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TRADE FINANCE LEXICON

A Acceptance Advance Payment

Importer's commitment by accepting a Bills of Exchange drawn on them by an Exporter, to pay for goods at a fixed date in the future. Importer remits fund before exporter ships the goods.

Advising bank Air Way Bill Amendment B Beneficiary Bill of exchange Bill of lading

A bank normally located in the Exporter's country, used by an importer's bank to deliver a Letter of Credit to Exporter, after validating the authenticity of the LC. The document issued as an evidence for transport of goods by air. A change in the terms and conditions of the issued Letter of Credit, with the consent of all the parties to the contract. The Exporter in a Letter of Credit, or the party authorized to claim from a bank under a Guarantee / Bond. This is an unconditional order in writing drawn by seller (the drawer) directing buyer (the drawee) to pay certain amount of money immediately or at a specified future date. It is also called as "Draft". A document that provides evidence of receipt of goods by the shipper, gives details of the conditions of transport, and, importantly, normally conveys title to the goods.

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TRADE FINANCE LEXICON


C Certificate of Inspection Certificate of Origin CFR (C & F or Cost and Freight) CIF (Cost, A document certifying that merchandise was in good condition prior to its shipment. A document certifying the country of origin of specified goods. An INCO term which explains that invoice issued by Exporter includes the cost of the goods and Freight charges. Insurance to be borne by Importer. An INCO term which explains that invoice issued by Exporter includes the cost of the goods,

Insurance & Freight) Freight charges and insurance. CIP (Cost, Insurance An INCO term which explains that invoice issued by Exporter includes the cost of the goods, Freight & Carriage to point charges and Carriages. Normally used for road transport but can also be used for a combination of transports. of destination)

Collection

An Exporter sends shipping documents through their banker to the importer's bank with a request to release the documents against payment (Documents against Payment) or against acceptance of Bill of Exchange (Documents against Acceptance). A bank which facilitates the remittance of collection amount to the exporter. Bank in the Exporter's country who adds confirmation and deliver the Letter of credit to the Beneficiary (Exporter). The date by which the beneficiary of the guarantee can claim for the damages.

Collecting Bank Confirming Bank Claim Expiry Date (Guarantee)

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TRADE FINANCE LEXICON


D D/A (documents
against Acceptance)

A collection where a bank is asked to release shipping document to a buyer (importer) only against the acceptance of Bill of Exchange i.e. commitment to make payment on fixed date in future. A collection where a bank is asked to release shipping document to a buyer (importer) only against the payment. The failure of a buyer or borrower (or its guarantor) to make contractually due payments, whether of principal or of interest. In case of air shipment, airway bill can not be endorsed as it is not a negotiable instrument. Therefore goods are released against the delivery order to the importer either on the payment of the bill or in absence of the airway bill. Where documents presented by an Exporter under a Letter of Credit do not comply with the term & conditions of the Letter of Credit or inconsistent with other documents presented. "Documentary Instruments Dispute Resolution Expertise Rules" developed by the International Chamber of Commerce as the rules that govern the resolution of the documentary instruments disputes. ICC publication No. 522 contains the details of the rules currently in use. Refer Bill of Exchange for full explanation. The party to which a Bill of Exchange is addressed for payment or acceptance. Usually , the importer in an international trade transaction. In a Letter of Credit transaction, it may be the issuing or advising bank. The party that issued a Bill of Exchange. Usually, the Exporter in an international trade transaction.

D/P (documents against payment) Default Delivery Order

Discrepancy

DOCDEX

Draft Drawee

Drawer

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TRADE FINANCE LEXICON


E Expiry Date (Guarantee) Expiry Date (Letter of Credit) Export Financing F FOB G Guarantor I INCO terms
(International contract trade terms)

The last day on which the beneficiary can present a valid claim to the Bank. The last day on which the seller can present documents to the advising or issuing bank. Normally, the terms Export Financing and Export Finance is used interchangeably to mean the financing an export business for fulfillment of their contractual obligations. An INCO term which explains that invoice issued by Exporter includes the cost of the goods only. Freight charges and Insurance will be borne by Importer. The provider of a guarantee of repayment of a debt obligation under a contract or loan agreement, in case of default of the principal debtor. This can be a government, a bank, a parent company, or an individual. These are official trade shipping terms agreed by the International Chamber of Commerce, Paris.

Invocation (Guarantee)

When the Applicant (principal debtor) fails to perform the committed task or fails to repay the obligation, Beneficiary will claim for the guarantee amount. This action is called INVOCATION and guarantee is said to be invoked ISP 98 International Standby Practices (ISP98) developed by the International Chamber of Commerce as the rules that govern the operation of Standby Letter of Credit transactions worldwide. International standby practices (ISP 98) developed by the international Chamber of Commerce as the rules that govern the operation of Standby Letter of Credit transactions worldwide.

ISP 98

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TRADE FINANCE LEXICON


Issuing Bank L Latest Shipment Date (Letter of Credit) Letter of Credit The bank in the importer's country who issues Letter of Credit at the request of the importer.

A date inserted in a Letter of Credit to compel the seller to ship the goods within a specific time period.

It is a written undertaking issued by the Bank at the request of the Importer (Applicant) to make the payment to the Exporter (Beneficiary), the specific amount on the specific tenor (term) / due date, if all the terms & conditions mentioned are complied with. Documentary credit popularly is known as Letter of Credit (LC). The date on which a Bill of Exchange or Letter of Credit becomes due for payment.

M Maturity Date N Negotiating Bank O Open Account P Partial Shipment Performance (Guarantee)

Bank to whom the seller submits the documents for negotiation (purchase) of documents by giving advance funds to beneficiary on or before the due date.

Exporter ships the goods & sends documents directly to importer. Importer make payment on receipt of goods.

This is when a load is sent in more than one consignment. In a letter of credit, the buyer can say whether this is allowed or not allowed. Performance means the completion of the task as per the agreed terms of contract.

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TRADE FINANCE LEXICON


Post shipment period Pre shipment period Presenting Bank Principal Debtor R Reimbursing Bank Remitting Bank S Sight Bill Shipping Guarantee SWIFT The period from the date on which goods are shipped or accepted until the last payment has been received. Sometimes called the credit period. The time from the date of contract until the date of shipment (or of acceptance by the buyer) i.e. the period up to the time the credit period begins. This is the bank that presents the documents forwarded by seller's bank, to the buyer and releases the documents to the buyer against collection of payment or a promise to pay in the future. The party who contracts to perform the task or liable to repay the agreed amount to the seller.

The bank authorized by the issuing bank to pay the bank submitting claims under the letter of credit.

The Bank who sends the documents (submitted by the exporter) along with the collection instructions to a bank in importer's country. When the importer needs to make the payment immediately on the sight of the documents, It is called SIGHT BILL. A written indemnity by the issuing Bank to the shipping company for giving the possession of goods to an importer without Bill of Lading. This is an inter-bank communication system and stands for 'Society for Worldwide Inter bank Financial Telecommunications". Every message is sent in a standard format.

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TRADE FINANCE LEXICON


T Trade Finance Transhipment Trade finance is the science that describes the management of money, banking, credit, investment and assets for trade transactions. This is when a consignment is unloaded from one form of transport (lorry or ship) to another during the course of its journey from place of origin to place of destination. In a Letter of Credit, the buyer can say whether this is allowed or not allowed. Transferring bank means a nominated bank that transfers the letter of credit to second beneficiary. It is specifically authorized by the issuing bank to transfer the letter of credit.

Transferring Bank

U UCP "Uniform Customs and Practice for Documentary Credit" developed by the International Chamber of Commerce as the rules that govern the operation of Letter of Credit Transactions worldwide. ICC publication No. 600 contains the details of the rules currently in use. "Uniform Rules for Collections" developed by the International Chamber of Commerce as the rules that govern the operation of collection transactions worldwide. ICC publication No. 522 contains the details of the rules currently in use. "Uniform Rules for Bank to Bank Reimbursements" developed by the International Chamber of Commerce as the rules which standardize the processing of bank-to-bank reimbursements. ICC publication No. 525 contains the details of the rules currently in use.

URC

URR

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TRADE FINANCE LEXICON


URDG "Uniform Rules for Demand Guarantee" developed by the International Chamber of Commerce as a framework for harmonizing international trading practices and establishes the rules for various types of guarantees. ICC publication No. 458 contains the details of the rules currently in use. When the importer needs to make the payment on the fixed future date, it is called USANCE BILL.

Usance Bill W Working Capital

This is the short term finance requirement of the manufacturer to carry out the day to day production cycle.

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Index
Acceptance 31,32,41,71 Advance Payment 3,5,7,8 Advising Bank 91,94-116,150-160,192,213,251-258 Air Way Bill 122,123,124,141 Amendment 90,97-99,107-111,124,131,135-139,207-213,189-192,251-253 Beneficiary 84,94,192,195,207,212,250,253 Bill of Exchange 117,122-123,244,246 Bill of Lading 122-125,127,227 Certificate of Inspection 122-124,140 Certificate of Origin 3,122-124,227 CFR (C & F or Cost & Freight) 87 CIF (Cost, Insurance & Freight) 87,124 CIP (Cost, Insurance & Carriage to point of Destination) 87 Claim Expiry Date (Guarantee) 151,160-162 Collecting Bank 135-139,142,202 Collection 6-8,83,89 Confirming Bank 156,157,192,194,201,213 D/A (Documents against Acceptance) 117 D/P (Documents against Payment) 117 Default 3,4,84,142,153 Discrepancy 3,90,111,125,195 DOCDEX 81,85,86 Draft 223-227 Drawee 83,93,122,132-142 Drawer 83,202 Expiry Date (Guarantee) 154,160-162,207-210 Expiry Date (Letter of Credit) 91-92,186,189,191 FOB 87 Guarantor 160 INCO Terms ( International Contract Trade Terms) 251-253 Invocation (Guarantee) 81,86 Issuing Bank 7 Latest Shipment Date (Letter of Credit) 130 Letter of Credit 81,82,94,129,183,188 Negotiating Bank 93 Open Account 111,112 Partial Shipment 125 Performance (Guarantee) 262,263 Presenting Bank 131-139,142 Principal Debtor 155,160 Reimbursing Bank 83-84,111,118,119,200,204 Remitting Bank 83,131,201-204 Shipping Guarantee 242 Sight Bill 133,138 SWIFT 81,85 Trade Finance 1 Transferring Bank 104 Trans Shipment 260 UCP 81-84 URC 81,83-84 URDG 81,83-84 URR 81,83-84 Usance Bill 117,133,139,140 Working Capital 59,60,223

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