A time draft that has been accepted by the drawee bank. The drawee bank (accepting bank) stamps the draft “ACCEPTED”, signs and dates the time draft, and in doing so unconditionally undertakes to pay the draft at maturity.
A time draft that has been accepted by the drawee bank. The drawee bank (accepting bank) stamps the draft “ACCEPTED”, signs and dates the time draft, and in doing so unconditionally undertakes to pay the draft at maturity.
German Bank Code (Similar to a routing number – see routing number).
Means the currency chosen as the settlement currency between a Bank and its customer.
Means the corresponding foreign currency being traded (Example: Purchased by or sold to) against the base currency.
Is a composite unit consisting of weighted amounts of the currencies of a group of designated nations.
The party in whose favor a Letter of Credit is established or draft drawn. The party to whom L/C is addressed. Also known as Shipper/Seller/Importer. The party that receives benefit from the L/C.
Is another name for a SWIFT Code. (See SWIFT).
Is another name for a draft.
The title document issued by a carrier which serves as a receipt for the goods to be delivered to a designated person or to his order. It describes the conditions under which the goods are accepted by the carrier and details of the nature and quantity of the goods, name of vessel, identifying marks and numbers, destination, etc.
A warehouse authorized by customs authorities for storage of goods on which payment of duties is deferred until the goods are removed.
Is the acronym for Bank State Branch / the Australian Bank Code (Similar to a routing number – see routing number).
The rate used when a customer is returning foreign currency for USD. The bank is “buying in” the foreign money.
 A time draft (or Bill of Exchange) which the drawee has accepted and is unconditionally obligated to pay at maturity.  Drawee’s act in receiving a draft and thus entering into the obligation to pay its value at maturity.  Broadly speaking, any agreement to purchase goods under specified terms.
The correspondent bank that has been asked to pass a letter of credit on to the beneficiary by the opening bank. The advising bank authenticates signatures, only, and has no other undertaking with regard to the letter of credit.
A bank which is owned by the same parent company and is “affiliated” with another bank.
Any change to the terms of a Letter of Credit (L/C). The applicant must ask the issuing bank to amend. If it is an irrevocable L/C, the issuing bank, confirming bank and beneficiary must approve any and all amendments.
Party that applies for the Letter of Credit. (Also known as the Consignee, Buyer, or the Importer).
The increase in the value of something (Example: FX, goods, shares of stock, etc.).
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.
Identifier Code for each bank on the SWIFT System. Must have a SWIFT Code to be able to send a wire internationally; this routes the funds to the proper institution. Sometimes a SWIFT Code is called a BIC Code. (See SWIFT)
A company that transports goods (via truck, airlines, and ship).
A certificate usually required for industrial equipment and meat products.
Document attesting to the country of origin of an article in trade, or of one or more of its components.
Term of sale denoting "cost and freight". Invoice reflects both the costs of goods and freight charges to a named location. Shipper must pay freight charges and adds those charges to the invoice. The buyer pays all other fees (insurance, unloading, etc.).
Term of sale denoting “cost, insurance, freight”. Invoice reflects all these charges and the seller is liable for loss/damage up to the foreign port. Unlike “Freight/Carriage and Insurance paid to...”, the seller is only required to cover insurance on minimum conditions.
Is an 18-digit account number for Mexican banks (Similar to IBAN – see IBAN).
A bill of lading bearing no notation by the carrier as to defects in goods or packing.
Is a Swiss Bank Code; this is included in the IBAN (Similar to a routing number – see routing number and IBAN).
An electronic payment system, made up of member banks, which is based in New York.
When used as a verb means to accelerate, terminate, liquidate or cancel transactions under an FX contract.
Bill rendered by exporter for goods shipped; it is one of the documents normally accompanying an export draft. This bill, issued by the shipper, should describe the following: [a] Cost of goods, [b] Description of goods, [c] Number of items being shipped, and [d] Transport costs.
In Letter of Trade (as distinguished from customary usage in domestic finance), any draft or other item to be presented for collection.
In export financing, the risk of the foreign purchaser’s ability and willingness to repay.
A public or privately owned firm or corporation that transports the goods of others over land, sea, or through the air, for a stated freight rate. By government regulation, a common carrier is required to carry all goods offered if accommodations are available and the established rate is paid.
To assume an obligation to pay under a Letter of Credit (See “Confirming Bank”).
This bank adds its engagement or obligation to pay the beneficiary in addition to that of the opening bank. The credit risk taken by the beneficiary lies with the confirming bank, not with the opening bank, as is the case with an advised L/C.
The Importer, Buyer, or person to whom goods are destined to be delivered.
Method of payment for exports by which title to goods does not pass to the importer, and the goods are not paid for until they are sold to a third party.
A term used to describe any person who consigns goods to himself or to another party in a bill of lading or equivalent document. A consignor might be the owner of the goods, or a freight forwarder who consigns goods on behalf of his principal.
The ability of owners of a currency to exchange it for foreign currencies in the open market.
An agreement between a corporate customer and the bank to accept wire and draft requests so the customer does not have to contact the branch every time they wish to send a wire.
Banks between whom a relationship exists for the purpose of facilitating trade. These relationships can include the holding of accounts, S.W.I.F.T. and/or telex authentication codes, and credit facilities, as well as specific agreements governing business transactions between the two banks.
In Letter of Shipping terms, this word is used interchangeably with Letter of Credit.
A service company that transacts customhouse (clearing goods through customs and paying taxes) formalities on behalf of an importer.
A Letter of Credit which calls for time drafts. These drafts cannot be discounted. The beneficiary must wait until maturity to collect funds due.
The term meaning “delivered ex-quay”. The seller makes the goods available to the buyer on the quay (wharf) at the destination named in the sales contract. Seller bears full cost and risk of getting the goods there. Care should be taken to state clearly who pays for import duties, value-added taxes or other taxes. DDP: Trade term that signifies “delivered duty paid”. DEQ plus seller pays import duties. DAF: Meaning “delivered at frontier”. The seller makes the goods available to the buyer on board the ship at the destination named in the sales contract. The seller bears full cost and risk involved in bringing the goods there.
Official lowering of the trade value of a country’s currency in relation to other currencies by direct government decision to establish a new relationship to another agreed standard, such as the U.S. Dollar or a “basket” of currencies.
Also known as discounted proceeds. This refers to the seller of a draft, time promissory note, or banker’s acceptance (B/A) receiving less than face value by “selling” the draft prior to maturity. The holder (owner) of the draft or B/A receives face value upon maturity. When discount charges are for the account of the buyer, this arrangement must be agreed to in the L/C. Then, the applicant of the L/C pays the discount charges.
A discrepancy occurs when document(s) do not conform to the L/C. “Curable” means that the beneficiary can correct the discrepancy. “Incurable” means they cannot be corrected (Example: Wrong goods shipped, shipped after latest shipping date, etc.).
When documents do not conform to the Letter of Credit terms, the negotiating (paying) bank must explain the rejection of documents within a “reasonable” amount of time. Two ways a drawee bank may pay under discrepant documents:  “Payment Under Guarantee”, or  Get issuing bank’s authority to pay or accept drafts despite the discrepancy.
The refusal of a drawee to accept a draft or to pay it when due.
With reference to drafts or other items for collection, this denotes that documents are attached for delivery to a specified party on specified terms and conditions.
Instructions given for presentation of time drafts, denoting that accompanying documents are to be released on acceptance of draft by drawee.
An instruction given for presentation of sight drafts, denoting that accompanying documents are to be released only upon payment of draft.
Addressee of the draft; party from whom payment is demanded.
The instrument by which one party directs another party to make a payment; a demand for payment. Clean- one with no accompanying documents; Sight- one payable on presentation; Time- one payable in a specified number of days “after sight” (after presentation) or “after date” (date draft is drawn).
Paying bank. Bank on which draft will be drawn.
Issuer or signer of a draft; party that fills out and signs a draft.
The business and/or competitive risk of transacting business in a place where the settlement currency is other than your own, base currency.
Electronic Data Interchange for Administration, Commerce and Transport; from the UN-backed electronic data interchange standards body, used to create electronic versions of common business documents that will work on a global scale.
The title document or draft which is signed on the back by the party receiving goods or the payee, respectively, to prove receipt. Blank- simply signed, anyone can claim goods; Restricted- only named party can claim goods.
Is a legal concept in which a financial instrument or an asset is held by a third party on behalf of two other parties that are in the process of completing a transaction. (Example: Money, securities, funds and other assets can all be held in escrow).
The price of one currency in terms of another (Example: The number of units of one currency that may be exchanged for one unit of another currency).
A Letter of Credit that automatically renews itself in the absence of notice of non-renewal. A non-renewed notice must be sent by the issuing bank a certain number of days prior to the then-current expiry date (the number of days is specified in the L/C). Failure to send the non-renewal notice causes the renewal of the L/C.
Is when governments or their Central Banks administratively set the exchange rate for their currency (by buying and or selling their own currency, thus manipulating global demand).
Is simply the mathematical representation of the value of one currency expressed in terms of another currency.
Is the Export-Import Bank of the United States. EximBank has many programs to help exporters through loans and guarantees.
Last date beneficiary can present documents and be certain they will be paid if documents are in order. The last day a Letter of Credit is valid for drawings.
A document secured from a government, authorizing an exporter to export a specific quantity of a particular commodity to a certain country. An export license is often required if a government has placed embargoes or other restrictions upon exports.
Seller/Beneficiary if sale is under a Letter of Credit. EXW: Or, “Ex-Works”. The seller’s only responsibility is to make the goods available at their premises. The buyer pays for all other fees such as shipping, insurance, loading & unloading, etc. (Example Factory, Ex Mill, Ex Plantation, Ex Warehouse, etc. are interchangeable).
Term of sale denoting “free along side”. The seller’s obligation is completed when goods are placed along side ship (Example: Buyer pays for loading, insurance, freight, unloading, etc.).
The free determination of rates based on supply and demand; for example, for exchange rates and/or interest rates.
Term of sale denoting “free on board”. The risk of loss of, or damage to, the goods is transferred from seller to buyer when goods pass over the ship’s rail.
The currency or credit instruments of a foreign country. Also, FX transactions involve the purchase and/or sale of currencies.
A mutually binding agreement between two counterparties to exchange a specific amount of one currency in exchange for a specific amount of another currency at a specific exchange rate, and on a specific date. FX may be bought or sold for delivery at a future time (up to one year for hard currencies, sometimes up to 3 to 5 years).
An agreement to purchase or sell an amount of foreign currency at a future date at a predetermined price. Forward rates have nothing to do with what spot rates are expected to be in the future; the difference between the spot rate and the forward rate is the difference between the interest rates of the two currencies expressed as “forward points”. Forward exchange is most commonly used to hedge or cover fluctuation risk in the value of a foreign currency over time.
Stands for General Agreement on Tariffs and Trade. GATT is a multilateral treaty intended to help reduce trade barriers and promote tariff concessions.
Those currencies whose value is sound and steady and is generally acceptable at face value (Example: U.S. dollar, Euro, British Pound Sterling, etc.).
Reducing one’s risk of loss by compensating transactions on the other side. (For example, buy goods for future delivery priced in a foreign currency. Hedge by buying the foreign exchange needed at the rate then in effect. Or, another way of hedging is to buy a forward exchange contract. In both cases the buyer will have a known cost in its own currency.). This is a hedge against the risk of foreign exchange fluctuation; it is not a hedge against a change in the price of the goods.
To pay or accept, as the case may be, upon presentation.
International Bank Account Number. Required on all wires being sent to Europe, the IBAN includes the Country Code, Region Code, Bank Code and Bank Account Number of the Beneficiary. If a customer requests an IBAN for an incoming wire, the US does not use them; however, we create one – (US + Routing Number + Account Number).
Buyer. Under a Letter of Credit, the importer is the account party, or the one who asks the opening bank to issue the L/C.
The acronym for International Chamber of Commerce.
Is a LC that is not subject to cancellation; L/C which cannot be changed or cancelled without agreement of all parties: buyer, seller, opening bank, and confirming/advising bank.
Are major currencies in the global economy. Key currencies include the U.S. dollar, the British pound sterling, the Euro, the Swiss franc, the Japanese yen and the Canadian dollar.
A financial institution where the transaction is routed before sending it to the beneficiary. Generally used for those beneficiary banks who are unable to receive direct payment.
A document that facilitates the movement of goods between buyer and seller by providing a means of payment. Undertaking of the issuing bank to make payment if terms and conditions of the L/C are met. A formal letter issued by a bank that authorizes the drawing of drafts against the bank up to a fixed amount on behalf of its customers and thereby facilitates the transaction of business between parties who may not be otherwise acquainted with each other.
Frequently referred to as transferability, this term applies to the changing of one currency into another with government permission.
The carrier delivers to the consignee (buyer). “Consigned to...(name)”. A straight bill of lading is not negotiable. Only the consignee can obtain the goods.
The carrier delivers to anyone the shipper or consignee so orders. “Consigned to order of...(name)” (Example: Someone other than buyer, perhaps freight forwarder or customs agent).
An insurance that will compensate the owner of goods transported overseas in the event of loss that cannot be legally recovered from the carrier.
The beneficiary can present documents to any bank that will agree to process the documents.
Made out “to order”. Anyone can obtain the goods. Marine and combined BOLs can be negotiable or paid at straight. All others are straight only. (See “Order Bill of Lading”).
Is an agency of the United States Department of the Treasury that administers and enforces economic and trade sanctions based on US foreign policy and national security goals against targeted foreign states, organizations, and individuals.
A presentation of documents made on or before expiration date and within presentation period. [a] For marine bill of lading, date begins on date of “on board” notation. [b] For air waybill, flight date is used. If not stated, it is the issue date of the air waybill. [c] For all other transport documents, date starts on the later of date of issuance or receipt stamp.
Origin charges pay for items and services provided before a shipment has departed the origin seaport or airport.
In relation to a foreign exchange transaction, refers to the foreign exchange risk that is not covered by an offsetting transaction (Example: A foreign exchange contract has not been entered into to protect or “hedge” against fluctuation risk). If the bank did not “cover” the purchase or sale of FX that it contracted with our customer as mentioned in “fully-booked” above, then we would not be “hedged” and would be in an open position.
Made under commercial L/C when the documents are received (see also time/deferred payment L/Cs). Banks pay against documents, not receipt of goods.
The exposure to a foreign exchange risk not covered by an offsetting transaction (Example: A foreign exchange contract has not been entered into to protect or “hedge” against fluctuation risk).
Usually “to order” bills of lading are to the order of the shipper and endorsed in blank, thereby giving the holder of the bill of lading title to the shipment. They may also be to the order of the consignee or bank financing the transaction. Order bills of lading are negotiable whereas Straight bills of lading are not. (See also “Negotiable Bill of Lading”).
This has the signature of the carrier (master) or its agent (for the master). If marked “copy non-negotiable” or if no signature, not original bills of lading are necessary to claim goods at port.
The original copy of the wire that has the customer’s original signature present.
Is the one who is paid under L/C transaction. Drawer and payee are usually the same party.
Open Account, Documentary Collections, Letters of Credit, Consignment, or Cash in Advance. Conditions under which buyer and seller have agreed to do business.
The beneficiary or issuing bank promises to repay the drawee bank if issuing bank rejects documents. This is a contingent credit exposure to the beneficiary (or issuing bank) which must be approved by a credit officer of the drawee bank.
Opening bank. The bank that issues the Letter of Credit for the applicant. Under an LC, the beneficiary’s risk is transferred from that of the buyer to that of the buyer’s bank (Example: Issuing bank).
In export financing, the risk of loss due to such causes as currency inconvertibility, government action preventing entry of goods, expropriation or confiscation, war, etc.
The port where the vessel is off loaded and cargo discharges.
A port at which foreign goods are admitted into the receiving country.
The port where the cargo is loaded aboard the vessel lashed and stowed.
The period of time during which documents under an LC must be presented to the negotiating bank. Usually begins on “on board” date, or date of issuance of other transport documents, and runs for a stipulated number of days. If no period of days is stipulated, documents must be within 21 days of shipment, provided that documents are presented on or before the expiry date. Under no circumstances may documents be presented after the expiry date.
An abbreviated invoice sent in advance of a shipment, usually to enable the buyer to obtain an import permit or an exchange permit or both. The pro forma invoice gives a close approximation of the weights and values of a shipment that is to be made. It is not binding on the exporter until the order is confirmed.
The bank that sends the draft to an overseas bank for collection.
The restoration of the value of a nation’s currency that had once been devalued in terms of the currency of another nation. Currencies of countries undergoing inflation are more often “devalued”, meaning that either by market forces or by declaration of the issuing government, a greater number of units of its currency are required to purchase other currencies. When the reverse occurs, usually in an attempt to restore the purchasing power of an inflated currency, this is called “revaluation.”
Used by American Banks, used to direct or “route” funds to the correct banks (Routing Numbers will always be 9 digits long).
The terms and conditions can be changed, amended, or cancelled without the agreement of the beneficiary. This can happen only before the beneficiary has presented documents and has had them accepted in order.
When the document is “viewed” by bank. A sight L/C means the beneficiary will be paid immediately after presentation of documents in conformity with the L/C.
The rate used when a customer would like to use USD to obtain a foreign currency. The bank is “selling” the foreign currency to the customer.
Each set-off date and the final settlement date. This date is the day on which the FX transaction is completed
In respect of any FX contract, the net amount that is due and payable by one Party to the other upon close out or final settlement.
The currency of a country that is not readily accepted by other countries and is not readily converted into currencies that are readily acceptable (hard currencies).
United Kingdom Bank Code. This number is included in the IBAN. (similar to a routing number – See routing number).
Society for Worldwide Interbank Financial Telecommunications. SWIFT is a telecommunications network made up of member banks around the world. SWIFT is a formatted system that reduces possible miscommunications, and is quicker and cheaper than telex.
A foreign currency option gives a corporate entity the right, but not the obligation to buy or sell a particular currency at a particular “strike price.” This option can be exercised on or before the date the option expires. More flexible than spot or forward contracts, however, options cost money (Example: A premium is charged up front based on the strike price, interest rates, length to maturity, and volatility of the currency). Think of maintaining the opportunity to take advantage of better exchange rates in the future. Appropriate for hedging uncertain exposures (Example: Bids, monthly sales of varying amounts throughout the year, etc.).
The advising bank pays when it has received funds from issuing bank and all terms and conditions of L/C have been met. Confirming bank usually undertakes the obligation to pay immediately upon determining documents conform to L/C.
The place where goods were made.
The purchase or sale of foreign currency for “immediate delivery”. Immediate delivery typically means two days for all currencies except Canadian dollars, which has a one day (or, next day) delivery date. Appropriate for immediate transactions.
A financial transaction that has many variations, usually highly complex. They generally involve a simultaneous exchange of assets (the swap) by counter-parties for other different assets of comparable value. The assets may be commodities or they may be financial instruments involving interest rates, cash flows, foreign Exchange, debts or equities. In addition to financial profits, the swaps have many purposes such as limiting risks, overcoming restrictions in certain markets, or balancing portfolios
The beneficiary is paid at some future time, usually a number of days after shipment, or after presentation of documents.
The risk of an unfavorable change in the U.S. dollar value of foreign denominated payables or receivables. This is short term in nature.
The risk of an unfavorable change in the reported U.S. dollar value of foreign denominated net equity (assets - liabilities). This is longer term and is not always realized.
A document signed by a buyer, on the strength of which a bank releases merchandise to him for the purpose of manufacture or sale, but retains title to the goods. The buyer obligates himself to maintain the identity of the goods or the proceeds thereof distinct from the rest of his assets and to hold them subject to repossession by the bank. Trust receipts are used extensively in the Far East, where it is customary to sell on terms of 60 or 90 days, documents against payment. The collecting bank permits buyers of goods to clear the goods under a trust receipt contract, before the maturity date of the draft. In some countries, Warrants serve the same purpose.
Uniform Customs & Practices for Documentary Credits, Letter of Chamber of Commerce publication No. 500. This is the set of regulations for the construction and use of letters of credit, commonly agreed to among banks that engage in Letter of business. It is not law, but care should be taken in accepting a Letter of Credit that does not bear a clause stating that it is subject to the UCP 500. (All L/Cs issued in the SWIFT format are subject to UCP 500 by convention, and will not bear the “UCP Clause”).
The date on which the actual exchange of currencies is to occur.
When drafts are negotiated without recourse, the beneficiary is relieved of responsibility to the holder of the draft to the extent that this is permissible under the contract involved and under the law governing the transaction. On the other hand, when drafts are negotiated with recourse, any bona fide holder has full recourse against the drawer of the draft until the instrument is paid finally by the drawee.