Trade glossary: 50 essential terms every trader should know

International trade uses specialized vocabulary. This glossary defines the most common terms you will encounter on Faktorist and in everyday trade communications.

A–D

• Ad valorem duty — A tariff calculated as a percentage of the goods' value.
• AQL — Acceptable Quality Level; the maximum defect rate considered acceptable in a batch.
• B/L (Bill of Lading) — A transport document and document of title for sea freight.
• CBAM — Carbon Border Adjustment Mechanism; an EU levy on embedded carbon in imports.
• CIF — Cost, Insurance, and Freight; seller pays transport and insurance to the destination port.
• CO — Certificate of Origin; proves where a product was made.
• Customs broker — A licensed professional who files import/export declarations on behalf of traders.
• DDP — Delivered Duty Paid; seller covers all costs including import duties.
• De minimis — Value threshold below which imports are duty-free.

E–L

• EORI — Economic Operators Registration and Identification; required for EU customs operations.
• EXW — Ex Works; buyer picks up goods at the seller's premises.
• FCA — Free Carrier; seller delivers goods to a named carrier.
• FOB — Free on Board; seller delivers goods on board the vessel.
• FTZ — Free Trade Zone; a designated area with relaxed customs rules.
• HS code — Harmonized System code; the international product classification number.
• Incoterms — International Commercial Terms; rules defining cost and risk allocation.
• L/C — Letter of Credit; a bank-backed payment guarantee.
• LCL — Less than Container Load; shared container shipping.

M–Z

• MFN — Most Favored Nation; the standard WTO tariff rate applied equally to all members.
• MOQ — Minimum Order Quantity.
• NTB — Non-Tariff Barrier; regulations, standards, or procedures that restrict trade beyond tariffs.
• OFAC — Office of Foreign Assets Control; administers US sanctions programs.
• PSI — Pre-Shipment Inspection.
• RFQ — Request for Quotation.
• SDS — Safety Data Sheet; document detailing chemical hazard information.
• T/T — Telegraphic Transfer; a bank wire payment.
• TARIC — The EU's integrated tariff database.
• TEU — Twenty-foot Equivalent Unit; the standard container measurement unit.
• VAT — Value Added Tax; consumption tax applied on imports in most countries.