Documents for financing international trade:
57. I. Letter of credit (L/C) () - an instrument issued by a bank, in which the bank promises to pay a beneficiary upon presentation of documents specified in the letter of credit.
Commercial letter of credit - , .
Documentary letter of credit - , .
58. Beneficiary () - is a seller, an exporter.
59. Types of letters of credit ( ) - commercial letters of credit are classified as follows: irrevocable and revocable letters of credit; confirmed and unconfirmed letters of credit; revolving and nonrevolving letters of credit.
60. An irrevocable L/C ( ) - obligates the issuing bank to honor drafts drawn in compliance with the credit and can be neither canceled nor modified without the consent of all parties, including in particular the beneficiary (exporter).
61. A revocable L/C ( ) -can be canceled or amended at any time before payment; it is intended to serve as a means of arranging payments but not as a guarantee of payment.
62. Confirmed L/C ( ) - a L/C issued by one bank that can be confirmed by another, in which case both banks are obligated to honor drafts drawn in compliance with the credit.
63. Unconfirmed (non-confirmed) L/C ( ) - is the obligation only of the issuing bank.
64. Nonrevolving L/C ( ) - most letters of credit are nonrevolving, they are valid for one transaction only.
65. A revolving credit ( ) (for example, a 10.000$ revolving weekly credit ) -- means that beneficiary is authorized to draw drafts (up to 10.000$ each week) until the credit expires; the period of a revolving credit might be daily, weekly, or monthly.
66. II. Draft or bill of exchange (B/E) (, ) - is simply an order written by an exporter (seller) instructing an importer (buyer) or its agent to pay a specified amount of money at a specified time.
67. The drawer (the maker, or originator) () - the person or business initiating the draft; normally this is the exporter who sells and ships the merchandise.
68. The drawee () - the party to whom the draft is addressed; the drawee is asked to honor the draft, that is, to pay the amount requested according to the stated terms.
69. Trade draft ( ) - in case of commercial transactions when the drawee is the buyer.
70. Bank draft ( ) - in case when the drawee is the buyers bank; bank drafts are usually drawn according to the terms of a L/C.
71. Payee () - a person to whom payment is to be made; may be the drawer itself or some other party such as the drawers bank.
72. Negotiable instruments ( ) - a draft or promissory note that is in writing, signed by the maker or drawer, contains an unconditional promise or order to pay a definite sum of money on demand or at a determinable future date, and is payable to order or to bearer.
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Types of drafts:
73. Sight draft ( ) -is payable on presentation to the drawee; the drawee must pay at once or dishonor the draft.
74. Time draft (usance draft) ( ) - allows a delay in payment; it is presented to the drawee, who accepts it by writing or stamping a notice of acceptance on its face. Once accepted, the time draft becomes a promise to pay by the accepting party.
75. A clean draft ( ) - is an order to pay unaccompanied by any other documents.
76. A documentary draft ( () ) - means that various shipping documents are attached to the draft.
77. A bankers acceptance ( ) - time draft that is drawn on and accepted by a bank.
78. A trade acceptance ( ) - a time draft that is drawn on and accepted by a business firm.
79. Tenor (or usance) of a draft ( ) - the time period of a draft.
80. III. Bill of lading (B/L) () - the document issued to the exporter by a common carrier transporting the merchandise; it serves as: a receipt, a contract, and a document of title.
81. B/L as a receipt (-) - indicates that the carrier has received the merchandise described on the face of the document.
82. B/L as a contract (-) - indicates the obligation of the carrier to provide certain transportation in return for certain charges.
83. B/L as a document of title (, ) - can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.
84. Straight B/L ( ) - provides that the carrier deliver the merchandise to the designated consignee; is used when the merchandise has been paid in advance, when the transaction is being financed by the exporters; is not title to the goods and is not required for the consignee to obtain possession.
85. An order B/L ( ) - directs the carrier to deliver the goods to the order of a designated party; grants title to the merchandise only to the person to whom the document is addressed, and surrender of the order B/L is required to obtain the shipment.
Variations in the B/L:
86. Clean B/L ( ) - indicates that the goods were received by the carrier in apparently good condition; the carrier is not obligated to check the condition of the merchandise beyond external visual appearance.
87. Foul B/L ( , ) - indicates that the merchandise appeared to have suffered some damage before being received for shipment.
88. On - board B/L ( ) - indicates that the merchandise has been placed on board the vessel whose name is designated on the document.
89. Received - for - shipment B/L ( ) -allows for the possibility that the goods are sitting on the dock and might remain there for some time; is not an acceptable document unless it has been specifically authorized in the L/C.
90. On - deck B/L ( ) - indicates that the goods have been stowed on deck; the banks will refuse to accept on-deck B/L unless authorized otherwise by the L/C.
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Additional documents:
91. A signed commercial invoice ( -) - is issued by the seller and contains a precise description of the merchandise; unit prices, financial terms of sale, and amount due from the buyer are indicated.
92. Insurance documents ( ) - must be: 1) as specified in the L/C; 2) issued by insurance companies or their agents; 3) expressed in the same currency as the credit; must not be dated later than the date of shipment carried on the face of the shipping documents.
93. Consular invoices ( ) - are issued by the consulate of the importing country to provide customs information and statistics for the country and to help prevent false declarations of value; may be combined with a certificate of origin of the goods.
94. Certificate of analysis ( ) - may be required by health or other officials of the importing country or by the importer as assurance that it is receiving what it ordered.
95. Packing list ( ) - may be required so that the contents of containers can be identified, either for customs purposes or for importer identification of the contents of separate containers.
96. An export declaration ( ) - is a document prepared by the exporter to assist the government to prepare export statistics.
97. FOB (free on board) ( ) - international trade term in which exporters quoted price includes the cost of loading goods into transport vessels at a named port.
98. FAS (free alongside) ( ) - term in which sellers quoted price for goods includes all cost of delivery of the goods alongside a vessel at the port.
99. C&F (cost and freight) ( ) - price, quoted by an exporter that includes the cost of transportation to the named port of destination.
100. CIF (cost, insurance, freight) (, , ) - exporters quoted price including the cost of packaging, freight, or carriage, insurance premium, and other charges paid in respect of the goods from the time of loading in the country of export to their arrival at the named port of destination or place of transshipment.
