Documentary operations

Main terms on documentary letters of credit

Acceptance - consent to payment or guaranteeing of payment of payment documents.

Accepting Bank - bank, which performed acceptance on transferable bill and will accept it after indicated date.

Advising - official notification of the bank on opening of letter of credit or amendments to it, sent to beneficiary.

Advising bank - bank, which on request of issuing bank or other bank advises letters of credit and any beneficiary’s amendments to it.

Applicant - person, which authorizes to issue letter of credit and specifies its conditions (applicant of letter of credit, payer, importer, drawee (if use of transferable bill is required under terms of letter of credit)).

Applicant, Credit Applicant, Buyer, Drawee, Accreditor - person, who entrusts to draw letter of credit and specifies its terms (applicant of letter of credit, payer, importer, drawee (if use of transferable bill is required by terms of letter of credit)).

Assignee - the third person (with regard to letters of credit, besides applicant and beneficiary), in favor of which funds of transferable letter of credit can be transferred.

Assignor - with regard to letters of credits— is a beneficiary, which instructs advising bank on transfer of part of the funds of transferable letter of credit to the third person.

Available Bank - bank, where letter of credit foresees fulfillment.

Banking day - working day of the bank in the place, where action shall take place, foreseen by UCP-600 or by other rules, applied to letter of credit.

Beneficiary’s Bank - bank, which serves beneficiary on letter of credit settlement method.

Beneficiary, Exporter, Seller - person, on which favour letter of credit is issued (exporter, seller, work or service executor).

Bill of exchange, Draft - unconditional written order of one person (drawer) to other person (drawee), signed by the first person and requiring from the second person to pay on presentation or at the fixed date in future, indicated amount of money to drawer or his order, or presenter, as it is indicated in the bill (draft).

Complying presentation - presentation of documents, which complies with the terms of letter of credit, regulations UCP — 600 or other international documents, approved by International Chamber of Commerce, as well as by international standard banking practice.

Confirmed Bank - bank, which adds its own payment liability to payment liability of issuing bank to pay/accept/negotiate against complying presentation of documents in compliance with terms of letter of credit.

Confirming letter of credit - letter of credit, payment on which is guaranteed by issuing bank as well as by other (confirmed) bank.

Consignee - person, for whom goods are shipped. Equivalent notions: commission merchant, addressee.

Consignor, Shipper - person, which ships goods, usually but not always, is beneficiary (consignor).

Covered letter of credit - letter of credit, secured by own funds of applicant.

Draft - unconditional written order of one body (drawer) to other body (drawee), signed by the first body and requiring from the second body to pay, on presentation or when fixed date in future, indicated mentioned amount of money to drawer or on his order, or presenter as it is indicated in bill (draft).

Drawee - person, in which favour transferable bill (draft) is drawn.

Drawer - person, who drew transferable bill (draft), drawer of a bill.

Endorsement - qualified endorsement, made, as a rule, on the overleaf of transfer bill, receipt or other document indicating the person, which is assigned with all rights on this document.

Export Documentary Credit - letter of credit, which is opened by foreign issuing bank in favor of beneficiary, which is located on the territory of Ukraine.

Fulfillment of letter of credit by acceptance - exporter draws bill for issuing bank or for bank, which confirms payment, or for buyer. When submitting documents, not payment but acceptance of bill is performed. Payment is performed at the determined date. Letter of credit with bill allows importer to sell goods before payment date and pay acceptance at the expense of earning.

Fulfillment of letter of credit by def payment - assumes obtaining of payment by beneficiary not when documents are presented, but at a later date, which is foreseen in the letter of credit. When documents are presented in accordance with letter of credit, beneficiary gets written consent of issuing bank or confirmed bank to make payment on the date of payment. Fulfilling of letter of credit by def payment, as well as by acceptance, allows importer to take possessions of documents much earlier than payment will be made.

Fulfillment of letter of credit by negotiation - issuing bank authorizes beneficiary to issue a bill on it or on applicant of letter of credit. Negotiation means funds payment by bank, authorized for negotiation, against presentation of bills or documents by beneficiary. Letters of credit with negotiation can be paid both immediately and before payment date. Letters of credit can be with free or limited negotiation. If letter of credit is with free negotiation, then any bank can act as negotiating bank.

Fulfillment of letter of credit by payment - settlements with beneficiary are performed right after provision of proper documents to available bank, if all terms of letter of credit are complied.

Import Documentary Credit - letter of credit, which is opened by authorized issuing bank by the order of applicant of letter of credit in favour of beneficiary, which is located outside the territory of Ukraine, or on the territory of Ukraine under terms of opening of transferable letter of credit.

Irrevocable L/C - letter of credit, which cannot be changed or cancelled by issuing bank without beneficiary’s consent, on which favour it was opened, and confirmed bank (if any).

Issuing Bank - bank, which by the order of applicant (account party) or by the order of other bank or sui juris opens letter of credit in favor of beneficiary.

Letter of Credit, L/C, Documentary Credit, Credit) - way of settlements, when issuing bank by client’s (applicant) order enters into commitment to perform payment to funds recipient (beneficiary) against due presentation of documents, compliant with the terms of letter of credit.

Negotiating bank - bank, which was authorized by issuing bank to buy and/or negotiate transferable bills (drafts) and/or documents, foreseen by the terms of letter of credit.

Negotiation - purchase and/or record of transferable bills (drafts) and/or documents, foreseen by the terms of letter of credit, by negotiating bank.

Reimbursement’s authorities - instructions and/or authorities, separated form letter of credit, which are submitted by issuing bank to reimbursing bank to perform compensation on letter of credit to bank, which provided reimbursement’s requirement, and on demand of issuing bank, to accept and pay transferable bill (draft), drawn to reimbursing bank.

Reimbursement’s liability - independent irrevocable liability of reimbursing bank, provided by it on the grounds or on request of issuing bank to available (confirmed) bank, indicated in reimbursement authorities, to pay reimbursement requirement, issued by available (confirmed) bank under terms of its compliance with rules of reimbursement liabilities, or accept and pay transferable bill (draft), drawn to reimbursing bank.

Reimbursement’s requirement - notification to reimbursing bank with the requirement to make payment to available (confirmed) bank or other bank with provided payment instructions.

Reimbursing Bank - bank, which was authorized by issuing bank to secure compensation on letter of credit to confirmed (available) bank or other bank in compliance with submitted instructions.

Revocable letter of credit - letter of credit, which can be changed or cancelled by issuing bank without preliminary approval of beneficiary.

Stand-By Letter of Credit - irrevocable liability of Issuing Bank, provided to Beneficiary on request of Applicant of letter of credit, to perform payment for applicant in case of obtaining the demand for payment together with documents, foreseen by terms of letter of credit, confirming non-fulfillment of liabilities by Applicant.

Transferable Letter of Credit - letter of credit, which foresees ability of its use completely or partially by one or several beneficiaries. Transferable letter of credit is applied in the case, when the first beneficiary does not supply goods itself, but it is an agent and wants to authorize actual supplier (the second beneficiary) with part or all its rights and liabilities. The first exporter authorizes advising (available) bank to advise the second exporter on the amount, subject to transfer, and on terms of letter of credit.

Transport Documents, Documents of Movement - documents, confirming shipment/sending of goods. In documentary operations the following transport documents are widely used: bill of lading, air way, road and railway bills, post office receipt.

Uncovered letter of credit - letter of credit unsecured by own funds of applicant.

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