Glossary of Trade Terms
L
Landed cost |
The cost of the exported product at the port or point of entry into the foreign market, but before the addition of foreign tariffs, taxes, local packaging/assembly costs and local distributors’ margins. Product modifications prior to shipment are included in the landed cost. |
Letter of credit (L/C) |
An instrument issued by a bank on behalf of an importer that guarantees an exporter payment for goods or services through a Canadian bank provided the terms of the letter of credit are met. |
Letter of credit (confirmed) |
A Canadian bank confirms the validity of a letter of credit issued by a foreign bank on behalf of the foreign importer, guaranteeing payment to the Canadian exporter provided that all terms in the document have been met. An unconfirmed letter of credit does not guarantee payment so, if the foreign bank defaults, the Canadian exporter will not be paid. Canadian exporters should accept only confirmed letters of credit as a form of payment. |
Letter of credit (irrevocable) |
A financial institution agrees to pay an exporter once all terms and conditions of the transaction are met. No terms or conditions can be modified without consent of all parties. |
Letter of credit (revocable) |
A letter of credit that may be cancelled or amended unilaterally at the behest of the buyer or the issuing bank. Rarely used and not recommended in support of "arms-length" trade transactions. |
Licensing |
The sale of the rights to use a firm’s products or services without releasing control or ownership. |