Do the trade industry’s buzzwords have you stumped? Like every industry, trade has developed its own unique vocabulary. Understanding these terms are vital to enhance your business efficiency and minimize the risk of costly errors. To aid you in this process, we have listed down important terms that you are likely to hear frequently when going about your business dealings.

 

  • AA (Always Afloat) – A contract term that indicates that vessel should not rest on the ground. This is mostly included in the contract as certain vessels can only reach a berth safely after dispatching part of the cargo into lighters. Also, in some ports where the bottom consists of soft mud, the ship is considered aground when approaching or at berth.

 

  • AAR (Against all risks) – The broadest form of insurance cover that exporters can avail of. It offers protection against all risks of physical loss or damage that occurs as a result of external events. It does not however cover loss or damage as a result of a delay, internal vice, pre-shipment clause, inadequate packing or loss of market.

 

  • Acceptance (also known as acc) – A contractual agreement that indicates that the drawee (usually the exporter) – who then becomes the acceptor – has agreed to pay a specified amount on the mutually decided due date. This term is also applicable for the accepted time draft.

 

  • Acceptance credit – A documentary credit which mandates the provision of a bill of exchange amongst various other documents. This bill is usually accepted by the bank on which it is drawn or discounted. The end result is that the beneficiary is paid promptly at a discount.

 

  • Ad valorem duty – A percentage rate of the value of the imported merchandise makes up this duty.

 

  • Advance clause credit – This clause authorizes the advising bank to make an immediate payment to the beneficiary of an amount that is almost the total of the credit or a lesser nominated amount. The advance clause credit in some cases may mandate that specified documents (e.g. storage warrants, insurance cover note) have to be produced in order for the beneficiary to avail the advance.

 

  • Advance payment guarantee/bond – This is guarantees that advance payments will be returned if the beneficiary who received these payments does not perform their part of the contract.

 

  • Advising bank – A bank, generally based out of the buyer’s country that handles letters of credit for a foreign bank by informing the exporter that the credit has been opened in his/her account.

 

  • Advisory capacity – A term that indicates that a shipper’s agent or representative has no authority to make definitive decisions or adjustments without the approval of the group or individual represented.

 

  • After date – A bank draft or any other negotiable instrument that specifies that payment is due a specified number of days after presentation of the draft.

 

  • Air waybill – A non-negotiable shipping document that clearly outlines the carrier conditions such as limits of liability and claims procedures. It covers both domestic and international flights transporting goods to a specified location. It serves as a bill of lading for land surface transport.

 

  • Applicant – Usually a buyer or importer in the documentary credit process who applies for a document credit in favor of the beneficiary, i.e. the seller.

 

  • ATA carnet – An international customs document that allows for the temporary duty-free admission of goods in a country for display, demonstration or similar purposes. ATA carnets can only be issued by the National chambers of commerce as it guarantees the payment of duties to local customs authorities in case the goods are not ultimately re-exported.

 

  • Aval – It indicates a bank’s guarantee to pay a bill of exchange on the due date. In the practice of forfaiting avals are commonly used.