Commerce and Trade Fundamentals
The vocabulary of trade
Commerce questions test whether you can use trade terms precisely. Distinguish a quotation (an offer to supply at a stated price), an estimate (approximate, not binding), a pro forma invoice (sent before supply, often to allow payment or customs clearance), and a commercial invoice (the demand for payment after supply). Understand Incoterms in outline: they allocate cost, risk, and responsibility between buyer and seller - for example, terms under which the seller delivers to a carrier versus terms under which the seller bears risk until destination. You do not need to memorise every term, but you must know that risk and cost can pass at different points.
Documents in a trade transaction
A candidate should be able to place these in sequence: enquiry, quotation, order, acknowledgement, dispatch, delivery note, invoice, statement of account, payment, receipt. Add the supporting documents - bill of lading, packing list, certificate of origin, insurance certificate - and know roughly what each proves.
Traps to watch
- Treating an estimate as a binding price.
- Confusing a delivery note (evidence of goods delivered) with an invoice (demand for money).
- Assuming the buyer always pays freight - it depends on the agreed term.
- Mixing up a statement of account (summary of transactions over a period) with a reminder letter (a chase for overdue money).
Worked example
A buyer asks for 200 units. The seller replies with a price, a validity period, and delivery terms. That reply is a quotation, and once the buyer accepts it unconditionally, a contract exists. If the buyer instead says "we will take 150 at that price", that is a counter-offer, not an acceptance - a favourite examination point.
Rule of thumb
Ask of any document: does it offer, confirm, prove delivery, demand payment, or summarise? Naming its function answers most questions.