If you want to learn about importing and exporting business you may already have heard about some of the basics. The Trade and Logistics world has a huge number of acronyms, and it is ever-changing. This list explains what some of them stand for and their meaning:
EXW (Ex Works)
EXW means that a buyer incurs the risks for bringing the goods to their final destination. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included.
EXW means that a buyer incurs the risks for bringing the goods to their final destination.
FOB (Free on Board)
Free on Board means that the seller fulfils his obligation to deliver when the goods have passed over the ship's rail at the named port of shipment. This means that the buyer has to bear all costs and risks of loss of or damage to the goods from that point.
C&F/CFR: Cost and Freight
Cost and Freight are paid at the named port of destination. The seller pays for the carriage of the goods up to the named port of destination. Risk transfers to buyer when the goods have been loaded on board the vessel in the country of export.
CIF: Cost, Insurance, and Freight.
This refers to an incoterm meaning the buyer assumes all risk once the goods are on-board the vessel for the main carriage but does not assume costs until the freight arrives at the named port of destination. CIF applies to ocean or inland waterway transport only. It is commonly used for bulk cargo, oversized or overweight shipments.
LOC: Letter of Credit
A letter of credit, also known as a documentary credit, bankers commercial credit, is a payment mechanism used in international trade to perform the same economic function as a guarantee, by allocating risk undertaken by contracting parties.
CAD: Cash Against Documents
A payment method in which banks are used for intermediation in terms of payment and transfer of the export documents from the exporter to the importer. It’s also called Documents Against Payment (DAP).
COO: Certificate of Origin
A certificate of origin (often abbreviated to C/O or COO) is a document used in international trade. In a printed form or as an electronic document, it is completed by the exporter and certified by a recognized issuing body, attesting that the goods in a particular export shipment have been produced, manufactured or processed in a particular country.
BOL (or B/L): Bill of Lading
A bill of lading is a document issued by a carrier to acknowledge receipt of cargo for shipment. In British English, the term relates to ship transport only, and in American English, to any type of transportation of goods.
HSN Code: Harmonized System of Nomenclature code.
This was introduced for a systematic classification of goods both national and international. This is a 6-digit code that classifies various products. The HSN code contains 21 sections. These are divided into 99 chapters which are divided into 1244 sections. This system helps in making GST simpler and globally accepted. HSN codes for goods at 6 digits are universally common. Codes prescribed in the Customs tariff are used for the GST purposes. In Customs Tariff, HS code is prescribed as heading (4 digits HS), sub-heading (6 digits HS) and tariff items (8 digits).
This table shows the distribution of costs between the seller and the buyer at each stage of the shipment (as shown in the horizontal row) in international trade terms (as shown in the vertical column).
Traditionally, these were the most commonly used acronyms in the trade business; however, due to the constant sophistication of technology and its contribution to banking facilities, some of these terms may be changed or eliminated.