Acceptance Letter of Credit
A letter of credit that, in addition to other required documentation, requires presentation of a term draft drawn on the bank nominated as the accepting bank under the letter of credit.
Back to top
Accepted Draft
A bill of exchange accepted by the drawee (acceptor) by putting his signature (acceptance) on it's face. In doing so, he commits himself to pay the bill upon presentation at maturity.
Back to top
Accepting Bank
A bank that by signing a time draft accepts responsibility to pay when the draft becomes due. In this case the bank is the drawee (party asked to pay the draft) but only becomes the acceptor (party accepting the responsibility to pay) upon acceptance (signing the draft).
Back to top
Acceptor
The party that signs a draft or obligation, thereby agreeing to pay the stated sum at maturity.
Back to top
Account Party
The party that instructs the bank (issuing bank) to open a letter of credit. The account party is usually the buyer or importer.
Back to top
Advance Against Collection
A short term loan or credit extended to the seller (usually the exporter) by the seller's bank once a draft has been accepted by the buyer (generally the importer) of the seller's goods. Once the buyer pays the loan is paid off. If the buyer does not pay the draft, the seller must still make good on the loan.
Back to top
Advance payment
Trading method in which the buyer pays for the goods before they are dispatched. Used where the buyer is of unknown creditworthiness and is unable to obtain a letter of credit.
(Also used as a matter of convenience for small orders).
Back to top
Advice
The forwarding of a letter of credit, or an amendment to a letter of credit to the seller, or beneficiary of the credit, by the advising bank (typically the sellers bank).
The term "advice" connotes several types of forms used in the banking field. In general terms an advice is a form of letter that acknowledges a certain action or result in regards to a customer's relation to the bank. Examples include credit advice, debit advice, advice of payment, and advice of execution. In commercial transactions, information pertaining to a business activity such as the delivery of goods.
Back to top
Advice of fate
A bank's notification of the status of a collection that is still outstanding.
Back to top
Advised Credit
A letter of credit whose terms and conditions have been forwarded by a bank.
Back to top
Advising bank
Bank (also referred to as the seller's bank or exporter's bank), usually in the seller's country, whose primary function is to authenticate the letter of credit and advise it to the seller.
The Advising bank MAY also take on other roles in the transaction, e.g.:
* confirm the letter of credit (confirming bank)
* accept a term bill of exchange (accepting bank)
* pay the seller upon presentation of documents (paying or negotiating bank)
Back to top
After Date
A notation used on financial instruments (such as drafts or bills of exchange) to fix the maturity date as a fixed number of days past the drawing of the draft. For example, if a draft stipulates "90 days after date" it means that the draft is due (payable) 90 days after the date it is drawn. This has the effect of fixing the date of the maturity of the draft, independent of the date of acceptance of the draft.
Back to top
After sight
A notation on a draft that indicates that payment is due a fixed number of days after the draft has been presented to the drawee. An example of which is "30 days after sight" which means that the drawee has thirty days from the presentation of the draft to make payment.
Back to top
Agent bank
A bank acting for a foreign bank or a bank handling administration of a loanin a syndicated credit.
Back to top
Air waybill
Transport document used in air freight. Serves as a receipt for the goods and evidence of carriage contract.
An airway bill is used by many truckers as a through document for coordinated air/truck service.
Airway bills are not negotiable. The airline industry has adopted a standard formatted waybill that accommodates both domestic and international traffic. The standard document was designed to enhance the application of modern computerized systems to air freight processing for both the carrier and the shipper.
An air waybill is not a document of title and so is not needed by the consignee in order to claim the goods from the carrier.
Back to top
All risks insurance
Extensive insurance coverage of cargo including coverage due to external causes (risks set out in Institute of London Underwriters Cargo Clauses A.) such as fire, collision, pilferage, etc., but usually excluding such "special" risks such as those resulting form acts of war, labor strikes, perishing perishable goods, and from internal damage due to faulty packing, decay, or loss of market.
Back to top
Amendment
An addition, deletion or change in a legal document.
A change in the terms and conditions of a letter of credit (e.g., extension of the letter of credit's validity period, shipping deadline, etc.), usually to meet the needs of the seller. The seller requests an amendment of the buyer who, if he agrees, instructs his bank (the advising bank) who then notifies the seller of the change. In the case of irrevocable letters of credit, amendments may only be made with the agreement of all the parties to the transaction.
Back to top
Applicant
Buyer/importer in a letter of credit transaction, who applies to the Issuing Bank for a letter of credit in favor of the seller (beneficiary).
May also be referred to as the accountee or accreditor.
Back to top
Approval basis
If documents containing discrepancies are presented to the nominated bank under a letter of credit, the bank can forward the documents to the issuing bank for approval, with the beneficiary's agreement. Because of the risk of loss in transit and delay's resulting in interest loss, however, it is recommended that the beneficiary first try to correct the document; but, if that is not possible, the beneficiary asks the nominated bank to contact the issuing bank for authorization to accept the discrepancies.
Issuing banks charge a fee to accept discrepant documents if they will, in fact, accept them.
Back to top
Arrival notice
A notice furnished to the consignee and shipping broker alerting them to the projected arrival of freight and it's availability for pickup.
Back to top
Assignment
The transfer of rights, title, interest, and benefits of a contract or financial instrument to a third party.
The beneficiary of a letter of credit is entitled to assign his claims to any of the proceeds that he may be entitled to, or portions thereof, to a third party. Usually the beneficiary informs the issuing bank that his claims under the letter of credit were assigned and asks the bank to advise the assignee (third party) that it has acknowledged the assignment. The validity of the assignment is not dependant on bank approval. In contrast, the transfer requires the agreement of the nominated (beneficiary) bank. An assignment is possible regardless of whether the letter of credit is transferable.
Back to top
At sight
Terms of a financial instrument that is payable upon presentation or demand. A bill of exchange may be made payable, for example, at sight or after sight, which (respectively) means it is either payable upon presentation or demand or within a particular period after the demand is made.
Back to top
Availability
In letters of credit, refers to the availability of documents in exchange for payment of the amount stated in the letter of credit.
Availability options are as follow:
By sight payment: payment on receipt of the documents by the issuing bank or the bank nominated in the letter of credit.
By deferred payment: payment after a period specified in the letter of credit, and the payment thereof at maturity.
By acceptance: acceptance of a draft (to be presented together with other documents) by the issuing bank or by the bank nominated in the letter of credit, and the payment thereof at maturity.
By negotiation: the giving of value by the nominated bank to the beneficiary for the documents presented, subject to receipt of cover from the issuing bank.
Back to top
Avalisation
Payment undertaking given by a bank in respect of a bill of exchange drawn on a buyer. A way of giving security to the drawer of a term bill.
The bill is stamped with wording such as 'Pour aval' and signed by a representative of the bank.
Back to top
Back-to-back letters of credit
A new letter of credit opened in favor of another beneficiary on the basis of an already existing, non-transferable, letter of credit.
For example, an American merchant agrees to buy cotton from Brazil for sale to a Chinese pants manufacturer. The Chinese manufacturer opens a non-transferable letter of credit for payment to the American merchant who then uses the strength of the letter of credit as a security with his bank for the opening of a new letter of credit to finalize payment to the Brazilian cotton supplier.
The beneficiary of one L/C (prime or 'master' letter of credit) offers this as security for the issue of a further L/C (second or 'slave' letter of credit) in favor of the supplier of the goods.
The bank issuing the second L/C (usually Advising bank to the prime L/C) is called the second Issuing bank.
Back to top
Bank acceptance
A bill of exchange will be drawn or accepted by a bank to pay specific bills for the customer when the bill becomes due. Depending on the bank's creditworthiness, the acceptance becomes a financial instrument that can be discounted for immediate payment.
Back to top
Bank draft
A check drawn by one bank against funds deposited to it's account in another bank.
Back to top
Bank guarantee
Undertaking given by a bank on behalf of a customer to pay the guaranteed party a sum of money if the customer cannot or will not pay.
(Not to be confused with the payment undertaking given under a letter of credit).
Back to top
Bank release
A document issued by a bank, after it has been paid or given an acceptance, giving authority to a person to take delivery of goods.
Back to top
Banker's Bank
A bank that is established by mutual consent by independent and unaffiliated banks to provide a clearinghouse for financial transactions.
Back to top
Banker's draft
A draft payable on demand and drawn by, or on behalf of, a bank itself. A banker's draft is considered cash and cannot be returned unpaid.
Back to top
Bearer
The person in possession.
A person who possesses a bearer document and who is entitled to payment of funds or transfer of title to property on presentation of the document to the payee or transferor. A buyer, for example, who presents bearer documents of title (such as a bill of lading) to a shipper that transported the goods is entitled to receive the shipment. A seller who presents to a bank a negotiable instrument, such as a check, that is payable to the bearer is entitled to payment of the funds.
Back to top
Bearer document
A negotiable instrument, commercial paper, document of title, or security that is issued payable or transferable on demand to the individual who holds the instrument, or one that is endorsed in blank. A bearer document authorizes the payment of funds or the transfer of property to the bearer when the bearer presents the document to the person, such as the bank or shipper, that is holding the funds or property.
Back to top
Beneficiary
The individual or company in whose favor a letter of credit is opened.
Back to top
Bill of exchange
The most commonly-used financial instrument in international trade.
An unconditional order in writing, signed by a buyer, and addressed to another person (drawee), typically a bank, ordering the drawee to pay a stated sum of money to yet another person (payee), often a seller, on demand or at a fixed or determinable future date.
The most common versions of a bill of exchange are:
A Draft; wherein the drawer instructs the drawee to pay a certain amount of money to a named person, usually in payment for the transfer of goods or services.
Sight drafts; are payable when presented.
Time Drafts; (also called usance drafts) are payable at a fixed future (specific) date or determinable (30, 60, or 90 days etc.) date. Time drafts are used as a financing tool (as with documents against acceptance, D/A terms) to give the buyer time to pay for the purchase.
Also known as a draft.
Back to top
Bill of lading
Transport document issued by the carrier. Serves as:
* a receipt for goods taken in charge
* evidence of the carriage contract
* a document of title - if appropriately drawn up, can allow bearer to claim the goods.
Back to top
Blank endorsement
The method whereby a bill of lading is made into a freely negotiable document of title.
Any bearer of a blank endorsed bill of lading has title to the goods and may claim them from the carrier.
Insurance documents can also be blank endorsed, so that any party can make a claim if necessary.
Back to top
Carriage and insurance paid (CIP)
Incoterm for all transport modes.
Exporter:
* delivers to a named destination
* pays costs, insurance & freight
* provides transport & insurance documents
* pays export duties
Importer:
* pays costs from named destination.
Back to top
Carriage paid to (CPT)
Incoterm for all transport modes.
Exporter:
* delivers to named destination
* pays cost and freight
* provides export license
* provides transport document
Importer:
* pays cost and freight from named destination
* pays insurance
* pays import duties
Back to top
Carrier
Party responsible for transport of goods (shipping line, airline, road haulage company etc.)
Back to top
Case of need
In a collection, party in the buyer's country who is designated by the seller to advise and/or give instructions in the event of problems or disputes. The collection order will specify whether the case of need is authorized to instruct the bank.
Back to top
Cash cover
In a letter of credit transaction, money is deposited by the applicant with the issuing bank: e.g. when existing credit facilities are fully utilized.
Back to top
Certificate of analysis/certificate of inspection
Documents that may be asked for by the importer and/or the authorities of the importing country, as evidence of quality or conformity to specifications.
Back to top
Certificate of origin
Documents that may be asked for by the authorities of the importing country, as evidence of the country of manufacture of the goods and hence qualification for preferential tariffs etc.
Back to top
Charter party bill of lading
Bill of lading issued by the charter or hirer of a vessel. Unpopular with banks, because situations can arise when the owner of the vessel has a claim on the goods.
Back to top
Clean collection
Collection in which only the financial document (bill of exchange) is sent through the banks.
(Commercial documents are sent direct to buyer or may accompany the goods).
Back to top
Collecting bank
Bank in the buyer's country that participates in a collection. The collecting bank may or may not also be the presenting bank, who presents documents to the buyer and claims payment.
Back to top
Collection
Trading method in which the banking system acts on behalf of the seller, presenting documents to the buyer and only releasing them upon payment (or upon acceptance of a term bill).
Back to top
Collection order
In a collection, the document in which the seller instructs the banks as to how the collection is to be conducted.
Back to top
Combined transport bill of lading
Transport document, widely used for container shipments, covering more than one transport mode: e.g.(Rail and Sea) have the same general characteristics as a marine Bill of Lading.
Back to top
Commercial document
General term for documents describing various aspects of a transaction, e.g. commercial invoice, transport document, insurance document, certificate of origin, certificate of inspection etc.
Back to top
Commercial invoice
Document drawn up by the seller that summarizes the commercial transaction (goods supplied, price, means of shipment and so on).
Back to top
Commitment fee
Various meanings:
* Fee charged by a forfaiter for reserving funds to a forfaiting transaction
* Fee charged by a negotiating bank for waiving recourse to the beneficiary in the event of non-payment by the Issuing bank.
Back to top
Compliant documents
Documents presented under a letter of credit that comply with all its terms and conditions. The banks are only obliged to pay the beneficiary if documents are compliant.
Back to top
Confirmed letter of credit
Letter of credit in which a bank (usually) in the seller's country adds its own payment undertaking to that of the Issuing bank. Protects against country risk and bank risk as well as customer credit risk.
Back to top
Confirming bank
Bank who adds its payment undertaking to a letter of credit. See confirmed letter of credit.
Back to top
Consignee
Party to whom goods are to be delivered.
NB some transport documents such as bills of lading may be made out consigned 'to order'.
Back to top
Constructive control
The ability to retain control over goods dispatched to the buyer. Usually maintained through transport documents. Where there is credit risk, constructive control is important to the seller. Constructive control may also be important to a bank who has financed a transaction.
Back to top
Consular invoice
Commercial invoice prepared in the seller's country by the consulate of the buyer's country. Helps the government of the buyer's country control and regulate imports.
Back to top
Correspondent bank
Overseas bank with whom a bank account has relationships (nostro-vostro accounts) and arrangements for authentication of communications.
Back to top
Cost and freight (CFR)
Incoterm.
Seller pays transport costs to named destination, but not insurance.
Back to top
Cost, insurance and freight (CIF)
Incoterm.
Seller pays transport costs and insurance to named destination.
Back to top
Counter credit
Another name for back-to-back letter of credit.
See Back-to-back letters of credit
Back to top
Country risk
Risk that economic or political instability in the buyer's country will interfere with the buyer's ability to pay for goods supplied.
Back to top
Cover note
Insurance document evidencing that insurance cover for a consignment has been taken out, but not giving full details.
Back to top
Currency option
Foreign exchange transaction in which a party buys the right (but not the obligation) to buy or sell a given amount of foreign currency at a given exchange rate at either:
* a given future date
or
* at any point within a future time period.
Back to top
Deed of Assignment
A banking arrangement between the beneficiary of a letter of credit and a third party - usually the supplier of the goods - who requires an assurance of payment.
The beneficiary of the credit is the assignor: part of the proceeds of the credit are irrevocably assigned to the assignee.
Back to top
Deed of protest
Document evidencing that a protest has been carried out.
In a collection, a bank may be asked to do this if a bill of exchange is not paid, accepted or honored at maturity.
Back to top
Delivered at frontier (DAF)
Incoterm
All transport modes, but designed for road and rail.
Exporter
* delivers at the frontier
* pays cost and freight to place of delivery
* provides export license
* provides evidence of delivery
Importer
* pays cost and freight from named destination
* pays insurance
* pays import duties
Back to top
Delivered duty paid (DDP)
Seller pays all costs (transport, loading, unloading, insurance, import and export duties) associated with delivering the goods to the buyer.
Back to top
Delivered duty unpaid (DDU)
Incoterm
Exporter
* delivers to a named place
* provides an export license
* provides a transport document
* pays cost and freight to the named place
* does not pay import duties and taxes
Importer
* provides an import license
* pays import duties and taxes
Back to top
Delivered ex-quay (duty paid)
Incoterm
Exporter
* delivers to a named destination
* pays freight and insurance
* pays export duties
* pays import duties
* pays unloading fees
Where importer is to pay some or all importation costs, wording may be varied, e.g.
DEQ duty unpaid
DEQ VAT unpaid
Back to top
Delivered ex-ship (DES)
Incoterm
Sea or inland waterway transport only
Exporter
* delivers to a named destination
* pays freight and insurance
* pays export duties
Importer
* pays unloading fees if extra
* pays import duties and taxes
Back to top
Demurrage
Charges made for storing goods at the port of destination while awaiting collection by the buyer.
These may be incurred unintentionally if the goods arrive before the buyer has received the document of title.
Back to top
Discounting of bills
Where the payee of a term bill requires payment immediately, a bank may discount the bill, i.e. make immediate payment, deducting an amount for interest over the term of the bill.
Back to top
Document of title
A transport document (usually a bill of lading) which (when appropriately made out) entitles the bearer to claim the goods from the carrier.
Back to top
Documentary collection
Procedure in which banks in the buyer's and seller's country act for the seller by presenting commercial documents to the buyer along with a payment demand (usually a bill of exchange).
Back to top
Documentary credit
Another name for a letter of credit.
Back to top
Draft
Another name for a bill of exchange.
See Bill of exchange
Back to top
Drawee
Party on whom a bill of exchange is drawn, i.e. who is required to make payment.
In the context of collections, usually the buyer.
In letters of credit, the drawee is usually a bank.
Back to top
Drawer
Party drawing up the bill of exchange. Usually also the payee, to whom the money is due.
Often used synonymously with 'seller'.
Back to top
Endorsement
Signing on the back of a document so as to assign a right or benefit to another party.
Endorsement by the seller may be necessary for
* transport documents
* insurance documents
* bills of exchange
Back to top
Engagement
The assumption of payment responsibility in respect of a letter of credit, e.g. when an Advising bank agrees to add its confirmation to a credit.
Back to top
Evergreen clause
Clause in a standby letter of credit to the effect that it remains in effect indefinitely - the letter of credit only expires upon receipt of advice to that effect from the Issuer. The clause may include a notice period - for example, expiry date is ninety days after advice.
Back to top
Ex-works (EXW)
Incoterm
Buyer bears all costs and assumes all risks for the consignment once it has been made available for collection by the buyer at the seller's premises or other named place. Seller is not responsible for loading goods onto buyer's vehicle.
This Incoterm places the minimum obligation on the seller by way of costs and risks, and the maximum obligation on the buyer.
Back to top
Expiry date
The date when a letter of credit ends - i.e. beyond which it cannot be used.
Back to top
Financial document
Document relating to payment.
The bill of exchange is the financial document most commonly used in collections and letters of credit.
Promissory notes are sometimes used in collections.
Back to top
Fixed forward contract
Currency is bought or sold at a given future date.
Back to top
Forward contract
A contract for the sale or purchase of a given amount of foreign currency at a future time at a rate of exchange that is fixed when the contract is made.
Back to top
Forward option contract
Currency must be bought or sold within a given period of time.
Back to top
Free Alongside Ship
Incoterm
Exporter
* delivers goods alongside ship
* provides alongside receipt
Importer
* pays freight charges and insurance
* pays for export license and taxes
Back to top
Free Carrier (FCA)
Incoterm
May be used for any mode of transport. Common for containerised shipments.
Exporter
* delivers to a named place
* provides export license
* pays export duties
Importer
* pays all costs from named place (insurance, import duties, taxes)
Back to top
Free On board (FOB)
Incoterm
Seller pays for loading onto vessel, but not for carriage or insurance.
Back to top
Freight Forwarders' Receipt
Transport document issued by Freight Forwarder. Not a document of title.
Back to top
Guarantee
Bank guarantee.
Undertaking given by a bank on behalf of a customer to pay the guaranteed party a sum of money if the customer cannot or will not pay.
(Not to be confused with the payment undertaking given under a letter of credit).
Back to top
Householder' protest
Protest that is carried out by a property owner (in practice usually a bank official) when a notary public is not available.
Back to top
Incoterms
Standard sets of trading conditions setting out responsibilities of buyer and seller
* who pays for carriage, loading, unloading, insurance, duties etc.
* at what point buyer assumes risk.
Commonest Incoterms are FOB, CIF, CFR, EXW.
For full list and more details, see Incoterms in main reference section.
Back to top
Institute Cargo Clauses
Standard conditions of insurance cover for goods, established by the Institute of London Underwriters.
Referred to as clauses A, B and C.
Back to top
Insurance certificate
Document giving details of insurance cover for a consignment.
The certificate will cross-reference a master insurance policy and must be countersigned.
Back to top
Insurance cover note
Insurance document evidencing that insurance cover for a consignment has been taken out, but not giving full details.
Back to top
Insurance policy
Document setting out full details of insurance in force.
A policy MAY refer to a single consignment and be sent with the other commercial documents. More commonly there is an open policy for all the shipper's consignments. For each consignment an insurance certificate is issued, cross-referencing the policy.
Back to top
International Chamber of Commerce
International non-governmental body concerned with promotion of trade and harmonisation of trading practice. Responsible for drafting and publishing:
* Uniform Rules for Collections no. 322
* Uniform Customs and Practices no. 500
Back to top
Inward collection
How a Collecting or Presenting bank will refer to a collection.
Collection that has been received from an overseas bank or exporter for presentation to a buyer in this country.
Back to top
Inward letter of credit
How an Advising or Confirming bank will refer to a letter of credit.
A letter of credit issued by an overseas bank for advice to a seller in this country.
Back to top
Irrevocable letter of credit
A letter of credit that cannot be cancelled or amended unless all parties give their agreement. Under UCP 500 all credits are irrevocable.
Revocable credits are very rare.
Back to top
Issuing bank
Bank giving the primary payment undertaking for a letter of credit, acting on behalf of a buyer.
Back to top
Latest shipment date
Date on a letter of credit by which the goods must have been dispatched.
At presentation, this date will be checked against the date on the transport document.
Back to top
Letter of credit
Undertaking given by a bank on behalf of a buyer to pay a seller a sum of money upon presentation of documents complying with all the terms and conditions of the letter of credit.
Back to top
Mail transfer
Payment instruction sent by airmail from one bank to another.
Back to top
Maturity date
Date at which payment is due under a term bill of exchange.
Back to top
Negotiating bank
Bank nominated on a letter of credit to negotiate the bill of exchange, i.e. check the documents, pay the seller and seek reimbursement from the Issuing bank.
Back to top
Negotiation
'Buying' of a bill of exchange drawn on another party.
When letters of credit are settled by negotiation, a negotiating bank may be nominated to check the documents, pay the seller and seek reimbursement from the Issuing bank. Alternatively the credit may be freely negotiable at any bank.
Back to top
Nostro-vostro accounts
Accounts held by correspondent banks in each others' currencies.
Each such account has a nostro view - our money held with you - and a vostro view - your money held with us.
Back to top
Note
Procedure that may carried out to evidence non-payment or non-acceptance of a bill of exchange. A preliminary to a protest. Not recognized in all countries.
Back to top
Notify party
Party who is to be notified when goods arrive at their destination.
Back to top
Open account
Trading method in which goods are dispatched to a buyer and paid for after they have been received.
Back to top
Opening bank
Another name for the Issuing bank in a letter of credit.
Back to top
Order
On a bill of exchange, 'order' or 'to order' means that the drawer directs payment to be made to another party (usually a bank).
On a bill of lading, 'order' or 'to order' assigns title to the goods to another party.
Back to top
Outward collection
How the Remitting bank refers to a collection.
Collection being sent overseas to collecting bank(s) for presentation to buyer.
Back to top
Outward letter of credit
How the Issuing bank refers to a letter of credit.
Back to top
Packing list
Document listing the contents of a consignment of goods.
May be called for on a letter of credit.
Back to top
Payee
Party to whom payment is due.
Back to top
Paying bank
In a letter of credit, bank that is nominated to make payment to the beneficiary upon presentation of complying documents.
Back to top
Political risk
Risk that political instability in the buyer's country will interfere with a buyer's ability to meet payment obligations.
Back to top
Postal receipt
Transport document issued by a postal authority. Not a document of title.
Back to top
Pour aval
Written on a bill of exchange when it is avalised by a bank.
Back to top
Presentation
In a collection, presentation of documents by a bank to a buyer for payment or acceptance. In a letter of credit, presentation of documents by a seller to a bank for payment, acceptance or negotiation.
Back to top
Presentation period
On a letter of credit, number of days allowed between shipment of goods and presentation of documents to a bank.
Back to top
Presenting bank
In a collection, bank that presents documents to a buyer for payment or acceptance.
Back to top
Prime letter of credit
In a back-to-back letter of credit transaction, the original letter of credit that is offered as security for another letter of credit (second letter of credit).
Back to top
Principal
Party who instigates a collection, i.e. the seller.
In a collection, all banks act for the principal.
Back to top
Promissory note
Financial document in which the buyer agrees to make payment to the seller at a specified time.
Back to top
Protest
Legal procedure that may be administered by a notary public, evidencing non-payment or non-acceptance of a bill of exchange. Useful in support of a subsequent civil action against the defaulter.
In a collection, the presenting bank may be instructed to arrange for this.
Back to top
Quay
Dock.
Back to top
Recourse
Right to demand return of money paid.
In negotiation of a letter of credit, payment by the negotiating bank will normally be with recourse (i.e. if the Issuing bank subsequently does not pay).
Back to top
Red clause
A letter of credit instructing an advance payment to be made to the beneficiary upon advice of the credit but before shipment of the goods.
Back to top
Reimbursing bank
Bank specified as a source of funds in a letter of credit transaction.
Not a party to the letter of credit.
Back to top
Release note
Document given by a bank to a buyer to enable buyer to claim the goods from the carrier. Used when goods are consigned to the bank as a means of retaining constructive control.
Back to top
Remitter
Party making a payment.
Back to top
Remitting bank
In a collection, bank who remits the documents overseas and in due course receives payment.
Back to top
Restrictive endorsement
Endorsement transferring title or right to a named party.
See Blank endorsement
Back to top
Revocable letter of credit
Letter of credit which may be amended or cancelled unilaterally. Offers no security to seller and so very rare.
Back to top
Revolving letter of credit
Letter of credit designed to cover a series of similar consignments over a period of time.
Back to top
Road consignment note
Transport document used for goods dispatched by road. Not a document of title.
Back to top
Second beneficiary
Where a transferable letter of credit is used, party to whom part of the value of this credit is transferred.
Back to top
Second Issuing bank
Bank issuing the second letter of credit in a back-to-back letter of credit transaction.
Usually the Advising bank to the prime letter of credit.
Back to top
Shipper
Party sending the goods, i.e. seller.
Back to top
Sight bill
Bill of exchange payable immediately upon presentation.
Back to top
Sovereign risk
Risk that a government or sovereign power will default on its payment obligations.
Back to top
Spot rate
Exchange rate for foreign exchange transactions for immediate or near-immediate execution.
Back to top
Standby letter of credit
A letter of credit designed to be used only when the applicant defaults on another agreed method of payment.
Back to top
Statement of default
Used to support utilisation of standby letter of credit.
Back to top
SWIFT
Society for Worldwide Interbank Financial Telecommunication.
Operates the major interbank electronic communication system for financial messages (payments, letters of credit, securities transactions etc.)
Back to top
Taking in charge
Receipt of goods by carrier from shipper.
Back to top
Telegraphic transfer
Payment instruction sent from one bank to another by electronic means, either SWIFT or telex.
The method of choice for urgent or high-value payments.
Back to top
Term bill
Bill of exchange on which payment is due at a future date.
Also known as tenor bill.
Back to top
Title document
Transport document in which the bearer has title to the goods, and so can claim them from the carrier at their destination.
Back to top
To order
On a bill of exchange 'order' or 'to order' means that the drawer directs payment to be made to another party (usually a bank).
On a bill of lading, 'order' or 'to order' assigns title to the goods to another party.
See Blank endorsement; Endorsement
Back to top
Transferable letter of credit
Letter of credit part of whose value can be transferred to another party (second beneficiary). The Advising bank gives the second beneficiary a transferred letter of credit.
Back to top
Transhipment
Transfer of goods from one vessel to another during its journey. Some letters of credit prohibit this.
Back to top
Transport document
Document given by the carrier to the shipper (seller), serving as:
* receipt for the goods
* evidence of a carriage contract.
The transport document MAY also serve as a document of title.
Back to top
Unconfirmed letter of credit
Letter of credit bearing the payment undertaking of a single bank, the Issuing bank.
Back to top
Uniform Customs & Practices (UCP)
ICC rules governing the administration of letters of credit Current revision is UCP 600.
Most letters of credit state that they are to be governed by this.
Back to top
Uniform Rules for Collections (URC)
ICC rules governing the administration of collections. Current revision is URC 522, which replaces URC 322.
Back to top
Usance letter of credit, usance bill
A letter of credit or bill of exchange where payment is due at some defined future date - the buyer is given a period of credit.
Also known as term or tenor letter of credit (or bill)
Back to top
Value date
Date on which a foreign exchange contract is executed, i.e. seller delivers foreign currency.
Back to top
Vostro account
How a correspondent bank refers to funds it holds on behalf of an overseas correspondent.
Back to top
Warehouse-to-warehouse
Insurance policy which covers goods over the entire journey from the seller's to the buyer's premises.
Back to top
Weight note
Document issued by either the exporter or a third party declaring the weight of goods in a consignment. This must tally with the weight declared on the transport document and shown on the invoice.
Back to top
|
