International settlings

Terms

•Terms, used on settlings with using of documentary letters of credit:

Advising Bank - is a bank of seller, its task is to advise (notify) letter of credit to exporter without obligations from its side as to payment, accept or negotiation.

Letter of Credit (L/C, Documentary credit, Credit) - is form of settlings when bank-issuer on order of its client (order issuer of letter of credit) or on its name obligates:

• to provide authority to another (fulfilling) bank to accomplish this payment;
• to accomplish payment to the third person (beneficiary) for supplied goods, fulfilled work and provided services.

Accepting Bank - is a bank that made accept on bill of exchange a d will accept it to payment after the indicated date.

Acceptance - is agreement for payment or guarantee of payment for payment documents.

Applicant - is a juridical person, that applied to the bank that services him for opening of letter of credit (order issuer of letter of credit, Importer, payer).

Issuing Bank (Opening Bank) - is bank of payer, that opens letter of credit on order of its client.

Irrevocable Letter of credit  (irrevocable L/C) - is letter of credit that can be changed or abrogated only on agreement of beneficiary, in favor of whom an account was opened. Irrevocable letter of credit gives beneficiary a high degree of confidence that his supplies or services will be paid, if he fulfils all conditions of letter of credit.

Beneficiary (Exporter, Seller) - is juridical person, in whose favor letter of credit is issued  exporter, seller, executor of work or services).

Consignor (Shipper) - is a person that sends goods, usually but not always is a beneficiary.

Consignee - is a person  to whom goods are supplied. Equivalent meanings are: consignee, addressee.

Due Date (Maturity Day) - is a date, indicated in accepting mark on transition bill of credit (term of payment)

Divisible Letter of Credit  -  is letter of credit that foresees paying out to exporter in accordance with contract of means after every partial supply.

Endorsement - is a transfer inscription made, as a rule, on the back of bill of exchange, check or other document and indicating the person to whom all rights by this document are transferred.

Accomplishing a Letter of Credit by acceptance -  exporter writes out a draft on bank-issuer or bank, confirming the payment or on buyer. On providing documents not payment but acceptance of draft takes place. Payment is accomplished in definite terms. Letter of credit with draft allow importer to sell goods before the term of payment and at the expense of receipt to pay for accept.

Fulfilling a L/C by negotiation - Bank-issuer provides beneficiary with authority to value B/C on him or on Applicant of L/C. Negotiation means paying out of means by the bank, authorized for negotiation, against providing by beneficiary of drafts and/or documents. Letters of credit with negotiation can be paid both immediately and on the term of payment. L/C can be with free or limited negotiation. If L/C is with free negotiation, any bank can be negotiating.

Fulfilling a L/C by payment - settlings with beneficiary are accomplished immediately after providing with corresponding documents to acting bank, if all conditions of letter of credit are sustained.

Fulfilling a L/C by def payment - foresee receiving of payment by beneficiary not on introducing documents but later, in the term determined in the L/C. On providing documents in accordance with L/C, beneficiary receives a written agreement of the bank-issuer or Confirmed  bank to accomplish payment on the day of determined term of payment. Fulfilling of L/C by def payment, like by acceptance, allows importer to come into their own of documents much earlier then payment will be accomplished.

Available Bank - is a bank that accomplishes payment against introduced documents, takes obligations on def payment, accepts or negotiates draft.

Negotiation - as to documentary operations - it is reception and evaluation of price (check of genuineness with reasonable care) of bills of exchange for turning on drawee or for payment (if bank added confirmation).

Negotiating Bank - is a bank that negotiates bills of exchange, issued by beneficiary according to conditions of documentary L/C, and which should be paid in another bank. If negotiating bank did not add confirmation on L/C, negotiation is accomplished with turn on exporter.

Indivisible L/C - is a letter of credit, which foresees that all sum that belongs to exporter will be paid out after finishing of supplies or after the last partial supply.

Uncovered L/C - is a letter of credit, on opening of which bank-issuer does not provide preliminarily currency means at the disposal of Available Bank.

Revocable Letter of Credit (Revocable L/C) - is  L/C that can be changed or abrogated by the bank-issuer, in most cases on prescription of order of L/C applicant, without preliminary coordinating with beneficiary Revocable L/C does not give beneficiary guarantee of receiving payment for shipped goods or provided services, that's why they are almost not used in foreign-trade settlings.

Bill of Exchange (Draft) - is unconstrained written order of one person (drawer) to another person (drawee), signed by the first person and demanding from the second person payment of indicated sum of money to drawer or to his order, or to bearer  as it is indicated in the bill of credit (bill of exchange) on presentation or on particular date in future.

Confirmed Bank - is a bank (as a rule is advising bank), which on demand or on allowance of the bank-issuer adds its irrevocable obligation to pay/accept/negotiate without turning on itself or other banks (i.e. undoubtedly) against correctly introduced documents according to conditions of letter of credit.

Confirming Letter of Credit - is irrevocable letter of credit, payment by which is guaranteed, except bank-issuer, by another (confirming) bank (it can also be advising bank). Confirming bank provides beneficiary with its own obligation to accomplish indicated in the letter of credit payments timely.

Covered Letter of Credit- is letter of credit, on opening of which bank-issuer preliminary provides currency means (covering) in sum of L/C in disposal of acting bank, for duration of obligations of bank-issuer on condition of possibility to use them for payments on L/C.

Applicant (Credit Applicant, Buyer, Drawee, Accreditor) - is a person that entrusts to issue L/C and determines its conditions (buyer, importer, drawee (if using of bill of exchange is needed in accordance with conditions of L/C)).

Reimbursing Bank  - is a bank, indicted in conditions of L/C as payer against bills of exchange on presentation, on term, indicated in accept etc, and issued on conditions of L/C.

Transport Documents (Documents of Movement) - are documents, confirming shipment/dispatching of goods. In documentary operations the following transport documents are widely used: bill of lading, avia, road and railway consignation note, mail quittance.

Transferable Letter of Credit - is L/C that foresees possibility of its being used completely or partially by one or by some beneficiaries. Transferable L/C is used in the case when the first beneficiary does not supply goods himself and is intermediary and wants to transfer part or all his rights and obligations to real supplier (second beneficiary). The first exporter entrusts advising (acting) bank to advise second exporter (supplier) about sum, that should be transferred and about conditions of letter of credit.

Drawer - is a person that valued bill of exchange (draft), maker.

Drawee - is a person on whom bill of exchange (draft) is valued.

Bill of Exchange (Draft) - is a revocable bill of credit, containing written instructions of billholder, addressed to payer, to pay certain sum of money within specified time.

Assignor - as to letters of credits - this is beneficiary, that gives instructions to advising bank about transfer of part of L/C exchange means to the third person.

Assignee - is the third person (as to L/C, except Applicant and beneficiary), in whose favor means of L/C of exchange can be transferred.

print page »