PACKAGE To the Top

A unit of cargo tendered by a shipper to a common carrier for onward transportation.

PACKING COST

The cost of all containers (exclusive of instruments of international traffic) and coverings of whatever nature and of packing, whether for labor or materials, used in placing merchandise in condition, packed ready for shipment.

PACKING LIST

A list which shows number and kinds of packages being shipped, totals of gross, legal and net weights of the packages, and marks and numbers of the packages. The list may be requested by an importer or may be required by an importing country to facilitate the clearance of goods through customs.

PACTA SUNT SERVANDA

A principle of international law that treaties and other international engagements are binding upon the nations that accede to them, and obligations accepted under such engagements must be performed, or reparations made in the event of a breach.

PALLET

A platform upon which a shipment rests or on which goods are assembled and secured before being loaded as a unit onto an aircraft or vessel.

PALLET ALLOWANCE

A provision in some ocean tariffs that the cubic measurement of pallets used in unitized cargoes will be deducted from total cubic measurement or computation of freight.

PAPERLESS RELEASE

Under ABI (Automated Broker Interface), certain commodities from low risk countries not designated for examination may be released through an ABI-certified broker without the actual submission of documentation.

PARATARIFF BARRIER

A distinctive form of non tariff barrier whose incidence is felt through the effect on the amount of duty collected. Paratariff barriers include arbitrary standards of valuation of classification for customs purposes, and can restrict trade only where there is a duty. Any reduction in duty also has the effect of reducing the additional protection afforded by the paratariff barrier.

PARCEL POST RECEIPT

The postal authorities signed acknowledgement of delivery to them of a shipment made by parcel post.

PARIS CLUB

A popular designation for meetings between representatives of a developing country that wishes to renegotiate its “official” debt (normally excluding debts owned by and to the private sector without official guarantees) and representatives of the relevant creditor governments and international institutions. Such meetings normally take place at the initiative of a debtor country that wishes to consolidate all or part of its debt service payments falling due over a specified period.

PAR ITEM

A collection or other transaction in which a paying bank remits to another bank without assessing a fee.

PARITY

An equivalent value for two currencies.

PAR OF EXCHANGE

The equivalent of the unit of money in one country expressed in the currency of another country.

PARTICIPATING CARRIER (AIR FREIGHT)

A carrier participating in a tariff and who therefore applies the rates, charges, routing and regulations of the tariff. It also means a carrier over whose air routes one or more sections of carriage under the AWB is undertaken or performed.

PARTICULAR AVERAGE

Partial loss or damage to goods.

PART-PARTICIPANT (AIR FREIGHT)

Neither a CASS airline nor a billing participant, which advises the Settlement Office of amounts due to it from agents.

PARTS

For purpose of classification (1) if it cannot be used on its’ own; or (2) if it must be combined with other articles to be used; or (3) if it is an integral, constituent, or component part with out which the articles could not function; or (4) it lends to the safe and efficient operation of the articles AND (5) it is identifiable by shape or other characteristics as being an article solely or principally used as a part.

PARTICIPATING CARRIER

A carrier which is a party to tariff issued by another carrier or conference or tariff publishing agent.

PAR VALUE

The nominal value assigned to currency by its issuing authority. Normally, this value is expressed as quantity of gold, or another currency convertible into gold.

PATENT

A grant issued by a governmental authority to an inventor permitting, for a fixed number of years, an exclusive right to the invention. Through various international arrangements, a patent granted in one country may protect the inventor’s rights in certain other countries as well.

PASSENGER

A passenger is any person carried on a vessel who is not connected with the operation of such vessel, her navigation, ownership, or business.

PAYABLE WITH EXCHANGE

A condition that may be written on a bill of exchange or check, the effect of which is to stipulate that exchange conversion or collection costs shall be borne by the payee in the case of a bill, or the maker in the case of a check.

PAYEE

The legal entity who is named in an instrument as the recipient of the amount shown on the instrument. In a check, the maker of the check orders the drawee bank to pay an amount to the payee whose name is written after the word, “Pay to the Order of” on the back of the check. In a draft, the drawer of the draft orders the drawee to pay an amount to the payee whose name appears after the words, “Pay to the order of” or “At Sight”. The payee is the party who will benefit by the payment of an instrument.

PAYING BANK

The bank which will effect payment to the seller-exporter, usually the drawee bank designated in the letter of credit.

PAYMENT IN KIND (PIK)

Form of payment, other than cash, to a person eligible to receive a cash payment from the Commodity Credit Corporation.

PECUNIARY EXCHANGE

The settlement of obligations by payment of money, rather than by goods or service.

PER DIEM To the Top

Per day. Equipment rental charges from one carrier or leasing company to another.

PERFORMANCE BOND

Bond provided by a supplier to assure the buyer that the supplier will perform according to the supply contract. It is usually for about 10% of the contract. The bond will compensate the buyer in the event that the supplier fails to perform.

PERFORMANCE BOND COVERAGE

Usually in the form of a letter of credit issued by the supplier’s bank which represents the bank’s undertaking to compensate the buyer, as beneficiary, up to a stated amount, typically 10-50% of the contract value, in the event the supplier does not perform in accordance with the contract.

PERFORMANCE LETTER OF CREDIT (PLC)

An undertaking, by a bank, in the form of a letter of credit, to assume a contractor’s or supplier’s nonfinancial contractual performance with an overseas buyer. Most common uses of PLCs are as bid bonds, performance bonds, advance payment bonds, and warranty bonds.

PERIL POINT

A hypothetical limit beyond which a reduction in tariff protection would cause serious injury to a domestic industry. U.S. legislation in 1949 that extended the Trade Agreements Act of 1934 required the Tariff Commission to establish such “peril points” for U.S industries, and for the President to submit specific reasons to Congress if and when any U.S. tariff was reduced below those levels. This requirement, which was an important constraint on U.S. negotiating positions in early GATT tariff-cutting Rounds, was eliminated by the Trade Expansion Act of 1962.

PERILS OF THE SEA

A marine insurance term used to describe extraordinary influence of wind, waves, and other violent marine forces serving to endanger a maritime adventure; to be distinguished from the normal, undisturbed forces of the sea that a vessel might reasonablY be expected to encounter during the course of the voyage.

PERIODIC REQUIREMENTS LICENSE

A special validated license authorizing the exportation, during a one-year period, of articles covered in the Commodity Control List to one or more specified consignees in a named ultimate destination.

PERISHABLE

Freight subject to deterioration or decay in a relatively short time; not necessarily refrigerated.

PER MILE (Pronounced meelay)

Per 1000. A basis upon which quotations are frequently made in foreign countries.

PERMIT

A written authority to remove dutiable goods from a bonded warehouse or from a bonded carrier’s possession.

PERMITTED MERCHANDISE

Merchandise is “permitted” when Customs authorizes the carrier bringing the shipment to the port to make delivery to the consignee or the next carrier and:

(a) these parties in interest, or their agents, make a joint determination of the quanti ties being delivered, or

(b) The carrier bringing the shipment to the port, at its option, independently declares the quantities available for delivery by filing with the district director of customs, no later than the close of business on the next working day after a determination of quantities is made, a signed statement that:

(1) an independent determination of quantities of merchandise avail able for delivery has been made, with the date of determination shown;

(2) at least 4 days have elapsed since the consignee or his agent was notified that Customs has autho rized delivery; and

(3) the merchandise was and is available for delivery.

PER PRO

Applied in the signature of an authorized agent on behalf of his principal.

PERSONAL EFFECTS

In custom usage, personal effects are those articles that a traveler might reasonably require during the course of his journey, excluding goods carried for commercial purposes, trade samples or contraband.

PHYTOSANITARY INSPECTION CERTIFICATE

A certificate indicating that a U.S. shipment has been inspected and is free from harmful pests and plant diseases.

PIER

Facility at which a shipment is discharged.

PIER TO PIER

Water carrier receives cargo at origin pier and delivers cargo at discharge pier Applies to CY cargo. Drayage to/from pier borne by customer.

PIGGY BACK

Transporting truck trailers on rail flat cars.

PIGGY BACKING

The assigning of export functions of marketing and distribution from one manufacturer to another.

PILFERAGE

Feloniously breaking into containers and taking and removing property of others.

PILOT

A person whose office or occupation is to steer ships, particularly along a coast, or into and out of a harbor.

PILOTAGE

The charge imposed on a vessel for the services of a pilot to guide the ship into or out of a harbor.

PILOTAGE UNIT

A unit of measure used to calculate pilotage fees charged a vessel for entering or leaving a harbor. The figure is determined by multiplying the ship’s length by its breadth by its depth from its lowest continuous deck, and dividing by ten thousand.

PIRATICAL COPIES

Actual copies or substantial copies of a recorded copyrighted work, produced and imported in contravention (violation) of the rights of the copyright owner. Importation is prohibited.

PIVOT CHARGE

The minimum charge imposed by an air carrier for the use of a united load device or air container. The charge is based upon a pivot weight assigned to the container.

PIVOT WEIGHT

The minimum chargeable weight assigned to an air container or unit load device. Each type of unit load device is assigned a weight (the pivot weight) for which the shipper will be charged even if he does not fill the unit. In the event the shipper loads cargo into the container in excess of the pivot weight, he will be charged at a fixed rate for the excess, in addition to the pivot charge.

PLACE To the Top

A particular street address or other designation of a factory, store, warehouse, place of business, private residence, construction camp or like.

PLACE OF REST

The term “Place of Rest” as used in the containerized Cargo Rules means that location of the floor, dock, platform or doorway at the CFS (container freight station) to which cargo is first delivered by shipper or agent thereof.

PLIMSOLL MARK

The depth to which a vessel may safely load is identified by a horizontal line painted on the outside of the ship. This mark must remain above the surface of the water.

POINT

A particular city, town, village or other community or area which is treated as a unit for the application of rates.

POINT FORECAST

An anticipated rate of exchange for a given foreign currency at fixed point in time.

POINT OF ORIGIN

The station at which a shipment is received by a transportation line for shipment.

POLARISCOPE, TESTING BY THE:

a) “Degree” or “Sugar Degree” means the percentage of sucrose contained in the sugar shown by direct polarimetric estimation.

b) Total sugars means the sum of the su crose, the raffinose, and the reducing sugars.

POLITICAL RISK

Commonly defined to include war, cancellation of an existing import or export license, insurrection, political unrest, expropriation, confiscation, and currency inconvertibility.

POLITICAL RISK COVERAGE

Insurance or guarantee coverage that protects the supplier or financing bank from nonpayment by the buyer or borrower because of political risks in the buyer’s country or a third country through which either goods or payment must pass.

POOL

A facility at which empty equipment is maintained and drawn from as required.

PORT

(a) A harbor or haven where ships may anchor. (b) The left side of a ship.

PORT AUTHORITY

A government body (city, country or state) which in international shipping maintains various airports and/or ocean cargo pier facilities, transit sheds, loading equipment warehouses for air cargo, etc. Has the power to levy dockage and wharfage charges, landing fees, etc.

PORT CHARGES

Fees incurred by a vessel upon entering or leaving a harbor including harbor dues paid to the port authority, as well as fees for pilots and tugs.

PORT CONGESTION SURCHARGE

A charge imposed by a steamship to offset the loss of revenue sustained by vessel calls at port lacking adequate discharging facilities or sufficient labor. The surcharge is usually expressed as a percentage of the basic freight assessed on the cargo.

PORTFOLIO INVESTMENT

The purchase by an individual, company, or financial institution of interest-bearing overseas securities, either government securities or company stocks and shares, but not involving the investor in acquiring control of the concern in which it is investing.

PORT MARKS OR MARKS AND NUMBERS

Identifying marks on crates or packages, including geometric shapes, which are required to be shown on all export and import packages.

PORT OF ARRIVAL IMMEDIATE RELEASE AND ENFORCEMENT DETERMINATION (PAIRED)

A U.S. Customs program that allows entry documentation for an import shipment to be filed at one location, usually an inland city, while the merchandise is cleared by customs at the port of entry, normally a seaport. May be ineffective with certain types of high-risks cargoes, such as quota-regulated textiles or shipments from drug-production regions. Cities where there is a natural flow of cargo are actually “paired” in the program; e.g., Atlantia, an inland city, is linked with Savannah, a seaport. Tested in ‘87-’88, it became generally available in mid-’88.

PORT OF CALL

A port at which a ship discharges or receives cargo.

PORT OF CHARGE

A charge made for services performed at ports.

PORT OF DISCHARGE

The pier at which a shipment is discharged.

PORT OF ENTRY

The terms “port” and “port of entry” refer to any place designated by Executive Order of the President, by order of the Secretary of the Treasure, or Act of Congress, at which Customs Officer is authorized to accept entries of merchandise to collect duties, and to enforce the various provisions of the Customs and navigation laws. The terms “port” and “Port of Entry” incorporate the geographical area under the jurisdiction of a port director when such port is one other than a district headquarters port. (Customs District of Virgin Islands, although under Secretary of Treasury has own Customs laws (48 USC 14065(i) is outside Customs Territory of the U.S. and Ports thereof are not “Ports of Entry”).

POSITIVE ADJUSTMENT

The term first used by the OECD to distinguish government policies which positively promote adjustment in the face of increased import competition as opposed to policies which are purely defensive and compensatory and which reduce the ability of countries to adjust. For example, a blanket subsidy given to a firm or an industry unable to compete with low cost imports from abroad forestalls adjustment. Government assistance to enable workers to retrain promotes adjustment.

POSITIVE CONCEPT OF VALUATION

An approach to the application of ad valorem duties that holds that duties should be applied upon the actual value of the transaction, as defined by buyer and seller. This view has been substantially fulfilled by the recent adoption of the transaction value basis of valuation in the Customs Valuation Agreement.

POWER OF ATTORNEY

A legal document in written form whereby one person grants to another person the legal rights of utilization, tenancy, transfer, or disposal of assets owned by the first person as though he himself were performing these rights. A power of attorney may be limited as to the assets listed in the power of attorney or may give full power over all assets owned.

PRECLEARANCE To the Top

The examination and inspection of air travelers and their baggage, at the request of an airline, at foreign places where Customs personnel are stationed for that purpose. Preclearance may be used only for air travelers and their baggage, not for merchandise.

PRE-COLUMBIAN MONUMENTAL AND ARCHITECTURAL SCULPTURE AND MURALS

The term “pre-Columbian monumental or architectural sculpture or mural “ means any stone carving or wall art listed in Section 12.105 paragraph B of the Customs Regulation of the United States which is the product of Pre-Columbian, Indian Culture of Belize, Bolivia, Columbia, Costa Rica, Dominican Republic, Ecuador, El Salvador, Guatemala, Honduras, Mexico, Panama, Peru, or Venezuela.

PREEMPTION

The prerogative of customs authorities to seize and sell merchandise that an importer has deliberately undervalued to avoid payment of duties.

PREFERENTIAL DUTIES

Especially low rates of duty granted by member of a political system to one another, or by a mother country to her colonial possessions.

PREMIUM

The adjustment to a spot price made in arriving at a quote for future delivery. If a dealer quotes $1.60-$1.65 (bid and asked) for British pounds and the premium for six months forward is 0.0275-0.0300, the forward quoted will be adjusted to $1.6275-$1.6800. The premium usually represents differences in interest rates for comparable instruments in the two countries. In a volatile situation, the premium can represent the market anticipation of a higher price.

PREMIUM (EXCHANGE)

In foreign exchange transactions, the rise in value of one currency when measured against another currency.

PREMIUM (INSURANCE)

The compensation paid to an insurance underwriter in return for the assumption of an agreed risk, as evidenced by issuance of a policy.

PREPAID

A notation indicating that transportation charges, or a portion of charges, have been paid at the point/port of origin.

PRESENTATION

“Presentation” according to part 141.0a (e) of the Customs Regulations of The United States is used only in connection with quota-class merchandise and is defined in Section 132.1 (d) as:

Presentation is the delivery in proper form to the appropriate Customs officer of:

1.) An entry summary for consumption, which shall serve as both entry and entry summary, with estimated duties attached; or

2.) A withdrawal for Consumption with duties attached.

PRESENTING BANK

The bank presenting the draft and documents to the drawee; may be the collecting bank or a branch or correspondent of the bank in the locality of the importer.

PRESENT VALUE

The discounted value of a certain sum due and payable at a certain specified due date.

PRESHIPMENT PERIOD

The period from date of contract signing to date of shipment. Insurance or guarantee cover and/or financing is sometimes available for this period.

PRE-SLUNG CARGO

Cargo shipped already in a cargo sling or net. Usually prepared and loaded at pier ready for arrival of vessel and subsequent loading. Example, coffee in bags, coconut shells etc.

PRICE CARTEL

An agreement among business entities to fix prices, to establish ranges within which prices may move, or to establish methods by which prices may be determined.

PRICE PAID OR PAYABLE

The total payment (whether direct or indirect, and exclusive of any charges, costs, or expenses incurred for transportation, insurance, and related services incident to the international shipment of the merchandise from the country of exportation to the place of importation in the U.S.) made, or to be made for imported merchandise by the buyer to, or for the benefit of, the seller.

PRIME BILL OF EXCHANGE

A draft or trade acceptance with a six month limitation which states on the face of the instrument that it was created through a business transaction involving a movement of goods.

PRIMA FACIA

Of first appearance.

PRIME MAKER The party who signs his name to a negotiable instrument and who becomes the original primary responsible party for its ultimate payment.

PRINCIPAL MARKETS In customs usage, the chief places in the country of exportation where the goods are freely sold or offered for sale, not necessarily the place where they are manufactured or delivered.

PRINCIPAL SUPPLIER

A nation that serves as the major source of supply to another country for a specific product.

PRINCIPLE USE

For the purpose of classification it means, the use that exceeds any other individual use. Principle use can mean different things to different countries. Defined in U.S. rule 1 (a) of the Harmonized Tariff System.

PRIOR IMPORT DEPOSIT

A sum that an importer is obliged to deposit with his nation’s central bank or other governmental authority as a condition for the issuance of an import license. Most industrialized nations do not require such deposits, but they are common in many developing nations, where the deposit may equal 100 percent of the value of the imported merchandise. The deposits are almost always denominated in the importer’s local currency.

PRIVATE AIRCRAFT

Any aircraft engaged in a personal or business flight to or from the U.S which is not:

(1) Carrying passengers and/or cargo for commercial purposes:

(2) Leaving the U..S. carrying neither passen gers nor cargo in order to lade passengers and/or cargo in a foreign area for com mercial purposes: or

(3) Returning to the U.S. carrying neither passengers nor cargo in ballast after leaving with passengers and/or cargo for commercial purposes.

PRIVATE BILL To the Top

A bill of exchange drawn upon and accepted by a party other than a bank; trade acceptances, for example, are private bills.

PRIVATE EXPORT FUNDING CORPORATION (PEFCO)

A private corporation formed in 1970 to provide intermediate term finance for foreign buyers of U.S. exports, under guarantee of the EximBank.

PRIVATE INTERNATIONAL LAW

The branch of international law that deals with the actions of private person or firms. Disputes rising under private international law are normally addressed in the municipal courts.

PRIVILEGED DOMESTIC STATUS

A condition that may be accorded to merchandise of U.S. origin, or to imported merchandise upon which duties have been paid, that is entered into a foreign trade zone. Any eligible merchandise so entered that is subject to internal revenue tax must have taxes paid prior to application for this status. Application is made to the district director of customs. Goods granted this status may re-enter the customs territory free of duties and taxes.

PRIVILEGED FOREIGN STATUS

A condition that may be accorded to foreign merchandise entering a foreign trade zone. Foreign merchandise entering a zone remains exempt from duty until withdrawn, by means of a consumption entry, for use. With foreign privileged status duties and taxes are assessed (but not collected) at the rates applicable to the merchandise at time of application to the district director of customs; actual payment occurs only upon withdrawal of the goods from the zone. This procedure permits the importer to fix his duties and taxes against anticipated future increases. This status cannot be accorded to goods that have been manipulated so as to change their tariff classification prior to application.

PRODUCED IN BENEFICIARY DEVELOPING COUNTRY

For purposes of parts 10.171 through 10.178 of The Customs Regulations of The United States, the words produced in the beneficiary developing “country” refer to the constituent materials which the eligible articles composed which are either:

1. wholly the growth, product, or manufac ture of beneficiary developing country; or

2. substantially transformed in the benefi ciary developing country into a new and different article of commerce. 35% of appraised value. Note: if questionable origin, considered to be produced in beneficiary developing country.

PRODUCT OF THE UNITED STATES

A “product of the United States” is an article manufactured within the Customs territory of the United States and may consist wholly of United States components or materials of United States and foreign components or materials, or wholly of foreign components or materials. If the article consists wholly or partially of foreign components or materials, the manufacturing process must be such that the foreign components or materials have been substantially transformed into a new and different article or have been merged into a new and different article.

PRO FORMA INVOICE

An invoice provided by a supplier to a buyer prior to the shipment of merchandise. The invoice contains the following information: a list of requested products; descriptions; prices; gross and net shipping weights; volumes; terms of payment; insurance and shipping costs; delivery point and expiration date. “Pro forma” means that the invoice is only a quotation, although the actual invoice for a sale would look identical.

PROHIBITIVE DUTY

A rate of duty so high as to effectively preclude entry of an item. Generally, prohibitive duties increase the selling price to such a level that the item cannot compete with domestic substitutes. Prohibitive duties are designed to protect domestic infant or ailing industries from vigorous competition or to retaliate for duty increases by other countries.

PROJECT LICENSE

A special validated license covering the exportation of controlled articles or articles to controlled destinations as specified in Commodity Control List in furtherance of an approved activity abroad. Such licenses are normally limited to period of one year or less.

PROMISSORY NOTE (P/N)

A written promise made by one person, the maker, to pay a certain sum to another person, the payee, or to his order on demand, at a specific or determinable future date.

PRO NUMBER

A number assigned by the carrier to a single shipment, used in all cases where the shipment must be referred to. Usually assigned at once.

PROOF OF DELIVERY

The consignee’s written certification that the cargo has been delivered.

PROPENSITY TO IMPORT

The relationship between income and the value of imports, expressed in monetary terms.

PROPORTIONAL RATE

A freight rate that is constructed by adding separate joint or local rates applying to a through movement. A proportional rate, unlike a combination rate, is applicable only when the goods have been transported prior or subsequent to the journey for which the rate applies.

PRORATE

To divide or distribute charges proportionally.

PROSPECTIVE TRANSACTION

A Custom’s transaction that is contemplated or is currently being undertaken and has not resulted in any arrival or the filing of any entry or other document, or in any other act to bring the transaction, or any part of it, under the jurisdiction on any customs service office.

PROPRIETARY (PTY)

Signifying a privately owned company in Great Britain and the Commonwealth.

PROTECTIONISM

The deliberate use or encouragement of restrictions on imports to enable relatively inefficient domestic producers to compete successfully with foreign producers.

PROTEST

A legal procedure of officially registering the fact that a draft has been presented for payment or acceptance and has been dishonored by the drawee. It is usually preliminary to further legal action against the defaulting drawee.

PROTRACTED DEFAULT

A commercial risk which is generally defined by certain Export Credit Agencies as payment outstanding six months or longer past maturity.

PUBLIC AIRCRAFT

Any aircraft owned by, or under the complete control and management of the U.S government or any of its agencies, or any aircraft owned by or under the complete control and management of any foreign government which exempts public aircraft of the U.S. from arrival, entry and clearance requirements similar to those provided in Subpart C of this part, but not including any government owned aircraft engaged in carrying persons or property for commercial purposes. This definition applies if the aircraft is:

(1) Manned entirely by members of the armed forces or civil service of such government, or by both:

(2) Transporting only property of such government, or passengers traveling on official business of such government; or

(3) Carrying neither passenger nor cargo.

PUBLIC INTERNATIONAL LAW

The body of international law that governs the conduct of a nation as a sovereign entity in its relations with other nations. It does not deal with the international activities of private individuals or firms.

PUBLIC LAW 480 (PL-480)

The Food for Peace program, providing foreign buyers with concessional financing for the purchase of U.S. agricultural commodities. Operated by the U.S. Department of Agriculture.

PUBLIC STORES

Any premises owned or leased by the government and used for the storage of merchandise undergoing examination by the Customs Officer, under seizure, or pending final release from Customs custody.

PURCHASING AGENT

An agent who purchases goods in his/her own country on behalf of foreign importers such as government agencies and large private concerns.

PURCHASE ORDER

A purchaser’s written offer to a supplier formally stating all terms and conditions of a proposed transaction.

PURCHASE PRICE

The price at which imported merchandise has been purchased, or will be purchased, prior to exportation. It is usually based on the ex factory price excluding any export duties levied in the country of manufacture. Defined in 19 U.S.C. 162.

Within the framework of the European Economic Community’s Common Agricultural Policy, the purchase price is the point at which EEC governments will directly intervene in the market to buy certain agricultural commodities selling at distressed prices.

PURCHASING POWER PARTY To the Top

An equal relationship of prices between two countries. Price levels in both countries are substantially the same, considering the rate of exchange.