Glossary for EXIM

8/7/2019 Glossary for EXIM

1/43

Glossary of Export Import International Trade andShipping Terms

A B C D E F G H I J K L M N O P Q R S T U V W Y Z

Words Descriptions

Glossary of Export Import Trade Terms Starting with- AAB Appellate Body

Absolute Advantage(AB-AD)An absolute advantage exists in condition of when a nation or othereconomic region of any country is able to produce a good or servicemore efficiently than a second (other) nation or its region.

Accounting Translation ExposureChanges in a organizations or corporations financial statements asa result of changes in currency values.

ACP African, Caribbean, and Pacific countries.

Acquisition of AssetsIn an acquisition of assets, one firm acquires the assets of anothercompany. None of the liabilities supporting that asset aretransferred to the purchaser.

Acquisition of Stock In an acquisition of stock, one firm buys an equity interest inanother.

Acquisition Premium In a merger or acquisition, the difference between the purchaseprice and the reacquisition value of the target firm or company.

Active Fund ManagementAn investment approach that actively shifts funds either betweenasset classes (asset allocation) or between individual securities(security selection).

Active Income In the U.S. tax code, income from an active business as opposed topassive investment income.

Activity-Based-Cost (ABC) An accounting method that allocates costs to specific productsbased on breakdowns of cost drivers.Ad valorem Tariff A tariff assessed as a percentage of the value of an import.

ADB Asia Development Bank, head quartered located in Manila,Philippines (ASIA).

Adjusted Present Value(APV) An APV is a valuation method that separately identifies the value ofan unlevered project from the value of financing side effects.

Advance Payment

Advance Payment is a Trading method in which the buyer pays forthe goods before they are sent out , method is used when buyer is

of unknown credit worthiness. It is applicable in International ordomestic trade.

AdventureAdventure also define for marine adventure." It is a term of art inthe marine insurance business. All insured cargo owners and everyshipper on that vessel are part of the adventure.

Advising BankAdvising Bank is usually in the country of the seller, whose primaryfunction is to authenticate the letter of credit and advise it to theseller, Purchase and collection of Export Bills.

Advisory Capacity Used to indicate that a shipper's agent or representative is not


2/43

empowered to make definitive changes or adjustments withoutapproval of the group or individual represented.

African Developmental Bank(ABD)

The ABD is one of four major regional developmental bankscurrently operating in the global economy; it is headquartered inAbidjan, Cote d'Ivoire.

Agency CostsThe costs incurred to ensure that agents act in the best interest ofthe principal.

AgentSomeone who represents business in domestic and overseas market.In corporate governance terminology, management is the agent ofthe principal stakeholders in a principal-agent relationship.

Aggregate DemandThe total demand of all potential buyers of a commodity or service.Includes all individuals and organizations that have the ability,willingness, and authority to purchase such products.

Air WaybillA no-negotiable instrument of domestic and international airtransport that functions as a bill of lading, all informationdescribed about domestic and international trade.

All-in Cost The percentage cost of a financing alternative, including any bankfees or placement fees.

Allocation Rules of IncomeIn the U.S. tax code, these rules define how income and deductionsare to be allocated between domestic-source and foreign-sourceincome.

Allocation efficiency The efficiency with which a market channels capital toward itsmost productive uses.

Andean Pact A regional trade pact that includes Venezuela, Colombia, Ecuador,Peru, and Bolivia.

AnnuityA level stream of equal dollar payments that lasts for a fixed time.An example of an annuity is the coupon part of a bond with levelannual payments.

Annuity Factor The term used to calculate the present value of the stream of levelpayments for a fixed period.

Anti-Dumping LawsLaws that are enacted to prevent dumping-offering prices in theoverseas market that is lower than that at which a product is soldin its home domestic market.

APEC Asia-Pacific Economic Cooperation

Appreciation An increase in a currency value relative to another currency in afloating exchange rate system.

ArbitrageThe process of purchasing and selling foreign exchange, stocks,bonds and other commodities in several markets intending to makeprofit from the difference in price.

Arbitrage Pricing Theory (APT)An asset pricing model that assumes a linear relation betweenrequired return and systematic risk as measured by one or morefactors according to Rj = mj + b1jF1 + ... + bKjFK + ej.

Asia-Pacific EconomicCooperation (APEC)

APEC forum designed to promote economic growth, cooperation,and integration among member nations. The most prominentmembers are China, Japan, and Korea.

Asian Development Bank (ABD) One of four major regional development banks currently operatingin the global economy; it is headquartered in Manila, Philippines.

Ask "offer" Rates The rate at which a market maker is willing to sell the quotedasset.Asset Allocation Policy The target weights given to various asset classes in an investment


3/43

portfolio.

Assets-in-Place Those assets in which the firm has already invested. (Compare togrowth options.)

Association of South East AsianNations (ASEAN)

A loose or low economic and geopolitical affiliation that includesSingapore, Brunei, Malaysia, Thailand, the Philippines, Indonesia,and Vietnam. Future members are likely to include Myanmar(Burma), Laos, and Cambodia.

At-the-Money Option An option with an exercise price that is equal to the current valueof the underlying asset.ATC Agreement on Textiles and Clothing

Autarky In models of international trade, a situation in which there is nocross-border trade.

AvalA guarantee of the buyer's credit provided by the guarantor, unlessthe buyer is of unquestioned financial standing. The aval is anendorsement note as opposed to a guarantee agreement.

Avalisation Payment undertaking given by a bank in respect of a bill ofexchange drawn.

Average Accounting Return (AAR) The average project earnings after taxes and depreciation dividedby the average book value of the investment during its life.AEZs Refers to a scheme of Agricultural Export Zones.

Advance Licence

Advance Licence is granted for import of inputs without payment ofcustoms duties. It is issued in accordance with the Policy andprocedures in force and subject to fulfillment of time-bound exportobligation. Such licences can be issu

AcceptanceAny agreement to purchase goods under specified terms. Anagreement to purchase goods at a stated price and under statedterms.

Ad Valorem According to value

Advance Against Documents A loan made on the security of the documents covering the

shipment.

Advising BankA bank, operating in the exporter's country, that handles LETTERSOF CREDIT for a foreign bank by notifying the exporter that thecredit has been opened in his or her favor.

Advisory CapacityA term indicating that shipper's agent or representative is notempowered to make definitive decisions or adjustments withoutapproval of the group or individual represented.

Air Waybill A BILL OF LADING that covers both domestic and internationalflights transporting goods to a specified destination.

Alongside

A phrase referring to the side of a ship. Goods to be delivered"alongside" are to be placed on the dock or barge within reach ofthe transport ship's tackle so that they can be loaded aboard the

ship.Alteration A change in the boundaries of an activated zone or subzone.

Applicant A corporation applying for the right to establish, operate andmaintain a foreign-trade zone.

ArbitrageThe process of buying FOREIGN EXCHANGE, stocks, bonds and othercommodities in one market and immediately selling them inanother market at higher prices.

Asian Dollars U.S. dollars deposited in Asia and the Pacific Basin.


4/43

Attributive BasisMethod of accounting for merchandise where direct identificationof the goods with the shipment as admitted to the zone has beenlost.

Glossary of Export Import International Trade Terms Starting with- B

Backward Innovation Building a more basic version of an existing product for a lesser-developed market.

Balance of Payments (BOP)

The BOP is the annual financial record of Foreign Payments andForeign Receivables. Or The BOP is the International Money Fundsaccounting system that tracks the flow of goods, services, andcapital in and out of each country.

Balance of Trade (BOT) The difference between a countrys total imports and exports.

Balance Sheet A statement showing a firm's accounting value on a particular date.It reflects the equation, Assets = Liabilities + Stockholders' equity.Bank for InternationalSettlements (BIS)

An international organization which promotes internationalmonetary and financial cooperation among nations.

Bank-based CorporateGovernance System

A system of corporate governance in which the supervisory board isdominated by bankers and other corporate insiders.

Banker's Draft A payment instrument used to make international payments.Bankers Acceptance A time draft drawn on and accepted by a commercial bank.Basis The simple difference between two nominal interest rates.

Bargain Purchase Option

A lease provision allowing the lessee, to purchase the equipmentfor a price predetermined at lease inception, which is substantiallylower than the expected fair market value at the date the optioncan be exercised.

Barter Trade in which goods or merchandise is exchanged directly forothers import or export without use of money.

Basic IRR Accept the project if IRR is greater than the discount rate; rejectthe project if IRR is less than the discount rate.Basis Point Equal to 1/100 of one percent.

Basis Risk The risk of unexpected change in the relationship between futuresand spot prices.

Basis SwapA floating-for-floating interest rate swap that pairs two floatingrate instruments at different maturities (such as six-month LIBORversus thirty-day U.S. T-bills).

Bearer Bonds Bonds that can be redeemed by the holder. The convention in mostWest European countries is to issue bonds in registered form.

BenchmarkingA systematic procedure of comparing a companys practices againstthe best practice and modifying actual knowledge to achievesuperior performance.

Beneficiary A party who receives a legal benefit Domestic or foreign Dealings.

BetaA measure of an assets sensitivity to changes in the marketportfolio (in the CAPM) or to a factor (in the APT). The beta of anasset j is computed as bj = rj,k (sj/sk), where k represents amarket factor (such as returns to the market portfolio in the C

Bid rate The rate at which a market maker is willing to buy the quotedasset.

Bid-offer Spread The difference between the interest rate at which the bankborrows money and lends money.Bill of Lading (B/L) A document that establishes the terms and conditions of a contract


5/43

between a shipper and a shipping company under which freight isto be moved between specified points for a specified charge. TheB/L is Negotiable or Non-Negotiable forms.

Blank Endorsement The method whereby a bill of lading is made into a freelynegotiable document of title.Blanket Bond A bond that coves a group of people, articles or properties.

Blanket ContractsA long-term contract in which the supplier promises to re-supplythe buyers as needed at agreed-upon prices over the contractingtime.

Blocked FundsCash flows generated by a foreign project that cannot beimmediately repatriated to the parent firm because of capital flowrestrictions imposed by the host government.

Bond Equivalent Yield A bond quotation convention based on a 365-day year andsemiannual coupons. (Contrast with effective annual yield.)

Bonded WarehouseA warehouse authorized by customs authorities for storage of goodson which payment of duties is deferred until the goods areremoved.

Bonded Warehouse- a warehouse authorized for storage of good on which payment ofduty is deferred until the goods are removed from the warehouse.

Break-Even Point Analysis Analysis of the level of sales at which a project would make zeroprofit.

Britton Woods Agreement

An agreement made in 1944 year the end of World War II topromote exchange rate stability and facilitate the internationalflow of currencies. The world Bank and IMF(International Monetaryfunds ) come into the existence.

Britton Woods ConferenceAn international conference held in 1944 at Britton Woods, NewHampshire, and established the International Monetary Fund andthe World Bank.

BTPBTP means Biotechnology Park as notified by Director General ofForeign Trade on the recommendation of the Department ofBiotechnology

Bonded WarehouseA warehouse authorized by CUSTOMS authorities for storage ofgoods on which payment of DUTIES is deferred until the goods areremoved.

Booking An arrangement with a steamship company for the acceptance andcarriage of freight.Glossary of Export Import Foreign Trade Terms Starting with-CCAA Clean Air Act (USA)

Call Option The right to buy the underlying currency at a specified price and ona specified date.

Capital (Financial) Structure The proportion of debt and equity and the particular forms of debt

and equity chosen to finance the assets of the firm.Capital Account A measure of change in cross-border ownership of long-termfinancial assets, including financial securities and real estate.Capital Asset Pricing Model(CAPM)

An asset pricing model that relates the required return on an assetto its systematic risk.

Capital Budgeting Planning and managing expenditures for long-lived assets.

Capital Formation The process of increasing the amount of capital goods - also calledcapital stock - in a country.


6/43

Capital Gain The positive change in the value of an asset, a negative capital gainis a capital loss.

Capital Market LineThe line between the risk-free asset and the market portfolio thatrepresents the mean-variance efficient set of investmentopportunities in the CAPM.

Capital MarketsMarkets for financial assets and liabilities with maturity greaterthan one year, including long-term government and corporatebonds, preferred stock, and common stock.

Capital Rationing The case where funds are limited to a fixed dollar amount and mustbe allocated among the competing projects.

Capital Structure

The mix of the various debt and equity capital maintained by afirm. Also called financial structure. The composition of acorporation's securities used to finance its investment activities;the relative proportions of short-term debt, long-term debt, and

CapitalismAn economic system that is based on private ownership; economicdevelopment is proportionate to and dependent upon theaccumulation and reinvestment of profits.

CarrierAn individual or entity that transports persons or goods forcompensation under the contract of carriage.

Cartel An agreement among, or an organization of, suppliers of a product.

Cash Against Documents (CAD) Payment for goods where a commission house or other intermediarytransfers title documents to the buyer upon payment in cash.

Cash Cover In a letter of credit transaction, money deposited by the applicantwith the issuing bank.

Cash Flow

Cash generated by the firm and paid to creditors and shareholders.It can be classified as (1) cash flow from operations, (2) cash flowfrom changes in fixed assets, and (3) cash flow from changes in networking capital.

Cash in Advance (CIA)Payment for goods in which the price is paid in full before theshipment is made. This type of payment is usually only made forvery small shipments or when goods are made in order.

Centrally Planned Economy An economy in which the government, rather than free-marketactivity, controls the allocation of resources.

Certificate of Acceptance

Term used in leasing. A document whereby the lesseeacknowledges that the equipment to be leased has been delivered,is acceptable, and has been manufactured or constructed accordingto specifications.

Certificate of Analysis/certificateof Inspection

Documents that may be asked for by the importer and/or theauthorities of the importing country, as evidence of quality orconformity to specifications.

Certificate of ManufactureA statement that is usually notarised in which the producer ofgoods certifies that the goods have been produced and are nowavailable to the buyer.

Certificate of OriginDocuments that may be asked for by the authorities of theimporting country, as evidence of the country of manufacture ofthe goods.

Certificate of Product Origin A document required by certain foreign countries for tariffpurpose, certifying the country of origin of specified goods.

Change in Net Working Capital Difference between net working capital from one period toanother.


7/43

Characteristic Line The line relating the expected return on a security to differentreturns on the market.CHIPS (Clearing House InterbankPayments System)

Financial network through which banks in the United Statesconduct their financial transactions.

CITES Convention on the International Trade in Endangered Species

Civil Society Organizations (CSOs)Non-governmental and non-profit groups that work to improvesociety and the human condition.

Clean Bill of Lading A receipt for goods issued by a carrier that indicates that the goodswere received in apparently good order and without damage.

Clean Collection Collection in which only the financial document is sent through thebanks.

Clearance The completion of customs entry requirements that results in therelease of goods to the importer.

Clearing The settlement of a transaction, often involving exchange ofpayments and/or documentation.

Closed-End FundA mutual fund in which the amount of funds under management isfixed and ownership in the funds is bought and sold in the market

like a depository receipt.Codex Codex Alimentarius Commission (a world food standards body)

Collection Order In a collection, the document in which the seller instructs thebanks as to how the collection is to be conducted.

Command EconomyAn economy based on government ownership and/or control ofsociety's resources; during the 20th century, the dominant form ofcommand economy was communism.

Commercial Document

General term for documents describing various aspects of atransaction, e.g. commercial invoice, transport document,insurance document, certificate of origin, certificate of inspectionetc.

Commodity Price Risk The risk of unexpected changes in a commodity price, such as the

price of oil.Commodity Swap A swap in which the (often notional) principal amount on at leastone side of the swap is a commodity such as oil or gold.Common Carrier An organization that transports persons or goods for a fee.

Comparative AdvantageA comparative advantage exists when a nation or economic regionis able to produce a product at a lower opportunity cost comparedto another nation or region.

Compliant DocumentsDocuments presented under a letter of credit that comply with allits terms and conditions. The banks are only obliged to pay thebeneficiary if documents are totally compliant.

Compound Interest

Interest that is earned both on the initial principal and on interestearned on the initial principal in previous periods. The interest

earned in one period becomes in effect part of the principal in afollowing period.

Compound Value Value of a sum after investing it over one or more periods. Alsocalled future value.

CompoundingProcess of reinvesting each interest payment to earn more interest.Compounding is based on the idea that interest itself becomesprincipal and therefore also earns interest in subsequent periods.

Confirming Bank Bank that adds its payment undertaking to a letter of credit.


8/43

Consignee Party to whom goods are to be delivered.

Consignment

Delivery of merchandise from an exporter (the consignor) to anagent (the consignee) under agreement that the consignee sells themerchandise of the account of the consignor, while the consignorretains title to the goods until the consignee sells them.

Consolidated IncomeThe sum of income across all of the multinational corporationsdomestic and foreign subsidiaries.

Consolidation A form of corporate reorganization in which two firms pool theirassets and liabilities to form a new company.

Corporate Governance The way in which major stakeholders exert control over the moderncorporation.

Correspondent Bank A bank that, in its own country, handles the business of a foreignbank.

Country Risk The political and financial risks of conducting business in aparticular foreign country.Coupon Swap A fixed-for-floating interest rate swap.Credit Risk Insurance Insurance that covers the risk of non-payment for delivered goods.

Consular StatementA document required by some foreign countries, describing ashipment of goods and showing information such as the consignor,consignee, and value of shipment. Certified by a consular official ofthe foreign country, it is used by the country's officials

Contingency Insurance

Contingency insurance protects the exporter in any situation inwhich exporter responsibility relied on the buyer to insure, butsustained a loss because of inadequate coverage from that source.It will cover situations in which the FOB endorsement.

Contingent Claim

Claim whose value is directly dependent on, or is contingent on,the value of its underlying assets. For example, the debt and equitysecurities issued by a firm derive their value from the total value ofthe firm.

Continuous CompoundingInterest compounded continuously, every instant, rather than atfixed intervals.

Continuous Quotation SystemA trading system in which buy and sell orders are matched withmarket makers as the orders arrive, ensuring liquidity in individualshares.

Contract Manufacturing A firm allowing another firm to manufacture a pre-specifiedproduct.

Contribution MarginAmount that each additional product, such as a jet engine,contributes to after-tax profit of the whole project: (Sales price -Variable cost) X (1 - T), where T is the corporate tax rate.

Controlled Foreign Corporation(CFC)

In the U.S. tax code, a foreign corporation owned more than 50percent either in terms of market value or voting power.

Convertible Bonds Bonds sold with a conversion feature that allows the holder toconvert the bond into common stock on or prior to a conversiondate and at a pre specified conversion price.

Convertible Currency A currency that can be traded for other currencies at will.

Convex Tax ScheduleA tax schedule in which the effective tax rate is greater at highlevels of taxable income than at low levels of taxable income. Sucha schedule results in progressive taxation.

Corporate Culture The set of values, beliefs, relationships between individuals andfunctions that guide the decisions of a company to achieve its


9/43


10/43

side of the contract.

Currency Swap

A contractual agreement to exchange a principal amount of twodifferent currencies and, after a prearranged length of time, togive back the original principal. Interest payments in each currencyare also typically swapped during the life of the agreement

Current Account A measure of a countrys international trade in goods and services.

Current Account BalanceA broad measure of import-export activity that includes services,travel and tourism, transportation, investment income andinterest, gifts, and grants along with the trade balance on goods.

Custom UnionA form of regional economic integration group that eliminatestariffs among member nations and establishes common externaltariffs.

Customhouse BrokerA person or firm obtains the license from the treasury departmentof its Country when required, and help clients (importers) to enterand declare goods through customs.

Customs The authorities designated to collect duties levied by a country onimports and exports.

CarnetA customs document permitting the holder to carry or sendmerchandise temporarily into certain foreign countries withoutpaying duties or posting bonds.

Cash with Order (C.W.O.) Payment for goods in which the buyer pays when ordering and inwhich the transaction is binding on both parties.

Certificate of Inspection A document certifying that merchandise was in good conditionimmediately prior to its shipment.

Cost And Freight (C & F) A pricing term indicating that the cost of the goods and freightcharges are included in the quoted price.

Charter Party Written contract between the owner of a vessel and a "chartered"who rents use of the vessel or a part of its freight space.

Cost and Insurance (C & I) A pricing term indicating that the cost of the product and insuranceare included in the quoted price.

Cost, Insurance, Freight A pricing term indicating that the cost of the goods, insurance, andfreight are included in the quoted price.Clean Draft A draft to which no documents have been attached.

Collection Papers All documents submitted to a buyer for the purpose of receivingpayment for a shipment.

Commercial Attachment The commerce expert on the diplomatic staff of his/her country'sembassy or large consulate.

Commercial Invoice An itemized list of goods shipped, usually among an exporter'sCOLLECTION PAPERS.

Common Carrier An individual, partnership, or corporation that transports persons orgoods for compensation.

Confirmation of Letter of Credit A letter of credit, issued by a foreign bank, whose validity has beenconfirmed by a Nationalized Indian bank.

ConsignmentDelivery of merchandise from an exporter (consignor) to an agent(consignee) under agreement that the agent sell the merchandisefor the account of the exporter.

Constructive TransferA legal fiction which permits acceptance of a Customs entry formerchandise in a zone before its physical transfer to the Customsterritory.


11/43

Consular InvoiceA document, required by some foreign countries, describing ashipment of goods and showing information such as the consignor,consignee, and value of the shipment.

Convertible Currency A currency that can be bought and sold for other currencies at will.

Corporation (Private)

Any corporation which is organized for the purpose of establishing,operating and maintaining a foreign-trade zone and which ischartered under a special act of the State within which it is tooperate such a zone.

Corporation (Public)A State, political subdivision thereof, a municipality, a publicagency of a State, political subdivision thereof, or municipality, ora corporate municipal instrumentality of one or more States.

Correspondent Bank A bank that, in its own country, handles the business of a foreignbank.

Counter Trade The sale of goods or services that are paid in whole or in part bythe transfer of goods or services from a foreign country.

Credit Risk Insurance Insurance designed to cover risks of nonpayment for deliveredgoods.

Customs TerritoryTerritory of the India in which the general tariff laws of the Indiaapply.

Custom House Agent (CHA) An individual or firm licensed to enter and clear goods throughCustoms.Glossary of EXIM International Trade Terms Starting with- D

Dealing Desk or Trading Desk The desk at an international bank that trades spot and forwardforeign exchange.

Debt capacity The amount of debt that a firm chooses to borrow to support aproject.

Debt-for-Equity Swap A swap agreement to exchange equity (debt) returns for debt(equity) returns over a prearranged length of time.

Decision Trees A graphical analysis of sequential decisions and the likely outcomes

of those decisions.Deferred Payment Credit A type of letter of credit which provides for payment some timeafter presentation of the shipping documents by the exporter.

Devaluation The official lowering of the value of one country's currency in termsof one or more foreign currencies.

Developing Country (DCs) A country that is in the process of becoming industrialized; thepoorer nations of the world.

Deliverable Instrument

The asset underlying a derivative security. For a currency option,the deliverable instrument is determined by the options exchangeand is either spot currency or an equivalent value in futurescontracts.

Delta-Cross-HedgeA futures hedge that has both currency and maturity mismatcheswith the underlying exposure.

Delta-HedgeA futures hedge using a currency that matches the underlyingexposure and a maturity date that is different from, but preferablyclose to, the maturity of the underlying exposure.

Demand Management A business process with the intention to coordinate and influenceall sources of demand for a firms products.

Depository Receipt A derivative security issued by a foreign borrower through adomestic trustee representing ownership in the deposit of foreign


12/43

shares held by the trustee.

Depreciation A decrease in a currency value relative to another currency in afloating exchange rate system.

Derivative Security A financial security whose price is derived from the price ofanother asset.

DevaluationA decrease in a currency value relative to another currency in afixed exchange rate system.

Developed Countries The richer, more industrialized countries in the world.DFID Department for International Development (UK)

Difference Check The difference in interest payments that is exchanged between twoswap counter parties.

Digital Divide The digital divide refers to the widening technological gap betweenthe richer and the poorer countries of the world.

Direct Costs of Financial Distress Costs of financial distress that are directly incurred duringbankruptcy or liquidation proceedings.

Direct ExportingMarketer takes direct responsibility for its products abroad byselling them directly to foreign customers or through local

representatives in foreign markets.

Direct Financing LeaseA non-leveraged lease by a lesser in which the lease meets any ofthe definitional criteria of a capital lease, plus certain additionalcriteria.

Direct Product Profitability Measuring the direct costs associated with handling a product fromthe warehouse until a customer buys from the retail store.

Direct TermsThe price of a unit of foreign currency in domestic currency terms,such as INR 45.70/USD for a India resident. (Contrast with indirectquote.)

Discount If a bond is selling below its face value, it is said to sell at adiscount.

Discounted Cash FlowA valuation methodology that discounts expected future cash flowsat a discount rate appropriate for the risk, currency, and maturityof the cash flows.

Discounted PaybackThe length of time needed to recoup the present value of aninvestment; sometimes used when investing in locations with highcountry risk.

Discounted Payback Period RuleAn investment decision rule in which the cash flows are discountedat an interest rate and the payback rule is applied on thesediscounted cash flows.

Discounting Calculating the present value of a future amount. The process isthe opposite of compounding.

Discretionary ReservesBalance sheet accounts that are used in some countries totemporarily store earnings from the current year or the recent

past.Discriminatory Pricing The practice that selling a product or service at different pricesthat do not reflect a proportional difference in costs.

DispatchAn amount paid by a vessel's operator to a charter if loading orunloading is completed in less time than stipulated in the charterparty.

Distributor A Foreign agent who sells for a supplier directly and maintains aninventory of the suppliers product.


13/43

Diversifiable (unique)(unsystematic) risk

A risk that specifically affects a single asset or a small group ofassets. Also called unique or unsystematic risk.

Doc Department of Commerce (USA)

Dock Receipt A receipt issued by an ocean carrier to acknowledge receipt of ashipment at the carrier's dock or warehouse.

Dock StatementA receipt issued by an ocean carrier to acknowledge the receipt ofa shipment at the carrier's dock or warehouse facilities.

Domestic Bonds Bonds issued and traded within the internal market of a singlecountry and denominated in the currency of that country.

Domestic Liquidity The aggregate of money supply, quasi-money or savings and timedeposits, and deposit substitutes.

Draft (trade bill, bill ofexchange)

A means of payment whereby a drawer (the importer) instructs adrawee (either the importer or its commercial bank) to pay thepayee (the exporter).

DSB Dispute Settlement BodyDSP Dispute Settlement PanelDSU Dispute Settlement Understanding

Dual Pricing The practice of selling identical products in different markets fordifferent prices.

Dumping

Selling goods or merchandise in another country at a price belowthe price at which the same merchandise is sold in the homemarket or selling such merchandise below the costs incurred inproduction and shipment. Dumping is an illegal trade practice.

Duty A tax imposed on imports by the customs authority of a country.

DGFT

Directorate General of Foreign Trade, which is headed by theDirector General of Foreign Trade. The office of the DGFT isresponsible for formulating and execution of Foreign Trade Policy,including licensing. Formerly (till 1991), was known as the Chief

Duty Exemption/scheme DutyFree Import of Inputs

Allows duty-free import of inputs for exports under AdvanceLicence, Duty Entitlement Pass Book (DEPB) and Duty FreeReplenishment Certificate (DFRC) Scheme.

DEPB

Refers to the Duty Entitlement Pass Book to neutralise theincidence of basic customs duty on the import content of exportproduct. This is provided by way of grant of duty credit against theexport product at specified rates. The DEPB Scheme

DFRC

Refers to the Duty Free Replenishment Certificate Scheme whichwas introduced from 1/4/2000 replacing. Transferable AdvanceLicensing Scheme. The scheme is available to merchant exportersas well as to manufacturer exporters. However,

Deemed ExportsRefers to those transactions in which the goods supplied do notleave the country and the payment for the goods is received by the

supplier in India.Date Draft A draft that matures in a specified number of days after the date itis issued, without regard to the date of "ACCEPTANCE".

Deactivisation Voluntary discontinuation of the activation of an entire zone orsubzone by the grantee or operator.

Default An act or omission that will result in a claim for duties, taxes,charges or liquidated damages under the FTZ Operator's BondDeferred Payments Credit Type of "LETTER OF CREDIT" providing for payment some time after


14/43

presentation of shipping documents by exporter.

Destination Control StatementAny of various statements that the U.S. Government requires to bedisplayed on export shipments and that specify the destinations forwhich export of the shipment has been authorized.

Devaluation The official lowering of the value of one country's currency in termsof one or more foreign currencies.Discrepancy - Letter of Credit When documents presented do not conform to the letter of credit.

Documentary Against Acceptance(D/A)

Instructions given by a shipper to a bank indicating that documentstransferring title to goods should be delivered to the buyer onlyupon the buyer's acceptance of the attached draft.

DraftAn unconditional order in writing from one person (the drawer) toanother (the drawee), directing the drawee to pay a specifiedamount to a named drawer at a fixed or determinable future date.

Drawback

Articles manufactured or produced in the India with the use ofimported components or raw materials and later exported areentitled to a refund of the duty charged on the imported productsor components.

DraweeThe individual or firm on whom a draft is drawn and who owes thestated amount.

Drawer The individual or firm that issues or signs a draft and thus stands toreceive payment of the stated amount from the drawee.

Dumping Exporting/Importing merchandise into a country below the costsincurred in production and shipment.Duty A tax imposed on imports by the customs authority of a country.Glossary of Export Import Trade Terms Starting with- E

Earnings Response Coefficient The relation of stock returns to earnings surprises around the timeof corporate earnings announcements.

Eclectic ParadigmA theory of the multinational firm that posits three types ofadvantage benefiting the multinational corporation: ownership-

specific, location-specific, and market internalisation advantages.Economic Exposure Change in the value of a corporations assets or liabilities as aresult of changes in currency values.

Economic Freedom Economic freedom occurs when individuals and businesses makemost of the economic decisions in an economy.

Economic Integration The integration of commercial and financial activities amongcountries through the abolishment of economic discrimination.

Economic UnionA group that combines the economic characteristics of a commonmarket with some degree of harmonization of monetary and fiscalpolicies.

Economic Value AddedA method of performance evaluation that adjusts accountingperformance with a charge reflecting investors required return oninvestment.

Economies of Scale Achieving lower average cost per unit through a larger scale ofproduction.

Economies of Vertical IntegrationAchieving lower operating costs by bringing the entire productionchain within the firm rather than contracting through themarketplace.

Effective Annual Interest Rate the interest rate as if it were compounded once per time periodrather than several times per period.


15/43


16/43

European Terms A foreign exchange quotation that states the foreign currency priceof one U.S. dollar. (Contrast with American terms.)

European Union (EU) An intergovernmental organization which coordinates foreign,economic, and judicial policy among its 25 member nations.

Exchange RateThe price of one currency in terms of another, i.e. the number ofunits of one currency that may be exchanged for one unit ofanother currency.

Exchange Risk The risk that losses may result from the changes in the relativevalues of different currencies.

Exercise Price The price at which an option can be exercised (also called thestriking price).

Exim Bank

Export-Import Bank of the India. Provides guarantees of workingcapital loans for Indian exporters, guarantees the repayment ofloans or makes loans to foreign purchasers of Indian goods andservices.

Exogenous Uncertainty Price or input cost uncertainty that is outside the control of thefirm.

Expiry DateThe date when a letter of credit is no longer valid - i.e. the datebeyond which it cannot be used.

Explicit Tax A tax that is explicitly collected by a government; includes income,withholding, property, sales, and value-added taxes and tariffs.

Export Any resource, intermediate good, or final good or service thatproducers in one country sell to buyers in another country.

Export Management Company A foreign or domestic company that acts as a sales agent anddistributor for domestic exporters in international markets.

Export Management Company A private firm that transacts export business on behalf of its clientcompanies in return for a commission, salary, or retainer.

Export BrokerAn individual or firm that helps to locate and introduce buyers andseller in international business for a commission but does not takepart in actual sales transaction.

Export License

A general export license covers the exportation of goods notrestricted under the terms of a validated export license. No formalapplication or written authorization is needed to ship exports undera general export license.

Export RestraintsQuantitative restrictions imposed by exporting countries to limitexports to specified foreign markets, usually as a follow-up toformal or informal agreements reached with importing countries.

Export Subsidies Any form of government payment that helps an exporter ormanufacturing concern to lower its export costs.

Export Trading Company (ETC)A company that facilitates the export of goods and services. An ETCcan either act as the export department for producers or take titleto the product and export for its own account.

Expropriation A specific type of political risk in which a government seizes foreignassets.

External Market A market for financial securities that are placed outside theborders of the country issuing that currency.

Extraterritoriality A government practice which applies its laws outside its territorialboundaries.

Exim Policy Refers to Export and Import (Exim) Policy. Exim Policy has gotincorporated into the comprehensive Foreign Trade Policy, which


17/43

was announced by the Commerce & Industry Minister on 31stAugust, 2004.

EPZs/EOUs

EPZs means Export Processing Zones which are special enclaves,separated from the Domestic Tariff Area (DTA), to provide aninternationally competitive duty-free environment for exportproduction. EOUmeans Export Oriented Units.

E-CommerceRefers to electronic commerce. In the context of Foreign TradePolicy, e-commerce relates to electronic filing and processing ofapplications etc.

EPCG

EPCG refers to the Export Promotion Capital Goods (EPCG) Scheme,which gives the manufacturer facility for import of capital goodsfor export production at concessional rate of duty (5 per cent)against certain level of export .

Exchange Permit

A government permit sometimes required by the importer'sgovernment to enable the importer to convert his or her owncountry's currency into foreign currency with which to pay a sellerin another country.

Exchange Rate

The price of one currency in terms of another, i.e., the number of

units of one currency that may be exchanged for one unit ofanother currency.

Exhibition The showing of merchandise within a zone, usually to prospectivebuyers.

Export Commission House An organization which, for a commission, acts as a purchasing agentfor a foreign buyer.

Export License A government document that permits the "Licensee" to engage inthe export of designated goods to certain destinations.Glossary of Export Trade Terms Starting with- F

Face Value The value of a bond that appears on its face. Also referred to aspar value or principal.

Factor ModelA model that assumes a linear relation between an assetsexpected return and one or more systematic risk factors.

FactoringSale of an accounts receivable balance to buyers (factors) that arewilling and able to bear the costs and risks of credit andcollections.

Financial (Capital) Structure The proportion of debt and equity and the particular forms of debtand equity chosen to finance the assets of the firm.

Financial Contagion The spread of a financial crisis from one country or region to othercountries or regions.

Financial Engineering The process of innovation by which new financial products arecreated.

Financial Innovation The process of designing new financial products, such as exoticcurrency options and swaps.Financial Markets Markets for financial assets and liabilities.

Financial Price RiskThe risk of unexpected changes in a financial price, includingcurrency (foreign exchange) risk, interest rate risk, and commodityprice risk.

Financial Risk Financial risk refers to unexpected events in a countrys financial,economic, or business life.Financial Strategy The way in which the firm pursues its financial objectives.


18/43

Fixed CostA cost that is fixed in total for a given period of time and for givenvolume levels. It is not dependent on the amount of goods orservices produced during the period.

Financial Policy

The corporations choices regarding the debt-equity mix,currencies of denomination, maturity structure, method offinancing investment projects, and hedging decisions with a goal of

maximizing the value of the firm to some set of stakeholders.

First-to-Market Advantage

Also know as "first-mover advantage." The idea of first-moveradvantage is that the initial occupant of a strategic position orniche (market segment) gains access to resources and capabilitiesthat a follower cannot match.

Fixed Exchange Rate System An exchange rate system in which governments stand ready to buyand sell currency at official exchange rates.Fixed Forward Contract Currency is bought or sold at a given future date.

Floating Currency SystemAn exchange rate system under which a government is notobligated to declare that its currency is convertible into a fixedamount of another currency.

Floating Exchange RateAn exchange rate system in which currency values are allowed tofluctuate according to supply and demand forces in the marketwithout direct interference by government authorities.

FoB Endorsement

Used with FOB, FAS, C&F, or CFR (but not CIF) quotations, FOBsales endorsement to an open marine policy can cover transit riskfrom the point of origin until title transfers. In these instances, theexporter relies on the importer to insure.

Force MajeureThe title of a standard clause in marine contracts exempting theparties for non-fulfillment of their obligations as a result ofconditions beyond their control, such as Acts of God, war.

Foreign Aid A grant of money, technical assistance, capital equipment, or otherassistance typically extended by richer nations to poorer nations.

Foreign Bonds

Bonds that are issued in a domestic market by a foreign borrower,

denominated in domestic currency, marketed to domesticresidents, and regulated by the domestic authorities.

Foreign BranchA foreign affiliate that is legally a part of the parent firm. In theU.S. tax code, foreign branch income is taxed as it is earned in theforeign country.

Foreign Debt Money owed by a nation to foreign investors, banks, orgovernments.

Foreign Direct investment (FDI) The act of building productive capacity directly in a foreigncountry.

Foreign Equity Requirements Investment rules that limit foreign ownership to a minority holdingis a company.

Foreign ExchangeCurrency of another country, or a financial instrument thatfacilitates payment from one currency to another.

Foreign Exchange (Currency) Risk The risk of unexpected changes in foreign currency exchange rates.

Foreign Exchange Broker Brokers serving as matchmakers in the foreign exchange marketthat do not put their own money at risk.Foreign Exchange Dealer A financial institution making a market in foreign exchange.

Foreign Exchange MarketsNetworks of commercial banks, investment banks, and otherfinancial institutions that convert, buy, and sell currencies in theglobal economy.


19/43

Foreign Trade Zone A physical area in which the government allows firms to delay oravoid paying tariffs on imports.Foreign-Source Income Income earned from foreign operations.

ForfaitingA form of factoring in which large, medium- to long-termreceivables are sold to buyers (forfaiters) that are willing and ableto bear the costs and risks of credit and collections.

Forward Contract A commitment to exchange a specified amount of one currency fora specified amount of another currency on a specified future date.

Forward Discount A currency whose nominal value in the forward market is lowerthan in the spot market. (Contrast with forward premium.)

Forward MarketA market for forward contracts in which trades are made for futuredelivery according to an agreed-upon delivery date, exchange rate,and amount.

Forward Parity When the forward rate is an unbiased predictor of future spotexchange rates.

Forward Premium A currency whose nominal value in the forward market is higherthan in the spot market. (Contrast with forward discount.)

Franchise Agreement An agreement in which a domestic company (the franchiser)licenses its trade name and or business system to an independentcompany (the franchisee) in a foreign market.

Franchising

A parent company grants another independent entity the privilegeto do business in a pre-specified manner, including manufacturing,selling products, marketing technology and other businessapproach.

Free Cash Flow Cash flow after all positive-NPV projects have been exhausted inthe firms main line of business.

Free Port An area such as a port city into which merchandise may legally bemoved without payment of duties.

Free Trade Area of the Americas(FTAA)

A proposed hemispheric trade zone that would cover all of thecountries in North, South, and Latin America. The FTAA is highlycontroversial.

Free Trade Zone

An area designated by the government to which goods may beimported for processing and subsequent export on duty-free basis.Merchandise may be stored, used or manufactured in the zone andre-exported without duties being paid.

Freely Floating Exchange RateSystem

An exchange rate system in which currency values are allowed tofluctuate according to supply and demand forces in the marketwithout direct interference by government authorities.

Freight Forwarder

An independent business that handles export shipment on behalf ofthe shipper without vested interest in the products. A freightforwarder is a good source of information and assistance on exportregulations and documentation.

Freight Shippers (FreightForwarders) Agents used to coordinate the logistics of transportation.

Frequency Distribution The organization of data to show how often certain values orranges of values occur.

Full Payout Lease

A lease in which the lesser recovers, through the lease payments,all costs incurred in the lease plus an acceptable rate of return,without any reliance upon the leased equipment's future residualvalue.


20/43

Fundamental AnalysisA method of predicting exchange rates using the relationships ofexchange rates to fundamental economic variables such as GNPgrowth, money supply, and trade balances.

Future Value Value of a sum after investing it over one or more periods. Alsocalled compound value.

Futures Commission MerchantA brokerage house that is authorized by a futures exchange totrade with retail clients.

Futures ContractA commitment to exchange a specified amount of one currency fora specified amount of another currency at a specified time in thefuture. Futures contracts are periodically marked-to-market,

FTP

Refers to Foreign Trade Policy, announced by the Commerce &Industry Minister on 31st August, 2004. It is a 5-year Policy(September 2004 -- March 2009), which takes effect fromSeptember 1, 2004.

FTWZ Free Trade and Warehousing Zone, a new scheme announced in theForeign Trade Policy 2004-2009.

FoBFob means Free on Board - i.e., when an exporter delivers goods"free on board", he pays all charges involved in getting themactually onto the ship.

First in-First Out (FIFO)An accounting method based on an assumption regarding the flowof goods that older stock is disposed of first, in accordance withgood merchandising policy.

Force Majeure

The title of a standard clause in marine contracts exempting theparties for no fulfillment of their obligations as a result ofconditions beyond their control, such as earthquakes, floods, orwar.

Foreign Exchange The currency or credit instruments of a foreign country.

Foreign First (FOFI) An accounting method based on an assumption regarding the flowof goods that foreign status merchandise is disposed of first.

Foreign Sales AgentAn individual or firm that serves as the foreign representative of adomestic supplier and seeks sales abroad for the supplier.

Foreign-Trade Zone/Free TradeZone

A port designated by the government of a country for duty-freeentry of any non-prohibited goods. Merchandise may be stored,displayed, or used for manufacturing, etc., within the zone and re-exported without duties being paid.

Foreign -Trade Zones Act The Foreign-Trade Zones Act of June 18, 1934, (48 Stat. 998-1003;19 U.S.C. 81a-81u) as amended.

Foul Bill of Lading A receipt of goods issued by a carrier with an indication that thegoods were damaged when received.

Free Alongside(F.A.S.) A pricing term indicating that the quoted price includes the cost ofdelivering the goods alongside a designated vessel.

Free in (F.I.)A pricing term indicating that the charter of a vessel is responsiblefor the cost of loading and unloading goods from the vessel.

Free Port An area such as a port city into which merchandise may be legallymoved without payment of duties.

Freight Forwarder An independent business which handles export shipments forcompensation.Glossary of Import Trade Terms Starting with- G

G-7 A formal organization of seven highly industrialized democracies:Canada, France, Germany, Italy, Japan, the United Kingdom, and


21/43

the United States.G-8 The G-7 countries plus Russia.Generally Accepted AccountingPrinciples (GAAP)

A common set of accounting concepts, standards, and proceduresby which financial statements are prepared.

General Agreement on Tariffs andTrade (GATT)

A post-World War II agreement designed to promote freerinternational trade among the nations of the world. The GATT wasreplaced by the World Trade Organization (WTO) in 1994.

Generalized Autoregressiveconditional Heteroskedasticity

A time series model in which returns at each instant of time arenormally distributed but volatility is a function of recent history ofthe series.

Geocentric Multinational

A multinational in which the subsidiaries are neither satellites norindependent city states, but parts of a whole whose focus is onworldwide objectives as well as local objectives, each part makingits unique contribution with its unique competence.

Global Bond A bond that trades in the Eurobond market as well as in one ormore national bond markets.

Global EconomyThe international network of individuals, businesses, governments,and multilateral organizations which collectively make productionand consumption decisions.

GlobalizationA global movement to increase the flow of goods, services, people,real capital, and money across national borders in order to create amore integrated and interdependent world economy.

Gold Exchange Standard

An exchange rate system used from 1925 to 1931 in which theUnited States and England were allowed to hold only gold reserveswhile other nations could hold gold, U.S. dollars, or pounds sterlingas reserves.

Gold StandardAn exchange rate system used prior to 1914 in which gold was usedto settle national trade balances. Also called the classical goldstandard.

GoodwillThe accounting treatment of an intangible asset such as thetakeover premium in a merger or acquisition.

Gradualism A steady and calculated approach to transforming an economy fromcommunism to capitalism.

Gray-Market Imports Gray-market imports are parallel distribution of genuine goods byintermediaries other than authorized channel members.

Greenfield A form of investment in which the firm designs and builds a newfactory from scratch, starting with nothing but a

Greenmail Buying shares on the open market in the hope that the targetsbusiness partners will buy back the shares at inflated prices.

Gross Domestic Product (GDP)

A measure of the market value of goods and services produced by anation. Unlike Gross National Product, GDP excludes profits madeby domestic firms overseas, as well as the share of reinvestedearning in domestic firms' foreign-based operations.

Growing Perpetuity

A constant stream of cash flows without end that is expected torise indefinitely. For example, cash flows to the landlord of anapartment building might be expected to rise a certain percentageeach year.

Growth OptionsThe positive-NPV opportunities in which the firm has not yetinvested. The value of growth options reflects the time value of thefirms current investment in real assets as well as the option value


22/43

of the firms potential future investments.

Growth StocksStocks with high price/book or price/earnings ratios. Historically,growth stocks have had lower average returns than value stocks(stocks with low price/book or PE ratios) in a variety of countries.

Guideline Lease A lease written under criteria established by the IRS to determinethe availability of tax benefits to the lesser.

GATT/General Agreement onTariffs And Trade

A multilateral treaty intended to help reduce trade barriersbetween the signatory countries and to promote trade throughtariff concessions.

GranteeA corporation to which the privilege of establishing, operating, andmaintaining a foreign-trade zone has been granted by the Foreign-Trade Zones Board.

Gross Weight The full weight of a shipment, including goods and packaging.Glossary of Import Export Trade Terms Starting with- H

Harmonized Tariff Schedule (HTS) A method of classification used by many countries to determinetariffs on imports.

Hedge Quality Measured by the r-square in a regression of spot rate changes on

futures price changes.Hedge Ratio The ratio of derivatives contracts to the underlying risk exposure.

Hedging Reducing the risk of a cash position by using the futuresinstruments to offset the price movement of the cash asset.High-Withholding-Tax InterestIncome

In the U.S. tax code, interest income that has been subject to aforeign gross withholding tax of 5 percent or more.

Heavily Indebted Poor Countries(HIPC) Initiative

The HIPC Inititiative is a major international response to theburdensome external debt held by the world's poorest, mostindebted countries. It originated in 1996 as a joint undertaking ofthe World Bank and the International Monetary Fund (IMF).

Hedge

A position or operation that offsets an underlying exposure. Forexample, a forward currency hedge uses a forward currency

contract to offset the exposure of an underlying position in aforeign currency. Hedges reduce the total variability of thecombined

Hedge Funds Private investment partnerships with a general manager and asmall number of limited partners.

Hedge Portfolio

The country-specific hedge portfolio in the International AssetPricing Model serves as a store of value (like the risk-free asset inthe CAPM) as well as a hedge against the currency risk of themarket portfolio.

Historical Volatility Volatility estimated from a historical time series.Holding-Period Return The rate of return over a given period.

Home Asset BiasThe tendency of investors to over invest in assets based in theirown country.

Homogeneous Expectations Idea that all individuals have the same beliefs concerning futureinvestments, profits, and dividends.

HyperinflationAn extremely high rate of inflation, often exceeding severalhundred or several thousand percent, that causes a country'smoney to become practically worthless.

Hysteresis The behavior of firms that fail to enter markets that appearattractive and, once invested, persist in operating at a loss. This


23/43

behavior is characteristic of situations with high entry and exitcosts along with high uncertainty.

Glossary of Import Export International Trade Terms Starting with- I

Implicit Tax Lower (higher) before-tax required returns on assets that aresubject to lower (higher) tax rates.

Implied Volatility The volatility that is implied by an option value given the otherdeterminants of option value.

Import Any resource, intermediate good, or final good or service thatbuyers in one country purchase from sellers in another country.

Import LicensesLicenses required by some countries to bring in a foreign-madegood. In many cases, import licenses are also used by the issuingcountry to control the quantity of imported items.

In-the-Money Option An option that has value if exercised immediately.

Income BasketsIn the U.S. tax code, income is allocated to one of a number ofseparate income categories. Losses in one basket may not be usedto offset gains in another basket.

Income Statement Financial report that summarizes a firm's performance over a

specified time period.Incremental IRR IRR on the incremental investment from choosing a large projectinstead of a smaller project.

Indemnity ClauseA clause in which the one party indemnifies the other. In leasing,generally a clause whereby the lessee indemnifies the lesser fromloss of tax benefits.

Independent Project A project whose acceptance or rejection is independent of theacceptance or rejection of other projects.

Index futures A futures contract that allows investors to buy or sell an index (suchas a foreign stock index) in the futures market.

Index options A call or put option contract on an index (such as a foreign stockmarket index).

Index swap A swap of a market index for some other asset (such as a stock-for-stock or debt-for-stock swap).Indication pricing schedule A schedule of rates for an interest rate or currency swap.Indirect Costs of FinancialDistress

Costs of financial distress that are indirectly incurred prior toformal bankruptcy or liquidation.

Indirect CustomersThe end-users (e.g., consumers) of the products and servicespurchased from the wholesalers, retailers, and consignees -- thedirect customers of the seller.

Indirect Diversification BenefitsDiversification benefits provided by the multinational corporationthat are not available to investors through their portfolioinvestment.

Indirect ExportingExport products to foreign markets by using an intermediary,usually export trading company based in the exporters country.

Inflation RateThe general increase in the price level herein measured by thegrowth rate in the GNP Implicit Price Index or the general pricedeflator.

Informational Efficiency Whether or not market prices reflect information and thus the true(or intrinsic) value of the underlying asset.

Integrated Financial Market A market in which there are no barriers to financial flows andpurchasing power parity holds across equivalent assets.


24/43

Intellectual Property

Material or communicable result in forms of discoveries, inventions,designs and literary and art works of scientific, humanistic, literary,and artistic endeavor. It includes, but is not limited to, works in theform of scientific discoveries and invention.

Intellectual Property RightsPatents, copyrights, and proprietary technologies and processesthat are the basis of the multinational corporations competitive

advantage over local firms.Inter-American DevelopmentBank(IADM)

A regional development bank designed to promote sustainableeconomic development in the Western Hemisphere. Itsheadquarters are located in Washington, D.C.

Interbank Spread The difference between a banks offer and bid rates for deposits inthe Eurocurrency market.Interest Rate Risk The risk of unexpected changes in an interest rate.

Interest Rate Swap

An agreement to exchange interest payments for a specific periodof time on a given principal amount. The most common interestrate swap is a fixed-for-floating coupon swap. The notionalprincipal is typically not exchanged.

Intermediated MarketA financial market in which a financial institution (usually acommercial bank) stands between borrowers and savers.

Intermodal The use of two or more modes of transportation to complete acargo move; truck/rail/ship, or truck/air, for example.

Internal Market A market for financial securities denominated in the currency of ahost country and placed within that country.

Internal Rate of Return (IRR)A discount rate at which the net present value of an investment iszero. The IRR is a method of evaluating capital expenditureproposals.

International Asset Pricing Model(IAPM)

The international version of the CAPM in which investors in eachcountry share the same consumption basket and purchasing powerparity holds.

International Monetary SystemThe global network of governmental and commercial institutionswithin which currency exchange rates are determined.

Intrinsic Value of an Option The value of an option if exercised immediately.

International Bank forReconstruction and Development

Also called the World Bank, an international organization created atBreton Woods in 1944 to help in the reconstruction anddevelopment of its member nations.

International BondsBonds that are traded outside the country of the issuer.International bonds are either foreign bonds trading in a foreignnational market or Eurobonds trading in the international market.

International Chamber ofCommerce

International non-governmental body concerned with promotion oftrade and harmonization of trading practice. Responsible fordrafting and publishing.

International Monetary Fund(IMF)

An international organization designed to promote global economicstability and development. It compiles statistics on cross-bordertransactions and publishes a monthly summary of each countrysbalance of payments.

Investment AgreementAn agreement specifying the rights and responsibilities of a hostgovernment and a corporation in the structure and operation of aninvestment project

Investment Opportunity Set The set of possible investments available to an individual orcorporation.


25/43

Investment Philosophy The investment approach-active or passive-pursued by aninvestment fund and its managers.

Input Output Norms The norms which define the amount of input/inputs required tomanufacture a unit of output.

ISO-9000 Refers to international standards, laid down by the InternationalStandards Organisation.

ITC(HS)Refers to Indian Trade Classification (Harmonized System). It is asystem of classification of products for the purposes of export andimport.

Import License A document required and issued by some national governmentsauthorizing the importation of goods into their individual countries.

Inland Bill of Lading A bill of lading used in transporting goods overland to the exporter'sinternational carrier.

Irrevocable Letter of credit A letter of credit in which the specified payment is guaranteed bythe bank if all terms and conditions are met by the drawee.Glossary of Impex Trade Terms Starting with - J

Joint Venture

An agreement of two or more companies to pool their resources to

execute a well-defined mission. Resource commitments,responsibilities, and earnings are shared according to apredetermined contractual formula.

Just In Time (JIT)An organization-wide practice that keeps the inventory to theminimum and provides customers the right goods or service at theright time.

Glossary of Export Import Foreign Trade Terms Starting with - K

Kyoto ProtocolA multilateral environmental agreement; its goal is to control globalwarming by reducing greenhouse gases emitted into the Earth'satmosphere.

KeiretsuCollaborative groups of vertically and horizontally integrated firmswith extensive share cross-holdings and with a major Japanese bank

or corporation at the center.Glossary of Export Import Trade Terms Starting with - L

Lease A contract in which one party conveys the use of an asset toanother party for a specific period of time at a predetermined rate.

Landed Cost The quoted or invoiced cost of a commodity, plus any inboundtransportation charges.

Law of one Price (PurchasingPower Parity)

The principle that equivalent assets sell for the same price. The lawof one price is enforced in the currency markets by financial marketarbitrage.

Lead Manager The lead investment bank in a syndicate selling a public securitiesoffering.

Leading and LaggingReduction of transaction exposure through timing of cash flowswithin the corporation.

Lease RateThe periodic rental payment to a lesser for the use of assets. Othersmay define lease rate as the implicit interest rate in minimum leasepayments.

Least-Developed Countries (LDCs)The poorest of the developing countries. They are characterized bya low gross national product per capita, a reliance on subsistenceagriculture, rapid population growth, inadequate infrastructure.

Letter of Credit (L/C) A letter issued by an importers bank guaranteeing payment upon


26/43

presentation of specified trade documents (invoice, bill of lading,inspection and insurance certificates, etc.).

Leveraged LeaseThe lesser provides an equity portion (usually 20 to 40 percent) ofthe equipment cost and lenders provide the balance on anonrecourse debt basis.

LiberalizationThe process by which certain business activities become moremarket driven.

Location-Specific Advantages Advantages (natural and created) that are available only orprimarily in a single location.

London Interbank Bid Rate (LIBID) The bid rate that a Euro market bank is willing to pay to attract adeposit from another Euro market bank in London.

Long Position A position in which a particular asset (such as a spot or forwardcurrency) has been purchased.

License Agreement

A sales agreement in which a domestic company (the licensor)allows a foreign company (the licensee) to market its products in aforeign country in return for royalties, fees, or other forms ofcompensation.

Licensing

One firm gives another firm a permission, which allows the latter toengage in an activity otherwise legally forbidden to it. Suchactivities usually involve the transfer of intellectual and proprietaryknowledge in return for royalty as revenue.

Limited Flexibility Exchange RateSystem

The International Monetary Funds name for an exchange ratesystem with a managed float.

Liquid Market A market in which traders can buy or sell large quantities of anasset when they want and with low transactions costs.

Liquidity The ease with which an asset can be exchanged for another asset ofequal value.

Loanable Funds The pool of funds from which borrowers can attract capital;typically categorized by currency and maturity.

London Interbank Offer Rate(LIBOR)

The offer rate that a Euro market bank demands in order to place adeposit at (or, equivalently, make a loan to) another Euro marketbank in London.

Letter of Credit(L/C)

A document, issued by a bank per instructions by a buyer of goods,authorizing the seller to draw a specified sum of money underspecified terms, usually the receipt by the bank of certaindocuments within a given time.

LicensingA business arrangement in which the manufacturer of a productgrants permission to some other group or individual to manufacturethat product in return for specified royalties.

Glossary of Export Trade Terms Starting with - M

ManifestDocument that lists in detail al the bills of lading issued by a carrierof its agent or master, i.e., a detailed summary of the total cargoof a vessel.

Macro Country Risks Country (or political) risks that affect all foreign firms in a hostcountry.

Management ContractAn agreement by which one firm allows another to manage itsforeign activities on behalf of it. The managing firm is forbidden tomake capital investment or financing decisions.

Managerial Flexibility Flexibility in the timing and scale of investment provided by a realinvestment option.


27/43

Maquiladoras Duty-free assembly plants located mainly in the developing world.Maquiladoras are one type of foreign direct investment.

Margin Account

An account maintained by an investor with a brokerage firm inwhich securities may be purchased by borrowing a portion of thepurchase price from the brokerage, or may be sold short byborrowing the securities from the brokerage firm.

Margin Requirement A performance bond paid upon purchase of a futures contract thatensures the exchange clearinghouse against loss.

Market AccessThe extent to which a domestic industry can penetrate a relatedmarket in a foreign country. Access can be limited by tariffs orother non-trade barriers.

Market Economy An economy in which resource allocations, prices and othermarketing decisions are primarily determined by the free market.

Market Failure

A failure of arms-length markets to efficiently complete theproduction of a good or service. In the eclectic paradigm, themultinational corporations market internalization advantages takeadvantage of market failure.

Market InternalizationAdvantages

Advantages that allow the multinational corporation to internalizeor exploit the failure of an arms-length market to efficientlyaccomplish a task.

Market Maker A financial institution that quotes bid (buy) and offer (sell) prices.Market Model (One-Factor MarketModel)

The empirical version of the security market line: Rj = aj + bjRM +ej.

Market Portfolio A portfolio of all assets weighted according to their market values.Market Risk Premium The risk premium on an average stock; (E[RM]-RF).

Market TimingAn investment strategy of shifting among asset classes in anattempt to anticipate which asset classes) will appreciate ordepreciate during the coming period.

Market-Based CorporateGovernance System

A system of corporate governance in which the supervisory boardrepresents a dispersed set of largely equity shareholders.

Multilateral EnvironmentalAgreements (MEAs) Environmental agreements negotiated by a number of countries.

Marketing Mix

The set of marketing tools that the firm uses to pursue itsmarketing objectives in the target market. One of the most popularclassifications of marketing mix tools is called the "4 P's" ofmarketing: product, price, place, and promotion.

Marking to Market The process by which changes in the value of futures contracts aresettled daily.Maturity Date The date on which the last payment on a bond is due.

Mean-Variance Efficient An asset that has higher mean return at a given level of risk (orlower risk at a given level of return) than other assets.

MercosurThe common market of the South, a customs union which includesArgentina, Brazil, Paraguay, and Uruguay in a regional trade pactthat reduces tariffs on intrapact trade by up to 90 percent. Boliviaand Chile are associate members.

Merger A form of corporate acquisition in which one firm absorbs anotherand the assets and liabilities of the two firms are combined.Method of Payment The way in which a merger or acquisition is financed.Micro Country Risks Country risks that are specific to an industry, company, or project


28/43

within a host country.

Micro Credit Small loans, perhaps $50 or $100, that are extended to smallbusinesses to finance a business start-up or other business activity.

Middle Market A market segment generally represented by financing under $2million. In leasing this sector is dominated by single investor leases.Miller and ModiglianisIrrelevance Proposition

If financial markets are perfect, then corporate financial policy(including hedging policy) is irrelevant.

Mixed Tariff A combination of specific and ad valorem tariffs.Monetary Assets andLiabilities(MAL) Assets and liabilities with contractual payoffs.

Money Market Hedge A hedge that replicates a currency forward contract through thespot currency and Eurocurrency markets.

Money Market Yield A bond quotation convention based on a 360-day year andsemiannual coupons. (Contrast with bond equivalent yield.)

Money Markets Financial markets for debt securities that pay off in the short term(usually less than one year).

Money Supply The total amount of currency in circulation and peso deposits

subject to check of the monetary system.Monopoly Exclusive control or possession by one group of the means ofproducing or selling goods or services.More Flexible Exchange RateSystem

The International Monetary Funds name for a floating exchangerate system.

Most Favored Nation (MFN)A status granted to one country by another; the granting countrythen accords the recipient's imports and exports the most favorabletreatment that it accords any country.

Multinational Corporation A corporation with operations in more than one country.

Multinational Netting Elimination of offsetting cash flows within the multinationalcorporation.Mutually Exclusive InvestmentDecisions

Investment decisions in which the acceptance of a projectprecludes the acceptance of one or more alternative projects.

ManipulationProcessing wherein merchandise is packed, unpacked, repacked,cleaned, sorted, graded or otherwise changed in condition but notmanufactured.

ManufacturerGenerally, the production of articles for use from raw or preparedmaterials by substantially transforming such materials into newforms.

Marine InsuranceInsurance that compensates the owners of goods transportedoverseas in the event of loss that cannot be legally recovered fromthe carrier.

Marking Letters, numbers, and other symbols on cargo packages to facilitateidentification.

MerchandiseIncludes goods, wares, and chattels of every description exceptProhibited Merchandise, building materials, production equipmentand supplies for use in operation of a zone.

Merchandise, Domestic Merchandise which has been produced in the India and not exportedtherefrom.

Merchandise, Foreign Imported Merchandise which has not been properly released fromCustoms custody into the Customs territory of the India.Merchandise, Fungible Merchandise which for commercial purposes is identical and


29/43

interchangeable in all situations.

Merchandise, Mixed Status Foreign Merchandise which has been combined with DomesticMerchandise in the zone.

Merchandise/Operations,Prohibited

Merchandise, the importation of which is prohibited by law ongrounds of public policy or morals, or excluded by order of theForeign-Trade Zones Board..

Merchandise/Operations,Restricted

Merchandise which may not be authorized for delivery fromCustoms custody without a special permit, or a waiver thereof byan agency of the Indian Government.

Glossary of EXIM Trade Terms Starting with - N

Net Currency Exposure Exposure to foreign exchange risk after netting all intracompanycash flows.

National Tax Policy The way in which a nation chooses to allocate the burdens of taxcollections across its residents.

National Treatment A country accords no less favorable treatment to imported goodsthan it does to domestic goods.

Nationalization A process whereby privately owned companies are brought under

state ownership and control. (Contrast with privatization.)

Negative-NPV Tie-in ProjectA negative (-) NPV infrastructure development project that a localgovernment requires of a company pursuing a positive (+) NPVinvestment project elsewhere in the economy.

Net Asset ValueThe sum of the individual asset values in a closed-end mutual fund.Closed-end funds can sell at substantial premiums or discounts totheir net asset values.

Net Exposed Assets Exposed assets less exposed liabilities. The term is used withmarket values or, in translation accounting, with book values.Net Monetary Assets Monetary assets less monetary liabilities.

Net Position A currency position after aggregating and canceling all offsettingtransactions in each currency, maturity, and security.

Net Present Value (NPV)The present value of future cash returns, discounted at theappropriate market interest rate, minus the present value of thecost of the investment.

Net Working Capital Current assets minus current liabilities.

New Protectionism Recent efforts to pressure national governments to exercise greatercontrol over foreign trade and foreign direct investment.

Nominal Cash Flow A cash flow expressed in nominal terms if the actual dollars to bereceived (or paid out) are given.Nominal Interest Rate Interest rate unadjusted for inflation.Non-Governmental Organizations(NGOs) Special interest groups that operate in the global community.

Non-Tariff Barrier An indirect measure used to discriminate against foreignmanufacturers, for example, extensive inspection procedures forforeign imports that create barriers to entering the market.

Noncash Item Expense against revenue that does not directly affect cash flow,such as depreciation and deferred taxes.

Non-Intermediated Debt Market

A financial market in which borrowers (governments and largecorporations) appeal directly to savers for debt capital through thesecurities markets without using a financial institution asintermediary.


30/43

Non-Monetary Assets andLiabilities Assets and Liabilities with non-contractual payoffs.

Normal Distribution Symmetric bell-shaped frequency distribution that can be definedby its mean and standard deviation.North American Free TradeAgreement (NAFTA)

A regional trade pact among the United States, Canada, andMexico.

Notional Principal In a swap agreement, a principal amount that is only notional and isnot exchanged.

NFE Refers to Net Foreign Exchange. Net Foreign Exchange earning iscalculated as a percentage of exports (NFEP).

Non-Privileged Foreign (NPF)Foreign Merchandise or non-tax-paid domestic merchandise uponwhich the duty and applicable taxes will be determined at the timeof entry from the zone for consumption.

Glossary of Export Business Trade Terms Starting with - O

Offer (Ask) Rates The rate at which a market maker is willing to sell the quotedasset.

Offering Statement

In the United States, a shortened registration statement required by

the Securities and Exchange Commission on debt issues with lessthan a nine-month maturity.Official Settlements Balance(Overall Balance)

An overall measure of a countrys private financial and economictransactions with the rest of the world.

Offshore Financial Centers (OFCs) The many types of financial institutions that operate withoutfinancial supervision by governments or other agencies.

Oligopoly A market dominated by so few sellers that action by any of themwill impact both the price of the good and the competitors.

Open Account The seller delivers the goods to the buyer and then bills the buyeraccording to the terms of trade.

Open and Reform Policy

An economic policy enacted by the Chinese government combiningcentral planning with market-oriented reforms to increase

productivity, living standards, and technological quality withoutexacerbating inflation, unemployment, and budget deficits.

Open-end Fund A mutual fund in which the amount of money under managementgrows/shrinks as investors buy/sell the fund.

Operating Cash FlowEarnings before interest and depreciation minus taxes. It measuresthe cash flow generated form operations, not counting capitalspending or working capital requirements.

Operating Exposure Changes in the value of real (no monetary) assets or operating cashflows as a result of changes in currency values.

Operating Leverage The trade-off between fixed and variable costs in the operation ofthe firm.

Operational EfficiencyMarket efficiency with respect to how large an influencetransactions costs and other market frictions have on the operationof a market.

OPICOverseas Private Investment Corporation. A US agency that assistsUS companies protect their investment against risk in a particularcountry besides providing other services.

Opportunity Cost Most valuable alternative that is given up. The rate of return usedin NPV computation is an opportunity interest rate.Opportunity Set The set of all possible investments.


31/43

Organization for EconomicCooperation and Development(OECD)

A group of 30 countries that meets regularly to discuss global issuesand make appropriate economic and social policies.

Organization of PetroleumExporting Countries (OPEC) A producer cartel that produces and sells oil.

Out-of-the-Money Option An option that has no value if exercised immediately.

Outright Quote A quote in which all of the digits of the bid and offer prices arequoted. (Contrast with points quote.)

Outsourcing A situation in which a firm's functions are performed or provided bya person or group from outside the company.Overall Balance (See official settlements balance.)

Overall FTC limitationIn the U.S. tax code, a limitation on the FTC equal to foreign-sourceincome times U.S. tax on worldwide income divided by worldwideincome.

Ownership-Specific Advantages

Property rights or intangible assets, including patents, trademarks,organizational and marketing expertise, production technology andmanagement, and general organizational abilities, that form thebasis for the multinationals advantage over local firms

Ocean Bill of Lading A bill of lading indicating that the exporter consigns a shipment toan int'l carrier for transportation to a specified foreign market.

On Board Bill of Lading A bill of lading in which a carrier certifies that goods have beenplaced on board a certain vessel.

Open Account A trade arrangement in which goods are shipped to a foreign buyerwithout guarantee of payment.

Open Insurance Policy A marine insurance policy that applies to all shipments made by anexporter over a period of time rather than to one shipment only.

Operator A corporation, partnership, or person that operates a zone or subzone under the terms of an agreement with the Grantee.

Operator's Bond All zone operators must submit to Customs a bond to assure

compliance with Customs regulations.Order Bill of Lading A negotiable bill of lading made out to the order of the shipper.Glossary of Import Business Trade Terms Starting with - P

Packing List Document listing the contents of a consignment of goods. May becalled for on a letter of credit.

Parallel LoanA loan arrangement in which a company borrows in its homecurrency and then trades this debt for the foreign currency debt ofa foreign counterpart.

Partnership

Form of business organization in which two or more co-ow