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Trade Finance Glossary

Key terms used in documentary credits and Letter of Credit transactions. Definitions are written in plain English for exporters and trade finance teams.

  • Advising Bank

    The bank in the beneficiary's country that receives the LC from the issuing bank and advises (notifies) the beneficiary. It authenticates the credit but does not guarantee payment unless it also confirms.

  • Beneficiary

    The party in whose favour a Letter of Credit is issued — typically the exporter or seller. The beneficiary must present compliant documents to receive payment.

  • Bill of Lading (B/L)

    A transport document issued by a carrier acknowledging receipt of goods for shipment. Under UCP 600, specific rules govern what constitutes an acceptable bill of lading.

  • Compliant Presentation

    A set of documents that conforms to the terms of the credit, UCP 600, ISBP 821, and international standard banking practice. A compliant presentation triggers the bank's obligation to pay.

  • Confirming Bank

    A bank that adds its own undertaking to pay the beneficiary, in addition to the issuing bank's obligation. Confirmation provides an extra layer of payment security.

  • Discrepancy

    Any deviation in the presented documents from the terms of the credit, UCP 600, or ISBP 821. Discrepancies can lead to refusal of documents and delayed or lost payment.

  • Documentary Credit

    Another name for a Letter of Credit. A written undertaking by a bank to pay the beneficiary a stated amount, provided compliant documents are presented within the specified time.

  • Field 47A

    The SWIFT field in an LC message that contains additional conditions — requirements beyond the standard document checklist. These often include specific certifications, markings, or statements required on documents.

  • Issuing Bank

    The bank that issues the Letter of Credit at the request of the applicant (buyer). It undertakes to pay the beneficiary if a compliant presentation is made.

  • Letter of Credit (LC)

    A financial instrument issued by a bank guaranteeing payment to a beneficiary (seller) provided that specified documents are presented in compliance with the credit terms. Governed by UCP 600.

  • Presentation

    The act of delivering documents to the nominated bank or issuing bank under a Letter of Credit. UCP 600 Article 6 defines what constitutes a valid presentation.

  • UCP 600

    Uniform Customs and Practice for Documentary Credits, published by the ICC. The international standard that governs Letter of Credit transactions worldwide since 2007.