents
2 terms
Order Terms
1 terms
Manufacturing
2 terms
Quality Assurance
2 terms
Tips for Using Trade Terms
Best Practices:
- • Always clarify terms with your trading partner
- • Use the latest Incoterms rules (2020)
- • Specify the exact location for delivery terms
- • Understand your responsibilities under each term
Common Mistakes:
- • Confusing CIF with CFR insurance coverage
- • Not specifying the exact delivery location
- • Mixing different versions of Incoterms
- • Assuming terms mean the same globally