Import Export Glossary

7/28/2019 Import Export Glossary

1/47

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 other economic region of any country is able toproduce a good or service more efficiently than a second(other) nation or its region.

Accounting TranslationExposure

Changes in a organizations or corporations financialstatements as a result of changes in currency values.

ACP African, Caribbean, and Pacific countries.

Acquisition of AssetsIn an acquisition of assets, one firm acquires the assets ofanother company. None of the liabilities supporting thatasset are transferred to the purchaser.

Acquisition of StockIn an acquisition of stock, one firm buys an equityinterest in another.

Acquisition Premium In a merger or acquisition, the difference between thepurchase price and the reacquisition value of the targetfirm or company.

Active Fund ManagementAn investment approach that actively shifts funds eitherbetween asset classes (asset allocation) or betweenindividual securities (security selection).

Active IncomeIn the U.S. tax code, income from an active business asopposed to passive investment income.

Activity-Based-Cost (ABC)An accounting method that allocates costs to specificproducts based on breakdowns of cost drivers.

Ad valorem TariffA tariff assessed as a percentage of the value of an

import.ADB

Asia Development Bank, head quartered located inManila, Philippines (ASIA).

Adjusted Present Value(APV)An APV is a valuation method that separately identifiesthe value of an unlevered project from the value offinancing side effects.

Advance Payment

Advance Payment is a Trading method in which the buyerpays for the goods before they are sent out , method isused when buyer is of unknown credit worthiness. It isapplicable in International or domestic trade.

Adventure

Adventure also define for marine adventure." It is a termof art in the marine insurance business. All insured cargoowners and every shipper on that vessel are part of theadventure.

Advising Bank

Advising Bank is usually in the country of the seller,whose primary function is to authenticate the letter ofcredit and advise it to the seller, Purchase and collectionof Export Bills.

Advisory Capacity

Used to indicate that a shipper's agent or representativeis not empowered to make definitive changes oradjustments without approval of the group or individualrepresented.

African Developmental Bank(ABD)

The ABD is one of four major regional developmental

banks currently operating in the global economy; it isheadquartered in Abidjan, Cote d'Ivoire.


2/47

Agency CostsThe costs incurred to ensure that agents act in the bestinterest of the principal.

Agent

Someone who represents business in domestic andoverseas market. In corporate governance terminology,management is the agent of the principal stakeholders in

a principal-agent relationship.

Aggregate Demand

The total demand of all potential buyers of a commodityor service. Includes all individuals and organizations thathave the ability, willingness, and authority to purchasesuch products.

Air Waybill

A no-negotiable instrument of domestic and internationalair transport that functions as a bill of lading, allinformation described about domestic and internationaltrade.

All-in CostThe percentage cost of a financing alternative, includingany bank fees or placement fees.

Allocation Rules of Income In the U.S. tax code, these rules define how income anddeductions are to be allocated between domestic-sourceand foreign-source income.

Allocation efficiencyThe efficiency with which a market channels capitaltoward its most productive uses.

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

AnnuityA level stream of equal dollar payments that lasts for afixed time. An example of an annuity is the coupon partof a bond with level annual payments.

Annuity FactorThe term used to calculate the present value of thestream of level payments for a fixed period.

Anti-Dumping LawsLaws that are enacted to prevent dumping-offering pricesin the overseas market that is lower than that at which aproduct is sold in its home domestic market.

APEC Asia-Pacific Economic Cooperation

AppreciationAn increase in a currency value relative to anothercurrency in a floating exchange rate system.

ArbitrageThe process of purchasing and selling foreign exchange,stocks, bonds and other commodities in several marketsintending to make profit from the difference in price.

Arbitrage Pricing Theory (APT)

An asset pricing model that assumes a linear relationbetween required return and systematic risk as measuredby one or more factors according to Rj = mj + b1jF1 + ...+ bKjFK + ej.

Asia-Pacific EconomicCooperation (APEC)

APEC forum designed to promote economic growth,cooperation, and integration among member nations. Themost prominent members are China, Japan, and Korea.

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

Ask "offer" RatesThe rate at which a market maker is willing to sell thequoted asset.

Asset Allocation Policy

The target weights given to various asset classes in an

investment portfolio.Assets-in-Place Those assets in which the firm has already invested.


3/47

(Compare to growth options.)

Association of South East AsianNations (ASEAN)

A loose or low economic and geopolitical affiliation thatincludes Singapore, Brunei, Malaysia, Thailand, thePhilippines, Indonesia, and Vietnam. Future members arelikely to include Myanmar (Burma), Laos, and Cambodia.

At-the-Money Option An option with an exercise price that is equal to thecurrent value of the underlying asset.

ATC Agreement on Textiles and Clothing

AutarkyIn models of international trade, a situation in whichthere is no cross-border trade.

Aval

A guarantee of the buyer's credit provided by theguarantor, unless the buyer is of unquestioned financialstanding. The aval is an endorsement note as opposed toa guarantee agreement.

AvalisationPayment undertaking given by a bank in respect of a billof exchange drawn.

Average Accounting Return(AAR)

The average project earnings after taxes anddepreciation divided by the average book value of theinvestment during its life.

AEZs Refers to a scheme of Agricultural Export Zones.

Advance Licence

Advance Licence is granted for import of inputs withoutpayment of customs duties. It is issued in accordancewith the Policy and procedures in force and subject tofulfillment of time-bound export obligation. Such licencescan be issu

AcceptanceAny agreement to purchase goods under specified terms.An agreement to purchase goods at a stated price andunder stated terms.

Ad Valorem According to value

Advance Against DocumentsA loan made on the security of the documents coveringthe shipment.

Advising Bank

A bank, operating in the exporter's country, that handlesLETTERS OF CREDIT for a foreign bank by notifying theexporter that the credit has been opened in his or herfavor.

Advisory Capacity

A term indicating that shipper's agent or representative isnot empowered to make definitive decisions oradjustments without approval of the group or individualrepresented.

Air WaybillA BILL OF LADING that covers both domestic andinternational flights transporting goods to a specifieddestination.

Alongside

A phrase referring to the side of a ship. Goods to bedelivered "alongside" are to be placed on the dock orbarge within reach of the transport ship's tackle so thatthey can be loaded aboard the ship.

AlterationA change in the boundaries of an activated zone orsubzone.

ApplicantA corporation applying for the right to establish, operateand maintain a foreign-trade zone.

Arbitrage The process of buying FOREIGN EXCHANGE, stocks, bondsand other commodities in one market and immediately


4/47

selling them in another market at higher prices.

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

Attributive BasisMethod of accounting for merchandise where directidentification of the goods with the shipment as admittedto the zone has been lost.

Glossary of Export Import International Trade Terms Starting with-BBackward Innovation

Building a more basic version of an existing product for alesser-developed market.

Balance of Payments (BOP)

The BOP is the annual financial record of ForeignPayments and Foreign Receivables. Or The BOP is theInternational Money Funds accounting system that tracksthe flow of goods, services, and capital in and out of eachcountry.

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

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 promotesinternational monetary and financial cooperation amongnations.

Bank-based CorporateGovernance System

A system of corporate governance in which thesupervisory board is dominated by bankers and othercorporate insiders.

Banker's DraftA payment instrument used to make internationalpayments.

Bankers AcceptanceA time draft drawn on and accepted by a commercial

bank.Basis

The simple difference between two nominal interestrates.

Bargain Purchase Option

A lease provision allowing the lessee, to purchase theequipment for a price predetermined at lease inception,which is substantially lower than the expected fairmarket value at the date the option can be exercised.

BarterTrade in which goods or merchandise is exchangeddirectly for others import or export without use ofmoney.

Basic IRR

Accept the project if IRR is greater than the discount

rate; reject the project if IRR is less than the discountrate.

Basis Point Equal to 1/100 of one percent.

Basis RiskThe risk of unexpected change in the relationshipbetween futures and spot prices.

Basis SwapA floating-for-floating interest rate swap that pairs twofloating rate instruments at different maturities (such assix-month LIBOR versus thirty-day U.S. T-bills).

Bearer BondsBonds that can be redeemed by the holder. Theconvention in most West European countries is to issuebonds in registered form.

BenchmarkingA systematic procedure of comparing a companyspractices against the best practice and modifying actual


5/47

knowledge to achieve superior performance.

BeneficiaryA party who receives a legal benefit Domestic or foreignDealings.

Beta

A measure of an assets sensitivity to changes in themarket portfolio (in the CAPM) or to a factor (in the

APT). The beta of an asset j is computed as bj = rj,k(sj/sk), where k represents a market factor (such asreturns to the market portfolio in the C

Bid rateThe rate at which a market maker is willing to buy thequoted asset.

Bid-offer SpreadThe difference between the interest rate at which thebank borrows money and lends money.

Bill of Lading (B/L)

A document that establishes the terms and conditions ofa contract between a shipper and a shipping companyunder which freight is to be moved between specifiedpoints for a specified charge. The B/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 BondA bond that coves a group of people, articles orproperties.

Blanket ContractsA long-term contract in which the supplier promises tore-supply the buyers as needed at agreed-upon pricesover the contracting time.

Blocked FundsCash flows generated by a foreign project that cannot beimmediately repatriated to the parent firm because ofcapital flow restrictions imposed by the host government.

Bond Equivalent YieldA bond quotation convention based on a 365-day year andsemiannual coupons. (Contrast with effective annualyield.)

Bonded WarehouseA warehouse authorized by customs authorities forstorage of goods on which payment of duties is deferreduntil the goods are removed.

Bonded Warehouse- a warehouse authorized for storage of good on whichpayment of duty is deferred until the goods are removedfrom the warehouse.

Break-Even Point AnalysisAnalysis of the level of sales at which a project wouldmake zero profit.

Britton Woods Agreement

An agreement made in 1944 year the end of World War IIto promote exchange rate stability and facilitate theinternational flow of currencies. The world Bank andIMF(International Monetary funds ) come into theexistence.

Britton Woods ConferenceAn international conference held in 1944 at BrittonWoods, New Hampshire, and established the InternationalMonetary Fund and the World Bank.

BTPBTP means Biotechnology Park as notified by DirectorGeneral of Foreign Trade on the recommendation of theDepartment of Biotechnology

Bonded Warehouse

A warehouse authorized by CUSTOMS authorities for

storage of goods on which payment of DUTIES is deferreduntil the goods are removed.


6/47

BookingAn arrangement with a steamship company for theacceptance and carriage 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 on a specified date.

Capital (Financial) StructureThe proportion of debt and equity and the particularforms of debt and equity chosen to finance the assets ofthe firm.

Capital AccountA measure of change in cross-border ownership of long-term financial assets, including financial securities andreal estate.

Capital Asset Pricing Model(CAPM)

An asset pricing model that relates the required return onan asset to its systematic risk.

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

Capital FormationThe process of increasing the amount of capital goods -

also called capital stock - in a country.

Capital GainThe positive change in the value of an asset, a negativecapital gain is a capital loss.

Capital Market LineThe line between the risk-free asset and the marketportfolio that represents the mean-variance efficient setof investment opportunities in the CAPM.

Capital Markets

Markets for financial assets and liabilities with maturitygreater than one year, including long-term governmentand corporate bonds, preferred stock, and commonstock.

Capital Rationing

The case where funds are limited to a fixed dollar

amount and must be allocated among the competingprojects.

Capital Structure

The mix of the various debt and equity capitalmaintained by a firm. Also called financial structure. Thecomposition of a corporation's securities used to financeits investment activities; the relative proportions ofshort-term debt, long-term debt, and

Capitalism

An economic system that is based on private ownership;economic development is proportionate to anddependent upon the accumulation and reinvestment ofprofits.

Carrier An individual or entity that transports persons or goodsfor compensation under the contract of carriage.

CartelAn agreement among, or an organization of, suppliers ofa product.

Cash Against Documents (CAD)Payment for goods where a commission house or otherintermediary transfers title documents to the buyer uponpayment in cash.

Cash CoverIn a letter of credit transaction, money deposited by theapplicant with the issuing bank.

Cash Flow

Cash generated by the firm and paid to creditors andshareholders. It can be classified as (1) cash flow fromoperations, (2) cash flow from changes in fixed assets,and (3) cash flow from changes in net working capital.


7/47

Cash in Advance (CIA)

Payment for goods in which the price is paid in full beforethe shipment is made. This type of payment is usuallyonly made for very small shipments or when goods aremade in order.

Centrally Planned EconomyAn economy in which the government, rather than free-

market activity, controls the allocation of resources.

Certificate of Acceptance

Term used in leasing. A document whereby the lesseeacknowledges that the equipment to be leased has beendelivered, is acceptable, and has been manufactured orconstructed according to specifications.

Certificate ofAnalysis/certificate ofInspection

Documents that may be asked for by the importer and/orthe authorities of the importing country, as evidence ofquality or conformity to specifications.

Certificate of ManufactureA statement that is usually notarised in which theproducer of goods certifies that the goods have beenproduced and are now available to the buyer.

Certificate of Origin Documents that may be asked for by the authorities ofthe importing country, as evidence of the country ofmanufacture of the goods.

Certificate of Product OriginA document required by certain foreign countries fortariff purpose, certifying the country of origin ofspecified goods.

Change in Net Working CapitalDifference between net working capital from one periodto another.

Characteristic LineThe line relating the expected return on a security todifferent returns on the market.

CHIPS (Clearing HouseInterbank Payments System)

Financial network through which banks in the UnitedStates conduct their financial transactions.

CITESConvention on the International Trade in EndangeredSpecies

Civil Society Organizations(CSOs)

Non-governmental and non-profit groups that work toimprove society and the human condition.

Clean Bill of LadingA receipt for goods issued by a carrier that indicates thatthe goods were received in apparently good order andwithout damage.

Clean CollectionCollection in which only the financial document is sentthrough the banks.

ClearanceThe completion of customs entry requirements thatresults in the release of goods to the importer.

ClearingThe settlement of a transaction, often involving exchangeof payments and/or documentation.

Closed-End FundA mutual fund in which the amount of funds undermanagement is fixed and ownership in the funds isbought and sold in the market like a depository receipt.

CodexCodex Alimentarius Commission (a world food standardsbody)

Collection OrderIn a collection, the document in which the seller instructsthe banks as to how the collection is to be conducted.

Command Economy

An economy based on government ownership and/orcontrol of society's resources; during the 20th century,

the dominant form of command economy wascommunism.


8/47

Commercial Document

General term for documents describing various aspects ofa transaction, e.g. commercial invoice, transportdocument, insurance document, certificate of origin,certificate of inspection etc.

Commodity Price RiskThe risk of unexpected changes in a commodity price,

such as the price of oil.

Commodity SwapA swap in which the (often notional) principal amount onat least one side of the swap is a commodity such as oilor gold.

Common CarrierAn organization that transports persons or goods for afee.

Comparative AdvantageA comparative advantage exists when a nation oreconomic region is able to produce a product at a loweropportunity cost compared to another nation or region.

Compliant Documents

Documents presented under a letter of credit that complywith all its terms and conditions. The banks are only

obliged to pay the beneficiary if documents are totallycompliant.

Compound Interest

Interest that is earned both on the initial principal and oninterest earned on the initial principal in previousperiods. The interest earned in one period becomes ineffect part of the principal in a following period.

Compound ValueValue of a sum after investing it over one or moreperiods. Also called future value.

Compounding

Process of reinvesting each interest payment to earnmore interest. Compounding is based on the idea thatinterest itself becomes principal and therefore also earnsinterest in subsequent periods.

Confirming BankBank that adds its payment undertaking to a letter ofcredit.

Consignee Party to whom goods are to be delivered.

Consignment

Delivery of merchandise from an exporter (the consignor)to an agent (the consignee) under agreement that theconsignee sells the merchandise of the account of theconsignor, while the consignor retains title to the goodsuntil the consignee sells them.

Consolidated IncomeThe sum of income across all of the multinationalcorporations domestic and foreign subsidiaries.

Consolidation

A form of corporate reorganization in which two firms

pool their assets and liabilities to form a new company.

Corporate GovernanceThe way in which major stakeholders exert control overthe modern corporation.

Correspondent BankA bank that, in its own country, handles the business of aforeign bank.

Country RiskThe political and financial risks of conducting business ina particular foreign country.

Coupon Swap A fixed-for-floating interest rate swap.

Credit Risk InsuranceInsurance that covers the risk of non-payment fordelivered goods.

Consular Statement

A document required by some foreign countries,

describing a shipment of goods and showing informationsuch as the consignor, consignee, and value of shipment.


9/47

Certified by a consular official of the foreign country, itis used by the country's officials

Contingency Insurance

Contingency insurance protects the exporter in anysituation in which exporter responsibility relied on thebuyer to insure, but sustained a loss because of

inadequate coverage from that source. It will coversituations in which the FOB endorsement.

Contingent Claim

Claim whose value is directly dependent on, or iscontingent on, the value of its underlying assets. Forexample, the debt and equity securities issued by a firmderive their value from the total value of the firm.

Continuous CompoundingInterest compounded continuously, every instant, ratherthan at fixed intervals.

Continuous Quotation SystemA trading system in which buy and sell orders arematched with market makers as the orders arrive,ensuring liquidity in individual shares.

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

Contribution Margin

Amount that each additional product, such as a jetengine, contributes to after-tax profit of the wholeproject: (Sales price - Variable cost) X (1 - T), where T isthe corporate tax rate.

Controlled Foreign Corporation(CFC)

In the U.S. tax code, a foreign corporation owned morethan 50 percent either in terms of market value or votingpower.

Convertible Bonds

Bonds sold with a conversion feature that allows theholder to convert the bond into common stock on or priorto a conversion date and at a pre specified conversion

price.

Convertible CurrencyA currency that can be traded for other currencies atwill.

Convex Tax Schedule

A tax schedule in which the effective tax rate is greaterat high levels of taxable income than at low levels oftaxable income. Such a schedule results in progressivetaxation.

Corporate CultureThe set of values, beliefs, relationships betweenindividuals and functions that guide the decisions of acompany to achieve its objectives.

Corporate Social Responsibility

The responsibilities that corporations (including MNCs)

have to workers and their families, to consumers, toinvestors, and to the natural environment.

Corporation

Form of business organization that is created as a distinct"legal person" composed of one or more actual individualsor legal entities. Primary advantages of a corporationinclude limited liability, ease of ownership, transfer, andperpetual succession.

CorrelationA measure of the co variability of two assets that isscaled for the standard deviations of the assets (rAB =sAB / sAsB such that -1 < rAB < +1).

Corruption Perceptions Index(CPI)

A ranking of countries by level of corruption that is

researched and published by Transparency International(TI), the world's leading non-governmental organization


10/47

dedicated to fighting corruption.

Cost and Freight(C&F)A pricing term that indicates that the cost of the goodsand freight charges are included in the quoted price.

Counter Credit Another name for back-to-back letter of credit.

Counter Trade

The sale of goods or services that are paid for in whole or

part by the transfer of goods or services from a foreigncountry.

Coupon The stated interest on a debt instrument.

CovarianceA measure of the co variability of two assets (sAB = sAsBrAB).

Cover NoteInsurance document evidencing that insurance cover for aconsignment has been taken out, but not giving fulldetails.

Cross-HedgeA futures hedge using a currency that is different from,but closely related to, the currency of the underlyingexposure.

Cost of Equity Capital

The required return on the company's common stock incapital markets. It is also called the equity holders'required rate of return because it is what equity holderscan expect to obtain in the capital market. It is a costfrom the firm's perspective.

Countervailing Duties

Duties levied on an imported good that has been unfairlysubsidized by a foreign government. Imposing duties onthe good is meant to raise the product's price to a "fairmarket value".

CTD WTO Committee on Trade and Development

Culture

Collective mental paradigms that a society imparts to

individuals in the form of behavior patterns, sharedvalues, norms and institutions.

Cumulative TranslationAdjustment (CTA)

An equity account under FAS #52 that accumulates gainsor losses caused by translation accounting adjustments.

Currency (Foreign Exchange)Risk

The risk of unexpected changes in foreign currencyexchange rates.

Currency Coupon SwapA fixed-for-floating rate no amortizing currency swaptraded primarily through international commercial banks.

Currency Cross-HedgeA hedge of currency risk using a currency that iscorrelated with the currency in which the underlyingexposure is denominated.

Currency of Reference The currency that is being bought or sold. It is mostconvenient to place the currency of reference in thedenominator of a foreign exchange quote.

Currency Option

A contract giving the option holder the right to buy or sellan underlying currency at a specified price and on aspecified date. The option writer (seller) holds theobligation to fulfill the other side of the contract.

Currency Swap

A contractual agreement to exchange a principal amountof two different currencies and, after a prearrangedlength of time, to give back the original principal.Interest payments in each currency are also typicallyswapped during the life of the agreement

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


11/47

Current Account Balance

A broad measure of import-export activity that includesservices, travel and tourism, transportation, investmentincome and interest, gifts, and grants along with thetrade balance on goods.

Custom Union

A form of regional economic integration group that

eliminates tariffs among member nations and establishescommon external tariffs.

Customhouse Broker

A person or firm obtains the license from the treasurydepartment of its Country when required, and helpclients (importers) to enter and declare goods throughcustoms.

CustomsThe authorities designated to collect duties levied by acountry on imports and exports.

CarnetA customs document permitting the holder to carry orsend merchandise temporarily into certain foreigncountries without paying duties or posting bonds.

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

Certificate of InspectionA document certifying that merchandise was in goodcondition immediately prior to its shipment.

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

Charter PartyWritten contract between the owner of a vessel and a"chartered" who rents use of the vessel or a part of itsfreight space.

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

Cost, Insurance, FreightA pricing term indicating that the cost of the goods,insurance, and freight are included in the quoted price.

Clean Draft A draft to which no documents have been attached.

Collection PapersAll documents submitted to a buyer for the purpose ofreceiving payment for a shipment.

Commercial AttachmentThe commerce expert on the diplomatic staff of his/hercountry's embassy or large consulate.

Commercial InvoiceAn itemized list of goods shipped, usually among anexporter's COLLECTION PAPERS.

Common CarrierAn individual, partnership, or corporation that transportspersons or goods for compensation.

Confirmation of Letter of Credit A letter of credit, issued by a foreign bank, whosevalidity has been confirmed by a Nationalized Indianbank.

ConsignmentDelivery of merchandise from an exporter (consignor) toan agent (consignee) under agreement that the agent sellthe merchandise for the account of the exporter.

Constructive TransferA legal fiction which permits acceptance of a Customsentry for merchandise in a zone before its physicaltransfer to the Customs territory.

Consular Invoice

A document, required by some foreign countries,describing a shipment of goods and showing informationsuch as the consignor, consignee, and value of the

shipment.Convertible Currency A currency that can be bought and sold for other


12/47

currencies at will.

Corporation (Private)

Any corporation which is organized for the purpose ofestablishing, operating and maintaining a foreign-tradezone and which is chartered under a special act of theState within which it is to operate such a zone.

Corporation (Public)A State, political subdivision thereof, a municipality, apublic agency of a State, political subdivision thereof, ormunicipality, or a corporate municipal instrumentality ofone or more States.

Correspondent BankA bank that, in its own country, handles the business of aforeign bank.

Counter TradeThe sale of goods or services that are paid in whole or inpart by the transfer of goods or services from a foreigncountry.

Credit Risk InsuranceInsurance designed to cover risks of nonpayment fordelivered goods.

Customs Territory Territory of the India in which the general tariff laws ofthe India apply.

Custom House Agent (CHA)An individual or firm licensed to enter and clear goodsthrough Customs.

Glossary of EXIM International Trade Terms Starting with-D

Dealing Desk or Trading DeskThe desk at an international bank that trades spot andforward foreign exchange.

Debt capacityThe amount of debt that a firm chooses to borrow tosupport a project.

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

Decision Trees A graphical analysis of sequential decisions and the likelyoutcomes of those decisions.

Deferred Payment CreditA type of letter of credit which provides for paymentsome time after presentation of the shipping documentsby the exporter.

DevaluationThe official lowering of the value of one country'scurrency in terms of one or more foreign currencies.

Developing Country (DCs)A country that is in the process of becomingindustrialized; the poorer nations of the world.

Deliverable Instrument

The asset underlying a derivative security. For a currencyoption, the deliverable instrument is determined by the

options exchange and is either spot currency or anequivalent value in futures contracts.

Delta-Cross-HedgeA futures hedge that has both currency and maturitymismatches with the underlying exposure.

Delta-Hedge

A futures hedge using a currency that matches theunderlying exposure and a maturity date that is differentfrom, but preferably close to, the maturity of theunderlying exposure.

Demand ManagementA business process with the intention to coordinate andinfluence all sources of demand for a firms products.

Depository ReceiptA derivative security issued by a foreign borrower througha domestic trustee representing ownership in the depositof foreign shares held by the trustee.


13/47

DepreciationA decrease in a currency value relative to anothercurrency in a floating exchange rate system.

Derivative SecurityA financial security whose price is derived from the priceof another asset.

DevaluationA decrease in a currency value relative to another

currency in a fixed exchange rate system.Developed Countries The richer, more industrialized countries in the world.

DFID Department for International Development (UK)

Difference CheckThe difference in interest payments that is exchangedbetween two swap counter parties.

Digital DivideThe digital divide refers to the widening technologicalgap between the richer and the poorer countries of theworld.

Direct Costs of FinancialDistress

Costs of financial distress that are directly incurredduring bankruptcy or liquidation proceedings.

Direct Exporting

Marketer takes direct responsibility for its products

abroad by selling them directly to foreign customers orthrough local representatives in foreign markets.

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

Direct Product ProfitabilityMeasuring the direct costs associated with handling aproduct from the warehouse until a customer buys fromthe retail store.

Direct TermsThe price of a unit of foreign currency in domesticcurrency terms, such as INR 45.70/USD for a Indiaresident. (Contrast with indirect quote.)

Discount If a bond is selling below its face value, it is said to sellat a discount.

Discounted Cash FlowA valuation methodology that discounts expected futurecash flows at a discount rate appropriate for the risk,currency, and maturity of the cash flows.

Discounted PaybackThe length of time needed to recoup the present value ofan investment; sometimes used when investing inlocations with high country risk.

Discounted Payback Period RuleAn investment decision rule in which the cash flows arediscounted at an interest rate and the payback rule isapplied on these discounted cash flows.

Discounting Calculating the present value of a future amount. Theprocess is the opposite of compounding.

Discretionary ReservesBalance sheet accounts that are used in some countriesto temporarily store earnings from the current year orthe recent past.

Discriminatory PricingThe practice that selling a product or service at differentprices that do not reflect a proportional difference incosts.

DispatchAn amount paid by a vessel's operator to a charter ifloading or unloading is completed in less time thanstipulated in the charter party.

DistributorA Foreign agent who sells for a supplier directly andmaintains an inventory of the suppliers product.


14/47

Diversifiable (unique)(unsystematic) risk

A risk that specifically affects a single asset or a smallgroup of assets. Also called unique or unsystematic risk.

Doc Department of Commerce (USA)

Dock ReceiptA receipt issued by an ocean carrier to acknowledgereceipt of a shipment at the carrier's dock or warehouse.

Dock StatementA receipt issued by an ocean carrier to acknowledge thereceipt of a shipment at the carrier's dock or warehousefacilities.

Domestic BondsBonds issued and traded within the internal market of asingle country and denominated in the currency of thatcountry.

Domestic LiquidityThe aggregate of money supply, quasi-money or savingsand time deposits, and deposit substitutes.

Draft (trade bill, bill ofexchange)

A means of payment whereby a drawer (the importer)instructs a drawee (either the importer or its commercialbank) to pay the payee (the exporter).

DSB Dispute Settlement BodyDSP Dispute Settlement Panel

DSU Dispute Settlement Understanding

Dual PricingThe practice of selling identical products in differentmarkets for different prices.

Dumping

Selling goods or merchandise in another country at aprice below the price at which the same merchandise issold in the home market or selling such merchandisebelow the costs incurred in production and shipment.Dumping is an illegal trade practice.

DutyA tax imposed on imports by the customs authority of a

country.

DGFT

Directorate General of Foreign Trade, which is headed bythe Director General of Foreign Trade. The office of theDGFT is responsible for formulating and execution ofForeign Trade Policy, including licensing. Formerly (till1991), was known as the Chief

Duty Exemption/scheme DutyFree Import of Inputs

Allows duty-free import of inputs for exports underAdvance Licence, Duty Entitlement Pass Book (DEPB) andDuty Free Replenishment Certificate (DFRC) Scheme.

DEPB

Refers to the Duty Entitlement Pass Book to neutralisethe incidence of basic customs duty on the importcontent of export product. This is provided by way ofgrant of duty credit against the export product atspecified rates. The DEPB Scheme

DFRC

Refers to the Duty Free Replenishment CertificateScheme which was introduced from 1/4/2000 replacing.Transferable Advance Licensing Scheme. The scheme isavailable to merchant exporters as well as tomanufacturer exporters. However,

Deemed ExportsRefers to those transactions in which the goods supplieddo not leave the country and the payment for the goodsis received by the supplier in India.

Date Draft

A draft that matures in a specified number of days after

the date it is issued, without regard to the date of"ACCEPTANCE".


15/47

DeactivisationVoluntary discontinuation of the activation of an entirezone or subzone by the grantee or operator.

DefaultAn act or omission that will result in a claim for duties,taxes, charges or liquidated damages under the FTZOperator's Bond

Deferred Payments Credit Type of "LETTER OF CREDIT" providing for payment sometime after presentation of shipping documents byexporter.

Destination Control Statement

Any of various statements that the U.S. Governmentrequires to be displayed on export shipments and thatspecify the destinations for which export of the shipmenthas been authorized.

DevaluationThe official lowering of the value of one country'scurrency in terms of one or more foreign currencies.

Discrepancy - Letter of CreditWhen documents presented do not conform to the letterof credit.

Documentary AgainstAcceptance (D/A)

Instructions given by a shipper to a bank indicating thatdocuments transferring title to goods should be deliveredto the buyer only upon the buyer's acceptance of theattached draft.

Draft

An unconditional order in writing from one person (thedrawer) to another (the drawee), directing the drawee topay a specified amount to a named drawer at a fixed ordeterminable future date.

Drawback

Articles manufactured or produced in the India with theuse of imported components or raw materials and laterexported are entitled to a refund of the duty charged onthe imported products or components.

DraweeThe individual or firm on whom a draft is drawn and whoowes the stated amount.

DrawerThe individual or firm that issues or signs a draft and thusstands to receive payment of the stated amount from thedrawee.

DumpingExporting/Importing merchandise into a country belowthe costs incurred in production and shipment.

DutyA tax imposed on imports by the customs authority of acountry.

Glossary of Export Import Trade Terms Starting with-E

Earnings Response CoefficientThe relation of stock returns to earnings surprises aroundthe time of corporate earnings announcements.

Eclectic Paradigm

A theory of the multinational firm that posits three typesof advantage benefiting the multinational corporation:ownership-specific, location-specific, and marketinternalisation advantages.

Economic ExposureChange in the value of a corporations assets or liabilitiesas a result of changes in currency values.

Economic FreedomEconomic freedom occurs when individuals and businessesmake most of the economic decisions in an economy.

Economic IntegrationThe integration of commercial and financial activitiesamong countries through the abolishment of economic

discrimination.Economic Union A group that combines the economic characteristics of a


16/47

common market with some degree of harmonization ofmonetary and fiscal policies.

Economic Value AddedA method of performance evaluation that adjustsaccounting performance with a charge reflectinginvestors required return on investment.

Economies of Scale Achieving lower average cost per unit through a largerscale of production.

Economies of VerticalIntegration

Achieving lower operating costs by bringing the entireproduction chain within the firm rather than contractingthrough the marketplace.

Effective Annual Interest Ratethe interest rate as if it were compounded once per timeperiod rather than several times per period.

Effective Annual Yield

Calculated as (1+i/n)n, where i is the stated annualinterest rate and n is the number of compounding periodsper year. (Contrast with bond equivalent yield and moneymarket yield.)

Efficient Frontier The mean-variance efficient portion of the investmentopportunity set.

Efficient Market A market in which prices reflect all relevant information.

EmbargoA type of economic sanction that totally disallows theimports of a specific product or all products from aspecific country.

Emerging Market

An emerging market has a very high growth rate, whichyields enormous market potential. It is distinguished bythe recent progress it has made in economicliberalization.

Emerging Stock MarketsThe stock markets of emerging economies. These marketstypically have higher expected returns than establishedmarkets but also higher risk.

Employment RateThe ratio, in percent, of the number of employed personsto total labor force.

Endogenous UncertaintyPrice or input cost uncertainty that is within the controlof the firm, such as when the act of investing revealsinformation about price or input cost.

EngagementThe assumption of payment responsibility in respect of aletter of credit, e.g.

Equity-Linked Eurobonds

A Eurobond with a convertibility option or warrantattached. Eurobonds: Fixed rate Eurocurrency depositsand loans and Eurocurrencies with longer maturities thanfive years.

ErosionCash-flow amount transferred to a new project fromcustomers and sales of other products of the firm.

Euro

The single currency of the European Economic andMonetary Union (EMU) introduced in January 1999. EMUmembers are Austria, Belgium, Finland, France,Germany, Ireland, Italy, Luxembourg, Netherlands,Portugal, and Spain.

EurobondA bond that is denominated in a currency other than thatof the country of issue.

Eurocurrencies

Deposits and loans denominated in one currency and

traded in a market outside the borders of the countryissuing that currency (like : Eurodollars).


17/47

Eurocurrency MarketA money market for currencies held in the form ofdeposits in countries other than that where the currencyis issued.

EurodollarsDollar-denominated deposits held in a country other thanthe United States.

European Bank forReconstruction andDevelopment (EBRD)

One of four major regional development banks currentlyoperating in the global economy.

European Currency Unit (ECU)A trade-weighted basket of currencies in the EuropeanExchange Rate Mechanism (ERM) of the European Union.

European Exchange ateMechanism (ERM)

The exchange rate system used by countries in theEuropean Union in which exchange rates are peggedwithin bands around an ERM central value.

European Monetary System(EMS)

An exchange rate system based on cooperation betweenEuropean Union central banks.

European OptionAn option that can be exercised only at expiration.

(Contrast with American option.)

European TermsA foreign exchange quotation that states the foreigncurrency price of one U.S. dollar. (Contrast withAmerican terms.)

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

Exchange RateThe price of one currency in terms of another, i.e. thenumber of units of one currency that may be exchangedfor one unit of another currency.

Exchange RiskThe risk that losses may result from the changes in therelative values of different currencies.

Exercise PriceThe price at which an option can be exercised (alsocalled the striking price).

Exim Bank

Export-Import Bank of the India. Provides guarantees ofworking capital loans for Indian exporters, guarantees therepayment of loans or makes loans to foreign purchasersof Indian goods and services.

Exogenous UncertaintyPrice or input cost uncertainty that is outside the controlof the firm.

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

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

ExportAny resource, intermediate good, or final good or servicethat producers in one country sell to buyers in anothercountry.

Export Management CompanyA foreign or domestic company that acts as a sales agentand distributor for domestic exporters in internationalmarkets.

Export Management CompanyA private firm that transacts export business on behalf ofits client companies in return for a commission, salary, orretainer.

Export Broker An individual or firm that helps to locate and introducebuyers and seller in international business for a


18/47

commission but does not take part in actual salestransaction.

Export License

A general export license covers the exportation of goodsnot restricted under the terms of a validated exportlicense. No formal application or written authorization is

needed to ship exports under a general export license.

Export Restraints

Quantitative restrictions imposed by exporting countriesto limit exports to specified foreign markets, usually as afollow-up to formal or informal agreements reached withimporting countries.

Export SubsidiesAny form of government payment that helps an exporteror manufacturing concern to lower its export costs.

Export Trading Company (ETC)

A company that facilitates the export of goods andservices. An ETC can either act as the export departmentfor producers or take title to the product and export forits own account.

Expropriation A specific type of political risk in which a governmentseizes foreign assets.

External MarketA market for financial securities that are placed outsidethe borders of the country issuing that currency.

ExtraterritorialityA government practice which applies its laws outside itsterritorial boundaries.

Exim Policy

Refers to Export and Import (Exim) Policy. Exim Policyhas got incorporated into the comprehensive ForeignTrade Policy, which was announced by the Commerce &Industry Minister on 31st August, 2004.

EPZs/EOUs

EPZs means Export Processing Zones which are specialenclaves, separated from the Domestic Tariff Area (DTA),to provide an internationally competitive duty-freeenvironment for export production.EOUmeans ExportOriented Units.

E-CommerceRefers to electronic commerce. In the context of ForeignTrade Policy, e-commerce relates to electronic filing andprocessing of applications etc.

EPCG

EPCG refers to the Export Promotion Capital Goods(EPCG) Scheme, which gives the manufacturer facility forimport of capital goods for export production atconcessional rate of duty (5 per cent) against certainlevel of export .

Exchange Permit

A government permit sometimes required by theimporter's government to enable the importer to converthis or her own country's currency into foreign currencywith which to pay a seller in another country.

Exchange RateThe price of one currency in terms of another, i.e., thenumber of units of one currency that may be exchangedfor one unit of another currency.

ExhibitionThe showing of merchandise within a zone, usually toprospective buyers.

Export Commission HouseAn organization which, for a commission, acts as apurchasing agent for a foreign buyer.

Export License A government document that permits the "Licensee" toengage in the export of designated goods to certain
http://www.eximguru.com/exim/eou/default.aspxhttp://www.eximguru.com/exim/eou/default.aspxhttp://www.eximguru.com/exim/eou/default.aspxhttp://www.eximguru.com/exim/eou/default.aspx


19/47

destinations.

Glossary of Export Trade Terms Starting with-F

Face ValueThe value of a bond that appears on its face. Alsoreferred to as par value or principal.

Factor Model

A model that assumes a linear relation between an

assets expected return and one or more systematic riskfactors.

FactoringSale of an accounts receivable balance to buyers (factors)that are willing and able to bear the costs and risks ofcredit and collections.

Financial (Capital) StructureThe proportion of debt and equity and the particularforms of debt and equity chosen to finance the assets ofthe firm.

Financial ContagionThe spread of a financial crisis from one country or regionto other countries or regions.

Financial EngineeringThe process of innovation by which new financial

products are created.

Financial InnovationThe process of designing new financial products, such asexotic currency options and swaps.

Financial Markets Markets for financial assets and liabilities.

Financial Price RiskThe risk of unexpected changes in a financial price,including currency (foreign exchange) risk, interest raterisk, and commodity price risk.

Financial RiskFinancial risk refers to unexpected events in a countrysfinancial, economic, or business life.

Financial StrategyThe way in which the firm pursues its financialobjectives.

Fixed CostA cost that is fixed in total for a given period of time andfor given volume levels. It is not dependent on theamount of goods or services produced during the period.

Financial Policy

The corporations choices regarding the debt-equity mix,currencies of denomination, maturity structure, methodof financing investment projects, and hedging decisionswith a goal of maximizing the value of the firm to someset of stakeholders.

First-to-Market Advantage

Also know as "first-mover advantage." The idea of first-mover advantage is that the initial occupant of astrategic position or niche (market segment) gains access

to resources and capabilities that a follower cannotmatch.

Fixed Exchange Rate SystemAn exchange rate system in which governments standready to buy and 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 isnot obligated to declare that its currency is convertibleinto a fixed amount of another currency.

Floating Exchange Rate

An exchange rate system in which currency values areallowed to fluctuate according to supply and demandforces in the market without direct interference bygovernment authorities.

FoB Endorsement Used with FOB, FAS, C&F, or CFR (but not CIF)


20/47

quotations, FOB sales endorsement to an open marinepolicy can cover transit risk from the point of origin untiltitle transfers. In these instances, the exporter relies onthe importer to insure.

Force Majeure

The title of a standard clause in marine contracts

exempting the parties for non-fulfillment of theirobligations as a result of conditions beyond their control,such as Acts of God, war.

Foreign AidA grant of money, technical assistance, capitalequipment, or other assistance typically extended byricher nations to poorer nations.

Foreign Bonds

Bonds that are issued in a domestic market by a foreignborrower, denominated in domestic currency, marketedto domestic residents, and regulated by the domesticauthorities.

Foreign BranchA foreign affiliate that is legally a part of the parentfirm. In the U.S. tax code, foreign branch income is taxedas it is earned in the foreign country.

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

Foreign Direct investment (FDI)The act of building productive capacity directly in aforeign country.

Foreign Equity RequirementsInvestment rules that limit foreign ownership to aminority holding is a company.

Foreign ExchangeCurrency of another country, or a financial instrumentthat facilitates payment from one currency to another.

Foreign Exchange (Currency)Risk

The risk of unexpected changes in foreign currencyexchange rates.

Foreign Exchange BrokerBrokers serving as matchmakers in the foreign exchangemarket that do not put their own money at risk.

Foreign Exchange DealerA financial institution making a market in foreignexchange.

Foreign Exchange MarketsNetworks of commercial banks, investment banks, andother financial institutions that convert, buy, and sellcurrencies in the global economy.

Foreign Trade ZoneA physical area in which the government allows firms todelay or avoid paying tariffs on imports.

Foreign-Source Income Income earned from foreign operations.

Forfaiting

A form of factoring in which large, medium- to long-termreceivables are sold to buyers (forfaiters) that are willingand able to bear the costs and risks of credit andcollections.

Forward ContractA commitment to exchange a specified amount of onecurrency for a specified amount of another currency on aspecified future date.

Forward DiscountA currency whose nominal value in the forward market islower than in the spot market. (Contrast with forwardpremium.)

Forward MarketA market for forward contracts in which trades are madefor future delivery according to an agreed-upon delivery

date, exchange rate, and amount.Forward Parity When the forward rate is an unbiased predictor of future


21/47

spot exchange rates.

Forward PremiumA currency whose nominal value in the forward market ishigher than in the spot market. (Contrast with forwarddiscount.)

Franchise Agreement

An agreement in which a domestic company (the

franchiser) licenses its trade name and or business systemto an independent company (the franchisee) in a foreignmarket.

Franchising

A parent company grants another independent entity theprivilege to do business in a pre-specified manner,including manufacturing, selling products, marketingtechnology and other business approach.

Free Cash FlowCash flow after all positive-NPV projects have beenexhausted in the firms main line of business.

Free PortAn area such as a port city into which merchandise maylegally be moved without payment of duties.

Free Trade Area of theAmericas (FTAA)

A proposed hemispheric trade zone that would cover allof the countries in North, South, and Latin America. TheFTAA is highly controversial.

Free Trade Zone

An area designated by the government to which goodsmay be imported for processing and subsequent export onduty-free basis. Merchandise may be stored, used ormanufactured in the zone and re-exported without dutiesbeing paid.

Freely Floating Exchange RateSystem

An exchange rate system in which currency values areallowed to fluctuate according to supply and demandforces in the market without direct interference bygovernment authorities.

Freight Forwarder

An independent business that handles export shipment onbehalf of the shipper without vested interest in theproducts. A freight forwarder is a good source ofinformation and assistance on export regulations anddocumentation.

Freight Shippers (FreightForwarders)

Agents used to coordinate the logistics of transportation.

Frequency DistributionThe organization of data to show how often certainvalues or ranges of values occur.

Full Payout Lease

A lease in which the lesser recovers, through the leasepayments, all costs incurred in the lease plus an

acceptable rate of return, without any reliance upon theleased equipment's future residual value.

Fundamental Analysis

A method of predicting exchange rates using therelationships of exchange rates to fundamental economicvariables such as GNP growth, money supply, and tradebalances.

Future ValueValue of a sum after investing it over one or moreperiods. Also called compound value.

Futures Commission MerchantA brokerage house that is authorized by a futuresexchange to trade with retail clients.

Futures Contract

A commitment to exchange a specified amount of one

currency for a specified amount of another currency at aspecified time in the future. Futures contracts are


22/47

periodically marked-to-market,

FTP

Refers to Foreign Trade Policy, announced by theCommerce & Industry Minister on 31st August, 2004. It isa 5-year Policy (September 2004 -- March 2009), whichtakes effect from September 1, 2004.

FTWZ Free Trade and Warehousing Zone, a new schemeannounced in the Foreign Trade Policy 2004-2009.

FoBFob means Free on Board - i.e., when an exporterdelivers goods "free on board", he pays all chargesinvolved in getting them actually onto the ship.

First in-First Out (FIFO)An accounting method based on an assumption regardingthe flow of goods that older stock is disposed of first, inaccordance with good merchandising policy.

Force Majeure

The title of a standard clause in marine contractsexempting the parties for no fulfillment of theirobligations as a result of conditions beyond their control,

such as earthquakes, floods, or war.Foreign Exchange The currency or credit instruments of a foreign country.

Foreign First (FOFI)An accounting method based on an assumption regardingthe flow of goods that foreign status merchandise isdisposed of first.

Foreign Sales AgentAn individual or firm that serves as the foreignrepresentative of a domestic supplier and seeks salesabroad for the supplier.

Foreign-Trade Zone/Free TradeZone

A port designated by the government of a country forduty-free entry of any non-prohibited goods. Merchandisemay be stored, displayed, or used for manufacturing,etc., within the zone and re-exported without dutiesbeing paid.

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

Foul Bill of LadingA receipt of goods issued by a carrier with an indicationthat the goods were damaged when received.

Free Alongside(F.A.S.)A pricing term indicating that the quoted price includesthe cost of delivering the goods alongside a designatedvessel.

Free in (F.I.)A pricing term indicating that the charter of a vessel isresponsible for the cost of loading and unloading goodsfrom the vessel.

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

Freight ForwarderAn independent business which handles export shipmentsfor compensation.

Glossary of Import Trade Terms Starting with-G

G-7A formal organization of seven highly industrializeddemocracies: Canada, France, Germany, Italy, Japan, theUnited Kingdom, and the United States.

G-8 The G-7 countries plus Russia.

Generally Accepted AccountingPrinciples (GAAP)

A common set of accounting concepts, standards, andprocedures by which financial statements are prepared.

General Agreement on Tariffs A post-World War II agreement designed to promote freer


23/47

and Trade (GATT) international trade among the nations of the world. TheGATT was replaced by the World Trade Organization(WTO) in 1994.

Generalized Autoregressiveconditional Heteroskedasticity

A time series model in which returns at each instant oftime are normally distributed but volatility is a function

of recent history of the series.

Geocentric Multinational

A multinational in which the subsidiaries are neithersatellites nor independent city states, but parts of awhole whose focus is on worldwide objectives as well aslocal objectives, each part making its unique contributionwith its unique competence.

Global BondA bond that trades in the Eurobond market as well as inone or more national bond markets.

Global EconomyThe international network of individuals, businesses,governments, and multilateral organizations whichcollectively make production and consumption decisions.

GlobalizationA global movement to increase the flow of goods,services, people, real capital, and money across nationalborders in order to create a more integrated andinterdependent world economy.

Gold Exchange Standard

An exchange rate system used from 1925 to 1931 in whichthe United States and England were allowed to hold onlygold reserves while other nations could hold gold, U.S.dollars, or pounds sterling as reserves.

Gold StandardAn exchange rate system used prior to 1914 in which goldwas used to settle national trade balances. Also calledthe classical gold standard.

Goodwill

The accounting treatment of an intangible asset such as

the takeover premium in a merger or acquisition.

GradualismA steady and calculated approach to transforming aneconomy from communism to capitalism.

Gray-Market ImportsGray-market imports are parallel distribution of genuinegoods by intermediaries other than authorized channelmembers.

GreenfieldA form of investment in which the firm designs and buildsa new factory from scratch, starting with nothing but a

GreenmailBuying shares on the open market in the hope that thetargets business partners will buy back the shares atinflated prices.

Gross Domestic Product (GDP)

A measure of the market value of goods and servicesproduced by a nation. Unlike Gross National Product, GDPexcludes profits made by domestic firms overseas, as wellas the share of reinvested earning in domestic firms'foreign-based operations.

Growing Perpetuity

A constant stream of cash flows without end that isexpected to rise indefinitely. For example, cash flows tothe landlord of an apartment building might be expectedto rise a certain percentage each year.

Growth Options

The positive-NPV opportunities in which the firm has notyet invested. The value of growth options reflects the

time value of the firms current investment in real assetsas well as the option value of the firms potential future


24/47

investments.

Growth Stocks

Stocks with high price/book or price/earnings ratios.Historically, growth stocks have had lower averagereturns than value stocks (stocks with low price/book orPE ratios) in a variety of countries.

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

GATT/General Agreement onTariffs And Trade

A multilateral treaty intended to help reduce tradebarriers between the signatory countries and to promotetrade through tariff concessions.

GranteeA corporation to which the privilege of establishing,operating, and maintaining a foreign-trade zone has beengranted by the Foreign-Trade Zones Board.

Gross WeightThe full weight of a shipment, including goods andpackaging.

Glossary of Import Export Trade Terms Starting with-H

Harmonized Tariff Schedule(HTS)

A method of classification used by many countries todetermine tariffs on imports.

Hedge QualityMeasured by the r-square in a regression of spot ratechanges on futures price changes.

Hedge RatioThe ratio of derivatives contracts to the underlying riskexposure.

HedgingReducing the risk of a cash position by using the futuresinstruments to offset the price movement of the cashasset.

High-Withholding-Tax InterestIncome

In the U.S. tax code, interest income that has beensubject to a foreign gross withholding tax of 5 percent or

more.

Heavily Indebted Poor Countries(HIPC) Initiative

The HIPC Inititiative is a major international response tothe burdensome external debt held by the world'spoorest, most indebted countries. It originated in 1996 asa joint undertaking of the World Bank and theInternational Monetary Fund (IMF).

Hedge

A position or operation that offsets an underlyingexposure. For example, a forward currency hedge uses aforward currency contract to offset the exposure of anunderlying position in a foreign currency. Hedges reducethe total variability of the combined

Hedge FundsPrivate investment partnerships with a general managerand a small number of limited partners.

Hedge Portfolio

The country-specific hedge portfolio in the InternationalAsset Pricing Model serves as a store of value (like therisk-free asset in the CAPM) as well as a hedge againstthe currency risk of the market 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 basedin their own country.

Homogeneous ExpectationsIdea that all individuals have the same beliefs concerningfuture investments, profits, and dividends.

Hyperinflation An extremely high rate of inflation, often exceeding


25/47

several hundred or several thousand percent, that causesa country's money to become practically worthless.

Hysteresis

The behavior of firms that fail to enter markets thatappear attractive and, once invested, persist in operatingat a loss. This behavior is characteristic of situations with

high entry and exit costs along with high uncertainty.Glossary of Import Export International Trade Terms Starting with-I

Implicit TaxLower (higher) before-tax required returns on assets thatare subject to lower (higher) tax rates.

Implied VolatilityThe volatility that is implied by an option value given theother determinants of option value.

ImportAny resource, intermediate good, or final good or servicethat buyers in one country purchase from sellers inanother country.

Import Licenses

Licenses required by some countries to bring in a foreign-made good. In many cases, import licenses are also used

by the issuing country to control the quantity of importeditems.

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 anumber of separate income categories. Losses in onebasket may not be used to offset gains in another basket.

Income StatementFinancial report that summarizes a firm's performanceover a specified time period.

Incremental IRRIRR on the incremental investment from choosing a largeproject instead of a smaller project.

Indemnity Clause

A clause in which the one party indemnifies the other. In

leasing, generally a clause whereby the lesseeindemnifies the lesser from loss of tax benefits.

Independent ProjectA project whose acceptance or rejection is independentof the acceptance or rejection of other projects.

Index futuresA futures contract that allows investors to buy or sell anindex (such as a foreign stock index) in the futuresmarket.

Index optionsA call or put option contract on an index (such as aforeign stock market index).

Index swapA swap of a market index for some other asset (such as astock-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 incurredprior to formal bankruptcy or liquidation.

Indirect CustomersThe end-users (e.g., consumers) of the products andservices purchased from the wholesalers, retailers, andconsignees -- the direct customers of the seller.

Indirect Diversification BenefitsDiversification benefits provided by the multinationalcorporation that are not available to investors throughtheir portfolio investment.

Indirect ExportingExport products to foreign markets by using anintermediary, usually export trading company based inthe exporters country.

Inflation Rate The general increase in the price level herein measured


26/47

by the growth rate in the GNP Implicit Price Index or thegeneral price deflator.

Informational EfficiencyWhether or not market prices reflect information andthus the true (or intrinsic) value of the underlying asset.

Integrated Financial Market

A market in which there are no barriers to financial flows

and purchasing power parity holds across equivalentassets.

Intellectual Property

Material or communicable result in forms of discoveries,inventions, designs and literary and art works ofscientific, humanistic, literary, and artistic endeavor. Itincludes, but is not limited to, works in the form ofscientific discoveries and invention.

Intellectual Property RightsPatents, copyrights, and proprietary technologies andprocesses that are the basis of the multinationalcorporations competitive advantage over local firms.

Inter-American DevelopmentBank(IADM)

A regional development bank designed to promote

sustainable economic development in the WesternHemisphere. Its headquarters are located in Washington,D.C.

Interbank SpreadThe difference between a banks offer and bid rates fordeposits in the Eurocurrency market.

Interest Rate Risk The risk of unexpected changes in an interest rate.

Interest Rate Swap

An agreement to exchange interest payments for aspecific period of time on a given principal amount. Themost common interest rate swap is a fixed-for-floatingcoupon swap. The notional principal is typically notexchanged.

Intermediated MarketA financial market in which a financial institution (usuallya commercial bank) stands between borrowers andsavers.

IntermodalThe use of two or more modes of transportation tocomplete a cargo move; truck/rail/ship, or truck/air, forexample.

Internal MarketA market for financial securities denominated in thecurrency of a host country and placed within thatcountry.

Internal Rate of Return (IRR)A discount rate at which the net present value of aninvestment is zero. The IRR is a method of evaluatingcapital expenditure proposals.

International Asset PricingModel (IAPM)

The international version of the CAPM in which investorsin each country share the same consumption basket andpurchasing power parity holds.

International Monetary SystemThe global network of governmental and commercialinstitutions within which currency exchange rates aredetermined.

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

International Bank forReconstruction andDevelopment

Also called the World Bank, an international organizationcreated at Breton Woods in 1944 to help in thereconstruction and development of its member nations.

International Bonds

Bonds that are traded outside the country of the issuer.

International bonds are either foreign bonds trading in aforeign national market or Eurobonds trading in the


27/47

international market.

International Chamber ofCommerce

International non-governmental body concerned withpromotion of trade and harmonization of tradingpractice. Responsible for drafting and publishing.

International Monetary Fund(IMF)

An international organization designed to promote global

economic stability and development. It compilesstatistics on cross-border transactions and publishes amonthly summary of each countrys balance of payments.

Investment AgreementAn agreement specifying the rights and responsibilities ofa host government and a corporation in the structure andoperation of an investment project

Investment Opportunity SetThe set of possible investments available to an individualor corporation.

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

Input Output NormsThe norms which define the amount of input/inputs

required to manufacture a unit of output.ISO-9000

Refers to international standards, laid down by theInternational Standards Organisation.

ITC(HS)Refers to Indian Trade Classification (HarmonizedSystem). It is a system of classification of products forthe purposes of export and import.

Import LicenseA document required and issued by some nationalgovernments authorizing the importation of goods intotheir individual countries.

Inland Bill of LadingA bill of lading used in transporting goods overland to theexporter's international carrier.

Irrevocable Letter of credit A letter of credit in which the specified payment isguaranteed by the bank if all terms and conditions aremet by the drawee.

Glossary of Impex Trade Terms Starting with - J

Joint Venture

An agreement of two or more companies to pool theirresources to execute a well-defined mission. Resourcecommitments, responsibilities, and earnings are sharedaccording to a predetermined contractual formula.

Just In Time (JIT)An organization-wide practice that keeps the inventory tothe minimum and provides customers the right goods orservice at the right time.

Glossary of Export Import Foreign Trade Terms Starting with - K

Kyoto ProtocolA multilateral environmental agreement; its goal is tocontrol global warming by reducing greenhouse gasesemitted into the Earth's atmosphere.

KeiretsuCollaborative groups of vertically and horizontallyintegrated firms with extensive share cross-holdings andwith a major Japanese bank or corporation at the center.

Glossary of Export Import Trade Terms Starting with -L

LeaseA contract in which one party conveys the use of an assetto another party for a specific period of time at apredetermined rate.

Landed Cost The quoted or invoiced cost of a commodity, plus anyinbound transportation charges.


28/47

Law of one Price (PurchasingPower Parity)

The principle that equivalent assets sell for the sameprice. The law of one price is enforced in the currencymarkets by financial market arbitrage.

Lead ManagerThe lead investment bank in a syndicate selling a publicsecurities offering.

Leading and Lagging Reduction of transaction exposure through timing of cashflows within the corporation.

Lease RateThe periodic rental payment to a lesser for the use ofassets. Others may define lease rate as the implicitinterest rate in minimum lease payments.

Least-Developed Countries(LDCs)

The poorest of the developing countries. They arecharacterized by a low gross national product per capita,a reliance on subsistence agriculture, rapid populationgrowth, inadequate infrastructure.

Letter of Credit (L/C)

A letter issued by an importers bank guaranteeingpayment upon presentation of specified trade documents

(invoice, bill of lading, inspection and insurancecertificates, etc.).

Leveraged LeaseThe lesser provides an equity portion (usually 20 to 40percent) of the equipment cost and lenders provide thebalance on a nonrecourse debt basis.

LiberalizationThe process by which certain business activities becomemore market driven.

Location-Specific AdvantagesAdvantages (natural and created) that are available onlyor primarily in a single location.

London Interbank Bid Rate(LIBID)

The bid rate that a Euro market bank is willing to pay toattract a deposit from another Euro market bank inLondon.

Long PositionA position in which a particular asset (such as a spot orforward currency) has been purchased.

License Agreement

A sales agreement in which a domestic company (thelicensor) allows a foreign company (the licensee) tomarket its products in a foreign country in return forroyalties, fees, or other forms of compensation.

Licensing

One firm gives another firm a permission, which allowsthe latter to engage in an activity otherwise legallyforbidden to it. Such activities usually involve thetransfer of intellectual and proprietary knowledge inreturn for royalty as revenue.

Limited Flexibility ExchangeRate System

The International Monetary Funds name for an exchangerate system with a managed float.

Liquid MarketA market in which traders can buy or sell large quantitiesof an asset when they want and with low transactionscosts.

LiquidityThe ease with which an asset can be exchanged foranother asset of equal value.

Loanable FundsThe pool of funds from which borrowers can attractcapital; typically categorized by currency and maturity.

London Interbank Offer Rate

(LIBOR)

The offer rate that a Euro market bank demands in orderto place a deposit at (or, equivalently, make a loan to)

another Euro market bank in London.Letter of Credit(L/C) A document, issued by a bank per instructions by a buyer


29/47

of goods, authorizing the seller to draw a specified sumof money under specified terms, usually the receipt bythe bank of certain documents within a given time.

Licensing

A business arrangement in which the manufacturer of aproduct grants permission to some other group or

individual to manufacture that product in return forspecified royalties.

Glossary of Export Trade Terms Starting with - M

ManifestDocument that lists in detail al the bills of lading issuedby a carrier of its agent or master, i.e., a detailedsummary of the total cargo of a vessel.

Macro Country RisksCountry (or political) risks that affect all foreign firms ina host country.

Management Contract

An agreement by which one firm allows another tomanage its foreign activities on behalf of it. Themanaging firm is forbidden to make capital investment or

financing decisions.Managerial Flexibility

Flexibility in the timing and scale of investment providedby a real investment option.

MaquiladorasDuty-free assembly plants located mainly in thedeveloping world. Maquiladoras are one type of foreigndirect investment.

Margin Account

An account maintained by an investor with a brokeragefirm in which securities may be purchased by borrowing aportion of the purchase price from the brokerage, or maybe sold short by borrowing the securities from thebrokerage firm.

Margin RequirementA performance bond paid upon purchase of a futurescontract that ensures the exchange clearinghouse againstloss.

Market AccessThe extent to which a domestic industry can penetrate arelated market in a foreign country. Access can belimited by tariffs or other non-trade barriers.

Market EconomyAn economy in which resource allocations, prices andother marketing decisions are primarily determined bythe free market.

Market Failure

A failure of arms-length markets to efficiently completethe production of a good or service. In the eclecticparadigm, the multinational corporations market

internalization advantages take advantage of marketfailure.

Market InternalizationAdvantages

Advantages that allow the multinational corporation tointernalize or exploit the failure of an arms-lengthmarket to efficiently accomplish a task.

Market MakerA financial institution that quotes bid (buy) and offer(sell) prices.

Market Model (One-FactorMarket Model)

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

Market PortfolioA portfolio of all assets weighted according to theirmarket values.

Market Risk Premium The risk premium on an average stock; (E[RM]-RF).Market Timing An investment strategy of shifting among asset classes in


30/47

an attempt to anticipate which asset classes) willappreciate or depreciate during the coming period.

Market-Based CorporateGovernance System

A system of corporate governance in which thesupervisory board represents a dispersed set of largelyequity shareholders.

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

Marketing Mix

The set of marketing tools that the firm uses to pursue itsmarketing objectives in the target market. One of themost popular classifications of marketing mix tools iscalled the "4 P's" of marketing: product, price, place, andpromotion.

Marking to MarketThe process by which changes in the value of futurescontracts are settled 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 (or lower risk at a given level of return) than otherassets.

Mercosur

The common market of the South, a customs union whichincludes Argentina, Brazil, Paraguay, and Uruguay in aregional trade pact that reduces tariffs on intrapact tradeby up to 90 percent. Bolivia and Chile are associatemembers.

MergerA form of corporate acquisition in which one firm absorbsanother and the assets and liabilities of the two firms arecombined.

Method of Payment The way in which a merger or acquisition is financed.

Micro Country RisksCountry risks that are specific to an industry, company,or project within a host country.

Micro CreditSmall loans, perhaps $50 or $100, that are extended tosmall businesses to finance a business start-up or otherbusiness activity.

Middle MarketA market segment generally represented by financingunder $2 million. In leasing this sector is dominated bysingle investor leases.

Miller and ModiglianisIrrelevance Proposition

If financial markets are perfect, then corporate financialpolicy (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 HedgeA hedge that replicates a currency forward contractthrough the spot currency and Eurocurrency markets.

Money Market YieldA bond quotation convention based on a 360-day year andsemiannual coupons. (Contrast with bond equivalentyield.)

Money MarketsFinancial markets for debt securities that pay off in theshort term (usually less than one year).

Money SupplyThe total amount of currency in circulation and pesodeposits subject to check of the monetary system.

MonopolyExclusive control or possession by one group of the meansof producing or selling goods or services.


31/47

More Flexible Exchange RateSystem

The International Monetary Funds name for a floatingexchange rate system.

Most Favored Nation (MFN)A status granted to one country by another; the grantingcountry then accords the recipient's imports and exportsthe most favorable treatment that it accords any country.

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

Elimination of offsetting cash flows within themultinational corporation.

Mutually Exclusive InvestmentDecisions

Investment decisions in which the acceptance of aproject precludes the acceptance of one or morealternative projects.

ManipulationProcessing wherein merchandise is packed, unpacked,repacked, cleaned, sorted, graded or otherwise changedin condition but not manufactured.

ManufacturerGenerally, the production of articles for use from raw orprepared materials by substantially transforming such

materials into new forms.

Marine InsuranceInsurance that compensates the owners of goodstransported overseas in the event of loss that cannot belegally recovered from the carrier.

MarkingLetters, numbers, and other symbols on cargo packagesto facilitate identification.

Merchandise

Includes goods, wares, and chattels of every descriptionexcept Prohibited Merchandise, building materials,production equipment and supplies for use in operation ofa zone.

Merchandise, DomesticMerchandise which has been produced in the India andnot exported therefrom.

Merchandise, ForeignImported Merchandise which has not been properlyreleased from Customs custody into the Customs territoryof the India.

Merchandise, FungibleMerchandise which for commercial purposes is identicaland interchangeable in all situations.

Merchandise, Mixed StatusForeign Merchandise which has been combined withDomestic Merchandise in the zone.

Merchandise/Operations,Prohibited

Merchandise, the importation of which is prohibited bylaw on grounds of public policy or morals, or excluded byorder of the Foreign-Trade Zones Board..

Merchandise/Operations,Restricted

Merchandise which may not be authorized for deliveryfrom Customs custody without a special permit, or awaiver thereof by an agency of the Indian Government.

Glossary of EXIM Trade Terms Starting with - N

Net Currency ExposureExposure to foreign exchange risk after netting allintracompany cash flows.

National Tax PolicyThe way in which a nation chooses to allocate theburdens of tax collections across its residents.

National TreatmentA country accords no less favorable treatment toimported goods than it does to domestic goods.

NationalizationA process whereby privately owned companies arebrought under state ownership and control. (Contrastwith privatization.)


32/47

Negative-NPV Tie-in Project

A negative (-) NPV infrastructure development projectthat a local government requires