Glossary

Agent:
A representative in a foreign market who attempts to sell your good or service through his or her network. Agents may be exclusive or represent many companies. They usually do not take responsibility for delivery or servicing of your product and are paid on a commission basis.

Bid Bond:
When an exporter is bidding on a foreign contract, a bid bond guarantees that the exporter will take the contract if it is awarded. If the exporter fails to take the contract, it will have to pay a penalty in the amount of the bond. A bid bond is usually requested by a foreign organization to screen out weak contenders. Your financial institution or the Export Development Corporation can assist in financing and issuing these bonds.

Bill of Lading:
A document prepared by a carrier or freight forwarder that acts as a receipt for the goods, as evidence of a contract between the carrier and the exporter and as a document of title. A foreign buyer needs this document to take possession of the goods.

Certificate of Origin:
This certifies the country or countries where a product is made. Many markets require this, including Canada, when shipping tariff-free or tariff-reduced goods, such as under the North American Free Trade Agreement.

C&F (cost and freight):
You pay the costs and freight to get your goods to the specified destination, but your responsibility ends there. The foreign buyer assumes the risk of loss or damage once the goods are loaded at the port of departure.

CIF (cost, insurance and freight):
As an exporter, you pay the cost of freight and insurance to get the goods to a named port of destination.

Commercial Invoice:
Supplied by the exporter, this summarizes the commercial transaction. It includes details about product, quantity, specifications, price, delivery and payment terms, plus the addresses of all parties involved.

Consular Invoice:
Some foreign governments with controls over what may be imported may require exporters to obtain consular invoices from their consulate offices within Canada. The foreign consul issues the document describing the goods and a fee is usually charged.

Countertrade:
This refers to transactions involving the reciprocal sale or barter of goods of equal value.

Customs Invoice:
This helps clear goods through customs points in an importing country by verifying the value of goods.

Delivered at Frontier:
An exporter agrees to safely transport the goods to the "frontier," which is a point before the actual customs border of the importing country. Commonly used when goods are shipped by road or rail.

Delivered Duty Paid:
The exporter has responsibility to not only deliver the goods, but also assumes any risk of damage, loss and the payment of any duty.

Documentary Collections:
A payment method where all the documents, including the bill of lading and bill of exchange (request for payment) are sent to the exporter's bank. All the documents are checked and sent to the importer's bank. Once the importer's bank has been paid by the importer, that bank releases the document of title (usually the bill of lading) to allow the importer to collect the goods.

Document of Title:
Evidence of ownership of goods, such as a carrier's bill of lading.

Draft (Bill of Exchange):
An unconditional order signed by the exporter requiring the importer to pay, on demand or at a determined future time, a certain amount of money to a specified individual. A "sight draft," for instance, requires immediate payment. A "time draft" requires payment over a certain period (from 30 to 180 days).

Export License:
Required under Canadian law to sell certain products abroad, such as protected birds or military equipment.

Ex Works:
This is the minimum level of responsibility for an exporter. You agree only to make the goods available to the buyer at your plant or office. The buyer may even be responsible for loading the goods on a vehicle. The buyer bears all responsibility for taking the goods from that point.

FAS (free along side):
The exporter agrees to place goods on the dock, alongside a vessel. At this point, a seller's obligations are met.

FOB (free on board):
The exporter agrees to place goods on board a vessel at the port of shipment specified in the sales contract. At this point, the risk of damage is transferred to the buyer at precisely the moment the goods pass over the ship's rail.

Free Carrier (Port):
With multi-modal transport taking the same goods by sea, air and other modes, FOB principles (as above) again come into play. This time though, an exporter's obligations are met when the goods are handed over to the carrier named by the buyer and cleared for export at the specified place or port.

Freight Forwarder:
A company handling all aspects of export shipping, including customs and export documentation. Sometimes, they can save you money by combining your shipment with others or using pre-booked carrier space.

Import Tariff:
A tax on imported goods by foreign governments.

INCO Terms:
The International Chamber of Commerce sets out the international rules for the interpretation of common trade terms, such as FOB.

Insurance Certificate:
Supplied by an exporter or freight forwarder to prove the goods to be exported are insured for transport.

Landed Cost:
The cost of the exported good at the foreign market's port or point of entry, excluding foreign tariffs, taxes and other local costs.

Letter of Credit:
A common document in exporting. An instrument issued by a bank on behalf of an importer that guarantees an exporter payment for goods or services, provided the terms of the credit are met.

Letter of Credit (Confirmed):
In cases where the financial strength of the issuing bank or country is in doubt, the exporter may ask their own bank in Canada to provide an undertaking (i.e. to confirm) that the credit will be paid. The exporter is assured that the letter of credit will be paid by the confirming bank, even if the issuing bank cannot pay, provided the terms and conditions of the credit have been met.

Letter of Credit (Irrevocable):
A financial institution agrees to pay an exporter once all terms and conditions of the transaction are met. Since it is irrevocable, no terms or conditions can be modified without consent of all parties, including the exporter. Revocable letters of credit are not common and should not be accepted by an exporter.

Open Account:
Goods are shipped to a buyer before the Canadian exporter receives payment. This is most common for Canadian exporters selling into the U.S. To reduce the risk in this, some banks will buy accounts receivable from exporters.

Packing List:
An important document in exporting, which shows the quantity and type of merchandise being shipped.

Performance Bond:
If a foreign contract is awarded, a performance bond may be required of an exporter. Your financial institution or the Export Development Corporation can often assist in financing these bonds.

Pro Forma Invoice:
An advance invoice prepared by an exporter before shipping, setting out the goods to be sent, their value and other details.

Trading House:
A company specializing in exporting and importing goods of other companies. A trading house can act as an agent to find foreign buyers on a commission basis or can act as a reseller.

Warehouse Receipt:
Document identifying goods shipped to a warehouse. A "non-negotiable warehouse receipt" sets out specifically who may take the goods, while a "negotiable receipt" allows goods to be released to the bearer of the document.