BRASS Business Guide - INTERNATIONAL BUSINESS

African Union (AU) - A continental organization promoting social and economic unity and cooperation among African states by addressing social, economic and political problems, especially those exacerbated by globalization.  Many member states.

Allocation-of-income rules - Tax provisions in the U.S. code that define how one must alocate income and deductions between domestic and foreign sources of income.  These rules exist in an attempt to prevent tax evasion via the use of shell companies.

American Depositary Shares (ADSs) - Shares of a foreign company, demoninated in U.S. dollars and offered directly to investors on an American stock exchange.

Andean Community - a South American customs union comprised of Bolivia, Colombia, Ecuador and Peru with the hope of "achieving more rapid, better balanced and more autonomous development..."

Arab Maghreb Union (AMU) - A trade agreement between Algeria, Libya, Mauritania, Morocco and Tunisia, intending to promote economic and political unity.

Arbitrage - The practice wherein one purchases and sells identical products (usually investment products - stocks, bonds, derivatives, commodities and currencies) in an attempt to take advantage of price differences between two or more markets One makes a profit based on the price difference between what he/she bought the product for, and what he/she can sell it for in another market.

Asia-Pacific Economic Cooperation Pact (APEC) - A loose economic pact between 21 'member economices' to promote trade and cooperation between the nations and regional economic growth.

Balance of payments -  A way to summarize a single economy's economic transations with the rest of the world, including all transactions between the nation's residents and all foreign goods and services providers.  Summary looks at the flow of goods, services and capital both into and out of the nation; while technically the overall figure must balance, individual accounts may be either in surplus or deficit.

Balance of trade - Net exports; the difference between how much an economy exports and how much they import, as measured in the currency of that economy and over a specified period of time. (A component of the 'current account', one of the individual accounts that make up the balance of payments and may indeed be in surplus or deficit.)

Bank for International Settlements (BIS) - International organization which fosters cooperation among the world's central banks in hope of increasing international monetary and financial cooperation.  Provides banking services to central banks and other international organizations.

Bilateral Investment Treaty (BIT) - An agreement between two nations that establishes the terms and conditions for investments by individuals or companies of one state in the other state (foreign direct investments).

Bill of Landing (B/L or BoL) - a document that establishes the details of a shipment process (when title is transferred, payment details, etc.)

Bureau of Industry and Security - Part of the U.S. Department of Commerce; stated mission is to "advance U.S. national security, foreign policy, and economic objectives by ensuring an effective export control and treaty compliance system and promoting continued U.S. strategic technology leadership."

Bonded warehouse - storage area supervised by customs authorities within which dutiable imports may be stored and/or undergo manipulation (NOT manufacturing) without payment of duty; importer/warehouse owner must provide a security for all duty payments until goods are exported, withdrawn or destroyed (also called a "custom's warehouse")

Bretton Woods conference - the 1944 international conference in Bretton Woods, New Hampshire; established the 'Bretton Woods Agreement' between the 44 Allied nations of WWII to encourage open markets through convertible currencies and stable exchange rates

Carribean Community and Common Market (CARICOM) - the formal organization of 15 Carribean nations and territories focused on promoting economic integration and coordinating foreign policy

Central Bank - also called a reserve bank, this institution manages a nation's currency and exchange rate through setting monetary and credit policies; usually oversees the commercial banking system and acts as a 'lender of last resort'

Certificate of product origin (C/O) - a document used in international trade, sometimes requested by the authorities of the importing country; attests that the goods included in a particular shipment were wholly manufactured within a particular country

Correspondent bank - a bank that acts on behalf of another financial institution; usually in international business this is a domestic bank that acts as the agent for a foreign bank

 Corruption Perception Index (The CPI) - from Transparency International, an annual score for individual countries reflecting how corrupt their public sectors appear to be 

Currency (foreign exchange) risk - the risk as a consequence of the potential change in price between two currencies (unexpected exchange rate fluctuations)

Customhouse broker (Customs broker) - a person or firm specializing in helping importers and exporters get their goods through customs barriers (assist in the preparation and submission of appropriate documents, determination of taxes, duties and excises, etc.)

Direct exporting - as opposed to indirect exporting (a middle man handles market research, distribution, and collection); a firm sells its products directly to foreign customers 

Dumping - when referring to a pricing policy, this is a type of "predatory pricing" wherein a product is priced below its sale price in the home market or is even sold at a loss to production costs, usually with the attempt to drive out competition (many governments impose anti-dumping measures)

Duty - tax imposed by customs; also called tariffs or dues

Economic exposure - a type of currency exposure; the potential for the value of a coprporation's assets or liabilities to change due to unexpected currency value fluxuations

Emerging market - a market considered to be making progress towards becoming advanced; generally evidenced by economic liberalization, high growth rate and the emergence of market exchanges and regulatory bodies

Excise tax - an indirect tax applied by a merchant or broker on goods either made or sold in a country; an inland tax (as opposed to 'border' taxes, like customs duties)

Export License - grants an individual or firm permission to perform a certain type of export transaction; most transactions do not require a specific license, but the exporter must perform due dilligence, researching the end use of the good, whether the product does require a licence and if so which federal agency would have jurisdiction

Export Trading Company (ETC) - an independent company that facilitates the export of goods and/or services for other companies usually by providing assistance with market research, warehousing, shipping, insuring and billing 

Expropriation - when a public agency siezes private property; a varying political risk for multinational corporations, depending on the nations within which they have assets

Federal Trade Commission (FTC) - A U.S. agency with the stated goal, "[to] prevent business practices that are anticompetitive or deceptive or unfair to consumers..."

Foreign direct investment (FDI) - the direct investment of one company into a company based in another country; often the investing firm has influence and/or control over the company in which they invest; generally done to build productive capacity within the foreign nation

Foreign tax credit (FTC) - U.S. tax code provision available to anyone who worked in a foreign nation or recieves income from a foreign investment; a nonrefundable credit against domestic income taxes up to the amount paid as a result of foreign income tax witholdings

Forward Foreign Exchange - used as a hege against currency risk, two parties agree to exchange two designated currencies at a future date at a predetermined rate

Free trade zone - a type of special economic zone wherein goods may be imported, handled and/or manufactured and reexported without paying customs duties; goods are only subject to customs if moved to consumers within the country

G7 - a formal organization composed of the finance ministers and central bank governors of seven highly-industrialized and advanced economies, namely some of the wealthiest by national net worth: United States, Japan, Canada, France, Germany, Italy and the United Kingdom; the EU is also represented in their meetings (generally to discuss global economic issues)

Greenfield - a type of foreign direct investment wherein a parent company builds entirely new operational facilities in a foreign nation, usually hiring new (often native) employees as well (as opposed to 'brown field' investing wherein the parent company utilizes existing production facilities to launch a new activity)

Gulf Cooperation Council (GCC) - a council created to facilitate the cooperation and integration of the economic policies of Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates

Hedging - making an investment to reduce your financial risk

INCOTERMS - from the International Chamber of Commerce (ICC), internationally-recognized trade terms to facilitate unform interpretation of contract clauses, etc. in global trade; mainly focused on transportation tasks, costs and risks

International Financial Reporting Standards (IFRS) - from the International Accounting Standards Board (IASB); intertnational accounting standards intended to facilitate comparisons of companies and finances internationally, currently difficult due to differing reporting standards in different nations

International Monetary Fund (IMF) - an international organization with near-global membership (180+ countries) focused on promoting global economic stability and growth; focuses on economic surveillance and the publication of the resulting statistics; provides policy advice to those members facing economic difficulties

International monetary system - an internationally agreed-upon set of rules that facilitate international trade and investment by regulating exchange rates and other means of payment; can be the culmination of many individual agreements between nations, or deliberately established, as was the case at the Bretton Woods Conference

Invisible barriers to trade - regulations that do not directly impeded trade but are excessive to the point where it is difficult, especially for foreign exporters unaware of these restrictions (hence they're 'invisible') to trade their goods and services

Letter of credit (L/C) - a letter from the importer's bank guaranteeing payment; the bank will be required to cover any shortfall if the buyer cannot make payment

Mercantalism - an economic philosophy wherein a national government attempts to achieve a positive balance (exporting more than the nation is importing) of trade through regulation, if necessary, in order to accumulate high levels of monetary reserves; high tariffs are a nearly universal feature

Mercosur - a customs union and trading bloc composed of Argentina, Brazil, Paraguay and Uruguay and Venezuela; intended to promote free trade 

Microcredit - a rising practice of giving very small loans ($100) traditionally to impoverished borrowers who would be unable to obtain other forms of credit; widely used in developing countries and considered a potential means of poverty alleviation 

Mixed economy - a 'mix' between a market and planned economy; sometimes a matter of sectors - some are populated by private enterprises while other sectors have significant state intervention; often a general regulatory environment in which there is some freedom in the use of capital but the government has the power to interfere in business enterprises in order to promote the public good

Multilateral Investment Guarantee Agency (MIGA) - part of the World Bank Group, an international financial organization focused on promoting equity and foreign direct investments in developing countries, mianly through providing political risk insuance to investors

Multinational corporation (MNC) - sometimes called a "transnational corporation", a corporation which operates in more than one nation

Nordic Council - the official inter-parliamentary body in the Nordic region, composed of members from Denmark, Finland, Iceland, Norway, Sweden, the Faroe Island, Greenland and Aland; promouts a common labor market and movement across borders without passports for the coutnries' citizens

Normal Trade Relations (NTR) - formerly called Most Favored Nation (MFN) trade status; legal status given to U.S. trading partner permitting favorable treatment, low tariffs and other concessions for the imports/exports of this nation, on par with all other nations that have been granted similar status

North American Free Trade Agreement (NAFTA) - an agreement between the United States, Canada and Mexico to create a regional trade bloc

Offshore Financial Centers (OFCs) - the IMFincludes in this definition any country or jurisdiction that offers financial services to nonresidents on a scale disproportionate to the size of the domestic economy; generally jurisdictions with low taxes and little government interference, thus making them attractive to offshore companies for use of financial services or investments in offshore funds

Organization for Economic Cooperation and Development (OECD) - An organization and forum composed of member nations intending to "promote policies that will improve the economic and social well-being of people around the world."

Organization of Petroleum Exporting Countries (OPEC) - an organization composed of the petroleum exporting countries, with the stated mission to "coordinate and unify the petroleum policies of its Member Countries and ensure the stabilization of oil markets in order to secure an efficient, economic and regular supply of petroleum to consumers, a steady income to producers and a fair return on capital for those investing in the petroleum industry."

Outsourcing - an activity whereby a business contracts select business processes to an outside party, generally as a cost-saving measure

Overseas Private Investment Corporation (OPIC) - the U.S. government's "development finance institution"; works with the private sector to help U.S. businesses invest in emerging markets (provides financing, political risk insurance, etc.), with the dual purpose of supporting development in these countries and promoting U.S. foreign policy

Pegged exchange rate system - what the International Monetary Fund calls a "fixed exchange rate system"; an exchange rate system in which a currency's value is fixed against the value of another currency, a basket of currencies or a concrete measure of value such as gold; used usually to stabilize the value of a currency and/or facilitate trade between two currencies

Political risk - the risk that a business's returns will be negativley impacted by political instability in a host nation; common considerations include changes in fiscal, monetary, trade, investment and income policies, or even more dramatic events such as civil war, political coups, terrorism etc.

Protectionism- both the theory and practice of protecting a domestic nation's industries from foreign competition through discriminatory tariffs, quotas and regulations

Purchasing Power Parity (PPP) - the measure of a currency's relative value based on purchasing power; a means of determining an exchange rate whereby one currency would have the same purchasing power whether it was used directly to purchased goods, or converted at the PPP rate to another currency to purchase the same goods

Quota - a type of "quantitive restriction" (QR); the limited number (or value) of a good or service that can be imported or exported within a particular time period without additional duties; used to regulate the volume of trade between countries

Real Exchange Rate - the purchasing power of one currency relative to another based on current exchange rates and prices

Regional Development Banks (RDBs) - banks owned and operated by regional member-nations with the express purpose of promoting business and instry development in the region; examples include: the African Development Bank Group, Asian Development Bank, European Bank for Restruction and Development, Inter-American Development Bank

Spot market - a commodities or securities market in which goods are sold for immediate or near-immediate delivery

Trade Barrier - a government-imposed policy intended to interrupt the flow of international trade, generally in order to make imported goods or services less competitive than domestic products; most common example, tariffs 

Transfer pricing - setting the price for goods and services to be sold between two units of the same company, or between a controlled, or related entity and a parent company; legally these prices should match the prices that would exist when doing business with an independent entity, but in practice unrealistic prices are sometimes used to lower profits in units subject to higher tax laws and transfer these profits to units within a low-tax country

Uniform Commercial Code (UCC) - a comprehensive code in U.S. law which addresses most aspects of commercial law and has been adopted (in whole or in part) in all 50 U.S. states

Usury - the illegal practice of lending money at an interest rate considered unairly high; in Islamic finance, this may be any amount of interest

Value-added tax (VAT) - a consumption tax wherein tax is collected at each stage of production in proportion to the value added during that state, as well as at the time of final sale

World Bank - a United Nations financial institution which provides loans and support for reconstruction and development in emerging economies and its member states; also facilitates financing through partnerships

World Customs Organization (WCO) - an independent, intergovernmental organization representing 179 Customs adminsitrations; offers technical assistance, training, standards and regulations to promote greater effectiveness and efficiency amongst the administrations and thus facilitate international trade

World Trade Organization (WTO) - an international organization which provides a forum for the negotiation of agreements intended to reduce obstacles to free international trade