Cross-border trade glossary

The vocabulary of an international manufacturing order, defined plainly. These are the same terms Tranchio uses to describe milestone evidence, so a contract and this glossary mean exactly the same thing by the same word.

Trade documents

Bill of lading(B/L, BOL, Ocean bill of lading): A bill of lading (B/L) is a document issued by a carrier acknowledging that goods have been received for shipment. It serves three functions at once: a receipt for the cargo, evidence of the contract of carriage, and, when issued as an original, negotiable bill, a document of title, meaning whoever holds it controls the right to collect the goods at destination.
Packing list(Packing slip, 裝箱單): A packing list is a shipping document itemising the contents of a consignment: carton count, what is in each, quantities, net and gross weights and dimensions. It carries no prices. Customs use it to check a declaration against what arrived, and a buyer uses it to establish what was actually sent.
Proforma invoice(PI, Pro forma invoice): A proforma invoice is a preliminary invoice issued by a seller before goods are supplied, setting out the goods, quantities, unit prices, payment terms and bank details being proposed. It is not a demand for payment and has no accounting status. In practice it is the document a manufacturing order is agreed on, and the one a buyer wires a deposit against.
Telex release(Telex release bill of lading, Surrendered bill of lading, Express release): A telex release is an instruction from a carrier's origin office to its destination office to release cargo to the named consignee without presentation of an original bill of lading. The shipper surrenders the originals at origin, or has none issued, and the bill is marked as released. It is faster than couriering originals, but the bill stops being a document of title.
VAT fapiao(Fapiao, 發票, Special VAT invoice): A fapiao (發票) is an official invoice issued through China's tax authority system and serving as the legal proof of a transaction there. A special VAT fapiao carries deductible input tax; a general fapiao does not. For an exporter it is the document that shows the sale went through the company's books rather than around them.

Payment

CIPS(Cross-border Interbank Payment System, 人民币跨境支付系统): CIPS, the Cross-border Interbank Payment System, is the clearing and settlement system for renminbi payments crossing China's border, operated under People's Bank of China authorisation by CIPS Co Ltd. It launched in 2015 and sits alongside SWIFT rather than replacing it: SWIFT usually carries the message, CIPS clears the money. It is domestic CNAPS that routes the final leg to a branch, which is why a cross-border CNY payment still needs a CNAPS code.
CNAPS code(China National Advanced Payment System code, CNAPS number): A CNAPS code is a 12-digit bank identifier used by the China National Advanced Payment System to route domestic payments to a specific branch of a Chinese bank. Cross-border payments settling into a mainland China account in CNY generally require the correct CNAPS code for the beneficiary's exact branch, in addition to the SWIFT/BIC code.
Letter of credit(L/C, LC, Documentary credit): A letter of credit (L/C) is an undertaking by the buyer's bank to pay the seller a specified amount, provided the seller presents documents that comply exactly with the terms stated in the credit. The bank's obligation is independent of the underlying goods. Banks pay against conforming documents, not against satisfactory merchandise.
SWIFT code(BIC, SWIFT/BIC, Bank Identifier Code): A SWIFT code, formally a BIC, is an 8- or 11-character identifier for a financial institution in the SWIFT network. It routes an international payment to the correct bank, and where it is 11 characters the last three identify a specific branch. Paying a mainland Chinese supplier in CNY usually needs a CNAPS code alongside it, because SWIFT identifies the bank and CNAPS identifies the branch.
Telegraphic transfer(T/T, Wire transfer, SWIFT payment): A telegraphic transfer (T/T) is an international bank wire, and the most common way manufacturing orders are paid in Asia. Funds move directly from the buyer's bank to the supplier's bank, usually via SWIFT. A T/T is irreversible once settled; there is no chargeback mechanism and no intermediary holding the funds.

Shipping and logistics

Incoterms(International Commercial Terms, Incoterms 2020): Incoterms are standardised three-letter trade terms published by the International Chamber of Commerce that define where responsibility for cost, risk and insurance passes from seller to buyer during shipment. The current version is Incoterms 2020. The term chosen determines the exact physical point at which the goods become the buyer's problem.

Quality and inspection

Pre-shipment inspection(PSI, Final random inspection, FRI): A pre-shipment inspection (PSI) is a quality check carried out by an independent third party at the factory, after production is finished but before the goods are shipped. The inspector samples the finished units against an agreed standard, usually an AQL sampling plan, and issues a pass or fail report that both buyer and supplier receive.