Acceptance
The act of giving a written undertaking on the face of a usance bill of exchange
to pay a stated sum on the maturity date indicated by the drawee of the bill,
(usually in exchange for documents of title to goods shipped on D/A terms).
Acceptance Credit
A documentary credit which requires the beneficiary to draw a usance bill for
subsequent acceptance by the issuing bank or the advising bank or any other
bank as the credit stipulates.
Accepting bank
The bank which accepts a bill of exchange drawn on it under a documentary
credit.
Accommodation Bill
In the context of fraud, a bill drawn without a genuine underlying commercial
transaction.
Accountee
Another name for the applicant/opener of a documentary credit i.e. the importer
= the person for whose account the transaction is made.
Advice of Fate
The Collecting Bank informs the Remitting Bank of non- payment/nonacceptance
or (for D/A bills) of acceptance and the bill maturity date.
Advising bank
The bank by which the terms and conditions of the documentary credit are
conveyed to the beneficiary. It is usually a bank in the beneficiary’s country.
Amendment
An alteration to the terms and conditions of the documentary credit. Following
the applicant’s request, the amendment originates from the issuing bank and is
advised to the beneficiary by the advising bank. Irrevocable credits (almost all
credits are irrevocable) cannot be amended unless the beneficiary agrees.
Applicant
The party, usually the importer, who applies to his bank to issue a documentary
credit. Also sometimes referred to as the opener or accountee.
Avalise
The act by a bank in guaranteeing payment of a bill of exchange or promissory
note by endorsing the reverse with the words "good per aval" and signed by the
bank, or by the issuance of a separate guarantee.
Back-to-Back Credit
A credit issued against the security back of another credit (master credit) on the
understanding that reimbursement will stem from documents eventually
presented under the first credit (master credit) issued. It follows therefore that
each side of a B/B transaction covers the shipment of the same goods.
Beneficiary
The party to whom a documentary credit is addressed and who will receive
payment under it if he complies with its terms.
Bill for Collection
Document(s) or cheque submitted through a bank for collection of payment from
the drawee.
Bill of Exchange
An unconditional order in writing, addressed by one person to another, signed
by the person giving it, requiring the person to whom it is addressed to pay on
demand or at fixed or determinable future time a sum certain in money to or to
the order of a specified person, or to bearer.
It is usually referred to in documentary credits as a draft.
Bill of Lading
A document demonstrating, among other things, ownership of goods.
Bill Receivable
Bills which are financed by the receiving branch, whether drawn under a DC or
not, are treated as BRs by both the remitting branch and the receiving branch.
Blank Endorsed
When a bill of lading is made out to order or shipper order and the shipper has
signed on the back of it, it is said to be blank endorsed. The bill of lading then
becomes a bearer instrument and the holder can present it to the shipping
company to take delivery of the goods.
Carrier
Person or company undertaking, for hire, the conveyance of goods e.g. shipping
company.
Case of Need
Agent nominated by a principal, to whom the collecting bank may refer in
specified circumstances concerning collections.
Clean
Used to describe a draft/cheque with no shipping documents (Collections
transactions), or to describe a bill of lading without clauses that expressly
declare a defective condition of the goods or the packing.
Clean Bill Purchased
A collection bill purchased with no shipping documents.
Clean Bill Receivable
BR (Bill Receivable) with no shipping documents. The term is more often used
for non-trade bills such as travellers cheques.
Clean Collection
A draft with no documents attached.
Clean Import Loan
A loan granted to an importer for payment of import bills, without the Bank
having any claim to the goods.
Collecting Bank
The bank, normally in the territory of the drawee/importer, which acts as the
agent of the remitting bank in collecting proceeds of a clean or documentary bill.
Collected proceeds are remitted back to the remitting bank, for payment to their
customer.
Collection/Collection Basis
A general term used in the TS FIM to describe a non-financed non-DC bill.
Collection Order
Form submitted, with documents, to the Remitting/Negotiating Bank by an
exporter with their instructions.
Confirming bank
A bank that undertakes on its own responsibility to pay, undertake a deferred
payment obligation, accept or negotiate under a documentary credit issued by
another bank. The confirming bank is usually the advising bank.
Consignee
Person, company or bank to whom goods are addressed.
Consignor
Also known as the shipper, the person or company sending goods.
Contingent Liability
A liability that arises only under specified conditions, e.g. when a bank opens a
DC it incurs an obligation to make a future payment on condition that the terms
are fully met.
DC Bills
Bills drawn under documentary credits.
Deferred Payment Credit
A DC which allows the nomination of a bank, or the issuing bank to effect
payment against stipulated documents at a maturity date as specified or
determinable from the wording of the credit.
Demurrage
A charge made by a shipping company or a port authority for failure to load or
remove goods within the time allowed.
Discounting
Act of purchasing an accepted usance bill of exchange at an amount less than
the face value.
Discrepancy
Any deviation from the terms and conditions of a DC, or the documents
presented thereunder, or any inconsistency between the documents themselves.
Dishonour
Non-payment or non-acceptance.
Documentary Credit
A conditional undertaking by a bank to make payment, often abbreviated to
credit. More precisely, it is a written undertaking by a bank (issuing bank) given
to the seller (beneficiary) at the request of the buyer (applicant) to pay a sum of
money against presentation of documents complying with the terms of the credit
within a set time limit.
Documents
The characteristics and importance of the various documents associated with
Import/Export operations are explained and illustrated in Deciding on
Documents.
Documents Against Acceptance
Instruction for commercial documents to be released to the drawee on
acceptance of the Bill of Exchange.
Documents Against Payment
Instruction for documents to be released to the drawee only on payment.
Documents of Title
Documents that give their owner the right to the goods, i.e. Bill of Lading.
Draft
Bill of exchange issued by an exporter and submitted to his bank for collection,
or under a DC - usually submitted with attached shipping documents - not to be
confused with a bankers draft which is sometimes used as a vehicle for
reimbursement.
Drawee
Party on whom a bill is drawn and the one to whom presentation is to be made
according to the collection order - the importer (NB: for DC bills, the drawee is
usually the DC issuing bank).
Drawer
The exporter, who draws the Bill of Exchange/draft which in itself is a claim for
payment.
Due Date
Maturity date for payment.
Endorsement
Signing (a bill of exchange or bill of lading) on the reverse to transfer title to
another party.
Expiry Date
Latest date, usually in the country of the beneficiary, on which
negotiation/payment of a DC can take place.
Financed Bills
Bills sent on collection in which the remitting bank has a financial interest.
Foreign Bill Purchased
A bill remitted to a correspondent bank in which the remitting branch is
financing the exporter.
Forward Exchange Contract
Contract between the Bank and its customer to buy/sell a fixed amount of
foreign currency at a future date at a specified rate. This could be for a
customer to make payment under a DC or to sell the proceeds received from an
export negotiation.
Freight
Goods OR the cost of transporting goods.
General Average
Loss which is the result of a sacrifice voluntarily made or an expense incurred;
for the sole purpose of saving a ship and its cargo in face of a common danger
(e.g. jettison of cargo to lighten a ship in distress). The loss is borne
proportionately by ship and cargo owners according to their respective interests
in the voyage.
Gross Weight
The weight of the merchandise in its shipping form, i.e. including all its
packaging.
Honour
To pay or accept a bill of exchange.
Import Licence
A permit issued by the importing country’s authorities in respect of goods
subject to import licensing restrictions.
Indemnity
Also known as Letter of Guarantee (L/G), it is an undertaking given in respect of
discrepancies in documents presented under a credit. The beneficiary who issues
the indemnity is primarily liable to repay funds received from the negotiating
bank in settlement under the credit, if the negotiating bank cannot obtain
reimbursement from the issuing bank as a result of documents being rejected by
the applicant.
Inherent Vice
The propensity of a commodity to self-destruction which gives rise to a high
insurance risk, therefore cover is given only after payment of an additional
premium (e.g. fruit rots, coal-dust spontaneously ignites).
Irrevocable DC
Constitutes a definite undertaking of the issuing bank and the confirming bank, if
any, to honour the credit provided the terms of the credit are observed. It may
be advised to the beneficiary without engagement by the advising bank, and
cannot be amended or cancelled unless the issuing bank, the confirming bank
and the beneficiary agree.
Issuing Bank
The bank that issues the documentary credit and acts for the applicant (usually
the importer).
Letter of Credit
American term for documentary credit. In the United States, the letters DC can
often be confused for documentary collection.
Letter of Hypothecation
A promise to hold goods as security taken from customers who are granted
loans against goods imported on a collection basis.
Master Credit
In back-to-back operations, the original export credit against which the second
credit is issued.
Maturity
The date on which a usance bill of exchange becomes due for payment.
Negotiable/Non-Negotiable
Usually used with regard to Bills of Lading: a negotiable BL is a valid document
of title, while a non-negotiable BL is not - the beneficiary of a DC (the exporter)
may send the importer a non-negotiable BL for information.
Negotiation
The purchase of a bill of exchange or documents which under the credit terms
the issuing bank has undertaken to pay. Unlike payment, Negotiation is with
recourse to the Drawer/Beneficiary. Unless otherwise indicated the term is used
in its generic sense in this manual to describe any method of settlement, or
giving value under documentary credits.
Negotiating Bank
The bank which negotiates under a documentary credit. It may be a bank
nominated by the issuing bank or any other authorised under the credit.
Net Weight
The weight of the merchandise before any packaging.
Non-DC Bill
A set of documents with or without a bill of exchange relating to a trade
transaction, not drawn under a DC, financed by a Group Office.
Non-Financed Bills
Bills sent on collection in which the remitting branch has no financial interest.
Notify Party
Most contracts involving transport overseas specify a party who is to be advised
of the arrival of the goods. This may be the consignee himself or an agent and
his name and address must appear on the transport document.
Noting
The first stage in protest of a dishonoured bill: if instructed to protest for nonpayment/
non- acceptance, the collecting bank must send the bill to a notary
public who will represent it to the drawee on the same day it was refused, or the
next business day. If the drawee still refuses the bill the notary public notes on
the bill: the amount of his charges, the date and his initials. The reason for
refusal is shown on a note attached to the bill. The bill is then protested.
Opener
See Applicant.
Opening Bank
See Issuing Bank.
Order (To)
The phrase To Order is sometimes shown on Bills of Lading against consignee:
this means that the Bill of Lading must be endorsed in blank by the shipper (i.e.
not to any particular named party which makes it bearer document and it
becomes transferable by delivery).
Packing Credit
A loan given to the beneficiary by the bank to enable him to purchase raw
materials. The beneficiary is usually requested to deposit the DC with the bank
as security.
Past Due
Bill or loan that has not been paid on the maturity date/due date.
Paying Bank
The bank which is to pay the proceeds under a payment DC. It can be the
issuing bank itself or a bank nominated by it, usually the advising/confirming
bank.
Perils of the Seas
They are accidents or casualties of the sea. The ordinary actions of the winds
and waves are not included. Heavy or tempestuous weather on a voyage is of
sufficient violence to constitute a peril of the sea.
Power of Attorney
Authority given to one party to act for another.
Presentation
Act of requesting the importer’s payment/acceptance of an import bill.
Presenting Bank
The bank that requests payment of a collection bill - may be the Collecting Bank
or its nominated branch or local correspondent, which is better placed to contact
the importer.
Principal
The exporter in collection transactions, being the initiator of the transaction,
whose instructions are followed at all stages (may be used to refer to any
customer who initiates a transaction e.g. the issuer of a DC).
Promissory Note
A signed statement containing a written promise to pay a stated sum to
specified person at a specified date or on demand.
Protest
The formal representation of a dishonoured bill of exchange: the bill is presented
by a notary public to the drawee - if refused again, it is noted” - see noting. The
notary public then issues a formal protest, an official certificate that the bill has
been refused: the drawer can use this certificate to sue the drawee in court.
Purchase
Unless otherwise indicated the term is used in its generic sense to describe the
process where an export department advances the proceeds of a non-DC bill to
a customer.
Recourse
The right to claim back a payment made.
Red Clause Credit
A credit with a clause which authorises the advising bank to make an advance
payment to the beneficiary.
Reimbursing Bank
The bank nominated by the DC issuing bank that will pay the value of the DC to
the negotiating/paying bank.
Remitting Bank
The bank that acts on behalf of the drawer/exporter in handling documents
under DC or non-DC bills. It sends documents to a receiving or collecting bank
for payment by the importer.
Retirement
The act of paying or settling an outstanding bill or import loan; i.e. payment by
the importer to the Bank.
Revocable DC
A documentary credit which may be amended or cancelled at any time without
prior notice to the beneficiary.
Revolving Credit
A credit automatically reinstated after each drawing or upon receipt of
authorisation from the DC issuing bank, with limits as to the duration of the
facility and as to the (cumulative or non-cumulative) amount involved for each
drawing.
Schedule
The Remitting/Negotiating Bank's letter covering a bill sent to the
Collecting/Issuing Bank, which lists the documents attached and gives collection
and/or payment instructions.
Self-Liquidating
A transaction is said to be self-liquidating when there is a known source of funds
available for its settlement on due date.
Settlement
Payment, acceptance or negotiation under a documentary credit. See
negotiation.
Shipment Date
The date inserted on the bills of lading evidencing goods received on board is
regarded for documentary credit purposes as being the date of shipment.
Shipper
See Consignor
Shipping Guarantee
Guarantees of this nature are required to enable customers to obtain goods
before the arrival of the documents of title, and are issued to the shipping
companies by the Bank against an undertaking to forward the bills of lading
when they are received. The Bank normally take 100% cash margin against the
value of the goods if the customer does not have T/R facility.
Sight
Under a sight documentary credit a Group Office should effect settlement
immediately if it is satisfied with the documents presented (unless the terms of
the sight credit are in some way modified by its contents). Banks are allowed a
reasonable time to check documents.
Snags
Irregular bills; import and export.
Status Report
Produced by a bank's TCI department or a credit information bureau, giving
details of the creditworthiness and business background of traders and
manufacturers.
Substitution
The act whereby the prime beneficiary substitutes his own documents i.e.
invoices and drafts, in back-to-back and transferable credit operations prior to
negotiation of the master credits.
Tenor
The period of time that must pass before a bill of exchange or promissory note
becomes due for payment. The date must be determinable from the face of the
bill or note.
Terms
Stipulates the conditions of the documentary credit, the method for the dispatch
of the goods, the basis on which the payment amount is fixed (e.g. FOB, CIF),
and the documents required under the credit.
Trade and Credit Information
A bank department that prepares and distributes status reports on its own
customers, and maintains records of traders and manufacturers with whom its
customers deal.
Transferable Credit
Permits the beneficiary to transfer all or some of the rights and obligations under
the credit to a second beneficiary or beneficiaries.
Transferee
A party (2nd beneficiary) to whom a transferable credit is transferred in whole or
in part.
Transferor
A party (1st beneficiary) at whose request a transferable credit is transferred to
a second beneficiary in whole or in part.
Transport Documents
Formerly and still usually referred to as shipping documents, the documents
which demonstrate that goods have been dispatched from one place to another.
Usance
In contrast to a sight credit, a usance credit is one where the bill (or draft) is
intended to be payable at a date later than that of the presentation of
documents (See Tenor).
Waive
To relinquish a right: used in collections, with BC charges and/or interest to be
collected from the drawee. These can be waived in certain circumstances as set
out in URC 522.
