International Trade Services
Glossary

If you buy or sell overseas, you'll likely need an in-depth understanding of international trade terms. Find common trade terms alphabetically, or use the Search function below.

A B C D E F G H I J K L
M N O P Q R S T U V W X Y Z

Abandonment - Consignee refusal of delivered merchandise.

Abandonment Clause - Term used in the marine insurance industry in which the clause gives an insured the right to abandon lost or damaged property and to claim full settlement from the insurer.

About - A term used in letter of credit practice which allows a 10% variance above or below the letter of credit value, or quantity of goods, or unit price of the goods. See also "Approximately."

Acceleration Clause - A clause in a promissory note shortening the time of payment of the note due to a breach of certain stipulated conditions.

Acceptance - The act of the buyer (drawee) acknowledging that a draft as drawn by the seller (drawer) is acceptable. By writing or stamping the word "accepted" and adding their signature, the buyer commits themselves to paying the amount of the draft when it matures. The controlling documents (if any) are released to the buyer when he accepts the draft. Unless otherwise instructed, the collecting bank will maintain an accepted draft for presentment to the buyer for payment at maturity.

Acceptance Commission - A fee imposed by a bank for accepting a time draft. The fee represents the bank's return for lending its name to the draft as acceptor. See "Bankers' Acceptances."

Acceptance Credit - A term used to specify a letter of credit that is payable to the beneficiary (seller of merchandise) on a time basis. Time drafts to be drawn on the issuer or on someone else will be required. Also referred to as "time credit" or "usuance credit."

Acceptance Liability - The legal obligation assumed by a bank when accepting time drafts drawn upon it. See "Bankers' Acceptance."

Acceptance Line (Facility) - The limit of money a bank is willing to finance a single customer utilizing Bankers' Acceptances.

Accepting House - A non-bank financial institution that specializes in "acceptance financing." Also, the term is used to indicate a member of the "London Accepting House Committee."

Acceptor - A person who accepts a time draft. By accepting the draft, the acceptor is primarily liable to pay the draft at maturity. Compare "Acceptance."

Accommodation Draft - A draft to which a credit-worthy party has added its endorsement.

Accommodation Endorsement - The endorsement of a draft or other negotiable instrument by a credit-worthy party in order to enhance the instrument's acceptability in the money market. Commonly used in banking whereby one bank endorses another bank's acceptance, so that the draft can be sold in the Bankers' Acceptance market.

Accommodation Paper - A negotiable instrument that is signed on the back by one party to induce a lender to grant credit or give money to another party.

Accommodation Party - One who provides an "accommodation endorsement" and thus assumes responsibility for payment if the drawee or prior endorsers default.

Account - A contractual relationship between a seller and buyer under which payment is made at a later time. See "Open Account."

Account Party - A letter of credit term used to designate the party who applies to the opening bank for the issuance of a letter of credit. Compare "Applicant."

Accountee - A letter of credit term sometimes used to designate the account party.

Accrued Interest - In bankers' acceptance financing, this term refers to discount interest earned but not paid.

Acknowledgement - In cargo insurance, this is a form issued to acknowledge that insurance is in effect even though the issuer may not have details of the actual coverage provided by the policy.

Actual Total Loss - In marine insurance, a loss where nothing remains of the insured merchandise or where the merchandise is so badly damaged that it is unsalvageable.

Ad Valorem - A tax, duty or charge that is applied as a percentage of value.

Ad Valorem Duty - A tax that is expressed as a percentage of the value of imported merchandise.

Advance Against documents - A loan made on the security of shipping documents. Commonly used as a form of finance with "documentary collections."

Advance Payment Bond - A bond issued by a surety company, or a standby letter of credit issued by a bank, on behalf of an exporter, the purpose of which is to refund a buyer for his advance payment of merchandise, if the exporter fails to fulfill his obligations.

Advanced Freight - Commonly known as "freight prepaid." Freight paid by the shipper when merchandise is accepted for shipment.

Advice - A term used in letter of credit transactions referring to the written notification of the letter of credit terms and conditions. This notification is addressed to the beneficiary (seller) by an advising bank.

Advice of Acceptance - A term used in documentary collection transactions referring to the notification given by a "collecting bank," addressed to the "remitting bank," indicating that a draft has been accepted and giving its maturity date.

Advice of Non-Payment/Non-Acceptance - Terms used in documentary collection transactions referring to the notification given by a "collecting bank," addressed to the "remitting bank," detailing the reasons for non-payment or non-acceptance of a draft under an individual documentary collection.

Advised Credit - A term used in letter of credit transactions referring to a letter of credit which has been communicated to the beneficiary (seller) by the advising bank, without any obligation on the part of the advising bank. See also "Unconfirmed Letter of Credit."

Advised Line of Credit - A notification given by a bank to a customer indicating the terms and conditions of a credit facility.

Advising Bank - A term used in letter of credit transactions denoting the bank giving notification of the terms and conditions of a letter of credit to the beneficiary (seller).

Agent - A person who acts with authority of another person (called the principal).

Agent Bank - Term used in documentary collection transactions referring to a bank, which is acting on instructions of another bank to collect money, usually by means of a draft.

Agented Letter of Credit - A term used in letter of credit transactions whereby a group of banks participates in issuing a letter of credit. One bank (Agent bank) from the group will be nominated to deal with the beneficiary of the credit.

Aggregated Shipment - Refers to the total sum of merchandise destined for a sole consignee, consolidated by a common carrier from smaller lots forwarded to the carrier at different times, and from one or more points of origin.

Agreement Corporation - An international banking corporation regulated in its activities by the Federal Reserve and chartered by state banking authorities.

Air Waybill - A document issued by an airline that is a contract of carriage between the carrier (airline) and shipper and is also a receipt for the merchandise. Since the air waybill is issued containing a straight consignment, it is not a negotiable document. See also "House Air Waybill" and "Master Air Waybill."

All Risk Insurance - A term used in the marine insurance industry. The "all risks" clause does not cover all risks. It excludes the following: strikes, riots, civil commotion, capture, war, seizure, civil war, piracy, loss of market, and inherent vice.

Allonge - A paper firmly attached to a draft or other negotiable instrument for the purpose of endorsements, because no room is available on the original instrument.

Allowance - In trade, the term represents an agreement between the seller and buyer allowing for a tolerance in quantity, quality, total price, unit price, or measurement. The allowance can also be based on customs in a specific trade.

Alongside - A term used to describe the delivery of merchandise beside a ship. This would include merchandise on a dock or lighter.

Amendment - A term used in letter of credit transactions denoting the formal process and document used in changing particular terms or conditions in a letter of credit.

Antedate - A term used to describe the dating of a draft earlier than the date on which the drawer signs and completes the draft.

Anticipated acceptance - a term used in describing the payment of an acceptance before its maturity date.

Anticipatory drawing - a term used in letter of credit transactions, specifically "red clause" type, whereby a beneficiary is allowed to receive money on the credit before presenting shipping documents. Furthermore, the term includes immediate reimbursement to the bank which paid the beneficiary. See also "Red Clause Letter of Credit."

Antidumping Duty - A tax that is imposed on imported merchandise sold at prices far below those charged in the exporter's market place. Such imports are considered detrimental to domestic manufacturing and trade.

Applicant - A letter of credit term used to designate the party who applies to the opening bank for the issuance of a letter of credit. Compare "Account Party."

Application - A form used in letter of credit transactions. The form is executed by the applicant, instructing the opening bank of the terms and conditions that should be incorporated in the letter of credit.

Approval Basis - A term used in letter of credit transactions denoting the act of forwarding discrepant documents to the opening bank. This action is authorized by the beneficiary for the express purpose of seeking the applicant's waiver and subsequent payment.

Approximately (or Allowable) - A term used in letter of credit practice which allows a 10% variance above or below the value, quantity of goods, or unit price specified in the letter of credit. Compare "About."

Assignee - A term used in letter of credit transactions denoting the party (usually a supplier of goods) in whose favor an "assignment of proceeds" has been issued.

Assignment of Proceeds - A term used in letter of credit transactions denoting a service that banks perform at the request of the beneficiary of a credit. It means that the bank notifies the assignee that monies have been allocated in their favor out of the proceeds of the beneficiary's drawing. The assignment of proceeds does not give the assignee any rights or protection under the beneficiary's letter of credit.

Assignor - A term used in letter of credit transactions denoting the party (beneficiary) who assigns proceeds.

At Sight - A draft whose tenor indicates that it is payable on demand or upon presentation.

Ata Carnet - A document used for the temporary importation of merchandise into a country without having to pay customs duties or complete customs entry documents. The carnet acts as an indemnity or guaranty to customs in the event that the merchandise is not re-exported and duties must be paid. The relevant duties will be paid by the issuer of the carnet. (Sometimes a standby letter of credit is used in lieu of a "carnet.")

Authority to Pay - A conditional payment authorization issued by a bank in favor of a seller of merchandise. This instrument originated in the Far East and is seldom used in today's mercantile transactions. Compare "Revocable Letter of Credit," which is synonymous with "Authority to Pay."

Authority to Purchase - A conditional payment authorization issued by a bank in favor of a seller of merchandise. This instrument originated in the Far East and requires drafts to be drawn on the buyer, with or without recourse to the seller. The utility of this instrument has decreased in recent years due to global practice and trust in using letters of credit.

Automatic Extension Clause - See "Evergreen Clause"