The following terms occur in this manual.
Letter of Credit (LC)
This is an arrangement that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honour a complying presentation.
Clean or Documentary LC
Clean Letters of Credit require no documents for processing, as opposed to Documentary Letters of Credit, which require documents.
Applicant
It means the party at whose request the LC is issued.
Beneficiary
It means the party in whose favour a LC is issued.
Import LC
This is an incoming Letter of Credit that involves an applicant who is a customer of the processing bank.
Export LC
This is an outgoing Letter of Credit that involves the beneficiary who is a customer of the processing bank.
Guarantees
Guarantee is a form of comfort, issued by the bank to its client, in cases where the bank is not very comfortable with the credit rating of the customer. Unlike a letter of credit, in which the bank has to pay on maturity, the amount is payable only on invocation of guarantee by the creditor.
Shipping Guarantee
This is a guarantee extended during the period in which the goods are under transit.
Standby Guarantee
This is a guarantee for performance of a contract. These are immediately realizable whenever the beneficiary presents a declaration to the issuing bank that the named party has not fulfilled the terms of contract.
Red Clause LC
This is an LC, the terms of which allow the confirming bank to make advance payments to the beneficiary before documents are received, towards anticipatory drawings on the part of the beneficiary.
Transferable LC
This is an LC, the terms of which allow transference of the LC to other buyers, sellers or parties.
Non-transferable LC
This is an LC, the terms of which disallow transference of the LC to other buyers, sellers or parties.
Revolving LC
This is an LC, the terms of which allow the restoration of the original LC amount (or the tenor) after its full settlement, without any further changes to any of the other terms. A revolving LC could be either revocable or irrevocable.
Non-Revolving LC
This is an LC, the terms of which disallow the restoration of the original LC amount (or the tenor) after its full settlement. A non-revolving LC could be either revocable or irrevocable.
Sight LC
This is an LC that involves immediate payment to the seller by the negotiating bank. The payment is later reimbursed by the issuing bank.
Usance LC
This is an LC that involves payment to the seller at maturity i.e., (at a future date). The drawee bank obligates itself to make the payment.
Issuing Bank
This is the bank at which a letter of credit is first initiated by the buyer or importer. It is the bank at which the buyer account is debited for the trade. The advising bank sends the documents for the trade to the issuing bank, from where they are released to the buyer.
Advising Bank
This is the bank in the LC chain which advises by sending a copy of the LC to the beneficiary. The advising bank also sometimes acts as the bank will receive and negotiate the documents from the beneficiary which the seller or exporter involved in a letter of credit receives payment towards the trade. The issuing bank sends the letter of credit to the advising bank. The documents regarding the trade are sent to` the advising bank by the seller. The advising bank then sends the documents to the issuing bank.
Confirming Bank
This is the bank that ratifies the trade involving a letter of credit, to the advising bank. Tracers (messages) requesting letters of confirmation of the trade are sent to the confirming bank.
Confirmation
This is the adding of a separate undertaking by a bank to an LC in addition to that of the bank issuing it. All LCs lacking specific confirmation notices from any additional banks are considered unconfirmed.
Document Code
This is a unique identifier in Oracle FLEXCUBE for a standard paper, file or record that is required and used in most countries for the processing of a documentary letter of credit.
Document Type
This is a group of similar document codes in Oracle FLEXCUBE. The document type identifies the nature of all document codes under it.
Clause Code
This is a unique identifier in Oracle FLEXCUBE for a statement that goes along with documents sent under a letter of credit.
Clause Type
This is a group of similar clause codes in Oracle FLEXCUBE. The clause type identifies the nature of all clause codes under it.
Goods Code
This is a unique identifier in Oracle FLEXCUBE for the standard stock or commodity that is traded under a letter of credit.
Text Code
This is a unique identifier in Oracle FLEXCUBE for a set of instructions and statements (the free format texts) pertaining to the processing of a letter of credit. Standard free format texts do appear on correspondence and messages sent to the parties involving the letter of credit.
Product
This is an identifier in Oracle FLEXCUBE for any type of service that a bank offers its customers. A set of attributes and preferences are maintained for the product, which will apply to the processing of any contracts, transactions or deals involving the product (service).
Product Group
This is a group under which a product is logically classified, under which logically similar products are placed together.
Product Remarks
It can be descriptive text about a product.
Product Slogan
It can be text or phrase that could be used as a declaration or an announcement of the product, to customers.
Accounting Head
This is the specific GL created in any module of the Oracle FLEXCUBE system into which the accounting entry would be posted.
Accounting Role
The general ledgers and sub-ledgers maintained as a chart of accounts in Oracle FLEXCUBE may be classified logically under different categories, each of which is called an accounting role.
Amount Tag
This is the amount entry that is passed into a general ledger/sub-ledger in the chart of accounts for each transaction.
Netting
It amounts to summing of two or more accounting entries passed to an account for the same event, so as to arrive at a net figure for posting.
Event
This is the occurrence or process that initiates the generation of an advice during the processing of a contract in Oracle FLEXCUBE.
Transaction Code
This is an identifier for each accounting entry that describes the nature (debit or credit) of the entry.
Rekey Options
They comprise the fields that are to be keyed in by an authorizer of a transaction, for the purpose of cross-checking, when the transaction is being authorized. Complete details of the transaction will only be displayed when the authorizer re-keys the values for these fields.
Positive Tolerance
It indicates the increment, expressed as a percentage that must be made to the amount of a letter of credit, to arrive at the Maximum LC Amount.
Negative Tolerance
It indicates the reduction, expressed as a percentage that must be made to the amount of a letter of credit, to arrive at the Minimum LC Amount.
Tenor
This is the period during which a letter of credit is viable or effective.
Commission Calculation Type
This is the basis upon which commission applicable on a letter of credit is to be computed. It can be computed on a periodic or non-periodic basis.
Commission Collection Type
This is the manner in which commission applicable on a letter of credit can be collected. Commission could be collected either in advance or as arrears.
Rate Override Limit
This is the limit within which exchange rates (for an LC) are allowed to be changed over and above the default value, without requiring an override. If the rate variance exceeds this limit, an override is necessary for the changed rate to be accepted.
Rate Stop Limit
This is the limit above which a change in exchange rates (for an LC) over and above the default value cannot be specified. If the rate variance exceeds this limit, the changed rate will not be accepted.
Tracer Code
This is a unique identifier for a tracer in FLEXCUBE. A tracer is a reminder or intimation, generated by FLEXCUBE, to be sent to the parties involved in a letter of credit.
Auto Closure
It refers to closing an LC automatically after its expiry date. Usually, the date of automatic closure is specified for an LC. By default, the date for automatic closure is taken to be 30 days after the expiry date.
Automatic Reinstatement
This is the automatic restoration of the amount (value) of a revolving letter of credit for which the unutilized value is zero, in FLEXCUBE. When the Beginning of Day (BOD) process is run on any given business day, any LC’s’ for which automatic reinstatement of value has been specified are restored in value, provided the un-availed portion of the amount is zero.
Cumulative (Revolving in time)
This is an attribute of a revolving letter of credit, according to which, the LC amount and Maximum Liability Amount is reinstated or reset based on the frequency specified for such reinstatement.
Revolves in Value
This refers to an attribute of a revolving letter of credit, according to which, the LC amount is reinstated or reset at the point when the availability under the LC is reduced to zero, due to an availment.
Credit Type
This indicates the type of credit for which the LC is being processed, viz., Straight or Negotiable.
Credit Mode
This indicates the mode of payment through which the LC will be settled - Sight, Acceptance, Negotiation or Deferred.
Media Type
This is the medium used to send advices to each of the parties involved in a letter of credit.
Partial Shipment
This indicates transportation through shipping, in part, or of a portion of merchandise under an LC. Partial shipment is allowed only if permitted for the LC.
Trans-shipment
This indicates transportation of merchandise under an LC, by shipping across countries. Trans-shipment is allowed only if permitted for the LC.
Reference Number/Account
An LC can be linked to a deposit or a customer account. The reference number identifies the deposit that the LC is linked to, and the account identifies the customer account.
Linked Amount
This is the portion of the contract amount of a letter of credit contract that is linked to a deposit or a customer account.
Availment Type
This indicates the nature of any availment under an LC. An availment could be a payment, an acceptance, or negotiation.
Commission Collection
This indicates the collection of commission applicable on an LC. Commission may be collected by the issuing bank or the advising bank, for an LC, or against amendments to an LC.
Commission Calculation
This is the computation of commission applicable on a letter of credit.
Limit Tenor Calculation
This is the limit within which the tenor of a tenor-based letter of credit can be set.
Process Till
This parameter indicates how automatic events falling due on holidays will be processed. If the specification is ‘System Date’, it indicates that all the processing of events will be done till the system date only. If the specification is ‘Working Day – 1’, all automatic events falling due on the holiday will be processed by the batch process as part of the End of Day processes on the last working day before the holiday.
Accrual Entries Level
This refers to the level at which commission accrual entries for letters of credit must be passed, by the automatic commission accrual process. Two levels are possible – product-level, indicating that a single entry for all the LCs for which commission was accrued automatically will be passed; or contract level, wherein accrual entries will be passed for each of the LCs for which commission was accrued.
Amendment
An amendment is an advice by the issuing bank of any proposed change to the terms and conditions of a LC. Any term of an LC can be changed or deleted, or new terms can be introduced, provided the change is acceptable to all parties. The beneficiary and any confirming bank may choose to accept or reject any amendment generated by the applicant. Under UCP 600 amendment confirmation must be communicated.
Negotiating Bank
This is the bank other than the opening bank authorized within the LC terms to give value for presentation of conforming documents against a LC. This bank may be the advising or confirming bank.
Latest shipment date
This indicates the latest (last) date that may appear as the shipment or on-board date on any transport documents required by the LC. Unlike expiry dates, latest shipment dates do not extend because of holidays.
Straight LC
This refers to the LC payable only at the opening bank or a bank specified within the credit.
Transhipment
Transhipment means unloading from one means of transport and reloading to another means of transport during the carriage from the place of shipment to the place of final destination stated in the credit.
Partial Shipment
This is a portion of less than the total quantity of an order. An LC must permit partial shipments otherwise the beneficiary has to ship the full value of the LC in a single shipment.
INCO Terms
INCO terms refer to a set of 13 international standard trade terms. They allow the seller and buyer to designate a point at which costs and risks of transport are precisely divided between them.
Draft
This is a financial instrument indicating debt by one party (the drawee who is responsible for payment) to another (the drawer to whom payment is due). Drafts may be drawn at sight for immediate payment or after a certain number of days.