Glossary of International Trade Terms

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- M -

Market Access:  The extent to which a domestic industry can penetrate a related market in a foreign country.  Access can be limited by tariffs or other non trade barriers.

Marine insurance:  Insurance that compensaes the owner of goods transported at sea in the event of loss that cannot be legally recovered from the carrier.

Master Lease: A contract where the lessee leases currently needed assets and is able to acquire other assets under the same basic terms and conditions without negotiating a new contract.

Maturity date: Date at which payment is due under a term bill of exchange.

Middle Market: A market segment generally represented by financing under $2 million.  In leasing this sector is dominated by single investor leases.

Most Favored Nation Treatment (MFN): When one country accords another most-favored nation status, it agrees to extend to that country the same trade concession it grants to other MFN recipients.  GATT members have agreed to accord each other MFN status.  Preferential treatment accorded developing countries, customs unions and free trade areas all represent allowable exceptions to the MFN concept.  This is sometimes now called "Normal Trading Relations."

- N -

National Treatment: The concept that countries must afford foreign companies the same access and other benefits they do local domestic firms.

Negotiating bank: Bank nominated on a letter of credit to negotiate the bill of exchange, i.e. check the documents, pay the seller and seek reimbursement from the
Issuing bank.

Negotiation:  discussion and give and take leading to an agreement.  In respect to Letters of credit is means “buying” of a bill of exchange drawn on another party.  In situations where letters of credit are settled by negotiation, a negotiating bank may be
nominated to check the documents, pay the seller and seek reimbursement from the Issuing bank. Alternatively the credit may be freely negotiable at any bank.

Net Lease: A lease wherein payments to the lessor do not include insurance and maintenance, which are paid separately by the lessee.

Nonrecourse Loan: In a leveraged lease, the lenders cannot look to the lessor for repayment. The lender's only recourse is to the lessee and, therefore, the lessee's credit rating is of prime importance.

Non Tariff Barriers:  Measures other than tariffs that restrict imports.  Import quotas, standards, licenses, and other policies can serve as not-tariff barriers.

Non-Vessel Operating Common Carrier: Also known as an NVOCC, a company which consolidates small shipments from different sources consigned to the same destination into a single container for shipment overseas by either ocean or air carriers.

Nostro-vostro accounts:  Accounts held by correspondent banks in each others' currencies.  Each such account has a nostro view - our money held with you - and a vostro view - your money held with us.

Notify party: the party who is to be notified when goods arrive at their destination.

- O -

Ocean bill of lading:  A bill of lading indicating that the exporter consigns a shipment to an international carrier for transport to a specified foreign destination.  Unlike an inland bill of lading, the ocean bill of lading also serves as a collection document. 

On boar bill of lading:  A bill aof lading inwhich a carrier certifies that goods have been placed on board a certain vessel.

Open account: Trading method in which goods are dispatched to a buyer and paid for after they have been received.

Open account trading and collections:  A bill of exchange that will be drawn on and accepted by the buyer.

Open Insurance Policy: A marine insurance policy that applies to all shipments made by an exporter over a period of time rather than to one shipment only.

Opening bank: Another name for the Issuing bank in a letter of credit.

Open-end Lease: A conditional sale lease in which the lessee guarantees that the lessor will realize a minimum value from the sale of the asset at the end of the lease.

Operating Lease: Any lease that is not a capital lease. These are generally used for short term leases of equipment. The lessee can acquire the use of equipment for just a fraction of the useful life of the asset. Additional services such as maintenance and insurance may be provided by the lessor.

OPIC: Overseas Private Investment Corporation.  A US agency that assists US companies protect their investment against risk in a particular country besides providing other services.

Order:  a form of endorsement or transfer.  On a bill of exchange, 'order' or 'to order' means that the drawer directs that payment be made to another party (usually a bank).

On a bill of lading: 'order' or 'to order' transfers or assigns title to the goods to another party.

Outward collection:  How the Remitting bank refers to a collection.  Collection being sent overseas to collecting bank(s) for presentation to buyer.

Outward letter of credit: How the Issuing bank refers to a letter of credit.

- P -

Packing list: Document listing the contents of a consignment of goods.  May be called for on a letter of credit.

Packager: The person or organization putting together a proposal.  In leasing, the leasing company, investment banker, or broker who arranges a leveraged lease.

Patent:A license that secures the holder the exclusive right to make, use or sell and invention.

Payee:  Party to whom payment is due.

Paying bank: In a letter of credit, bank that is nominated to make payment to the
beneficiary upon presentation of complying documents.

Perils of the Sea: An insurance term used to designate heavy weather grounding, stranding, collision, water damage or lightning.

Political risk: Risk that political instability in the buyer's country will interfere with a buyer's ability to meet payment obligations.

Present Value: The current equivalent of payments or a stream of payments to be received at various times in the future. The present value will vary with the discount interest factor applied to future payments.

Presentation: In a collection, presentation of documents by a bank to a buyer for payment
or acceptance. In a letter of credit, presentation of documents by a seller to a
bank for payment, acceptance or negotiation.

Presentation period: On a letter of credit, number of days allowed between shipment of goods and presentation of documents to a bank.

Presenting bank: In a collection, bank that presents documents to a buyer for payment or

Prime letter of credit: In a back-to-back letter of credit transaction, the original letter of credit that is offered as security for another letter of credit (second letter of credit).

Principal: Main Party to a transaction.

Pro forma Invoice:  An invoice provided by a supplier prior to the shipment of merchandise, informing the buyer of the kinds and quantities of goods to be sent, their value, and important specifications.

Promissory note: Financial document in which the buyer agrees to make payment to the seller at a specified time.

Protest: Legal procedure that may be administered by a notary public, evidencing non-payment or non-acceptance of a bill of exchange. Useful in support of a subsequent civil action against the defaulter.  In a collection, the presenting bank may be instructed to arrange for this.

Purchase Option: A provision in a document that gives the party receiving the benefit the right to purchase the property at a future date.  In leasing, a provision by which a lessee has the right to purchase the equipment at the end of the lease. The purchase option may be stated at a specified amount or at fair market value.

Put Option:  The requirement to purchase an asset at a particular time and at a predetermined price. This term is used in stock, commodities and leasing.  In a lease transaction, this is a lessor's right to force the lessee (or some third party) to purchase the equipment at the end of the lease term. IRS guidelines prohibit put options in tax oriented leases.

- Q -

Quota:The quantity of goods of a specific type that may be imported without restriction or the imposition of additional duties.

- R -

Recourse: The right to demand return of money paid. In negotiation of a letter of credit, payment by the negotiating bank will normally be with recourse (i.e. if the Issuing bank subsequently does not pay).

Red clause: A letter of credit instructing an advance payment to be made to the beneficiary upon advice of the credit but before shipment of the goods.

Reimbursing bank: Bank specified as a source of funds in a letter of credit transaction. Bank is not a party to the letter of credit.

Release note: Document given by a bank to a buyer to enable buyer to claim the goods from the carrier. Used when goods are consigned to the bank as a means of retaining constructive control.

Remitter: The party making a payment.

Remitting bank: In a collection, bank who remits the documents overseas and in due course receives payment.

Residual Value: The value of an asset at the conclusion of a lease.

Restrictive endorsement: Endorsement transferring title or right to a named party. See also: blank endorsement.

Revocable letter of credit: Letter of credit which may be amended or cancelled unilaterally. Offers no security to seller and so very rare.

Revolving letter of credit:A Letter of credit designed to cover a series of similar consignments over a period of time.

Road consignment note: Transport document used for goods sent by road. This is not a document of title.

Rules of Origin:  Rules used to determine in what country a good will be considered as actually made for tariff and other trade purposes.


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