Documentary Credit Terms

presenter

Beneficiary, bank or other party that makes a presentation. (UCP 600, art. 2)

beneficiary

The party in whose favor a credit is issued. (UCP 600, art. 2)

red clause credit

A credit that includes a clause that permits the advising bank to make an advance payment to the beneficiary.

transferable credit

A credit that specifically states it is transferable, may be available in whole or in part to another beneficiary (known as a 'second beneficiary') at the request of the beneficiary (known as a 'first beneficiary). (UCP 600, art. 38)

confirmation

A definite undertaking of the confirming bank, in addition to that of the issuing bank, to honor or negotiate a complying presentation. (UCP 600, art. 2)

complying presentation

A presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules, and international standard banking practice. (UCP 600, art. 2)

contract

An agreement between two or more persons or entities, which may or may not contain specific terms, in which there is a promise to do something in return for a consideration.

short-shipment

Shipment of a lesser quantity than ordered.

signature

Signed by handwriting, facsimile signature, perforated signature, stamp, symbol or any other mechanical or electronic method of authentication. (UCP 600, art. 3)

confirming bank

The bank that adds its confirmation to a credit upon the issuing bank's authorization or request. (UCP 600, art. 2)

applicant

The party on whose request the credit is issued. (UCP 600, art. 2)

negotiation

The purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. (UCP 600, art. 2)

honor

a. to pay at sight if the credit is available by sight payment. b. to incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. c. to accept a bill of exchange ('draft') drawn by the beneficiary and pay at maturity if the credit is available by acceptance. (UCP 600, art. 2)

invoice discounting

A form of trade finance in which the seller presents copies of the invoices to the invoice discounter against which finance is provided, usually for 80-90% of the face value of the invoice.

forfaiting

An arrangement or agreement between a seller and a forfaiter (a bank or specialist institution) under which the seller receives payment for export receivables from the lender.

documentary credit

An irrevocable undertaking issued by a bank whereby it undertakes to make payment to the named beneficiary provided the documents stipulated in the documentary credit are presented and all of its terms and conditions are complied with.

bill of exchange

An unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to bearer. (Bill of Exchange Act 1882, sec. 3(1))

promissory note

An unconditional promise in writing made by one person to another signed by the maker, engaging to pay, on demand at a fixed or determinable future date a sum certain in money to, or to the order of, a specified person or bearer. (UK Bills of Exchange Act 1882)

credit

Any arrangement, however named or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a complying presentation. (UCP 600, art. 2)

presentation

Either the delivery of documents under a credit to the issuing bank or nominated bank or the documents so delivered. (UCP 600, art. 2)

advising bank

The bank that advises the credit at the request of the issuing bank. (UCP 600, art. 2)

issuing bank

The bank that issues a credit at the request of an applicant or on its own behalf. (UCP 600, art. 2)

nominated bank

The bank with which the credit is available or any bank in the case of a credit available with any bank. (UCP 600, art. 2)