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International Resource Center – Glossary of Terms

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Acceptance Letter of Credit
A letter of credit available "by acceptance" calling for a time draft (or usance draft), drawn on an intermediate accepting bank, that the drawee (payer) has accepted and is unconditionally obligated to pay at maturity.
 
Advance Payment
The buyer delivers payment to the seller before the seller releases the goods. Some sellers ask for this payment to show good faith on the part of the buyer and also to enhance their cash flow related to the sale of particular custom-made items.
 
Advising Bank
Bank that notifies the beneficiary that a letter of credit is available from the issuing bank. The advising bank can be a branch office of the issuing bank or a correspondent bank located in the beneficiary's country.
 
Air Release
(See Steamship Guarantee)
 
Air waybill
Non-negotiable forwarding or carrying agreement between an air carrier and a shipper (or freight forwarder), serves as a receipt for the shipper, indicating that the carrier has accepted the goods listed therein and obligates the carrier to carry the consignment to the airport of destination according to specified conditions.
 
All Risks
Extensive insurance coverage for loss or damage to goods but excludes special risks such as war, strikes, perishing of goods or any other causes listed in the insurance policy.
 
Amendment
Change to a letter of credit, usually in the interest of the beneficiary.
 
Applicant
Party applying to issuing bank to issue the letter of credit, usually an importer.
 
Assignment of Proceeds
Document signed by the beneficiary under a letter of credit assigning the rights to proceeds from a letter of credit drawing to a third party. From the perspective of the assignee, an assignment differs radically from a transferable letter of credit as the latter conveys a right to the transferee to present documents under a letter of credit, the former does not.
 
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B

Bankers' Acceptances
Short-term financial instrument that is the unconditional obligation of the accepting bank, used to finance trade-related transactions (e.g., importation, exportation, domestic shipment or storage of goods in inventory).
 
Beneficiary
The individual or company to whom money is payable according to terms of a letter of credit.
 
Bill of Exchange
A written, unconditional order, signed by the drawer and addressed to the drawee, to pay a sum of money at a fixed or future date to the order of the payee or to the bearer.
 
Bill of Lading
A document that establishes the terms of a contract between a shipper and a transportation company, serves as a document of title, a contract of carriage and a receipt for goods.
 
Blocked Currency
Cash deposit which cannot be transferred to another country because of local regulations or a shortage of foreign exchange.
 
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C

CFR (Cost and Freight)
Title, risk and insurance cost pass to buyer when goods are delivered on board the ship by seller and cross the ship's rails; seller pays the transportation cost to the ocean port of destination; used for ocean vessel port-to-port, shipments that are not containerized.
 
CIF (Cost, Insurance and Freight)
Title and risk pass to buyer when goods are delivered on board the ship by seller and cross the ship's rail; seller pays transportation and insurance cost to ocean port of destination; used for ocean vessel port-to-port, shipments are not containerized.
 
CIP (Carriage and Insurance Paid To)
Title and risk pass to buyer when delivered to first carrier at named place or port of destination by seller, who pays transportation and insurance cost to destination; used for any mode of transportation, including air or ocean containerized and roll-on/roll-off shipments.
 
CPT (Carriage Paid To)
Title, risk and insurance cost pass to buyer when delivered to first carrier at named place or port of destination by seller, who pays transportation cost to destination; used for any mode of transportation, including air or ocean containerized and roll-on/roll-off shipments.
 
Carnet
Customs document allowing special categories of goods to cross international borders without paying duties or posting bonds.
 
Cash Against Documents (CAD)
Method of payment for goods in which documents transferring title are given to the buyer upon payment of cash to an intermediary acting for the seller, usually a bank or commission house.
 
Cash in Advance
Method of payment for goods in which the buyer pays the seller in advance of the shipment of goods. Usually employed when the goods, such as specialized machinery, are built to order.
 
Certificate of Origin
A certified document showing the origin of goods, required by certain countries for tariff purposes.
 
Clean Bill of Lading
A receipt for goods issued by a carrier with an indication that the goods were received in "apparent good order and condition," without damage or other irregularities.
 
Collecting Bank
Bank in the importer's country to which the remitting bank sends a draft and/or documents for collection.
 
Collection
A draft drawn on the buyer, usually accompanied by documents, with complete instructions concerning processing for payment or acceptance.
 
Combined Transport Bill of Lading
A bill of lading used when more than one carrier is involved in a shipment, for example when a consignment travels by rail and by sea; sometimes referred to as a multi-modal bill of lading.
 
Commercial Invoice
Seller's itemized list of goods and invoice shipped with descriptions, details, prices and costs addressed to the buyer. Serves as the basis for all other documents about the shipment.
 
Commercial Letter of Credit
Also called a documentary letter of credit, it is a written document issued by a bank (at the request of the bank's customer) to a specified beneficiary to make payment to the beneficiary under specified conditions.
 
Confirmation
The act of a bank to add its commitment to that of the issuing bank to pay the beneficiary for compliance documents, although the act of confirmation does not relieve the issuing bank of its obligation to the beneficiary.
 
Confirmed Letter of Credit
A letter of credit guaranteed by both the issuing and advising banks of payment so long as seller's documents are in order, and the letter of credit terms are met. The confirming bank assumes the credit risk of the issuing bank.
 
Confirming Bank
The correspondent bank that adds its confirmation to the issuing bank's letter of credit and promises to pay the beneficiary upon presentation of documents specified in the letter of credit.
 
Consolidator's Bill of Lading
A receipt for merchandise issued by a freight consolidator (forwarder) to a shipper for goods to be consolidated with other cargoes prior to shipment.
 
Control of Goods
Exercised through the transport documents, control of goods determines whether the buyer will be able to clear an inbound shipment without the transport documents, and thus without paying for the documents held at the bank.
 
Correspondent Bank
A bank that, in its own country, handles the business of a foreign bank.
 
Country of Origin
The country where a product is made, as determined by the amount of work done on the product in the country and attested to by a certificate of origin.
 
Currency Hedging Products
Help to guard against foreign exchange fluctuations with spot contract, forward contract and foreign currency options.
 
Customs Broker
A person or firm, licensed by the treasury department of their country when required, engaged in entering and clearing goods through customs for a client (importer).
 
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D

DAF (Delivered at Frontier)
Title, risk and responsibility for import clearance pass to buyer when delivered, but not unloaded, to named border point of destination by seller as agreed in the buyer/seller agreement; used for any mode of transportation, but mainly truck or rail, as long as delivery will be made at a land port.
 
DDP (Delivered Duty Paid)
Title and risk pass to buyer when seller delivers goods to named place of destination consistent with the buyer/seller agreement cleared for import, but not unloaded; used for any mode of transportation.
 
DDU (Delivered Duty Unpaid)
Title, risk and responsibility of import clearance pass to buyer when seller delivers goods to named destination point consistent with buyer/seller agreement, but not unloaded, not cleared; seller fulfills obligation when goods have been made available at the named place in the country of importation; buyer is obligated for import clearance; used for any mode of transportation.
 
DEQ (Delivered Ex Quay-Duty Paid)
Title and risk pass to buyer when delivered on board the ship at the named port of destination by the seller, but unloaded, not cleared; used for ocean shipments only, port-to-port.
 
DES (Delivered Ex Ship)
Title, risk, responsibility for vessel discharge and import clearance pass to buyer when seller delivers goods on board the ship, not unloaded, to destination port; used for ocean shipments only on ocean vessel port-to-port.
 
Date Draft
A draft that matures on a fixed date, regardless of the time of acceptance.
 
Deferred Payment Letter of Credit
A letter of credit in which the payment is deferred to a specific later date.
 
Demurrage
Storage fee for inbound merchandise held beyond the free time allowed for loading or unloading at a pier or freight terminal.
 
Direct Documentary Export Collections
Same as Import Documentary Collections, except the seller is responsible for the transaction, sending all documents to the foreign bank for payment.
 
Discrepancy
When documents presented do not conform to the requirements of the letter of credit, banks will not process them, so the buyer and/or seller must provide further instructions before the bank will process.
 
Dishonor
Refusal on the part of the drawee to accept a draft or pay upon maturity.
 
Documentary Collection
An order written by the seller to the bank to deliver documents against payment, or to deliver documents against acceptance to the buyer, a branch or a correspondent bank in the country of the buyer, with instructions for collection. (See Direct Documentary Export Collections, Import Documentary Collections)
 
Documentary Letter of Credit
(See Import Letter of Credit, Export Letter of Credit)
 
Documents Against Acceptance
Also known as time or usance drafts, these are instructions given by a shipper to a bank indicating that export documents transferring title to goods should be delivered to the buyer only upon the buyer's acceptance of the attached draft.
 
Documents Against Payment
Also called sight drafts or drafts, these are documentary collections in which the seller instructs the bank to release the export documents to the buyer against cash payments.
 
Draft
An unconditional signed order by one party (the drawer) addressed to another party (the drawee) directing the drawee to pay a specified sum to the order of the third party (the payee) at a fixed or determinable future date.
 
Drawee
Party upon whom a bill of exchange is drawn, also, very commonly the party to whom presentation is to be made in accordance with a collection instruction.
 
Drawer
Party that issues a draft and thus stands to receive payment.
 
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E

EXW (Ex Works)
Title and risk pass to buyer, including payment of all transportation and insurance cost from the named place where shipment is available to the buyer (seller's facility), not loaded; buyer contracts for any transportation; used for any mode of transportation.
 
Endorsement
Signature on back of negotiable instrument (i.e., bill of lading) for the purpose of transferring rights to another.
 
Eurodollars
U.S. dollars on deposit in any branch at any bank located outside the United States.
 
Euroyen
Japanese yen on deposit in banks outside Japan, and may be outside of Europe.
 
Evergreen Clause
A provision in a letter of credit for the expiration date to extend without requiring an amendment.
 
Ex-Im Bank
The U.S. Export-Import Bank, an independent U.S. Government Agency which facilitates exports of U.S. goods by providing loan guarantees and insurance for repayment of bank-provided export credit.
 
Exchange Rate
The price of one currency expressed in terms of another; may be quoted spot – for delivery within two working days, or forward – for delivery at a future time.
 
Expiry Date
Date after which a letter of credit is no longer available for payment.
 
Export Letter of Credit
Issued by a foreign bank on behalf of the exporter/seller, it's a Letter of Credit issued by the buyer's bank authorizing the seller to draw money up to a specified amount from the buyer's bank, provided the conditions set out in the Letter of Credit are met.
 
Export License
Document issued by a U.S. Government agency allowing the export of goods.
 
Export Working Capital Loans
Special financing to support exports of U.S.-made products.
 
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