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Glossary

1. Shipping Documentation: Documentation must be precise because slight discrepancies or omissions may prevent merchandise from reaching its destination and/or result in nonpayment or even the seizure of a shipment by Customs. Collection documents are subject to precise time limits and may not be honored by a bank if time has expired. The following documents are commonly used in the shipping process:
2. Commercial Invoice: A commercial invoice is a bill for the goods from the seller to the buyer. Governments use commercial invoices to control imports. They often specify its form, content, number of copies and language to be used, as well as other important details.
3. Packing List: Indicates the number of products in each pack/box along with individual weights and dimensions. This list enables you to check that the correct number of units has been received. Customs can also easily identify a specific pack for inspection purposes.
4. Bill of Lading (B/L): The B/L is a formal, signed receipt for a specified number of packs, which is given to the seller by the shipper when it receives the consignment. If the cargo is apparently in good order and properly packed when received by the shipping line, the bill of lading, is deemed as "clean". The shipper thus accepts full liability for the cargo described in the bill. A bill of lading (B/L) is used for large shipments such as LTL (Less than Truck Load) and TL (Truck Load or sea/container shipments). It represents a certificate of ownership and must be produced at the final destination by recipients in order to claim their goods. As a document of title, the bill of lading is a negotiable document and you may sell the goods by endorsing or handing it over to another authorized party, even while the goods are in transit.
   
   Note: Some countries do not allow B/L or make it difficult to be used. Make sure that a negotiable B/L is accepted in your country. Otherwise, a non-negotiable B/L is issued.
5. Airway Bill: An airway bill is used for air transport. Usually, this document consists of three originals and nine copies. The original is intended for the carrier and is signed by an export agent; the second, the consignee's copy, is signed by an export agent and accompanies the goods; the third is signed by the carrier and is handed to the export agent as a receipt for the goods after they have been accepted for carriage. An Airway Bill serves as:
   • Proof of receipt of the goods for shipment.
   • Invoice for the freight.
   • Certificate of insurance.
   • A guide to the airline for the handling, dispatch and delivery of the consignment.
6. Inspection Certificate: This document confirms and details the composition and quality of a given shipment. An inspection is required by some purchasers and countries in order to attest to the specifications of the goods shipped. This is usually performed by a third party and is often obtained through independent testing organizations. The inspection certificate is required by some importers and/or importing countries. In case an inspection certificate is required, the importer may stipulate in the letter of credit (L/C) to use an independent surveyor. In the case of a foreign-government-required pre-shipment inspection, which is stipulated in the L/C, the report of findings can be in the form of a security label attached on the invoice. The label bears the number and date of the corresponding report of findings issued by the foreign government engaged surveyor.
7. Insurance Certificate: This document is a representation of the insurance policy taken out by the buyer or the seller (depending on the * Incoterms) for a shipment.
   • Blank insurance certificates are supplied by the insurer pre-signed and bearing the open policy number of the exporter. For an air shipment, an air waybill serves as an insurance certificate.
   • For a sea shipment, an insurance certificate is issued as evidence of the existence of the marine insurance policy.
   • The marine insurance policy is a contract between the insured and the insurer which defines the terms of the agreement between the insured and the insurer.
8. Basic types of insurance: Insurance Policy versus Insurance Certificate
   • An insurance policy is issued once by the insurer. Shippers holding an open policy cannot produce and send their sole policy to all buyers for all the shipments made over a period of time. Therefore, an insurance certificate is issued by the shipper for each shipment. The blank insurance certificates are supplied by the insurer in pre-signed form and bear the open policy number of the exporter.
   • Open policy versus specific policy: The open (blank or floating) policy is issued once by the insurer under contract to cover all shipments made by the shipper over a period of time (usually one year), rather than for only one shipment. It is most often used by larger companies. In an open policy, shippers are required to periodically cover every shipment made to any location, covering any type of goods, and using any means of conveyance, including multimodal transport and transshipment, so the insurer can calculate the insurance premiums and invoice them accordingly. The shipper completes the insurance declaration form supplied by the insurer and/or supplies the copy of the insurance certificates to the insurer. The specific policy is issued by the insurer to cover a particular shipment.
9. HS Codes: The Harmonized Commodity Description and Coding System, generally referred to as Harmonized System or simply HS, is a multipurpose international product nomenclature developed by the World Customs Organization (WCO). It comprises about 5,000 commodity groups. Each group is identified by a six digit code, arranged in a legal and logical structure and is supported by well-defined rules to achieve uniform classification. The system is used by more than 177 countries and economies as a basis for their Customs tariffs and for the collection of international trade statistics. Over 98% of the merchandise in International trade is classified in terms of the HS. The HS is thus a universal economic language and code for goods, as well as an indispensable tool for international trade. The HS contributes to the harmonization of Customs and trade procedures, and the non-documentary trade data interchange in connection with such procedures, thus reducing the costs related to international trade. It is also extensively used by governments, international organizations and the private sector for many other purposes such as internal taxes, trade policies, monitoring of controlled goods, rules of origin, freight tariffs, transport statistics, price monitoring, quota controls, compilation of national accounts, and economic research and analysis.
   
   Obtain more information about the Harmonized System.
10. Incoterms: The prevailing set of commercial terms is called Incoterms 2000. Incoterms are standard trade definitions commonly used in international sales contracts. Devised and published by the International Chamber of Commerce, they establish the contractual obligations of the seller and the buyer under the price quotation and sales agreement. Below are definitions most commonly used:

Incoterms

Term	Definition	Risk	Cost
EXW Ex Works	Buyer arranges for pick up of goods at the seller's location. Seller is responsible for packing, labeling, and preparing goods for shipment on a specified date or time frame.	Buyer assumes all risk.	Buyer pays all transportation costs.
FCA Free Carrier	Seller is responsible for costs until the buyer's named freight carrier takes charge.	Seller and buyer	Split evenly
FAS Free Alongside Ship (over water only)	Buyer arranges for ocean transport. Seller is responsible for packing, labeling, preparing goods for shipment and delivering the goods to the dock.	Seller: until the goods reach the dock. Buyer: from dock to destination.	Buyer pays all ocean transport costs. Sellers responsible for costs associated with transporting the goods to the dock.
FOB Free On Board (over water only)	Seller arranges for ocean transport of the goods, preparing goods for shipment, and loading the goods onto the vessel.	Buyer: once the items are on board.	Seller pays charges to load the goods onto the ship and freight forwarder fees.
CFR Cost and Freight (over water only)	Seller has the same responsibilities as when shipping FOB, but shipping costs are prepaid by the seller.	Seller assumes risk until the shipment reaches the overseas dock.	Seller pays costs of freight fees up to destination.
CIF Cost, Insurance, and Freight (over water only)	Seller has the same responsibilities as when shipping CFR with the addition of including a marine insurance policy.	Seller assumes risk until the shipment reaches the overseas dock.	Seller pays insurance and freight forwarder fees

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