{"id":70,"date":"2014-06-16T14:21:00","date_gmt":"2014-06-16T06:21:00","guid":{"rendered":"https:\/\/www.leadxpress.com\/export-resources\/?p=70"},"modified":"2016-09-10T18:18:38","modified_gmt":"2016-09-10T10:18:38","slug":"glossary-for-letter-of-credit","status":"publish","type":"post","link":"https:\/\/leadxpress.com\/export-resources\/glossary-for-letter-of-credit","title":{"rendered":"Glossary for Letter of Credit (L\/C Glossary)"},"content":{"rendered":"

Acceptance Draft<\/strong>
\n<\/strong>payable at a fixed or determinable future date, upon the\u00a0face of which the drawee has acknowledged in writing his\/her obligation to\u00a0pay at maturity.<\/p>\n

\u00a0<\/strong><\/p>\n

Account Party<\/strong>
\n<\/strong>The party instructing the bank to open a letter of credit and on\u00a0whose behalf the bank agrees to make payment. In most cases, the account\u00a0party is the importer\/buyer, and is also known as the applicant.<\/p>\n

 <\/p>\n

Advice of Fate<\/strong>
\n<\/strong>Notification of the status of a collection that is still outstanding.When a draft bears this phrase, the time begins to run from its date. The date ofmaturity is therefore fixed and does not depend on the date of acceptance of the\u00a0draft.<\/p>\n

 <\/p>\n

Advising Bank<\/strong>
\n<\/strong>A bank that accepts a letter of credit from the issuing bank,\u00a0verifies its authenticity, and forwards it to the beneficiary. The advising bank\u00a0does not take on any payment obligations.<\/p>\n

 <\/p>\n

After Sight<\/strong>
\n<\/strong>When a draft bears this phrase, the time begins to run from the\u00a0date of its acceptance.<\/p>\n

 <\/p>\n

Air Waybill<\/strong>
\n<\/strong>A signed receipt and a contract to deliver goods by\u00a0air. Such bills are non-negotiable and do not convey title to the goods as do \u201cTo\u00a0Order\u201d bills of lading used by ocean and land carriers. The title passes to the\u00a0party to whom the goods are consigned (the Consignee).<\/p>\n

 <\/p>\n

Amendment<\/strong>
\n<\/strong>Change to terms of a letter of credit. Beneficiary has the right to\u00a0refuse the amendment under an irrevocable letter of credit.<\/p>\n

 <\/p>\n

Applicant<\/strong>
\n<\/strong>The party instructing the bank to open a letter of credit and on\u00a0whose behalf the bank agrees to make payment. In most cases, the account\u00a0party is the importer\/buyer, and is also known as the applicant.<\/p>\n

 <\/p>\n

Assignment of Proceeds<\/strong>
\n<\/strong>A request by the beneficiary to pay all or part of the\u00a0funds due to him to a third party. This instrument does not transfer rights in the\u00a0letter of credit nor the title to the goods.<\/p>\n

 <\/p>\n

Back-to-Back Letter of Credit<\/strong>
\n<\/strong>Letter of credit issued for the account\u00a0of a buyer who is already holding an L\/C in his\/her favor. The back-to-back\u00a0L\/C is issued in favor of the supplier to cover the same shipment as stipulated in\u00a0the credit already held by the buyer. Terms of both L\/Cs, except for the amount\u00a0and expiration date, are so similar that the same documents presented under the\u00a0back-to-back credit are subsequently applied against the credit in favor of the\u00a0buyer. However, the beneficiary of the first credit substitutes this draft\u00a0and invoice for those presented by the supplier.<\/p>\n

 <\/p>\n

Banker\u2019s Acceptance<\/strong>
\n<\/strong>Form of credit created when a bank \u201caccepts\u201d a time\u00a0draft typically drawn on the bank by a seller of goods.By accepting a draft, the\u00a0bank is obligated to pay the face amount at a specified time in the future, usually\u00a06 months or less after acceptance. A seller of merchandise can sell the banker’s\u00a0acceptance for an amount less than face value and have immediate use of funds.<\/p>\n

 <\/p>\n

Bank Draft<\/strong>
\n<\/strong>A check drawn by a bank on another bank payable to the seller at\u00a0the request of the buyer. The check may be denominated in U.S. Dollars or most\u00a0foreign currencies.<\/p>\n

 <\/p>\n

Beneficiary<\/strong>
\n<\/strong>The party who receives payment as stipulated in a letter of credit.\u00a0This party is usually the seller\/exporter.<\/p>\n

 <\/p>\n

Bill of Exchange<\/strong>
\n<\/strong>Formal written order addressed by one person (drawer) to\u00a0another (drawee), signed by the drawer, and directing the drawee to pay on\u00a0demand or at a fixed or determinable future time, a certain sum in money to the\u00a0order of a specified payee.<\/p>\n

 <\/p>\n

Bill of Lading<\/strong>
\n<\/strong>\u00a0<\/strong>A document of title issued by\u00a0the carrier (transport company) or its agent. Bill of lading is a receipt for the\u00a0merchandise in transit, as well as a contract for delivery to a specified party at a\u00a0specified destination.<\/p>\n

 <\/p>\n

\u201cBLANK ENDORSED\u201d
\nA negotiable bill of lading in which the title to the\u00a0merchandise is passed on to another party by means of an endorsement. The\u00a0holder of the \u201cblank endorsed\u201d bill of lading is entitled to take possession of the\u00a0merchandise.<\/p>\n

 <\/p>\n

\u201cCLEANBILL OF LADING\u201d
\nOne in which the goods are described as having\u00a0been received by the carrier in \u201capparent good order and condition\u201d and without\u00a0qualification. \u201cLATE PRESENTATION\u201d (STALE): A bill of lading is presented to\u00a0a bank for payment or negotiation after the stipulated date in the letter of credit,\u00a0or later than 21 days after the date of its issuance.<\/p>\n

 <\/p>\n

\u201cNEGOTIABLE OR \u2018TO ORDER\u2019
\nA bill of lading in which the merchandise is\u00a0consigned directly \u201cto order\u201d or \u201cto the order of\u201d a designated party, usually the\u00a0shipper or a bank. The phrase \u201cto order\u201d or \u201cto the order of (a designated party)\u201d \u00a0signifies negotiability permitting the title of the merchandise to be transferred\u00a0many times by means of appropriate endorsements.<\/p>\n

 <\/p>\n

\u201cNOTIFY\u201d
\nThis phrase requires the carrier to notify a designed party upon\u00a0arrival of the merchandise, but does not transfer title of the merchandise to that\u00a0party.<\/p>\n

 <\/p>\n

\u201cSTRAIGHT OR NON-NEGOTIABLE\u201d
\nA bill of lading in which the\u00a0merchandise is consigned directly to a designated party, generally the buyer, but\u00a0not to his \u201corder\u201d. Delivery of the merchandise is made only to the designated\u00a0party, usually without surrendering the bill of lading.<\/p>\n

 <\/p>\n

\u201cTHROUGH\u201d
\nA bill of lading issued by a shipping company or their agent\u00a0covering more than one mode of transportation.<\/p>\n

 <\/p>\n

Cash Against Documents (CAD)<\/strong>
\n<\/strong>Payment for goods in which an\u00a0intermediary (usually a bank) releases title documents to the buyer upon payment\u00a0in cash.<\/p>\n

 <\/p>\n

Cash in Advance (CIA) <\/strong><\/p>\n

A term of trade in which the exporter does not ship\u00a0goods until payment is received; offers the least risk to sellers and the most risk\u00a0to buyers.<\/p>\n

 <\/p>\n

Clean Draft<\/strong>
\n<\/strong>A sight or time draft (bill of exchange) which is not accompanied\u00a0by additional documents.<\/p>\n

 <\/p>\n

Collecting Bank<\/strong>
\n<\/strong>Bank that acts as an agent for a remitting bank that wishes to\u00a0have its collections handled. The collecting bank demands payment from the\u00a0buyer and handles the funds received as instructed; generally the funds are sent\u00a0back to the remitting bank.<\/p>\n

 <\/p>\n

Commercial Invoice<\/strong>
\n<\/strong>A written and signed list of merchandise and\/or services\u00a0with associated quantities, prices and expenses. It contains the terms of the sale\u00a0and is prepared by the seller to show the total amount owed by the buyer.<\/p>\n

 <\/p>\n

Confirmed Credit<\/strong>
\n<\/strong>A letter of credit in which the issuing bank\u2019s obligation to\u00a0pay isconfirmed by a second bank.<\/p>\n

 <\/p>\n

Deferred Letter of Credit<\/strong>
\n<\/strong>Letter of credit that calls for payment at a\u00a0future date, but does not require a draft.<\/p>\n

 <\/p>\n

Direct Collection<\/strong>
\n<\/strong>Method of payment for goods in which the seller sends a\u00a0draft drawn on the buyer, the shipping documents, invoices, insurance\u00a0certificates, other appropriate documents directly to the buyer\u2019s bank for\u00a0collection. Only an information copy of the advice is sent to the exporter\u2019s bank\u00a0to establish and monitor the collection transaction for the seller.<\/p>\n

 <\/p>\n

Discrepancy<\/strong>
\n<\/strong>Any deviation from the terms and conditions of a letter of credit\u00a0or from the documents presented under the letter of credit.<\/p>\n

 <\/p>\n

Documentary Credit<\/strong>
\n<\/strong>A letter of credit issued to support the movement of\u00a0merchandise supported by shipping documents presented by the beneficiary to\u00a0the Issuing Bank for payment or acceptance.<\/p>\n

 <\/p>\n

Documents Against Acceptance (D\/A)<\/strong>
\n<\/strong>Instructions given by a shipper to his\/her acceptance bank that the documents attached to a time draft for collection\u00a0are deliverable to the drawee\/payer against his\/her acceptance of the draft.<\/p>\n

 <\/p>\n

Documents Against Payment (D\/P)<\/strong>
\n<\/strong>Instructions given by a shipper to his\/her bank that the documents are deliverable to the drawee\/payer only against his\u00a0or her payment of the draft.<\/p>\n

 <\/p>\n

Draft<\/strong>
\n<\/strong>A draft is a formal demand for payment. It is an unconditional order in\u00a0writing, addressed by one party (drawer) to another party (drawee), requiring\u00a0the drawee to pay, at a designated or determinable future date, a specified sum in\u00a0lawful currency (either in dollars or other currency) to the order of a named\u00a0party (the Payee). In international trade, drafts are also known as \u201cBills of\u00a0Exchange.\u201d<\/p>\n

 <\/p>\n

Eurodollars<\/strong>
\n<\/strong>A term used for U.S. dollars held on deposit or traded anywhere\u00a0else in the world except in the USA.<\/p>\n

 <\/p>\n

Eximbank (Export-Import Bank of the United States)<\/strong>
\n<\/strong>A U.S. government\u00a0agency that offers insurance\/guarantees of commercial or political risks\u00a0associated with U.S. export transactions. These programs encourage U.S.\u00a0exports by reducing the exporter\u2019s risk.<\/p>\n

 <\/p>\n

Expiry Date<\/strong>
\n<\/strong>The date on which the draft and documents drawn\u00a0under a letter of credit must be presented to the negotiating, accepting, paying,\u00a0or issuing bank in order to effect payment. The issuing bank\u2019s obligation ceases\u00a0on that date if the letter of credit is a \u201cstraight credit.\u201d If the letter of credit is a\u00a0\u201cnegotiable credit,\u201d the issuing bank must honor the credit, provided the\u00a0complying documents were submitted prior to the expiry date.<\/p>\n

 <\/p>\n

Foreign Exchange<\/strong>
\n<\/strong>The process of trading the currency of one country for\u00a0that of another.<\/p>\n

 <\/p>\n

Foreign Exchange Exposure<\/strong>
\n<\/strong>A situation in which a U.S. company,\u00a0selling\/purchasing in a currency other than U.S. Dollars, runs the risk of\u00a0receiving a reduced dollar amount or paying an increased dollar amount due to a\u00a0fluctuating exchange rate.<\/p>\n

 <\/p>\n

Forward Transactions<\/strong>
\n<\/strong>Foreign exchange transactions settling between three\u00a0business days and one year (and sometimes longer).<\/p>\n

 <\/p>\n

Freight Forwarder<\/strong>
\n<\/strong>An independent business that arranges for the shipment of\u00a0export cargo and completes the necessary export documentation on behalf of the\u00a0exporter.<\/p>\n

 <\/p>\n

Irrevocable Letter of Credit<\/strong>
\n<\/strong>Letter of credit that cannot be changed or\u00a0cancelled without the consent of all parties involved. Almost all L\/Cs are\u00a0irrevocable unless otherwise stated on L\/C.<\/p>\n

 <\/p>\n

Issuing Bank<\/strong>
\n<\/strong>Bank that draws up and issues the letter of credit and that\u00a0makes payment according to the conditions.<\/p>\n

 <\/p>\n

Letter of Credit<\/strong>
\n<\/strong>An instrument issued by a bank, at the request of the\u00a0applicant, promising to pay the beneficiary upon his presentation of stipulated\u00a0documents in accordance with the terms and conditions of the credit.<\/p>\n

 <\/p>\n

\u201cCONFIRMED\u201d
\nA letter of credit issued by one bank to which another bank\u00a0added its irrevocable confirmation to pay, thereby obligating itself in the same\u00a0manner as the opening bank.<\/p>\n

 <\/p>\n

\u201cSTAND-BY\u201d
\nA letter of credit that generally guarantees payment due for an\u00a0unfulfilled obligation on the part of the applicant or another party. It is payable\u00a0upon presentation of a draft, as well as a signed statement or certification by the\u00a0beneficiary that the applicant has failed in his obligation.<\/p>\n

 <\/p>\n

Maturity Date<\/strong>
\n<\/strong>The date on which negotiable instruments become due for\u00a0payment.<\/p>\n

 <\/p>\n

Negotiate<\/strong>
\n<\/strong>Take action to verify that the documents presented under an L\/C\u00a0conform to the requirements in order to release funds to the seller.<\/p>\n

 <\/p>\n

Negotiating Bank<\/strong>
\n<\/strong>The bank that reviews the documents required in the letter\u00a0of credit for compliance with its terms and remits payment to the beneficiary.\u00a0The bank may be specifically named in the letter of credit, or may be a bank\u00a0chosen by the seller.<\/p>\n

 <\/p>\n

Opening Bank<\/strong>
\n<\/strong>Bank that draws up and issues the letter of credit and that\u00a0makes payment according to the conditions.<\/p>\n

 <\/p>\n

Paying Bank<\/strong>
\n<\/strong>Bank that effects payment of documents negotiated under a letter\u00a0of credit, customarily the buyer’s bank. It is usually also the negotiating bank,\u00a0unless the L\/C allows another bank to negotiate or the paying bank is unable to\u00a0negotiate.<\/p>\n

 <\/p>\n

Presentation<\/strong>
\n<\/strong>Presentation for acceptance or payment on a collection or letter\u00a0of credit.<\/p>\n

 <\/p>\n

Proforma Invoice<\/strong>
\n<\/strong>An invoice sent in advance of shipment, to enable the buyer\u00a0to obtain an import permit or exchange permit or both. The proforma invoice\u00a0gives a close approximation of the weights and values of the intended shipment.<\/p>\n

 <\/p>\n

Protest<\/strong>
\n<\/strong>Legal process of demanding payment of a negotiable item from the\u00a0maker who has refused to pay.<\/p>\n

 <\/p>\n

Red Clause<\/strong>
\n<\/strong>Clause in a letter of credit that authorizes the advising\/negotiating\u00a0bank to make an advance payment to the beneficiary before presentation of\u00a0shipping documents, usually against a simple receipt.<\/p>\n

 <\/p>\n

Reimbursing Bank<\/strong>
\n<\/strong>The bank names in a letter of credit as the bank authorized\u00a0by the issuing bank to honor claims presented by the paying, accepting, or\u00a0negotiating bank.<\/p>\n

 <\/p>\n

Revocable Letter of Credit<\/strong>
\n<\/strong>A letter of credit that can be modified or\u00a0canceled by the issuing bank without the beneficiary\u2019s consent unless the\u00a0negotiation of complying documents has already taken place. The issuing bank\u00a0must honor the draft(s) negotiated before the notice of revocation has been made.<\/p>\n

 <\/p>\n

Spot Transaction<\/strong>
\n<\/strong>Foreign exchange transaction in which foreign currency is\u00a0bought at the current rate of exchange and delivered within two business days\u00a0after the transaction date.<\/p>\n

 <\/p>\n

Spread<\/strong>
\n<\/strong>The difference between the buying (bid) rate and the selling (offer) rate\u00a0of any foreign currency for any particular period.<\/p>\n

 <\/p>\n

Standby Letter of Credit<\/strong>
\n<\/strong>Letter of credit issued to back an obligation\u00a0of the applicant, but typically not intended to be the primary method of payment.\u00a0Usually payable against drafts and statements, but not against commercial\u00a0documents.<\/p>\n

 <\/p>\n

Trade Acceptance<\/strong>
\n<\/strong>Draft drawn by the seller of goods on the buyer and\u00a0accepted by the buyer for payment at a specified future date.<\/p>\n

 <\/p>\n

Transferable Letter of Credit<\/strong>
\n<\/strong>Letter of credit that permits the\u00a0beneficiary to transfer all or some of the rights and obligations under the credit to\u00a0a second beneficiary.<\/p>\n

 <\/p>\n

UCP<\/strong>
\n<\/strong>Uniform Customs and Practices for Documentary Credits. Publication\u00a0issued by the International Chamber of Commerce (2007 revision, ICC\u00a0Publication No. 600, or \u201cUCP 600\u201d) that outlines the rules and guidelines\u00a0involved in a letter of credit transaction.<\/p>\n

 <\/p>\n

Usance (Time) Credit<\/strong>
\n<\/strong>Letter of credit that calls for payment against drafts\u00a0calling for payment at some specified date in the future. Gives buyers time to sell\u00a0the goods to get the funds to reimburse the issuer.<\/p>\n

 <\/p>\n

Usance Letter of Credit<\/strong>
\n<\/strong>Letter of credit that calls for payment at a\u00a0future date (generally within six months) and requires a draft drawn on the\u00a0issuing\/paying bank for the amount of the invoice.<\/p>\n

 <\/p>\n

Value (Settlement) Date<\/strong>
\n<\/strong>Contracted date on which the foreign exchange is to\u00a0be delivered or received.<\/p>\n","protected":false},"excerpt":{"rendered":"

Letter of Credit Glossary <\/p>\n","protected":false},"author":3,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_aioseop_title":"Glossary for Letter of Credit (L\/C Glossary) ","_aioseop_description":"Letter of Credit Glossary ","footnotes":""},"categories":[7],"tags":[36,35],"class_list":{"0":"post-70","1":"post","2":"type-post","3":"status-publish","4":"format-standard","6":"category-export-terms-practices","7":"tag-glossary-for-lc","8":"tag-letter-of-credit-glossary"},"_links":{"self":[{"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/posts\/70","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/comments?post=70"}],"version-history":[{"count":0,"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/posts\/70\/revisions"}],"wp:attachment":[{"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/media?parent=70"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/categories?post=70"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/leadxpress.com\/export-resources\/wp-json\/wp\/v2\/tags?post=70"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}