Global Commerce & Trade Terms

Global Commerce & Trade Terms

The world trades $32 trillion annually. The vocabulary of that trade is a professional language.

Incoterms (International Commercial Terms): Who Owns the Risk?

• EXW (Ex Works): Buyer picks up from seller warehouse. Maximum buyer responsibility.
• FOB (Free on Board): Seller loads vessel. Risk transfers on loading.
• CIF (Cost, Insurance, and Freight): Seller arranges freight and insurance to destination port.
• DDP (Delivered Duty Paid): Seller handles everything including destination duties. Maximum seller responsibility.

Knowing the Incoterm in a contract tells you exactly where your responsibility begins and ends.

FX (Foreign Exchange) Risk in Cross-Border Business

If you invoice in USD (US Dollars) but earn in JMD (Jamaican Dollars), a 5% depreciation of JMD (Jamaican Dollars) costs you 5% of gross margin — before any business expenses.

Options:

1. Invoice in your home currency (shift risk to buyer)
2. Forward contract (lock in exchange rate now for future delivery)
3. Natural hedge (earn and spend in the same currency)

The LC (Letter of Credit) Mechanism

LC (Letter of Credit) steps:

1. Buyer applies for LC at their bank
2. Bank issues LC to seller
3. Seller ships and presents complying documents
4. Bank pays — regardless of buyer's financial condition

Critical in emerging-market trade where counterparty trust is limited.

Remittance: The Hidden Economic Force

Jamaica's remittance inflows (~$3B USD annually) exceed FDI (Foreign Direct Investment) and tourism combined in some years. Understanding remittance flows matters for anyone in JA commerce.