Trade terms, plainly explained
A short glossary of the terms you will encounter most often when preparing to export. Definitions here are plain-language summaries for orientation only; they are not legal definitions.
A — E
Agent. A person or firm that represents you in a foreign market and is paid on commission. Agents typically do not take title to the goods; they introduce buyers and facilitate the sale.
BOL (Bill of Lading). The transport document issued by a carrier that serves as a receipt for goods, evidence of the contract of carriage, and — when negotiable — proof of ownership.
Commercial invoice. The bill for the goods from the exporter to the importer. It is the primary document used by customs to assess duties and taxes.
Certificate of origin. A document certifying the country in which a product was manufactured. Required to claim preferential tariff treatment under free trade agreements such as CUSMA, CETA, and the UK Trade Continuity Agreement.
Distributor. A firm that buys your goods and resells them in a foreign market. Unlike an agent, the distributor takes title to the goods and carries inventory risk.
EXW (Ex Works). An Incoterm under which the seller makes the goods available at their premises and the buyer bears all costs and risks from that point forward. The least obligation for the seller.
F — N
FOB (Free on Board). An Incoterm for sea or inland waterway transport. The seller delivers goods on board the vessel nominated by the buyer; risk passes once goods are on board.
HS code (Harmonized System code). An internationally standardized six-to-ten digit classification number used to identify products for customs, duty assessment, and trade statistics.
IBAN (International Bank Account Number). A standardized format for identifying bank accounts internationally, used in many jurisdictions for cross-border payments.
Incoterms. A set of internationally recognized rules published by the International Chamber of Commerce that define the responsibilities of buyers and sellers in international trade. Current version: Incoterms 2020.
IP (Intellectual Property). Creations of the mind — inventions, literary and artistic works, designs, symbols, names, and images used in commerce — protected by patents, trademarks, copyrights, and trade secrets.
Letter of credit (L/C). A written commitment by a bank, on behalf of the buyer, to pay the seller a specified amount upon presentation of documents that comply with the terms of the credit. Used to reduce payment risk in cross-border transactions.
NDA (Non-Disclosure Agreement). A contract under which one or both parties agree to keep certain information confidential. Commonly used before sharing technical or commercial details with a potential partner.
O — Z
OEM (Original Equipment Manufacturer). A firm that produces goods to be sold under another company's brand. Common in electronics, automotive, and industrial equipment.
Packing list. A shipping document that itemizes the contents of each package in a shipment, including weights, dimensions, and marks. Used by customs and freight handlers.
PCT (Patent Cooperation Treaty). An international treaty that allows applicants to seek patent protection in multiple jurisdictions through a single international filing.
Proforma invoice. An invoice sent in advance of a shipment to allow the buyer to apply for an import licence, arrange foreign exchange, or set up payment. It is not a demand for payment.
SWIFT code. A standard format for identifying banks internationally, used to route cross-border wire transfers.
White label. Goods or services produced by one firm and rebranded by another for sale as the latter's own product.
Looking for Incoterms in detail? See our Incoterms 2020 quick reference card for a one-page summary of buyer and seller responsibilities under each term.