exim glossary (be done )

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Glossary of Export Import Trade Terms Starting with-A

AB Appellate Body Absolute Advantage(AB-AD) An absolute advantage exists in condition ofwhen a nation or other economic region of any country is able to produce a good or service moreefficiently than a second (other) nation or its region. Accounting Translation Exposure Changesin a organizations or corporations financial statements as a result of changes in currency values.

ACP African, Caribbean, and Pacific countries. Acquisition of Assets In an acquisition of assets,one firm acquires the assets of another company. None of the liabilities supporting that asset aretransferred to the purchaser. Acquisition of Stock In an acquisition of stock, one firm buys anequity interest in another. Acquisition Premium In a merger or acquisition, the differencebetween the purchase price and the reacquisition value of the target firm or company. ActiveFund Management An investment approach that actively shifts funds either between asset classes

(asset allocation) or between individual securities (security selection). Active Income In the U.S.tax code, income from an active business as opposed to passive investment income. Activity-Based-Cost (ABC) An accounting method that allocates costs to specific products based onbreakdowns of cost drivers. Ad valorem Tariff A tariff assessed as a percentage of the value ofan import. ADB Asia Development Bank, head quartered located in Manila, Philippines (ASIA).Adjusted Present Value(APV) An APV is a valuation method that separately identifies the valueof an unlevered project from the value of financing side effects. Advance Payment AdvancePayment is a Trading method in which the buyer pays for the goods before they are sent out ,method is used when buyer is of unknown credit worthiness. It is applicable in International ordomestic trade. Adventure Adventure also define for marine adventure." It is a term of art in themarine insurance business. All insured cargo owners and every shipper on that vessel are part of

the adventure. Advising Bank Advising Bank is usually in the country of the seller, whoseprimary function is to authenticate the letter of credit and advise it to the seller, Purchase andcollection of Export Bills. Advisory Capacity Used to indicate that a shipper's agent orrepresentative is not empowered to make definitive changes or adjustments without approval ofthe group or individual represented. African Developmental Bank (ABD) The ABD is one offour major regional developmental banks currently operating in the global economy; it isheadquartered in Abidjan, Cote d'Ivoire. Agency Costs The costs incurred to ensure that agentsact in the best interest of the principal. Agent Someone who represents business in domestic andoverseas market. In corporate governance terminology, management is the agent of the principalstakeholders in a principal-agent relationship. Aggregate Demand The total demand of allpotential buyers of a commodity or service. Includes all individuals and organizations that have

the ability, willingness, and authority to purchase such products. Air Waybill A no-negotiableinstrument of domestic and international air transport that functions as a bill of lading, allinformation described about domestic and international trade. All-in Cost The percentage cost ofa financing alternative, including any bank fees or placement fees. Allocation Rules of Income Inthe U.S. tax code, these rules define how income and deductions are to be allocated betweendomestic-source and foreign-source income. Allocation efficiency The efficiency with which amarket channels capital toward its most productive uses. Andean Pact A regional trade pact thatincludes Venezuela, Colombia, Ecuador, Peru, and Bolivia. Annuity A level stream of equal


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dollar payments that lasts for a fixed time. An example of an annuity is the coupon part of a bondwith level annual payments. Annuity Factor The term used to calculate the present value of thestream of level payments for a fixed period. Anti-Dumping Laws Laws that are enacted toprevent dumping-offering prices in the overseas market that is lower than that at which a productis sold in its home domestic market. APEC Asia-Pacific Economic Cooperation Appreciation An

increase in a currency value relative to another currency in a floating exchange rate system.Arbitrage The process of purchasing and selling foreign exchange, stocks, bonds and othercommodities in several markets intending to make profit from the difference in price. ArbitragePricing Theory (APT) An asset pricing model that assumes a linear relation between requiredreturn and systematic risk as measured by one or more factors according to Rj = mj + b1jF1 + ...+ bKjFK + ej. Asia-Pacific Economic Cooperation (APEC) APEC forum designed to promoteeconomic growth, cooperation, and integration among member nations. The most prominentmembers are China, Japan, and Korea. Asian Development Bank (ABD) One of four majorregional development banks currently operating in the global economy; it is headquartered inManila, Philippines. Ask "offer" Rates The 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.(Compare to growth options.) Association of South East Asian Nations (ASEAN) A loose or loweconomic and geopolitical affiliation that includes Singapore, Brunei, Malaysia, Thailand, thePhilippines, Indonesia, and Vietnam. Future members are likely to include Myanmar (Burma),Laos, and Cambodia. At-the-Money Option An option with an exercise price that is equal to thecurrent value of the underlying asset. ATC Agreement on Textiles and Clothing Autarky Inmodels of international trade, a situation in which there is no cross-border trade. Aval Aguarantee of the buyer's credit provided by the guarantor, unless the buyer is of unquestionedfinancial standing. The aval is an endorsement note as opposed to a guarantee agreement.Avalisation Payment undertaking given by a bank in respect of a bill of exchange drawn.Average Accounting Return (AAR) The average project earnings after taxes and depreciationdivided by the average book value of the investment during its life. AEZs Refers to a scheme ofAgricultural Export Zones. Advance Licence Advance Licence is granted for import of inputswithout payment of customs duties. It is issued in accordance with the Policy and procedures inforce and subject to fulfillment of time-bound export obligation. Such licences can be issuAcceptance Any agreement to purchase goods under specified terms. An agreement to purchasegoods at a stated price and under stated terms. Ad Valorem According to value Advance AgainstDocuments A loan made on the security of the documents covering the shipment. Advising BankA bank, operating in the exporter's country, that handles LETTERS OF CREDIT for a foreignbank by notifying the exporter that the credit has been opened in his or her favor. AdvisoryCapacity A term indicating that shipper's agent or representative is not empowered to makedefinitive decisions or adjustments without approval of the group or individual represented. AirWaybill A BILL OF LADING that covers both domestic and international flights transportinggoods to a specified destination. Alongside A phrase referring to the side of a ship. Goods to bedelivered "alongside" are to be placed on the dock or barge within reach of the transport ship'stackle so that they can be loaded aboard the ship. Alteration A change in the boundaries of anactivated zone or subzone. Applicant A corporation applying for the right to establish, operateand maintain a foreign-trade zone. Arbitrage The process of buying FOREIGN EXCHANGE,stocks, bonds and other commodities in one market and immediately selling them in anothermarket at higher prices. Asian Dollars U.S. dollars deposited in Asia and the Pacific Basin.


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Attributive Basis Method of accounting for merchandise where direct identification of the goodswith the shipment as admitted to the zone has been lost.

Glossary of Export Import International Trade Terms Starting with-B

Backward Innovation Building a more basic version of an existing product for a lesser-developedmarket. Balance of Payments (BOP) The BOP is the annual financial record of ForeignPayments and Foreign Receivables. Or The BOP is the International Money Funds accountingsystem that tracks the flow of goods, services, and capital in and out of each country. Balance ofTrade (BOT) The difference between a countrys total imports and exports. Balance Sheet Astatement showing a firm's accounting value on a particular date. It reflects the equation, Assets= Liabilities + Stockholders' equity. Bank for International Settlements (BIS) An internationalorganization which promotes international monetary and financial cooperation among nations.Bank-based Corporate Governance System A system of corporate governance in which thesupervisory board is dominated by bankers and other corporate insiders. Banker's Draft Apayment instrument used to make international payments. Bankers Acceptance A time draft

drawn on and accepted by a commercial bank. Basis The simple difference between two nominalinterest rates. Bargain Purchase Option A lease provision allowing the lessee, to purchase theequipment for a price predetermined at lease inception, which is substantially lower than theexpected fair market value at the date the option can be exercised. Barter Trade in which goodsor merchandise is exchanged directly for others import or export without use of money. BasicIRR Accept the project if IRR is greater than the discount rate; reject the project if IRR is lessthan the discount rate. Basis Point Equal to 1/100 of one percent. Basis Risk The risk ofunexpected change in the relationship between futures and spot prices. Basis Swap A floating-for-floating interest rate swap that pairs two floating rate instruments at different maturities (suchas six-month LIBOR versus thirty-day U.S. T-bills). Bearer Bonds Bonds that can be redeemedby the holder. The convention in most West European countries is to issue bonds in registered

form. Benchmarking A systematic procedure of comparing a companys practices against thebest practice and modifying actual knowledge to achieve superior performance. Beneficiary Aparty who receives a legal benefit Domestic or foreign Dealings. Beta A measure of an assetssensitivity to changes in the market portfolio (in the CAPM) or to a factor (in the APT). The betaof an asset j is computed as bj = rj,k (sj/sk), where k represents a market factor (such as returns tothe market portfolio in the C Bid rate The rate at which a market maker is willing to buy thequoted asset. Bid-offer Spread The difference between the interest rate at which the bankborrows money and lends money. Bill of Lading (B/L) A document that establishes the termsand conditions of a contract between a shipper and a shipping company under which freight is tobe moved between specified points 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 freely

negotiable document of title. Blanket Bond A bond that coves a group of people, articles orproperties. Blanket Contracts A long-term contract in which the supplier promises to re-supplythe buyers as needed at agreed-upon prices over the contracting time. Blocked Funds Cash flowsgenerated by a foreign project that cannot be immediately repatriated to the parent firm becauseof capital flow restrictions imposed by the host government. Bond Equivalent Yield A bondquotation convention based on a 365-day year and semiannual coupons. (Contrast with effectiveannual yield.) Bonded Warehouse A warehouse authorized by customs authorities for storage ofgoods on which payment of duties is deferred until the goods are removed. Bonded Warehouse -


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a warehouse authorized for storage of good on which payment of duty is deferred until the goodsare removed from the warehouse. Break-Even Point Analysis Analysis of the level of sales atwhich a project would make zero profit. Britton Woods Agreement An agreement made in 1944year the end of World War II to promote exchange rate stability and facilitate the internationalflow of currencies. The world Bank and IMF(International Monetary funds ) come into the

existence. Britton Woods Conference An international conference held in 1944 at BrittonWoods, New Hampshire, and established the International Monetary Fund and the World Bank.BTP BTP means Biotechnology Park as notified by Director General of Foreign Trade on therecommendation of the Department of Biotechnology Bonded Warehouse A warehouseauthorized by CUSTOMS authorities for storage of goods on which payment of DUTIES isdeferred until the goods are removed. Booking An arrangement with a steamship company forthe acceptance and carriage of freight.

Glossary of Export Import Foreign Trade Terms Starting with-C

CAA Clean Air Act (USA) Call Option The right to buy the underlying currency at a specified

price and on a specified date. Capital (Financial) Structure The proportion of debt and equity andthe particular forms of debt and equity chosen to finance the assets of the firm. Capital AccountA measure of change in cross-border ownership of long-term financial assets, including financialsecurities and real estate. Capital Asset Pricing Model (CAPM) An asset pricing model thatrelates the required return on an asset to its systematic risk. Capital Budgeting Planning andmanaging expenditures for long-lived assets. Capital Formation The process of increasing theamount of capital goods - also called capital stock - in a country. Capital Gain The positivechange in the value of an asset, a negative capital gain is a capital loss. Capital Market Line Theline between the risk-free asset and the market portfolio that represents the mean-varianceefficient set of investment opportunities in the CAPM. Capital Markets Markets for financialassets and liabilities with maturity greater than one year, including long-term government and

corporate bonds, preferred stock, and common stock. Capital Rationing The case where funds arelimited to a fixed dollar amount and must be allocated among the competing projects. CapitalStructure The mix of the various debt and equity capital maintained by a firm. Also calledfinancial structure. The composition of a corporation's securities used to finance its investmentactivities; the relative proportions of short-term debt, long-term debt, and Capitalism Aneconomic system that is based on private ownership; economic development is proportionate toand dependent upon the accumulation and reinvestment of profits. Carrier An individual or entitythat transports persons or goods for compensation under the contract of carriage. Cartel Anagreement among, or an organization of, suppliers of a product. Cash Against Documents (CAD)Payment for goods where a commission house or other intermediary transfers title documents tothe buyer upon payment in cash. Cash Cover In a letter of credit transaction, money deposited by

the applicant with the issuing bank. Cash Flow Cash generated by the firm and paid to creditorsand shareholders. It can be classified as (1) cash flow from operations, (2) cash flow fromchanges in fixed assets, and (3) cash flow from changes in net working capital. Cash in Advance(CIA) Payment for goods in which the price is paid in full before the shipment is made. This typeof payment is usually only made for very small shipments or when goods are made in order.Centrally Planned Economy An economy in which the government, rather than free-marketactivity, controls the allocation of resources. Certificate of Acceptance Term used in leasing. Adocument whereby the lessee acknowledges that the equipment to be leased has been delivered,


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is acceptable, and has been manufactured or constructed according to specifications. Certificateof Analysis/certificate of Inspection Documents that may be asked for by the importer and/or theauthorities of the importing country, as evidence of quality or conformity to specifications.Certificate of Manufacture A statement that is usually notarised in which the producer of goodscertifies that the goods have been produced and are now available to the buyer. Certificate of

Origin Documents that may be asked for by the authorities of the importing country, as evidenceof the country of manufacture of the goods. Certificate of Product Origin A document requiredby certain foreign countries for tariff purpose, certifying the country of origin of specified goods.Change in Net Working Capital Difference between net working capital from one period toanother. Characteristic Line The line relating the expected return on a security to differentreturns on the market. CHIPS (Clearing House Interbank Payments System) Financial networkthrough which banks in the United States conduct their financial transactions. CITES Conventionon the International Trade in Endangered Species Civil Society Organizations (CSOs) Non-governmental and non-profit groups that work to improve society and the human condition.Clean Bill of Lading A receipt for goods issued by a carrier that indicates that the goods werereceived in apparently good order and without damage. Clean Collection Collection in which

only the financial document is sent through the banks. Clearance The completion of customsentry requirements that results in the release of goods to the importer. Clearing The settlement ofa transaction, often involving exchange of payments and/or documentation. Closed-End Fund Amutual fund in which the amount of funds under management is fixed and ownership in thefunds is bought and sold in the market like a depository receipt. Codex Codex AlimentariusCommission (a world food standards body) Collection Order In a collection, the document inwhich the seller instructs the banks as to how the collection is to be conducted. CommandEconomy An economy based on government ownership and/or control of society's resources;during the 20th century, the dominant form of command economy was communism. CommercialDocument General term for documents describing various aspects of a transaction, e.g.commercial invoice, transport document, insurance document, certificate of origin, certificate ofinspection etc. Commodity Price Risk The risk of unexpected changes in a commodity price,such as the price of oil. Commodity Swap A swap in which the (often notional) principal amounton at least one side of the swap is a commodity such as oil or gold. Common Carrier Anorganization that transports persons or goods for a fee. Comparative Advantage A comparativeadvantage exists when a nation or economic region is able to produce a product at a loweropportunity cost compared to another nation or region. Compliant Documents Documentspresented under a letter of credit that comply with all its terms and conditions. The banks areonly obliged to pay the beneficiary if documents are totally compliant. Compound InterestInterest that is earned both on the initial principal and on interest earned on the initial principal inprevious periods. The interest earned in one period becomes in effect part of the principal in afollowing period. Compound Value Value of a sum after investing it over one or more periods.Also called future value. Compounding Process of reinvesting each interest payment to earnmore interest. Compounding is based on the idea that interest itself becomes principal andtherefore also earns interest in subsequent periods. Confirming Bank Bank that adds its paymentundertaking to a letter of credit. Consignee Party to whom goods are to be delivered.Consignment Delivery of merchandise from an exporter (the consignor) to an agent (theconsignee) under agreement that the consignee sells the merchandise of the account of theconsignor, while the consignor retains title to the goods until the consignee sells them.Consolidated Income The sum of income across all of the multinational corporations domestic


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and foreign subsidiaries. Consolidation A form of corporate reorganization in which two firmspool their assets and liabilities to form a new company. Corporate Governance The way in whichmajor stakeholders exert control over the modern corporation. Correspondent Bank A bank that,in its own country, handles the business of a foreign bank. Country Risk The political andfinancial risks of conducting business in a particular foreign country. Coupon Swap A fixed-for-

floating interest rate swap. Credit Risk Insurance Insurance that covers the risk of non-paymentfor delivered goods. Consular Statement A document required by some foreign countries,describing a shipment of goods and showing information such as the consignor, consignee, andvalue of shipment. Certified by a consular official of the foreign country, it is used by thecountry's officials Contingency Insurance Contingency insurance protects the exporter in anysituation in which exporter responsibility relied on the buyer to insure, but sustained a lossbecause of inadequate coverage from that source. It will cover situations in which the FOBendorsement. Contingent Claim Claim whose value is directly dependent on, or is contingent on,the value of its underlying assets. For example, the debt and equity securities issued by a firmderive their value from the total value of the firm. Continuous Compounding Interestcompounded continuously, every instant, rather than at fixed intervals. Continuous Quotation

System A trading system in which buy and sell orders are matched with market makers as theorders arrive, ensuring liquidity in individual shares. Contract Manufacturing A firm allowinganother firm to manufacture a pre-specified product. Contribution Margin Amount that eachadditional product, such as a jet engine, contributes to after-tax profit of the whole project: (Salesprice - Variable cost) X (1 - T), where T is the corporate tax rate. Controlled Foreign Corporation(CFC) In the U.S. tax code, a foreign corporation owned more than 50 percent either in terms ofmarket value or voting power. Convertible Bonds Bonds sold with a conversion feature thatallows the holder to convert the bond into common stock on or prior to a conversion date and at apre specified conversion price. Convertible Currency A currency that can be traded for othercurrencies at will. Convex Tax Schedule A tax schedule in which the effective tax rate is greaterat high levels of taxable income than at low levels of taxable income. Such a schedule results inprogressive taxation. Corporate Culture The set of values, beliefs, relationships betweenindividuals and functions that guide the decisions of a company to achieve its objectives.Corporate Social Responsibility The responsibilities that corporations (including MNCs) have toworkers and their families, to consumers, to investors, and to the natural environment.Corporation Form of business organization that is created as a distinct "legal person" composedof one or more actual individuals or legal entities. Primary advantages of a corporation includelimited liability, ease of ownership, transfer, and perpetual succession. Correlation A measure ofthe co variability of two assets that is scaled for the standard deviations of the assets (rAB = sAB/ sAsB such that -1 < rAB < +1). Corruption Perceptions Index (CPI) A ranking of countries bylevel of corruption that is researched and published by Transparency International (TI), theworld's leading non-governmental organization dedicated to fighting corruption. Cost andFreight(C&F) A pricing term that indicates that the cost of the goods and freight charges areincluded 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 ofgoods or services from a foreign country. Coupon The stated interest on a debt instrument.Covariance A measure of the co variability of two assets (sAB = sAsB rAB). Cover NoteInsurance document evidencing that insurance cover for a consignment has been taken out, butnot giving full details. Cross-Hedge A futures hedge using a currency that is different from, butclosely related to, the currency of the underlying exposure. Cost of Equity Capital The required


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return on the company's common stock in capital markets. It is also called the equity holders'required rate of return because it is what equity holders can expect to obtain in the capitalmarket. It is a cost from the firm's perspective. Countervailing Duties Duties levied on animported good that has been unfairly subsidized by a foreign government. Imposing duties on thegood is meant to raise the product's price to a "fair market value". CTD WTO Committee on

Trade and Development Culture Collective mental paradigms that a society imparts toindividuals in the form of behavior patterns, shared values, norms and institutions. CumulativeTranslation Adjustment (CTA) An equity account under FAS #52 that accumulates gains orlosses caused by translation accounting adjustments. Currency (Foreign Exchange) Risk The riskof unexpected changes in foreign currency exchange rates. Currency Coupon Swap A fixed-for-floating rate no amortizing currency swap traded primarily through international commercialbanks. Currency Cross-Hedge A hedge of currency risk using a currency that is correlated withthe currency in which the underlying exposure is denominated. Currency of Reference Thecurrency that is being bought or sold. It is most convenient to place the currency of reference inthe denominator of a foreign exchange quote. Currency Option A contract giving the optionholder the right to buy or sell an underlying currency at a specified price and on a specified date.

The option writer (seller) holds the obligation to fulfill the other side of the contract. CurrencySwap A contractual agreement to exchange a principal amount of two different currencies and,after a prearranged length of time, to give back the original principal. Interest payments in eachcurrency are also typically swapped during the life of the agreement Current Account A measureof a countrys international trade in goods and services. Current Account Balance A broadmeasure of import-export activity that includes services, travel and tourism, transportation,investment income and interest, gifts, and grants along with the trade balance on goods. CustomUnion A form of regional economic integration group that eliminates tariffs among membernations and establishes common external tariffs. Customhouse Broker A person or firm obtainsthe license from the treasury department of its Country when required, and help clients(importers) to enter and declare goods through customs. Customs The authorities designated tocollect duties levied by a country on imports and exports. Carnet A customs document permittingthe holder to carry or send merchandise temporarily into certain foreign countries without payingduties or posting bonds. Cash with Order (C.W.O.) Payment for goods in which the buyer payswhen ordering and in which the transaction is binding on both parties. Certificate of Inspection Adocument certifying that merchandise was in good condition immediately prior to its shipment.Cost And Freight (C & F) A pricing term indicating that the cost of the goods and freight chargesare included in the quoted price. Charter Party Written contract between the owner of a vesseland a "chartered" who rents use of the vessel or a part of its freight space. Cost and Insurance (C& I) A pricing term indicating that the cost of the product and insurance are included in thequoted price. Cost, Insurance, Freight A pricing term indicating that the cost of the goods,insurance, and freight are included in the quoted price. Clean Draft A draft to which nodocuments have been attached. Collection Papers All documents submitted to a buyer for thepurpose of receiving payment for a shipment. Commercial Attachment The commerce expert onthe diplomatic staff of his/her country's embassy or large consulate. Commercial Invoice Anitemized list of goods shipped, usually among an exporter's COLLECTION PAPERS. CommonCarrier An individual, partnership, or corporation that transports persons or goods forcompensation. Confirmation of Letter of Credit A letter of credit, issued by a foreign bank,whose validity has been confirmed by a Nationalized Indian bank. Consignment Delivery ofmerchandise from an exporter (consignor) to an agent (consignee) under agreement that the


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agent sell the merchandise for the account of the exporter. Constructive Transfer A legal fictionwhich permits acceptance of a Customs entry for merchandise in a zone before its physicaltransfer to the Customs territory. Consular Invoice A document, required by some foreigncountries, describing a shipment of goods and showing information such as the consignor,consignee, and value of the shipment. Convertible Currency A currency that can be bought and

sold for other currencies at will. Corporation (Private) Any corporation which is organized forthe purpose of establishing, operating and maintaining a foreign-trade zone and which ischartered under a special act of the State within which it is to operate such a zone. Corporation(Public) A State, political subdivision thereof, a municipality, a public agency of a State, politicalsubdivision thereof, or municipality, or a corporate municipal instrumentality of one or moreStates. Correspondent Bank A bank that, in its own country, handles the business of a foreignbank. Counter Trade The sale of goods or services that are paid in whole or in part by the transferof goods or services from a foreign country. Credit Risk Insurance Insurance designed to coverrisks of nonpayment for delivered goods. Customs Territory Territory of the India in which thegeneral tariff laws of the India apply. Custom House Agent (CHA) An individual or firmlicensed to enter and clear goods through Customs.

Glossary of EXIM International Trade Terms Starting with-D

Dealing Desk or Trading Desk The desk at an international bank that trades spot and forwardforeign exchange. Debt capacity The amount of debt that a firm chooses to borrow to support aproject. Debt-for-Equity Swap A swap agreement to exchange equity (debt) returns for debt(equity) returns over a prearranged length of time. Decision Trees A graphical analysis ofsequential decisions and the likely outcomes of those decisions. Deferred Payment Credit A typeof letter of credit which provides for payment some time after presentation of the shippingdocuments by the exporter. Devaluation The 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 becoming industrialized; the poorer nations of the world. DeliverableInstrument The asset underlying a derivative security. For a currency option, the deliverableinstrument is determined by the options exchange and is either spot currency or an equivalentvalue in futures contracts. Delta-Cross-Hedge A futures hedge that has both currency andmaturity mismatches with the underlying exposure. Delta-Hedge A futures hedge using acurrency that matches the underlying exposure and a maturity date that is different from, butpreferably close to, the maturity of the underlying exposure. Demand Management A businessprocess with the intention to coordinate and influence all sources of demand for a firms

products. Depository Receipt A derivative security issued by a foreign borrower through adomestic trustee representing ownership in the deposit of foreign shares held by the trustee.Depreciation A decrease in a currency value relative to another currency in a floating exchange

rate system. Derivative Security A financial security whose price is derived from the price ofanother asset. Devaluation A decrease in a currency value relative to another currency in a fixedexchange rate system. Developed Countries The richer, more industrialized countries in theworld. DFID Department for International Development (UK) Difference Check The differencein interest payments that is exchanged between two swap counter parties. Digital Divide Thedigital divide refers to the widening technological gap between the richer and the poorercountries of the world. Direct Costs of Financial Distress Costs of financial distress that aredirectly incurred during bankruptcy or liquidation proceedings. DirectExportingMarketer takes
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direct responsibility for its products abroad by selling them directly to foreign customers orthrough local representatives in foreign markets. Direct Financing Lease A non-leveraged leaseby a lesser in which the lease meets any of the definitional criteria of a capital lease, plus certainadditional criteria. Direct Product Profitability Measuring the direct costs associated withhandling a product from the warehouse until a customer buys from the retail store. Direct Terms

The price of a unit of foreign currency in domestic currency terms, such as INR 45.70/USD for aIndia resident. (Contrast with indirect quote.) Discount If a bond is selling below its face value, itis said to sell at a discount. Discounted Cash Flow A valuation methodology that discountsexpected future cash flows at a discount rate appropriate for the risk, currency, and maturity ofthe cash flows. Discounted Payback The length of time needed to recoup the present value of aninvestment; sometimes used when investing in locations with high country risk. DiscountedPayback Period Rule An investment decision rule in which the cash flows are discounted at aninterest rate and the payback rule is applied on these discounted cash flows. DiscountingCalculating the present value of a future amount. The process is the opposite of compounding.Discretionary Reserves Balance sheet accounts that are used in some countries to temporarilystore earnings from the current year or the recent past. Discriminatory Pricing The practice that

selling a product or service at different prices that do not reflect a proportional difference incosts. Dispatch An amount paid by a vessel's operator to a charter if loading or unloading iscompleted in less time than stipulated in the charter party. Distributor A Foreign agent who sellsfor a supplier directly and maintains an inventory of the suppliers product. Diversifiable(unique) (unsystematic) risk A risk that specifically affects a single asset or a small group ofassets. Also called unique or unsystematic risk. Doc Department of Commerce (USA) DockReceipt A receipt issued by an ocean carrier to acknowledge receipt of a shipment at the carrier'sdock or warehouse. Dock Statement A receipt issued by an ocean carrier to acknowledge thereceipt of a shipment at the carrier's dock or warehouse facilities. Domestic Bonds Bonds issuedand traded within the internal market of a single country and denominated in the currency of thatcountry. Domestic Liquidity The aggregate of money supply, quasi-money or savings and timedeposits, and deposit substitutes. Draft (trade bill, bill of exchange) A means of paymentwhereby a drawer (the importer) instructs a drawee (either the importer or its commercial bank)to pay the payee (the exporter). DSB Dispute Settlement Body DSP Dispute Settlement PanelDSU Dispute Settlement Understanding Dual Pricing The practice of selling identical products indifferent markets for different prices. Dumping Selling goods or merchandise in another countryat a price below the price at which the same merchandise is sold in the home market or sellingsuch merchandise below the costs incurred in production and shipment. Dumping is an illegaltrade practice. Duty A tax imposed on imports by the customs authority of a country. DGFTDirectorate General of Foreign Trade, which is headed by the Director General of Foreign Trade.The office of the DGFT is responsible for formulating and execution of Foreign Trade Policy,including licensing. Formerly (till 1991), was known as the Chief Duty Exemption/scheme DutyFree Import of Inputs Allows duty-free import of inputs for exports under Advance Licence,Duty Entitlement Pass Book (DEPB) and Duty Free Replenishment Certificate (DFRC) Scheme.DEPB Refers to the Duty Entitlement Pass Book to neutralise the incidence of basic customsduty on the import content of export product. This is provided by way of grant of duty creditagainst the export product at specified rates. The DEPB Scheme DFRC Refers to the Duty FreeReplenishment Certificate Scheme which was introduced from 1/4/2000 replacing. TransferableAdvance Licensing Scheme. The scheme is available to merchant exporters as well as tomanufacturer exporters. However, Deemed Exports Refers to those transactions in which the


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goods supplied do not leave the country and the payment for the goods is received by thesupplier in India. Date Draft A draft that matures in a specified number of days after the date it isissued, without regard to the date of "ACCEPTANCE". Deactivisation Voluntary discontinuationof the activation of an entire zone or subzone by the grantee or operator. Default An act oromission that will result in a claim for duties, taxes, charges or liquidated damages under the

FTZ Operator's Bond Deferred Payments Credit Type of "LETTER OF CREDIT" providing forpayment some time after presentation of shipping documents by exporter. Destination ControlStatement Any of various statements that the U.S. Government requires to be displayed onexport shipments and that specify the destinations for which export of the shipment has beenauthorized. Devaluation The official lowering of the value of one country's currency in terms ofone or more foreign currencies. Discrepancy - Letter of Credit When documents presented do notconform to the letter of credit. Documentary Against Acceptance (D/A) Instructions given by ashipper to a bank indicating that documents transferring title to goods should be delivered to thebuyer only upon the buyer's acceptance of the attached draft. Draft An unconditional order inwriting from one person (the drawer) to another (the drawee), directing the drawee to pay aspecified amount to a named drawer at a fixed or determinable future date. Drawback Articles

manufactured or produced in the India with the use of imported components or raw materials andlater exported are entitled to a refund of the duty charged on the imported products orcomponents. Drawee The individual or firm on whom a draft is drawn and who owes the statedamount. Drawer The individual or firm that issues or signs a draft and thus stands to receivepayment of the stated amount from the drawee. Dumping Exporting/Importing merchandise intoa country below the costs incurred in production and shipment. Duty A tax imposed on importsby the customs authority of a country.

Glossary of Export Import Trade Terms Starting with-E

Earnings Response Coefficient The relation of stock returns to earnings surprises around the time

of corporate earnings announcements. Eclectic Paradigm A theory of the multinational firm thatposits three types of advantage benefiting the multinational corporation: ownership-specific,location-specific, and market internalisation advantages. Economic Exposure Change in thevalue of a corporations assets or liabilities as a result of changes in currency values. Economic

Freedom Economic freedom occurs when individuals and businesses make most of the economicdecisions in an economy. Economic Integration The integration of commercial and financialactivities among countries through the abolishment of economic discrimination. EconomicUnion A group that combines the economic characteristics of a common market with somedegree of harmonization of monetary and fiscal policies. Economic Value Added A method ofperformance evaluation that adjusts accounting performance with a charge reflecting investorsrequired return on investment. Economies of Scale Achieving lower average cost per unit

through a larger scale of production. Economies of Vertical Integration Achieving loweroperating costs by bringing the entire production chain within the firm rather than contractingthrough the marketplace. Effective Annual Interest Rate the interest rate as if it werecompounded once per time period rather than several times per period. Effective Annual YieldCalculated as (1+i/n)n, where i is the stated annual interest rate and n is the number ofcompounding periods per year. (Contrast with bond equivalent yield and money market yield.)Efficient Frontier The mean-variance efficient portion of the investment opportunity set.Efficient Market A market in which prices reflect all relevant information. Embargo A type of


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economic sanction that totally disallows the imports 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 by the recent progress it has made ineconomic liberalization. Emerging Stock Markets The stock markets of emerging economies.These markets typically have higher expected returns than established markets but also higher

risk. Employment Rate The ratio, in percent, of the number of employed persons to total laborforce. Endogenous Uncertainty Price or input cost uncertainty that is within the control of thefirm, such as when the act of investing reveals information about price or input cost. EngagementThe assumption of payment responsibility in respect of a letter of credit, e.g. Equity-LinkedEurobonds A Eurobond with a convertibility option or warrant attached. Eurobonds: Fixed rateEurocurrency deposits and loans and Eurocurrencies with longer maturities than five years.Erosion Cash-flow amount transferred to a new project from customers and sales of otherproducts of the firm. Euro The single currency of the European Economic and Monetary Union(EMU) introduced in January 1999. EMU members are Austria, Belgium, Finland, France,Germany, Ireland, Italy, Luxembourg, Netherlands, Portugal, and Spain. Eurobond A bond thatis denominated in a currency other than that of 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). Eurocurrency Market A money market for currenciesheld in the form of deposits in countries other than that where the currency is issued. EurodollarsDollar-denominated deposits held in a country other than the United States. European Bank forReconstruction and Development (EBRD) One of four major regional development bankscurrently operating in the global economy. European Currency Unit (ECU) A trade-weightedbasket of currencies in the European Exchange Rate Mechanism (ERM) of the European Union.European Exchange ate Mechanism (ERM) The exchange rate system used by countries in theEuropean Union in which exchange rates are pegged within bands around an ERM central value.European Monetary System (EMS) An exchange rate system based on cooperation betweenEuropean Union central banks. European Option An option that can be exercised only atexpiration. (Contrast with American option.) European Terms A foreign exchange quotation thatstates the foreign currency price of one U.S. dollar. (Contrast with American terms.) EuropeanUnion (EU) An intergovernmental organization which coordinates foreign, economic, andjudicial policy among its 25 member nations. Exchange Rate The price of one currency in termsof another, i.e. the number of units of one currency that may be exchanged for one unit ofanother currency. Exchange Risk The risk that losses may result from the changes in the relativevalues of different currencies. Exercise Price The price at which an option can be exercised (alsocalled the striking price). Exim Bank Export-Import Bank of the India. Provides guarantees ofworking capital loans for Indian exporters, guarantees the repayment of loans or makes loans toforeign purchasers of Indian goods and services. Exogenous Uncertainty Price or input costuncertainty that is outside the control of the firm. Expiry Date The date when a letter of credit isno longer valid - i.e. the date beyond which it cannot be used. Explicit Tax A tax that is explicitlycollected by a government; includes income, withholding, property, sales, and value-added taxesand tariffs. Export Any resource, intermediate good, or final good or service that producers inone country sell to buyers in another country. Export Management Company A foreign ordomestic company that acts as a sales agent and distributor for domestic exporters ininternational markets. Export Management Company A private firm that transacts exportbusiness on behalf of its client companies in return for a commission, salary, or retainer. ExportBroker An individual or firm that helps to locate and introduce buyers and seller in international


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business for a commission but does not take part in actual sales transaction. Export License Ageneral export license covers the exportation of goods not restricted under the terms of avalidated export license. No formal application or written authorization is needed to ship exportsunder a general export license. Export Restraints Quantitative restrictions imposed by exportingcountries to limit exports to specified foreign markets, usually as a follow-up to formal or

informal agreements reached with importing countries. Export Subsidies Any form ofgovernment payment that helps an exporter or manufacturing concern to lower its export costs.Export Trading Company (ETC) A company that facilitates the export of goods and services. AnETC can either act as the export department for producers or take title to the product and exportfor its own account. Expropriation A specific type of political risk in which a government seizesforeign assets. External Market A market for financial securities that are placed outside theborders of the country issuing that currency. Extraterritoriality A government practice whichapplies its laws outside its territorial boundaries. Exim Policy Refers to Export and Import(Exim) Policy. Exim Policy has got incorporated into the comprehensive Foreign Trade Policy,which was announced by the Commerce & Industry Minister on 31st August, 2004. EPZs/EOUsEPZs means Export Processing Zones which are special enclaves, separated from the Domestic

Tariff Area (DTA), to provide an internationally competitive duty-free environment for exportproduction.EOUmeans Export Oriented Units. E-Commerce Refers to electronic commerce. Inthe context of Foreign Trade Policy, e-commerce relates to electronic filing and processing ofapplications etc. EPCG EPCG refers to the Export Promotion Capital Goods (EPCG) Scheme,which gives the manufacturer facility for import of capital goods for export production atconcessional rate of duty (5 per cent) against certain level of export . Exchange Permit Agovernment permit sometimes required by the importer's government to enable the importer toconvert his or her own country's currency into foreign currency with which to pay a seller inanother country. Exchange Rate The price of one currency in terms of another, i.e., the numberof units of one currency that may be exchanged for one unit of another currency. Exhibition Theshowing of merchandise within a zone, usually to prospective buyers. Export Commission HouseAn organization which, for a commission, acts as a purchasing agent for a foreign buyer. ExportLicense A government document that permits the "Licensee" to engage in the export ofdesignated goods to certain destinations.

Glossary of Export Trade Terms Starting with-F

Face Value The value of a bond that appears on its face. Also referred to as par value orprincipal. Factor Model A model that assumes a linear relation between an assets expected

return and one or more systematic risk factors. Factoring Sale of an accounts receivable balanceto buyers (factors) that are willing and able to bear the costs and risks of credit and collections.Financial (Capital) Structure The proportion of debt and equity and the particular forms of debt

and equity chosen to finance the assets of the firm. Financial Contagion The spread of a financialcrisis from one country or region to other countries or regions. Financial Engineering Theprocess of innovation by which new financial products are created. Financial Innovation Theprocess of designing new financial products, such as exotic currency options and swaps.Financial Markets Markets for financial assets and liabilities. Financial Price Risk The risk ofunexpected changes in a financial price, including currency (foreign exchange) risk, interest raterisk, and commodity price risk. Financial Risk Financial risk refers to unexpected events in acountrys financial, economic, or business life. Financial Strategy The way in which the firm
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pursues its financial objectives. Fixed Cost A cost that is fixed in total for a given period of timeand for given volume levels. It is not dependent on the amount of goods or services producedduring the period. Financial Policy The corporations choices regarding the debt-equity mix,currencies of denomination, maturity structure, method of financing investment projects, andhedging decisions with a goal of maximizing the value of the firm to some set of stakeholders.

First-to-Market Advantage Also know as "first-mover advantage." The idea of first-moveradvantage is that the initial occupant of a strategic position or niche (market segment) gainsaccess to resources and capabilities that a follower cannot match. Fixed Exchange Rate SystemAn exchange rate system in which governments stand ready to buy and sell currency at officialexchange rates. Fixed Forward Contract Currency is bought or sold at a given future date.Floating Currency System An exchange rate system under which a government is not obligatedto declare that its currency is convertible into a fixed amount of another currency. FloatingExchange Rate An exchange rate system in which currency values are allowed to fluctuateaccording to supply and demand forces in the market without direct interference by governmentauthorities. FoB Endorsement Used with FOB, FAS, C&F, or CFR (but not CIF) quotations,FOB sales endorsement to an open marine policy can cover transit risk from the point of origin

until title transfers. In these instances, the exporter relies on the importer to insure. ForceMajeure The title of a standard clause in marine contracts exempting the parties for non-fulfillment of their obligations as a result of conditions beyond their control, such as Acts ofGod, war. Foreign Aid A grant of money, technical assistance, capital equipment, or otherassistance typically extended by richer nations to poorer nations. Foreign Bonds Bonds that areissued in a domestic market by a foreign borrower, denominated in domestic currency, marketedto domestic residents, and regulated by the domestic authorities. Foreign Branch A foreignaffiliate that is legally a part of the parent firm. In the U.S. tax code, foreign branch income istaxed as it is earned in the foreign country. Foreign Debt Money owed by a nation to foreigninvestors, banks, or governments. Foreign Direct investment (FDI) The act of buildingproductive capacity directly in a foreign country. Foreign Equity Requirements Investment rulesthat limit foreign ownership to a minority holding is a company. Foreign Exchange Currency ofanother country, or a financial instrument that facilitates payment from one currency to another.Foreign Exchange (Currency) Risk The risk of unexpected changes in foreign currency exchangerates. Foreign Exchange Broker Brokers serving as matchmakers in the foreign exchange marketthat do not put their own money at risk. Foreign Exchange Dealer A financial institution makinga market in foreign exchange. Foreign Exchange Markets Networks of commercial banks,investment banks, and other financial institutions that convert, buy, and sell currencies in theglobal economy. Foreign Trade Zone A physical area in which the government allows firms todelay or avoid paying tariffs on imports. Foreign-Source Income Income earned from foreignoperations. Forfaiting A form of factoring in which large, medium- to long-term receivables aresold to buyers (forfaiters) that are willing and able to bear the costs and risks of credit andcollections. Forward Contract A commitment to exchange a specified amount of one currency fora specified amount of another currency on a specified future date. Forward Discount A currencywhose nominal value in the forward market is lower than in the spot market. (Contrast withforward premium.) Forward Market A market for forward contracts in which trades are made forfuture delivery according to an agreed-upon delivery date, exchange rate, and amount. ForwardParity When the forward rate is an unbiased predictor of future spot exchange rates. ForwardPremium A currency whose nominal value in the forward market is higher than in the spotmarket. (Contrast with forward discount.) Franchise Agreement An agreement in which a


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domestic company (the franchiser) licenses its trade name and or business system to anindependent company (the franchisee) in a foreign market. Franchising A parent company grantsanother independent entity the privilege to do business in a pre-specified manner, includingmanufacturing, selling products, marketing technology and other business approach. Free CashFlow Cash flow after all positive-NPV projects have been exhausted in the firms main line of

business. Free Port An area such as a port city into which merchandise may legally be movedwithout payment of duties. Free Trade Area of the Americas (FTAA) A proposed hemispherictrade zone that would cover all of the countries in North, South, and Latin America. The FTAAis highly controversial. Free Trade Zone An area designated by the government to which goodsmay be imported for processing and subsequent export on duty-free basis. Merchandise may bestored, used or manufactured in the zone and re-exported without duties being paid. FreelyFloating Exchange Rate System An exchange rate system in which currency values are allowedto fluctuate according to supply and demand forces in the market without direct interference bygovernment authorities. Freight Forwarder An independent business that handles exportshipment on behalf of the shipper without vested interest in the products. A freight forwarder is agood source of information and assistance on export regulations and documentation. Freight

Shippers (Freight Forwarders) Agents used to coordinate the logistics of transportation.Frequency Distribution The organization of data to show how often certain values or ranges ofvalues occur. Full Payout Lease A lease in which the lesser recovers, through the lease payments,all costs incurred in the lease plus an acceptable rate of return, without any reliance upon theleased equipment's future residual value. Fundamental Analysis A method of predictingexchange rates using the relationships of exchange rates to fundamental economic variables suchas GNP growth, money supply, and trade balances. Future Value Value of a sum after investingit over one or more periods. Also called compound value. Futures Commission Merchant Abrokerage house that is authorized by a futures exchange to trade with retail clients. FuturesContract A commitment to exchange a specified amount of one currency for a specified amountof another currency at a specified time in the future. Futures contracts are periodically marked-to-market, FTP Refers to Foreign Trade Policy, announced by the Commerce & IndustryMinister on 31st August, 2004. It is a 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. FoB Fob means Free on Board - i.e., when anexporter delivers goods "free on board", he pays all charges involved in getting them actuallyonto 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, in accordance with good merchandisingpolicy. Force Majeure The title of a standard clause in marine contracts exempting the parties forno fulfillment of their obligations as a result of conditions beyond their control, such asearthquakes, floods, or war. Foreign Exchange The currency or credit instruments of a foreigncountry. Foreign First (FOFI) An accounting method based on an assumption regarding the flowof goods that foreign status merchandise is disposed of first. Foreign Sales Agent An individualor firm that serves as the foreign representative of a domestic supplier and seeks sales abroad forthe supplier. Foreign-Trade Zone/Free Trade Zone A port designated by the government of acountry for duty-free entry of any non-prohibited goods. Merchandise may be stored, displayed,or used for manufacturing, etc., within the zone and re-exported without duties being paid.Foreign -Trade Zones Act The Foreign-Trade Zones Act of June 18, 1934, (48 Stat. 998-1003;19 U.S.C. 81a-81u) as amended. Foul Bill of Lading A receipt of goods issued by a carrier withan indication that the goods were damaged when received. Free Alongside(F.A.S.) A pricing


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term indicating that the quoted price includes the cost of delivering the goods alongside adesignated vessel. Free in (F.I.) A pricing term indicating that the charter of a vessel isresponsible for the cost of loading and unloading goods from the vessel. Free Port An area suchas a port city into which merchandise may be legally moved without payment of duties. FreightForwarder An independent business which handles export shipments for compensation.

Glossary of Import Trade Terms Starting with-G

G-7 A formal organization of seven highly industrialized democracies: Canada, France,Germany, Italy, Japan, the United Kingdom, and the United States. G-8 The G-7 countries plusRussia. Generally Accepted Accounting Principles (GAAP) A common set of accountingconcepts, standards, and procedures by which financial statements are prepared. GeneralAgreement on Tariffs and Trade (GATT) A post-World War II agreement designed to promotefreer international trade among the nations of the world. The GATT was replaced by the WorldTrade Organization (WTO) in 1994. Generalized Autoregressive conditional HeteroskedasticityA time series model in which returns at each instant of time are normally distributed but

volatility is a function of recent history of the series. Geocentric Multinational A multinational inwhich the subsidiaries are neither satellites nor independent city states, but parts of a wholewhose focus is on worldwide objectives as well as local objectives, each part making its uniquecontribution with its unique competence. Global Bond A bond that trades in the Eurobondmarket as well as in one or more national bond markets. Global Economy The internationalnetwork of individuals, businesses, governments, and multilateral organizations whichcollectively make production and consumption decisions. Globalization A global movement toincrease the flow of goods, services, people, real capital, and money across national borders inorder to create a more integrated and interdependent world economy. Gold Exchange StandardAn exchange rate system used from 1925 to 1931 in which the United States and England wereallowed to hold only gold reserves while other nations could hold gold, U.S. dollars, or pounds

sterling as reserves. Gold Standard An exchange rate system used prior to 1914 in which goldwas used to settle national trade balances. Also called the classical gold standard. Goodwill Theaccounting treatment of an intangible asset such as the takeover premium in a merger oracquisition. Gradualism A steady and calculated approach to transforming an economy fromcommunism to capitalism. Gray-Market Imports Gray-market imports are parallel distribution ofgenuine goods by intermediaries other than authorized channel members. Greenfield A form ofinvestment in which the firm designs and builds a new factory from scratch, starting with nothingbut a Greenmail Buying shares on the open market in the hope that the targets business partners

will buy back the shares at inflated prices. Gross Domestic Product (GDP) A measure of themarket value of goods and services produced by a nation. Unlike Gross National Product, GDPexcludes profits made by domestic firms overseas, as well as the share of reinvested earning in

domestic firms' foreign-based operations. Growing Perpetuity A constant stream of cash flowswithout end that is expected to rise indefinitely. For example, cash flows to the landlord of anapartment building might be expected to rise a certain percentage each year. Growth Options Thepositive-NPV opportunities in which the firm has not yet invested. The value of growth optionsreflects the time value of the firms current investment in real assets as well as the option value

of the firms potential future investments. Growth Stocks Stocks with high price/book orprice/earnings ratios. Historically, growth stocks have had lower average returns than valuestocks (stocks with low price/book or PE ratios) in a variety of countries. Guideline Lease A


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lease written under criteria established by the IRS to determine the availability of tax benefits tothe lesser. GATT/General Agreement on Tariffs And Trade A multilateral treaty intended to helpreduce trade barriers between the signatory countries and to promote trade through tariffconcessions. Grantee A corporation to which the privilege of establishing, operating, andmaintaining a foreign-trade zone has been granted by the Foreign-Trade Zones Board. Gross

Weight The full weight of a shipment, including goods and packaging.

Glossary of Import Export Trade Terms Starting with-H

Harmonized Tariff Schedule (HTS) A method of classification used by many countries todetermine tariffs on imports. Hedge Quality Measured by the r-square in a regression of spot ratechanges on futures price changes. Hedge Ratio The ratio of derivatives contracts to theunderlying risk exposure. Hedging Reducing the risk of a cash position by using the futuresinstruments to offset the price movement of the cash asset. High-Withholding-Tax InterestIncome In the U.S. tax code, interest income that has been subject to a foreign gross withholdingtax of 5 percent or more. Heavily Indebted Poor Countries (HIPC) Initiative The HIPC

Inititiative is a major international response to the burdensome external debt held by the world'spoorest, most indebted countries. It originated in 1996 as a joint undertaking of the World Bankand the International Monetary Fund (IMF). Hedge A position or operation that offsets anunderlying exposure. For example, a forward currency hedge uses a forward currency contract tooffset the exposure of an underlying position in a foreign currency. Hedges reduce the totalvariability of the combined Hedge Funds Private investment partnerships with a general managerand a small number of limited partners. Hedge Portfolio The country-specific hedge portfolio inthe International Asset Pricing Model serves as a store of value (like the risk-free asset in theCAPM) as well as a hedge against the currency risk of the market portfolio. Historical VolatilityVolatility estimated from a historical time series. Holding-Period Return The rate of return overa given period. Home Asset Bias The tendency of investors to over invest in assets based in their

own country. Homogeneous Expectations Idea that all individuals have the same beliefsconcerning future investments, profits, and dividends. Hyperinflation An extremely high rate ofinflation, often exceeding several hundred or several thousand percent, that causes a country'smoney to become practically worthless. Hysteresis The behavior of firms that fail to entermarkets that appear attractive and, once invested, persist in operating at a loss. This behavior ischaracteristic of situations with high entry and exit costs along with high uncertainty.

Glossary of Import Export International Trade Terms Starting with-I

Implicit Tax Lower (higher) before-tax required returns on assets that are subject to lower(higher) tax rates. Implied Volatility The volatility that is implied by an option value given the

other determinants of option value. Import Any resource, intermediate good, or final good orservice that buyers in one country purchase from sellers in another country. Import LicensesLicenses required by some countries to bring in a foreign-made good. In many cases, importlicenses are also used by the issuing country to control the quantity of imported items. In-the-Money Option An option that has value if exercised immediately. Income Baskets In the U.S. taxcode, income is allocated to one of a number of separate income categories. Losses in one basketmay not be used to offset gains in another basket. Income Statement Financial report thatsummarizes a firm's performance over a specified time period. Incremental IRR IRR on the


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incremental investment from choosing a large project instead of a smaller project. IndemnityClause A clause in which the one party indemnifies the other. In leasing, generally a clausewhereby the lessee indemnifies the lesser from loss of tax benefits. Independent Project Aproject whose acceptance or rejection is independent of the acceptance or rejection of otherprojects. Index futures A futures contract that allows investors to buy or sell an index (such as a

foreign stock index) in the futures market. Index options A call or put option contract on anindex (such as a foreign stock market index). Index swap A swap of a market index for someother asset (such as a stock-for-stock or debt-for-stock swap). Indication pricing schedule Aschedule of rates for an interest rate or currency swap. Indirect Costs of Financial Distress Costsof financial distress that are indirectly incurred prior to formal bankruptcy or liquidation. IndirectCustomers The end-users (e.g., consumers) of the products and services purchased from thewholesalers, retailers, and consignees -- the direct customers of the seller. IndirectDiversification Benefits Diversification benefits provided by the multinational corporation thatare not available to investors through their portfolio investment. IndirectExportingExportproducts to foreign markets by using an intermediary, usually export trading company based inthe exporters country. Inflation Rate The general increase in the price level herein measured by

the growth rate in the GNP Implicit Price Index or the general price deflator. InformationalEfficiency Whether or not market prices reflect information and thus the true (or intrinsic) valueof the underlying asset. Integrated Financial Market A market in which there are no barriers tofinancial flows and purchasing power parity holds across equivalent assets. Intellectual PropertyMaterial or communicable result in forms of discoveries, inventions, designs and literary and artworks of scientific, humanistic, literary, and artistic endeavor. It includes, but is not limited to,works in the form of scientific discoveries and invention. Intellectual Property Rights Patents,copyrights, and proprietary technologies and processes that are the basis of the multinationalcorporations competitive advantage over local firms. Inter-American DevelopmentBank(IADM) A regional development bank designed to promote sustainable economicdevelopment in the Western Hemisphere. Its headquarters are located in Washington, D.C.Interbank Spread The difference between a banks offer and bid rates for deposits in theEurocurrency market. Interest Rate Risk The risk of unexpected changes in an interest rate.Interest Rate Swap An agreement to exchange interest payments for a specific period of time ona given principal amount. The most common interest rate swap is a fixed-for-floating couponswap. The notional principal is typically not exchanged. Intermediated Market A financialmarket in which a financial institution (usually a commercial bank) stands between borrowersand savers. Intermodal The use of two or more modes of transportation to complete a cargomove; truck/rail/ship, or truck/air, for example. Internal Market A market for financial securitiesdenominated in the currency of a host country and placed within that country. Internal Rate ofReturn (IRR) A discount rate at which the net present value of an investment is zero. The IRR isa method of evaluating capital expenditure proposals. International Asset Pricing Model (IAPM)The international version of the CAPM in which investors in each country share the sameconsumption basket and purchasing power parity holds. International Monetary System Theglobal network of governmental and commercial institutions within which currency exchangerates are determined. Intrinsic Value of an Option The value of an option if exercisedimmediately. International Bank for Reconstruction and Development Also called the WorldBank, an international organization created at Breton Woods in 1944 to help in thereconstruction and development of its member nations. International Bonds Bonds that are tradedoutside the country of the issuer. International bonds are either foreign bonds trading in a foreign
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national market or Eurobonds trading in the international market. International Chamber ofCommerce International non-governmental body concerned with promotion of trade andharmonization of trading practice. Responsible for drafting and publishing. InternationalMonetary Fund (IMF) An international organization designed to promote global economicstability and development. It compiles statistics on cross-border transactions and publishes a

monthly summary of each countrys balance of payments. Investment Agreement An agreementspecifying the rights and responsibilities of a host government and a corporation in the structureand operation of an investment project Investment Opportunity Set The set of possibleinvestments available to an individual or corporation. Investment Philosophy The investmentapproach-active or passive-pursued by an investment 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 the International StandardsOrganisation. ITC(HS) Refers to Indian Trade Classification (Harmonized System). It is asystem of classification of products for the purposes of export and import. Import License Adocument required and issued by some national governments authorizing the importation ofgoods into their individual countries. Inland Bill of Lading A bill of lading used in transporting

goods overland to the exporter's international carrier. Irrevocable Letter of credit A letter ofcredit in which the specified payment is guaranteed 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 their resources to execute a well-defined mission. Resource commitments, responsibilities, and earnings are shared according to apredetermined contractual formula. Just In Time (JIT) An organization-wide practice that keepsthe inventory to the minimum and provides customers the right goods or service at the right time.

Glossary of Export Import Foreign Trade Terms Starting with - K

Kyoto Protocol A multilateral environmental agreement; its goal is to control global warming byreducing greenhouse gases emitted into the Earth's atmosphere. Keiretsu Collaborative groups ofvertically and horizontally integrated firms with extensive share cross-holdings and with a majorJapanese bank or corporation at the center.

Glossary of Export Import Trade Terms Starting with -L

Lease A contract in which one party conveys the use of an asset to another party for a specificperiod of time at a predetermined rate. Landed Cost The quoted or invoiced cost of a commodity,

plus any inbound transportation charges. Law of one Price (Purchasing Power Parity) Theprinciple that equivalent assets sell for the same price. The law of one price is enforced in thecurrency markets by financial market arbitrage. Lead Manager The lead investment bank in asyndicate selling a public securities offering. Leading and Lagging Reduction of transactionexposure through timing of cash flows within the corporation. Lease Rate The periodic rentalpayment to a lesser for the use of assets. Others may define lease rate as the implicit interest ratein minimum lease payments. Least-Developed Countries (LDCs) The poorest of the developingcountries. They are characterized by a low gross national product per capita, a reliance on


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subsistence agriculture, rapid population growth, inadequate infrastructure. Letter of Credit (L/C)A letter issued by an importers bank guaranteeing payment upon presentation of specified trade

documents (invoice, bill of lading, inspection and insurance certificates, etc.). Leveraged LeaseThe lesser provides an equity portion (usually 20 to 40 percent) of the equipment cost andlenders provide the balance on a nonrecourse debt basis. Liberalization The process by which

certain business activities become more market driven. Location-Specific AdvantagesAdvantages (natural and created) that are available only or primarily in a single location. LondonInterbank Bid Rate (LIBID) The bid rate that a Euro market bank is willing to pay to attract adeposit from another Euro market bank in London. Long Position A position in which aparticular asset (such as a spot or forward currency) has been purchased. License Agreement Asales agreement in which a domestic company (the licensor) allows a foreign company (thelicensee) to market its products in a foreign country in return for royalties, fees, or other forms ofcompensation. Licensing One firm gives another firm a permission, which allows the latter toengage in an activity otherwise legally forbidden to it. Such activities usually involve the transferof intellectual and proprietary knowledge in return for royalty as revenue. Limited FlexibilityExchange Rate System The International Monetary Funds name for an exchange rate system

with a managed float. Liquid Market A market in which traders can buy or sell large quantities ofan asset when they want and with low transactions costs. Liquidity The ease with which an assetcan be exchanged for another asset of equal value. Loanable Funds The pool of funds fromwhich borrowers can attract capital; typically categorized by currency and maturity. LondonInterbank Offer Rate (LIBOR) The offer rate that a Euro market bank demands in order to placea deposit at (or, equivalently, make a loan to) another Euro market bank in London. Letter ofCredit(L/C) A document, issued by a bank per instructions by a buyer of goods, authorizing theseller to draw a specified sum of money under specified terms, usually the receipt by the bank ofcertain documents within a given time. Licensing A business arrangement in which themanufacturer of a product grants permission to some other group or individual to manufacturethat product in return for specified royalties.

Glossary of Export Trade Terms Starting with - M

Manifest Document that lists in detail al the bills of lading issued by a carrier of its agent ormaster, i.e., a detailed summary of the total cargo of a vessel. Macro Country Risks Country (orpolitical) risks that affect all foreign firms in a host country. Management Contract Anagreement by which one firm allows another to manage its foreign activities on behalf of it. Themanaging firm is forbidden to make capital investment or financing decisions. ManagerialFlexibility Flexibility in the timing and scale of investment provided by a real investment option.Maquiladoras Duty-free assembly plants located mainly in the developing world. Maquiladorasare one type of foreign direct investment. Margin Account An account maintained by an investor

with a brokerage firm in which securities may be purchased by borrowing a portion of thepurchase price from the brokerage, or may be sold short by borrowing the securities from thebrokerage firm. Margin Requirement A performance bond paid upon purchase of a futurescontract that ensures the exchange clearinghouse against loss. Market Access The extent towhich a domestic industry can penetrate a related market in a foreign country. Access can belimited by tariffs or other non-trade barriers. Market Economy An economy in which resourceallocations, prices and other marketing decisions are primarily determined by the free market.Market Failure A failure of arms-length markets to efficiently complete the production of a good


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or service. In the eclectic paradigm, the multinational corporations market internalizationadvantages take advantage of market failure. Market Internalization Advantages Advantages thatallow the multinational corporation to internalize or exploit the failure of an arms-length marketto efficiently accomplish a task. Market Maker A financial institution that quotes bid (buy) andoffer (sell) prices. Market Model (One-Factor Market Model) The empirical version of the

security market line: Rj = aj + bjRM + ej. Market Portfolio A portfolio of all assets weightedaccording to their market 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 anattempt to anticipate which asset classes) will appreciate or depreciate during the coming period.Market-Based Corporate Governance System A system of corporate governance in which thesupervisory board represents a dispersed set of largely equity shareholders. MultilateralEnvironmental Agreements (MEAs) Environmental agreements negotiated by a number ofcountries. Marketing Mix The set of marketing tools that the firm uses to pursue its marketingobjectives in the target market. One of the most popular classifications of marketing mix tools iscalled the "4 P's" of marketing: product, price, place, and promotion. Marking to Market Theprocess by which changes in the value of futures contracts are settled daily. Maturity Date The

date on which the last payment on a bond is due. Mean-Variance Efficient An asset that hashigher 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 which includes Argentina,Brazil, Paraguay, and Uruguay in a regional trade pact that reduces tariffs on intrapact trade byup to 90 percent. Bolivia and Chile are associate members. Merger A form of corporateacquisition in which one firm absorbs another and the assets and liabilities of the two firms arecombined. Method of Payment The way in which a merger or acquisition is financed. MicroCountry Risks Country risks that are specific to an industry, company, or project within a hostcountry. Micro Credit Small loans, perhaps $50 or $100, that are extended to small businesses tofinance a business start-up or other business activity. Middle Market A market segment generallyrepresented by financing under $2 million. In leasing this sector is dominated by single investorleases. Miller and Modiglianis Irrelevance Proposition If financial markets are perfect, thencorporate financial policy (including hedging policy) is irrelevant. Mixed Tariff A combinationof specific and ad valorem tariffs. Monetary Assets and Liabilities(MAL) Assets and liabilitieswith contractual payoffs. Money Market Hedge A hedge that replicates a currency forwardcontract through the spot currency and Eurocurrency markets. Money Market Yield A bondquotation convention based on a 360-day year and semiannual coupons. (Contrast with bondequivalent yield.) Money Markets Financial markets for debt securities that pay off in the shortterm (usually less than one year). Money Supply The total amount of currency in circulation andpeso deposits subject to check of the monetary system. Monopoly Exclusive control orpossession by one group of the means of producing or selling goods or services. More FlexibleExchange Rate System The International Monetary Funds name for a floating exchange rate

system. Most Favored Nation (MFN) A status granted to one country by another; the grantingcountry then accords the recipient's imports and exports the most favorable treatment that itaccords any country. Multinational Corporation A corporation with operations in more than onecountry. Multinational Netting Elimination of offsetting cash flows within the multinationalcorporation. Mutually Exclusive Investment Decisions Investment decisions in which theacceptance of a project precludes the acceptance of one or more alternative projects.Manipulation Processing wherein merchandise is packed, unpacked, repacked, cleaned, sorted,graded or otherwise changed in condition but not manufactured. Manufacturer Generally, the


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production of articles for use from raw or prepared materials by substantially transforming suchmaterials into new forms. Marine Insurance Insurance that compensates the owners of goodstransported overseas in the event of loss that cannot be legally recovered from the carrier.Marking Letters, numbers, and other symbols on cargo packages to facilitate identification.Merchandise Includes goods, wares, and chattels of every description except Prohibited

Merchandise, building materials, production equipment and supplies for use in operation of azone. Merchandise, Domestic Merchandise which has been produced in the India and notexported therefrom. Merchandise, Foreign Imported Merchandise which has not been properlyreleased from Customs custody into the Customs territory of the India. Merchandise, FungibleMerchandise which for commercial purposes is identical and interchangeable in all situations.Merchandise, Mixed Status Foreign Merchandise which has been combined with DomesticMerchandise in the zone. Merchandise/Operations, Prohibited Merchandise, the importation ofwhich is prohibited by law on grounds of public policy or morals, or excluded by order of theForeign-Trade Zones Board.. Merchandise/Operations, Restricted Merchandise which may notbe authorized for delivery from Customs custody without a special permit, or a waiver thereof byan agency of the Indian Government.

Glossary of EXIM Trade Terms Starting with - N

Net Currency Exposure Exposure to foreign exchange risk after netting all intracompany cashflows. National Tax Policy The way in which a nation chooses to allocate the burdens of taxcollections across its residents. National Treatment A country accords no less favorabletreatment to imported goods than it does to domestic goods. Nationalization A process wherebyprivately owned companies are brought under state ownership and control. (Contrast withprivatization.) Negative-NPV Tie-in Project A negative (-) NPV infrastructure developmentproject that a local government requires of a company pursuing a positive (+) NPV investmentproject elsewhere in the economy. Net Asset Value The sum of the individual asset values in a

closed-end mutual fund. Closed-end funds can sell at substantial premiums or discounts to theirnet asset values. Net Exposed Assets Exposed assets less exposed liabilities. The term is usedwith market values or, in translation accounting, with book values. Net Monetary AssetsMonetary assets less monetary liabilities. Net Position A currency position after aggregating andcanceling all offsetting transactions in each currency, maturity, and security. Net Present Value(NPV) The present value of future cash returns, discounted at the appropriate market interestrate, minus the present value of the cost of the investment. Net Working Capital Current assetsminus current liabilities. New Protectionism Recent efforts to pressure national governments toexercise greater control over foreign trade and foreign direct investment. Nominal Cash Flow Acash flow expressed in nominal terms if the actual dollars to be received (or paid out) are given.Nominal Interest Rate Interest rate unadjusted for inflation. Non-Governmental Organizations

(NGOs) Special interest groups that operate in the global community. Non-Tariff Barrier Anindirect measure used to discriminate against foreign manufacturers, for example, extensiveinspection procedures for foreign imports that create barriers to entering the market. NoncashItem Expense against revenue that does not directly affect cash flow, such as depreciation anddeferred taxes. Non-Intermediated Debt Market A financial market in which borrowers(governments and large corporations) appeal directly to savers for debt capital through thesecurities markets without using a financial institution as intermediary. Non-Monetary Assetsand Liabilities Assets and Liabilities with non-contractual payoffs. Normal Distribution


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Symmetric bell-shaped frequency distribution that can be defined by its mean and standarddeviation. North American Free Trade Agreement (NAFTA) A regional trade pact among theUnited States, Canada, and Mexico. Notional Principal In a swap agreement, a principal amountthat is only notional and is not exchanged. NFE Refers to Net Foreign Exchange. Net ForeignExchange earning is calculated as a percentage of exports (NFEP). Non-Privileged Foreign

(NPF) Foreign Merchandise or non-tax-paid domestic merchandise upon which the duty andapplicable taxes will be determined at the time of entry from the zone for consumption.

Glossary of Export Business Trade Terms Starting with - O

Offer (Ask) Rates The rate at which a market maker is willing to sell the quoted asset. OfferingStatement In the United States, a shortened registration statement required by the Securities andExchange Commission on debt issues with less than a nine-month maturity. Official SettlementsBalance (Overall Balance) An overall measure of a countrys private financial and economictransactions with the rest of the world. Offshore Financial Centers (OFCs) The many types offinancial institutions that operate without financial supervision by governments or other

agencies. Oligopoly A market dominated by so few sellers that action by any of them will impactboth the price of the good and the competitors. Open Account The seller delivers the goods to thebuyer and then bills the buyer according to the terms of trade. Open and Reform Policy Aneconomic policy enacted by the Chinese government combining central planning with market-oriented reforms to increase productivity, living standards, and technological quality withoutexacerbating inflation, unemployment, and budget deficits. Open-end Fund A mutual fund inwhich the amount of money under management grows/shrinks as investors buy/sell the fund.Operating Cash Flow Earnings before interest and depreciation minus taxes. It measures the cashflow generated form operations, not counting capital spending or working capital requirements.Operating Exposure Changes in the value of real (no monetary) assets or operating cash flows asa result of changes in currency values. Operating Leverage The trade-off between fixe