Basic Terms in International Trade Explained

~ Clear explanations of essential words for import and export business ~

ntroduction

When starting international trade, understanding the basic terms is essential. Misunderstanding terms can lead to problems in contracts, document preparation, and negotiations. This article picks up representative basic terms indispensable for import and export, explaining them clearly. In addition, the relationships among terms are illustrated to help readers visualize the concepts easily.

1. Invoice

Meaning and Role

An invoice, also called a commercial invoice, is a document issued by the seller to the buyer that details the transaction, including product names, quantities, unit prices, total amounts, and trade terms.It is a crucial document for export-import procedures, submitted to customs and used as a basis for customs duties calculation.

Key Points

• Proof of transaction

• Required for payment and customs procedures

• Accurate entries prevent troubles

2. Packing List

Meaning and Role

A packing list details the contents of the shipment, showing which products are packed in which boxes, along with weights and dimensions. It is used by transporters and recipients to verify cargo.

Key Points

• Clearly shows packaging contents

• Essential for logistics management and dispute resolution

• Must align with the invoice content

3. Incoterms

Meaning and Role

Incoterms are international trade terms defined by the International Chamber of Commerce (ICC). Examples include FOB, CIF, and DAP, which clarify delivery points, cost responsibilities, and risk transfer timing.

Major Terms and Meanings

Term	Meaning and Characteristics
FOB	Free On Board: Seller’s responsibility until goods loaded on ship.
CIF	Cost, Insurance, Freight: Price includes freight and insurance.
DAP	Delivered At Place: Delivered to specified place, buyer bears risk after delivery.

Key Points

• Clarify responsibility and cost allocation

• Must be included in contracts

4. Export/Import License

Meaning and Role

A license required for exporting or importing certain goods. It is mandated by law depending on the country and product.

Key Points

• Check regulations for restricted items

• Unauthorized shipments can lead to penalties

5. Customs Duty

Meaning and Role

A tax imposed on imported goods based on product type, price, and origin. It is collected by customs and serves as government revenue.

Key Points

• Tax base is the invoice value

• Rates vary by country

6. Certificate of Origin

Meaning and Role

A document certifying the manufacturing country of goods, required for tariff applications and free trade agreements. Issued by the exporter or authorized bodies.

Key Points

• Origin affects customs duty rates

• Accurate declarations are critical

7. Other Important Terms

Term	Meaning and Usage
B/L (Bill of Lading)	Proof of shipment and ownership document for cargo.
L/C (Letter of Credit)	Bank guarantee of payment method.
HS Code	International standardized product classification number.
FOB Price	Price under FOB terms, includes costs up to shipment.

Diagram Concept of Terms Relations＜International Trade＞

[Seller] --(Issues Invoice)--> [Buyer]

│ │

│ Payment Request

│ ↓

[Cargo Packing] --(Packing List)--> [Carrier] --(Issues B/L)--> [Buyer]

Contract terms clarified by “Incoterms”

Import involves “Certificate of Origin”, “Import License”, and “Customs Duty”

Payments may be guaranteed by “L/C”

コピーする編集する

[Seller] --(Issues Invoice)--> [Buyer] │ │ │ Payment Request │ ↓ [Cargo Packing] --(Packing List)--> [Carrier] --(Issues B/L)--> [Buyer] Contract terms clarified by “Incoterms” Import involves “Certificate of Origin”, “Import License”, and “Customs Duty” Payments may be guaranteed by “L/C”

Conclusion

International trade involves many specialized terms, each with distinct roles and meanings.Proper understanding and usage of these terms are key to smooth transactions and trouble prevention.Accurate document preparation and contract checks are especially important.

Use this article as a foundation and build more practical knowledge step-by-step.