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) - see Collections Introduction.
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 - see Documentary Credits.
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/non-acceptance or (for D/A bills) of acceptance and the bill maturity date - see Handling Import Collections.
Advising Act of conveying the terms and conditions of a DC to the beneficiary. The advising bank is the issuing bank agent, usually located in the beneficiary country - see Export - DC Advising.
Advising also involves authentication i.e. advising bank should take reasonable care to check the apparent authenticity of the credit (ICC UCC 500 Art 7).
Amendment Alteration to the terms of a DC; amendments must stem from the applicant, be issued and advised to the beneficiary; the beneficiary has the right to refuse an amendment if the credit is irrevocable - see Amendments to DCs.
Applicant One who applies to his bank to issue a documentary credit; in the majority of credits issued the applicant is an importer of goods.
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 - see Special DCs. It follows therefore that each side of a B/B transaction covers the shipment of the same goods.
Beneficiary A payee or recipient, usually of money. A party in whose favour a documentary credit is established, usually the exporter.
Bill for Collection (BC) Document(s) or cheque submitted through a bank for collection of payment from the drawee.
Bill of Exchange (B/E) 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.
Bill of Lading (B/L) A receipt for goods for shipment by sea. It is a Document of Title: see Documents.
Bill Receivable (BR) 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 branches - see Bills Receivable.
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 - see the sections on Collections.
Chaser Reminder sent by the collecting (or DC issuing) bank to the importer, repeating a request for payment - see Handling Import Collections.
Clean Used to describe a draft/cheque with no shipping documents - see Collections Introduction.
Used 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 Purchase documents - see Financing Export Collections.
Clean Bill Receivable (CBR) 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 Collection attached –
Clean Import Loan (CIL) A loan granted to an importer for payment of import bills, without the Bank having any claim to the goods.
Collection Bank Bank in the drawee country that is instructed to collect payment from the drawee - see Collections Introduction.
Collection Order Form submitted, with documents, to the Remitting/Negotiating Bank by an exporter with his instructions - see Collections Introduction.
Confirming Act of a bank other than the issuing bank assuming the liability for payment, acceptance or negotiation of correctly presented documents under a DC -
Consignee The person/company/bank to whom the goods are delivered - usually the importer or the Collecting Bank - see Handling Import Collections.
Consignor Also called shipper, is the person/company who sends goods by ship, by land or air.
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 (DPC) 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 - see Negotiation under DCs.
Dishonour Non-payment or non-acceptance.
Documentary Credit (DC) 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 (D/A) Instruction for commercial documents to be released to the drawee on acceptance of the Bill of Exchange -.
Documents Against Payment (D/P) Instruction for documents to be released to the drawee only on payment –
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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
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 branch has a financial interest.
Foreign Bill Purchased (FBP) A bill remitted to a correspondent bank in which the remitting branch is financing the exporter - see Financing Export Collections.
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.
ICC 322 Uniform Rules for Collections
ICC 323 Standard Forms for Issuing Documentary Credits
ICC 420 Guide to the Prevention of International Trade Fraud.
ICC 460 Incoterms 1990. Explains the 13 standard Incoterms.
ICC 500 Uniform Customs and Practice for Documentary Credits (1993 revision) replaced the previous ICC 400 as from 1 January 1994.
ICC 522 Uniform Customs and Practice for Documentary Credits (1995 revision) replaced the previous ICC 322 as from 1 January 1996.
Import License A permit issued by the importing country's authorities in respect of goods subject to import licensing restrictions.
Incoterms Shipping Terms - see "Introduction to International Trade.
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).
International Chamber of Commerce (ICC) The international body which promotes and facilitates world trade, and which codifies world trade practices in various publications –
Irrevocable Credit 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 opens a documentary credit at the request of its customer, the applicant.
Letter of Credit (L/C) American term for documentary credit. In the United States, the terms D/C 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.
Loan Against Imports (LAI) Loans granted to import customers for payment of bills.
Master Credit In back-to-back operations, the original export credit against which the second credit is opened
Maturity Due date of payment of a usance bill or promissory note.
Negotiable/Non-Negotiable Usually used with regard to Bills of Lading: a negotiable B/L is a valid document of title, while a non-negotiable B/L is not - the beneficiary of a DC (the exporter) may send the importer a non-negotiable B/L for information.
Negotiation Purchase of drafts under a documentary credit which the issuing bank has undertaken to pay.
Net Weight The weight of the merchandise before any packaging.
Non-DC Bills Bills not drawn under DC i.e. sent on a collection basis (D/P or D/A). In common usage we distinguish between Non DC bills which are financed collections and DCs which are non-financed.
Non-Financed Bills Bills sent on collection in which the remitting branch has no financial interest.
Noting The first stage in protest of a dishonoured bill: if instructed to protest for non-payment/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 - see Protest.
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 that makes payment to the beneficiary of a payment DC after presentation to it of documents stipulated in the DC.
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. - See Handling Import Collections.
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 opener 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.
Recourse The right to claim a refund from another party which has handled a bill at an earlier stage.
Red Clause Credit A credit with a clause which authorises the advising bank to make an advance payment to the beneficiary - see special DCs.
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 exporter's bank in collection transactions, which remits the bill to the collecting bank.
The exporter's bank in DC transactions, which dispatches the documents to the issuing bank.
Retirement The act of paying or settling an outstanding bill or import loan; i.e. payment by the importer to the Bank.
Revocable Credit One that may be amended or cancelled without notice to the beneficiary.
Revolving Credit A credit automatically reinstated after each drawing or upon receipt of authorisation from 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 - see Special DCs.
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.
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 (SG) 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.
Shipping Terms See Incoterms
Sight A bill payable at sight is payable on presentation to the drawee i.e. on demand.
Standby Credit This may be established as security for facilities granted at another branch or bank, usually to a subsidiary of the DC applicant. - see Special DCs.
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 Term or Period of credit granted by the drawer. See Usance Bill.
Tracer See Chaser.
Trade and Credit Information (TCI) 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 - see Special DCs.
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.
Usance Bill A Bill of Exchange which allows the drawee a term or period of credit (this period is also called usance).
The term is usually stated in days (e.g. 30 days) or months and starts either from the date of the bill (e.g. 30 days date) or from the date of bill of lading, or from sight by the drawee (e.g. 30 days sight) which in practice means from the date of acceptance.
An essential feature of acceptance credits and D/A collections.
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 ICC 522.
