A means of financing international trade transactions through credit extended by a commercial or merchant bank to a foreign importer deemed creditworthy.
Autarky refers to the policy of establishing a self-sufficient and independent national economy, aiming to reduce or eliminate dependence on international trade.
A Back-to-Back Letter of Credit (L/C) is a secondary letter of credit issued to a different beneficiary, supported by a primary letter of credit. This financial instrument is used in complex, three-party transactions to provide assurance and liquidity to trading partners.
The balance of trade measures the difference in value over a period of time between a country's imports and exports of merchandise. A favorable balance, or trade surplus, occurs when exports exceed imports, while an unfavorable balance, or trade deficit, occurs when imports outweigh exports.
A Banker's Acceptance (BA) is a time draft drawn on and accepted by a bank, commonly used to effect payment for merchandise sold in import-export transactions, and a significant source of financing used in international trade.
Government rules that attempt to promote domestic industry by raising the cost to consumers of purchasing imported goods.
A Bill of Lading is a legal document issued by a carrier to a shipper, detailing the type, quantity, and destination of the goods being carried. It serves as a shipment receipt and is a key part of international trade.
Blocked funds are finances that cannot be transferred out of a country due to exchange controls or similar restrictions, often imposed by governments to manage the flow of currencies.
Goods brought into a country that are placed in a bonded warehouse until all duties are paid.
The Boomerang Effect refers to the phenomenon where exported technology is used to manufacture products that compete with those produced by the original exporter.
Cargo refers to freight or merchandise transported on a transportation vehicle, such as a ship, airplane, truck, or train, excluding passengers. It covers a broad range of goods, from raw materials to finished products, playing a crucial role in global trade and logistics.
A Certificate of Origin is a crucial document required in international trade, stating the country from which a parcel of goods originated and often determining the applicable import duty.
A CIF contract of sale includes the cost of the goods, insurance, and freight to the destination in the contract price. The seller’s obligation is fulfilled once the merchandise is delivered to the shipper, and relevant documents including the bill of lading, invoice, insurance policy, and payment receipt for freight are forwarded to the buyer.
In various fields such as Accounting, Finance, International Trade, and Securities, the term 'Clean' refers to different contexts of unstained or debt-free conditions, reflecting a desirable state or favorable judgment.
The concept of comparative advantage explains the efficiency of individuals or groups in particular economic activities compared to others, encouraging specialization and trade for maximum benefit.
CBI is an organization that lobbies for British business interests, primarily focusing on influencing UK government policies, the European Union, and other international bodies to foster a favorable business environment.
A confirmed irrevocable letter of credit adds an additional layer of security for the beneficiary by employing a second bank's confirmation, ensuring payment even if the initial issuing bank fails.
A consignor is any person or organization that sends goods to a consignee or a principal who sells goods on consignment through an agent, usually in a foreign country.
Cost and Freight (C&F) denotes a shipping agreement wherein the seller is responsible for covering the cost and freight to transport goods to a specified destination. However, the buyer assumes the responsibility for insurance once the goods are loaded onto the shipping vessel.
Cost, Insurance, and Freight (CIF) is a trade term used in international shipping to indicate that the seller covers the cost, insurance, and freight charges up to the destination port.
Countervailing credit, often referred to as back-to-back credit, is a form of financing used in international trade that involves two separate but interdependent letters of credit. This type of credit is typically established by an intermediary in trade transactions to facilitate complex trade processes.
Currency appreciation refers to an increase in the value of a currency relative to another currency, while currency depreciation refers to a decrease in the value of a currency relative to another currency. These concepts are pivotal in international trade, impacting everything from import/export prices to inflation rates.
Currency risk, also known as exchange-rate risk or foreign exchange risk, arises from the fluctuation in the exchange rate between two currencies, impacting the value of investments or transactions made in foreign currencies.
An authoritative agency dedicated to regulating the import and export of goods, ensuring compliance with laws, and collecting duties and taxes on imports.
A customs duty is a levy imposed on the importation of certain goods and on some goods manufactured from imported materials. It is also charged on some exports. Within the European Union, import duties between member states have been abolished and a Common External Tariff has been established.
A customs invoice is an essential document used in international trade to declare goods being imported or exported, prepared particularly for customs authorities to ensure legal and efficient handling of shipments.
Documentary credit, also known as a letter of credit, is a financial instrument commonly used in international trade transactions to reduce risk. It guarantees that a buyer's payment to a seller will be received on time and for the correct amount.
Dollar drain refers to the amount by which a foreign country's imports from the United States exceed its exports to the United States, leading to a depletion of the country's dollar reserves.
Dumping refers to the practice of selling goods at a price lower than their cost or lower than the price charged in the domestic market. This is done to eliminate surplus, undermine foreign competition, or dispose of goods unacceptable for the domestic market.
The Export Credits Guarantee Department (ECGD), now known as UK Export Finance (UKEF), is the United Kingdom's export credit agency, which is responsible for providing guarantees and insurance to UK-based businesses to help them export goods and services. This government department facilitates international trade by offering financial support and risk management solutions.
Economic exposure, also known as operating exposure, encompasses the potential impact of changes in macroeconomic variables and exchange rates on the value of a business engaged in international trade.
Internationally, restrictions upon trade and financial dealings that a country imposes upon another for political reasons, usually as punishment for following policies of which the sanctioning country disapproves.
An embargo is a government-imposed prohibition against the shipment of certain goods to another country. While most common during wartime, embargoes can also be applied for economic or political reasons.
A currency deposited in a bank outside its country of issue, providing a cheap and convenient form of liquidity for international trade and investment.
Eurodollars refer to U.S. dollars deposited in financial institutions outside the United States. The eurodollar market originated in London in the late 1950s, driven by the growing demand for dollars to finance international trade and investment.
A financial market that facilitates the international trade of currencies outside of domestic regulatory jurisdictions, alongside being seen as the converged market of the European Union for goods.
An exchange rate is the rate at which one currency can be converted into another. It indicates the relative value of two currencies and is a critical factor in international trade and finance. The UK uniquely expresses exchange rates as the number of units of a foreign currency that £1 sterling will buy.
An exchange rate is the price of one currency in terms of another currency. It is a crucial element in the global economy, impacting international trade, investments, and the purchasing power of consumers.
Exporting is the process of shipping goods produced in one country for sale in another and the transfer of data from one computer or application to another. This term has significant relevance in international trade and data handling.
The Export-Import Bank (EXIM Bank) is an independent U.S. government agency that facilitates international trade by offering financial assistance, including loans, guarantees, and insurance to U.S. exporters and their foreign buyers. Its goal is to support American jobs by leveling the global playing field for U.S. goods and services and mitigating the risks associated with international trade.
A favorable trade balance occurs when the value of a nation’s exports exceeds the value of its imports, resulting in a surplus.
The floating currency exchange rate, also known as a flexible exchange rate, is the movement of a foreign currency exchange rate in response to changes in market forces of supply and demand. The value of a country's currency is determined by market conditions rather than by any direct intervention by the central or national government.
A foreign exchange rate is the price of a nation's currency in units of another currency, indicating how much one currency is worth in terms of another.
The Foreign Trade Multiplier is a concept in economics that measures the increase in a country's GDP due to efficiencies and interconnections of foreign trade activities. It demonstrates how trade can amplify economic growth by leveraging the comprehensive benefits of exporting and importing.
A Foreign Trade Zone (FTZ) is a designated, enclosed area near a port where goods can be stored, inspected, packaged, or undergo other processes without the assessment of duties or customs fees.
Free Alongside Ship (FAS) is an international trade term where the seller is responsible for delivering the goods alongside the vessel at the named port of shipment. The buyer assumes responsibility for all risks and costs from that point forward.
Free on Board (FOB) is a term used in international commerce to distinguish the point at which the seller relinquishes all ownership, responsibility, and risk for the shipped goods.
A freight forwarder, also known as a forwarding company, acts as an intermediary between a shipper and various transportation services, facilitating the global movement of goods while managing logistics and documentation.
The General Agreement on Tariffs and Trade (GATT) was a multilateral treaty created to reduce tariffs and other trade barriers, aimed at promoting international trade and economic cooperation. It was later replaced by the World Trade Organization (WTO) in 1995.
The General Agreement on Tariffs and Trade (GATT) was a legal agreement between many countries, whose overall purpose was to promote international trade by reducing or eliminating trade barriers such as tariffs or quotas.
The General Agreement on Tariffs and Trade (GATT) was a trade treaty aiming to promote international trade by reducing or eliminating trade barriers such as tariffs and quotas. Active from 1948 until 1995, it was replaced by the World Trade Organization (WTO).
Globalization refers to the multifaceted process that allows investment in financial markets and the exchange of goods, services, and information across international boundaries, facilitated by advancements in technology, deregulation, and the operations of powerful multinational enterprises.
A currency that is widely accepted around the world for international transactions; typically from Western industrialized countries or prominent regional trading blocs.
The International Monetary Fund (IMF) is an international financial institution that provides monetary cooperation and financial stability to its member countries, aiming to facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
The term 'import' refers to the action of bringing in goods or services produced outside of a specific economy into that economy. It also signifies the process within computer applications of incorporating files created by another program.
Import duty is a type of tax levied by a government on goods brought into the country from abroad. It is aimed at regulating international trade, protecting domestic industries, and generating revenue for the government.
An import quota is an imposed limit on the quantity of a particular good that may be brought into a country or economy over a specified period of time. These quotas may be implemented by governments, foreign governments, or producers themselves.
International Commercial Terms, or Incoterms, first published in 1936 by the International Chamber of Commerce to promote standardized terminology for international trade.
An international boycott country is one that may impose or encourage participation in economic boycotts or trade restrictions against other nations or entities, often for political or social reasons.
An irrevocable letter of credit, also known as ILOC, is a financial instrument issued by a bank guaranteeing a buyer's payment to a seller will be received on time and for the correct amount, providing the terms specified in the letter are met. It cannot be amended or canceled without the consent of the beneficiary.
A letter of credit, or documentary credit, is a fundamental financial tool in international trade, providing a promise of payment from a bank to a seller on behalf of a buyer under specified conditions.
A letter of credit (L/C) is a financial instrument issued by a bank or other financial institution that guarantees a buyer's payment to a seller will be received on time and for the correct amount.
A Letter of Credit (L/C) is an instrument or document issued by a bank guaranteeing the payment of a customer's drafts up to a stated amount for a specified period. It substitutes the bank's credit for the buyer's and eliminates the seller's risk. It is used extensively in international trade.
London Gold Fixing, also known simply as Gold Fixing, is a procedure by which the price of gold is determined in the London bullion market. It takes place twice daily and is a crucial process for the international gold market.
A comprehensive overview of merchant banks, evolving from financing foreign trade to multifaceted financial institutions providing venture capital, advising on takeovers, and managing investment portfolios.
MERCOSUR, also known as MERCOSUL, is a regional trade bloc established by a free trade agreement among Argentina, Brazil, Paraguay, and Uruguay, aimed at promoting free trade and fluid movement of goods, people, and currency.
Most Favored Nation (MFN) is a trade status granted by one nation to another, ensuring the lowest possible tariffs and the fewest trade barriers. This status fosters equal treatment in international trade, promoting economic cooperation and growth.
The North American Free Trade Agreement (NAFTA) is a trade deal that dramatically impacts trade, investment, and social standards among the United States, Mexico, and Canada by eliminating tariffs and quotas on most goods exchanged among these countries.
The official exchange rate of a country's currency as determined by that country's government.
An open economy is one in which foreign investment, imports, and exports are easily facilitated and play a significant role in the nation's economic activities.
A corporation established by the U.S. government to facilitate unsubsidized funding of U.S. exports.
An estimate or 'sample invoice' provided by a seller to a buyer in certain circumstances, serving as a preliminary bill of sale before the details are finalized, often used in international trade and shipments.
Purchasing Power Parity (PPP) is an economic theory that estimates the currency exchange rates necessary in foreign trade situations so that each currency has the same purchasing power.
A Real Exchange Rate (RER) is an exchange rate that has been adjusted for the effects of inflation, providing a more accurate reflection of a currency's purchasing power.
A remitting bank processes documents sent by the exporter under a collection arrangement and sends them to the collecting bank in the importer’s country.
Products made by a multinational corporation's overseas units for export to the home country.
A sight draft, also known as a documentary draft, is a type of financial instrument or bill of exchange that is payable upon presentation, typically used in international trade to facilitate the payment for goods and services.
A tariff war is an international trade conflict where nations impose counterbalancing tariff rates in retaliation to each other's tariff policies, aiming to gain trade advantages but often resulting in adverse economic consequences.
A trade agreement is typically a legally binding pact between or among governments designed to foster, regulate, and sometimes restrict various aspects of commerce between the member countries.
The trade balance, also known as the balance of trade, measures the difference in value between a country's imports and exports over a specific period. It is a critical indicator of economic health and international competitiveness.
Trade barriers are governmental or operational activities or restrictions that make the importation of certain goods into a country difficult or impossible. Examples include tariffs, regulations, and inspections.
A trade deficit occurs when a country's imports exceed its exports, resulting in a negative balance of trade, while a trade surplus occurs when exports exceed imports, leading to a positive balance of trade.
A Trade War is a conflict involving two or more countries aimed at improving their own import/export positions by imposing tariffs or other trade barriers against each other.
Trading blocs are agreements between multiple countries that aim to make trade easier and more beneficial for member nations while typically imposing trade barriers on non-members.
Transaction exposure refers to the risk that a firm's exposure to exchange-rate fluctuations will impact the value of anticipated cash flows from a transaction when the contractual obligation is settled.
Translation risk, also known as currency risk, is the monetary value risk that occurs in international trade when two or more currencies are used in a transaction. The longer the period before the transaction ends, the greater the translation risk.
A mechanism instituted to protect domestic markets from unfair competition by imposing trade restrictions when the price of an imported commodity drops below a specified threshold.
UK Export Finance, also known as the Export Credits Guarantee Department, is the United Kingdom's export credit agency. It provides government financial support to help UK businesses succeed in the global marketplace.
An unfavorable balance of trade, also known as a trade deficit, occurs when the value of a country's imports exceeds the value of its exports. It indicates that a country is purchasing more goods and services from other nations than it is selling abroad.
Usance refers to the period allowed for the payment of a foreign bill of exchange. This term has played a crucial role in international trade finance by specifying the timeframe within which the debtor must settle their account.
The World Trade Organization (WTO) is a global international organization dedicated to facilitating and expediting trade between nations. Headquartered in Geneva, Switzerland, it has approximately 150 member countries. The WTO encourages international trade, sets rules for trade, and resolves disputes between member countries concerning international trade.
The World Trade Organization (WTO) is an international trade organization formed to replace GATT and oversee international trade rules and liberalization efforts. It aims to ensure that trade flows smoothly, predictably, and freely.
The World Trade Organization (WTO) is an intergovernmental organization that regulates international trade, ensuring that trade flows as smoothly, predictably, and freely as possible.
