Letter of Credit or L/Cs
More correctly, Documentary Credits, enable international payments typically for foreign-sourced goods. LCs entail a formal set of documents to be delivered to the Purchaser’s bank which, if all in order, will result in the bank making a payment to the seller’s bank. Documents include a commercial invoice, Bill of Lading, packing list, amongst others. LCs have expiry dates, beyond which the delivery of the above documents will result in no payment being made.

Revolving Documentary Credit
This is set up in the normal manner but does not expire or close. As the beneficiary sends cargo and draws payment against the
instrument the credit gets topped up by the applicant at the other end each time they receive cargo or for a specific time period.

Confirmed Documentary Credit
This is when an additional bank (not the applicant or beneficiaries bank) is asked to underwrite the payment in order to “insure” against the insolvency of the applicants’ bank, the collapse of the country or currency.

Standby Letter of Credit
A Standby Letter of Credit differs from the “normal” documentary credit in that, in order to draw down under the standby the beneficiary one would need to provide the bank with evidence of something the applicant did not do, i.e. Did not pay under open account terms as agreed. Essentially it is a default instrument rather than a payment instrument.

A Telegraphic Transfer
This is an instruction (via SWIFT) on behalf of a buyer to credit the account of a seller. Effectively, an international EFT.

Foreign Exchange Contracts
FEC/Forward Cover is an agreement to exchange one currency for another currency at a fixed rate on a specified date in the future. This agreement fixes the price of foreign currency payments or receipts expected to materialise at a future date and eliminates adverse currency movements beyond the agreed forward rate.

This is a sophisticated, financial tool which enables credit sales to be converted into working capital by allowing a third party to purchase your outstanding book of debts, against which an amount is advanced and the balance paid to you once it has been collected from your customers. The third party controls and maintains your debtors’ ledger.

Invoice Discounting
This is a method to raise debt from a company’s outstanding invoices that does not require the company to relinquish administrative control of the invoices.

General Notarial Bond
GNB or NGB is registered over movable property in general terms. That is, the movables are not individually specified in the notarial bond, but, instead, are generally identified (for example, as trading stock or furniture).

Special Notarial Bond
This is registered over a specified movable property. The goods are specified through their description in the bond, which must make it readily recognisable and identifiable.

This is a contract whereby the insurer undertakes to indemnify the insured in the event of the specified risk arising. It is the intention of the insurance agreement to place the insured in a position they would have been had the insurable event not have occurred.

Marine Insurance
This refers to the insurance of goods being transported in all forms of transport including air, road or rail.

Open Marine Policy
This is normally used when there is a high volume and frequency of goods movement. Quite often these are taken out by Freight Forwarders and Clearing Agents to offer to their clients. Declarations of goods being covered need to be provided to the insurer before the realisation of a claim.

Freight Forwarders
They arrange transport on behalf of a buyer or seller of goods. When contracting with a transport owner (such as a shipowner) can also be known as a Shipper. In SA, Freight Forwarders usually also provide customs clearing services.

Clearing Agents
They interface with customs and excise to declare goods in the correct manner, use the correct forms and procedures as well as the correct formulas and calculations to ensure that goods are properly cleared and customs duties paid.

Customs & Excise
Ad Valorem costs or charges are applied based on the value of goods during movement or customs clearing, i.e. 10% of the invoice value. Customs & excise rates are generally ad valorem but freight rates are generally calculated in a different manner, i.e. per weight.

He books transport services with a transport owner (such as a shipowner) on behalf of buyers and sellers of goods.

A transporter of goods, such as a shipowner or land transporter.

Bill of Exchange
This is defined as instructions from one party to a second party to pay a third.

Bill of Lading
B/L is a receipt issued by a shipping line for cargo, which is a document of title to the cargo and which details the terms of the contract of carriage.

Commercial Invoice
An invoice issued by a seller to a buyer used extensively for the purposes of Customs & Excise procedures and is typically one of the documents required to accompany an LC.

To improve consistency and remove uncertainty in international trade, the International Chamber of Commerce (ICC) in Paris developed INCOTERMS (International Commercial TERMS), a set of uniform rules for the interpretation of international commercial terms defining the costs, risks, and obligations of buyers and sellers in international transactions. First published in 1936, these rules have been periodically revised to account for changing modes of transport and document delivery. For a summary of all Incoterms, please click the following link -

Some of the more commonly used Incoterms are:

Free on Board - FOB means that risk and responsibility pass from the seller to the buyer when the goods cross the ship’s rail at the port of loading, cleared for export by the seller.

Cost Insurance Freight - Risk passes from the seller to the buyer when the goods cross the ship's rail at the seaport of loading; however, the seller is responsible for the payment of freight and procurement of insurance to the destination seaport.

Cost and Freight - C&F / C+F / CFR is when the seller meets his obligation under the sales contract i.e. Risk passes from seller to buyer when the goods cross the ship’s rail at the seaport of loading. The seller is however responsible for the payment of freight to the destination seaport.

Ex Works - EXW is when risk and responsibility pass from the seller to the buyer when the goods are made available on the ground at the “works” i.e. where the goods are produced, such as at the factory, at or on the agreed future date or future time, uncleared through customs and Excise.

The above definitions are for basic information purposes only, and do not constitute technical or legal definitions, as such may differ from country to country, and depend upon the context in which the terms are being used.

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