Understanding international trade terms

Air waybill

An air waybill is a receipt issued by an international airline for goods, and evidence of the contract of carriage. It obliges the carrier to carry the goods to the airport of destination, according to specified conditions. It is a document of title, which proves ownership, and is non-negotiable.

Bill of lading

A bill of lading is a contract between the owner of the goods and the carrier. It is a receipt, contains the terms of the carriage contract, and importantly, is a document of title, which proves ownership of the goods. For ships, there are two types:

• A straight bill of lading. This is not negotiable. It indicates that the carrier has accepted the goods listed and obliges the carrier to carry the goods to the port of destination, according to specific conditions.
• A ‘shipper’s orders’ bill of lading. This is negotiable. It can be bought, sold or traded whilst the goods are in transit.

Certificate of conformity

A certificate of conformity is a signed statement from a manufacturer guaranteeing that a product meets certain technical standards.

Certificate of origin (COO)

A certificate of origin is a signed statement guaranteeing the origin of the export item. Certificates of origin are usually validated by a chamber of commerce in the UK.

Commercial invoice

A commercial invoice provides the information needed to clear your goods through customs in the destination country.

It is prepared by the exporter or freight forwarder and required by the buyer to arrange for payment to the exporter. It should provide a description of goods, the address of the shipper and seller, and the delivery and payment terms. In most cases, the commercial invoice is used to assess customs duties and taxes.

Consignment

A consignment is an arrangement where an exporter delivers goods to a distributor, who agrees to only pay the exporter once they have sold it. The exporter retains ownership of the goods until they are sold, but also carries all the financial burden and risk.

Consular invoice

An invoice covering a shipment of goods certified by the embassy or consulate of the country for which the merchandise is destined. A consular invoice describes the shipment of goods and shows information such as the consignor, consignee, and value of the shipment. It is used by the country’s customs officials to verify the value, quantity, and nature of the shipment.

Customs declaration

A customs declaration needs to be made in the UK for any goods that are being exported out of the country. HMRC is replacing the Customs Handling of Import and Export Freight (CHIEF) system, with the Customs Declaration Service (CDS). A freight forwarder can make a customs declaration for you. Learn how to make a customs declaration on GOV.UK.

Customs invoice

A customs invoice is a document used to clear goods through customs in the country you are exporting to. It provides evidence for the value of the goods. In some countries, it might be sufficient to use the commercial invoice for this.

Export licence

An export licence is a government document that authorises the export of restricted goods. Learn about the type of goods which may require a licence for export from the UK.

Export packing list

An export packing list is a document that indicates the type of package being used to transport goods for export, such as a box, crate, drum or carton. It also itemises the goods for export in each package. An export packing list is considerably more detailed than a standard domestic packing list. For example, it shows individual weights and measurement for each package.

Freight forwarder

A freight forwarder is a third-party agent that you can hire to move your goods from the UK to the country you are exporting to. Most UK companies choose to use a freight forwarder to move their goods.

A freight forwarder can take on full responsibility for the documentation required to clear UK and foreign customs, and the movement of goods between these points. The split of responsibility between you and the freight forwarder will depend on the type of incoterms you choose. Read our guidance on moving goods and using freight forwarders.

Incoterms

Incoterms are a set of rules which define the responsibilities of sellers and buyers for the delivery of goods under sales contracts. They are published by the International Chamber of Commerce (ICC) and are widely used in commercial transactions.

A freight forwarder can also advise you on selecting the most appropriate Incoterms for your business, defining delivery responsibilities for you and your overseas buyer. You may decide on a company policy of the Incoterm you will use in all but exceptional circumstances. This makes your pricing and sales terms clear. However, an overseas buyer may insist on which of you organises the freight and that will determine the Incoterm you eventually use. Read more information on incoterms.

Inspection certificate

A pre-shipment inspection (PSI), is required in certain countries. The certificate issued guarantees the specifications of the goods being shipped.

The inspection is performed by a third party such as Intertec, SGS, Cotecna or Bureau Veritas. The required inspection agency is contracted by the country of destination.

Insurance certificate

An insurance certificate is a document prepared by the exporter or freight forwarder to provide evidence that insurance against loss or damage has been obtained for the goods.

Pro forma invoice

A pro forma invoice can act as a quotation and is prepared by the exporter before shipping the goods. It informs the buyer of the goods to be sent, their value, and other key specifications. Sometimes exporters say they are being paid by 'Proforma'. They mean payment in advance with their buyer using this document as a notification of the full amount to be paid.

Tariff

Tax or duty imposed on a product when it is imported into a country. When an exporter knows the tariff code for their product, they can look up the import duty. This duty would usually be paid by the buyer/importer unless the exporter is selling on incoterms such as DDP where they include the duty in their selling price.

Tariff code

A tariff, or commodity code, is a unique number that’s assigned to every product type. The same code is used in all countries of the world so its relatively easy to find out the import duty for your product.

Terms of Sale

Terms that define the obligations, risks, and costs of the buyer and seller involving the delivery of goods that comprise the export transaction. These terms are commonly known as Incoterms.