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Glossary

 

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Acceptance

(1) A time draft (or Bill of Exchange) which the drawee has accepted and is unconditionally obligated to pay at maturity. (2) Drawee’s act in receiving a draft and thus entering into the obligation to pay its value at maturity. (3) Broadly speaking, any agreement to purchase goods under specified terms.

 

Acceptance Credit

A Letter of Credit which includes a term bill of exchange in its required documentation. The bill will be accepted by the bank on which it is drawn, usually the issuing or advising bank, and the proceeds paid to the beneficiary at maturity.
 

Acceptance Draft

Payable at a fixed or determinable future date, upon the face of which the Drawee has acknowledged in writing his or her obligation to pay at maturity.

 

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.

 

Accepting Bank

The bank in a term Letter of Credit on which drafts are drawn that has agreed to accept the draft. By accepting the draft, the Drawee Bank signifies its commitment to pay the face amount at maturity to anyone who presents it at maturity. After accepting the draft, the Drawee Bank becomes the Accepting Bank.

 

Account Party

The party instructing the bank to open a letter of credit and on whose behalf the bank agrees to make payment. In most cases, the account party is the importer/buyer, and is also known as the applicant.

 

Accountee

The buyer, which is the same as the opener, applicant or account party.

 

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.

 

Advance Payment Guarantee

A guarantee issued by a bank, on behalf of a seller to a buyer, in relation to any advance payment that is made by the buyer to the seller to allow the contract to commence. If the contract is not completed the buyer can claim reimbursement of the advance payment under the guarantee.

 

Advice of Fate

Notification of the staus of a collection that is still outstanding. When a draft bears this phrase, the time begins to run from its date. The date of maturity is therefore fixed and does not depend on the date of acceptance of the draft.

 

Advised Credit

A letter of credit whose terms and conditions have been forwarded by a bank.

 

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.

 

Affiliate

A bank which is owned by the same parent company and is “affiliated” with another bank.

 

After Date

A notation used on financial instruments (such as drafts or bills of exchange) to fix the maturity date as a fixed number of days past the drawing of the draft. For example, if a draft stipulates "90 days after date" it means that the draft is due (payable) 90 days after the date it is drawn. This has the effect of fixing the date of the maturity of the draft, independent of the date of acceptance of the draft.

 

After Sight

When a draft bears this phrase, the time begins to run from the date of its acceptance.

 

Agent Bank

A bank acting for a foreign bank or a bank handling administration of a loan in a syndicated credit.

 

Air Release

This can be used in place of BOL to get goods (i.e., take possession, clear customs, etc.).  An air release  is used when goods arrive before the documents. The bank issues this on behalf of the buyer/importer. The buyer must pay for the goods whether the documents are in order or not, even if the documents never arrive.

 

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 Insurance

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.

 

Antidiversion Clause

To help ensure that U. S. exports go only to legally authorized destinations, the U. S. government requires a destination control statement on shipping documents. Under this requirement, the commercial invoice and bill of lading (or air waybill) for nearly all commercial shipments leaving the United States must display a statement notifying the carrier and all foreign parties that the U. S. material has been approved for export only to certain destinations and may not be diverted contrary to U. S. law. 

 

Antidumping Duty

Special duty imposed to offset the price effect of dumping that has been determined to be materially harmful to domestic producers. (See also dumping)

 

Applicant

Party applying to issuing bank to issue the letter of credit, usually an importer.

 

Appreciation

The increase in the value of something (e.g. FX, goods, shares of stock, etc.).

 

Approval Basis

If documents containing discrepancies are presented to the nominated bank under a letter of credit, the bank can forward the documents to the issuing bank for approval, with the beneficiary's agreement. Because of the risk of loss in transit and delay's resulting in interest loss, however, it is recommended that the beneficiary first try to correct the document; but, if that is not possible, the beneficiary asks the nominated bank to contact the issuing bank for authorization to accept the discrepancies.

Issuing banks charge a fee to accept discrepant documents if they will.

 

Arbitrage

The process of buying foreign exchange, stocks, bonds, and other commodities in one market and immediately selling them in another market at higher prices. In doing so, one takes advantage of the fact that there may be different prices in different markets for identical goods, FX, commodities, etc.

 

Arbitration

Process of resolving a dispute or a grievance outside of the court system by presenting it to an impartial third party or panel for a decision that may or may not be binding. 

 

Arrival Notice

A notice furnished to the consignee and shipping broker alerting them to the projected arrival of freight and it's availability for pickup.

 

Assignment

The transfer of rights, title, interest, and benefits of a contract or financial instrument to a third party.

 

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.

 

ASWP

Any safe world port.

 

At Sight

Terms of a financial instrument that is payable upon presentation or demand. A bill of exchange may be made payable, for example, at sight or after sight, which (respectively) means it is either payable upon presentation or demand or within a particular period after the demand is made.

 

AUD

Australian dollar.

 

Availability

In letters of credit, refers to the availability of documents in exchange for the payment of the amount stated in the letter of credit. Availability options are as follows:

  • By sight payment: payment on the receipt of the documents by the issuing bank or the bank nominated in the letter of credit.

  • By deferred payment: after a period specified in the letter of credit and the payment thereof at maturity.

  • By acceptance: acceptance on a draft (to be presented together with other documents) by the issuing bank or by the bank nominated in the letter of credit and the thereof at maturity.

  • By negotiation: the giving of value by the nominated bank to the beneficiary for the documents presented, subject to receipt of cover from the issuing bank.

 

Available with Bank

The bank authorized in the Letter of Credit to effect payment under, accept or negotiate the Letter of Credit.

 

Avalisation

(1) Payment undertaking given by a bank in respect of a bill of exchange drawn on a buyer. A way of giving security to the drawer of a term bill. (2) The bill is stamped with wording such as "Pour aval" and signed by a representative of the bank.

 

Avalize

The process by which a third party, usually a bank guarantees the undertaking of the drawee to meet their responsibility under a Bill of Exchange. The words "Per Aval" and the signature of the avalizing (guarantor) party must be written on the Bill.

 

 

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