Key International Trade Terms
Product classification (Schedule B) number
Export statistics are initially collected and compiled in terms of approximately 9,000 10-digit commodity codes in the Schedule B, Statistical Classification of Domestic and Foreign Commodities Exported from the United States. The Schedule B is maintained by the U.S. Census Bureau and is based on the 4- and 6-digit headings and subheadings of the international Harmonized System (HS). Knowing your Schedule B number is important to conducting foreign market research, completing customs documentation, and complying with U.S. export regulations.
North American Industry Classification System (NAICS)NAICS is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. For more information, see the NAICS website.
Foreign Trade Regulations
Regulations that govern the filing of electronic export information with the Census Bureau. The Census Bureau continuously collects and processes this information to provide detailed statistics on goods shipped from the U.S. to foreign countries. For more information, please visit the Census Bureau's Foreign Trade Regulations website or call 1-800-549-0595, option 3.
Electronic Export Information (EEI)Electronic Export Information is the electronic export data as filed by the exporter (or U.S. Principle Party of Interest) in the Automated Export System (AES). This data is the electronic equivalent of the export data formerly collected as Shipper’s Export Declaration (SED) information. This information is now mandated to be filed into the Automated Export System or AESDirect. See video for more details: http://business.usa.gov/export/International-Logistics/Automated-Export-System-Filing-Requirements.
An export license grants permission to conduct a certain type of export transaction. It is issued by the appropriate licensing agency after a careful review of the facts surrounding the given export transaction. Most export transactions do not require specific approval in the form of licenses from the U.S. Government. Exporters should learn which federal department or agency has jurisdiction over the item they are planning to export in order to find out if a license is required.
The Office of Foreign Assets Control (OFAC) of the US Department of the Treasury administers and enforces economic and trade sanctions based on U.S. foreign policy and national security goals against targeted foreign countries, terrorists, international narcotics traffickers, and those engaged in activities related to the proliferation of weapons of mass destruction.
An international freight forwarder is an agent for the export transaction and can move cargo from “dock-to-door,” providing several significant services such as:
- Advising on exporting costs including freight costs, port charges, consular fees, costs of special documentation, insurance costs and freight handling fees;
- Preparing and filing required export documentation such as the bill of lading and routing appropriate documents to the seller, the buyer or a paying bank;
- Advising on the most appropriate mode of cargo transport and making arrangements to pack and load the cargo;
- Reserving the necessary cargo space on a vessel, aircraft, train, or truck.
- Making arrangements with overseas customs brokers to ensure that the goods and documents comply with customs regulations.
For more information please visit: http://business.usa.gov/export/International-Logistics/What-is-a-Freight-Forwarder-.
Bill of LadingA document that establishes the terms of a contract between a shipper and a transportation company under which freight is to be moved between specified points for a specified charge. Usually prepared by the authorized agent on forms issued by the carrier, it serves as a document of title, a contract of carriage, and a receipt for goods.
"Incoterms" is an abbreviation of International Commercial Terms. Incoterms provide a common set of rules for the most often used international terms of trade. The goal of the Incoterms is to alleviate or reduce confusion over interpretations of shipping terms, by outlining exactly who is obligated to take control of and/or insure goods at a particular point in the shipping process. Further, the terms will outline the obligations for the clearance of the goods for export or import, and requirements on the packing of items. The Incoterms are used quite frequently in international contracts, and a specific version of the Incoterms should be referenced in the text of the contract.
Letter of Credit
A documentary letter of credit is issued by an importer’s bank guaranteeing payment upon presentation of specified trade documents (invoice, transportation document, packing list, inspection and insurance certificates, etc.). Letters of credit are often used in international transactions to ensure that payment will be received. Due to the nature of international dealings including factors such as distance, differing laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. The bank also acts on behalf of the buyer (holder of letter of credit) by ensuring that the supplier will not be paid until the bank receives a confirmation that the goods have been shipped.
Certificates of Origin
Specific certificates of origin are sometimes required for countries involved in special trade agreements, such as the North American Free Trade Agreement (NAFTA), which was signed by Canada, Mexico, and the United States. For instance, the NAFTA certificate of origin validates that a good originated in a NAFTA country and is eligible for the preferential duty rate. The specific Certificate of Origin varies across the 14 Free Trade Agreements the United States has with 20 countries.