IIBF Trade Finance flashcards

32 cards. Read the term and the definition here. The deck at the top of this page is optional.

Documentary credit independence principle

Under UCP 600 Article 4, a credit is separate from the sale contract. Banks deal only with documents and are not concerned with goods, services or performance, so a complying presentation must be honoured regardless of underlying disputes.

UCP 600 examination period

Issuing, confirming or nominated banks have a maximum of five banking days following presentation to examine documents and determine compliance, or to refuse and give notice of discrepancies.

UCP 600 default presentation period

If the credit does not state a presentation period, documents must be presented within 21 calendar days after the date of shipment, and never later than the credit expiry date.

Transferable credit rule

A credit is transferable only if expressly designated as such. It may be transferred once, and fractions may go to multiple second beneficiaries only if partial shipments are permitted under the credit.

About or approximately tolerance

Under UCP 600 Article 30, words such as about, approximately or circa on amount, quantity or unit price allow a tolerance not exceeding ten percent more or ten percent less.

Documents against acceptance

A URC 522 collection where the presenting bank releases documents only against the drawee's acceptance of a term draft. The exporter then carries buyer credit risk until maturity.

URC 522 bank role

Banks handling collections act only on instructions, do not examine documents, and give no payment undertaking. Goods must not be consigned to a bank without its prior agreement.

Bill of lading document of title

A bill consigned to order is negotiable and transfers title by endorsement and delivery. A straight bill naming a consignee is non-negotiable and cannot be endorsed to another party.

Shipped on board notation

A received-for-shipment bill of lading becomes an on-board document when the carrier adds a shipped-on-board notation stating the vessel and loading date, which fixes the shipment date.

CIF insurance requirement

Under CIF, the seller arranges marine insurance at least 110 percent of invoice value, in the contract currency, covering Institute Cargo Clauses C unless the contract specifies broader cover.

UCP 600 single refusal notice

Article 16(c) requires a refusing bank to state every discrepancy in a single notice, within five banking days of presentation, and to state the disposal of documents.

Invoice goods description match

UCP 600 Article 18(c) requires the commercial invoice description of goods to correspond with the credit. Other documents may use general terms not inconsistent with the credit.

Incoterms 2020 risk points

FOB, CFR and CIF transfer risk when goods are loaded on the vessel. FCA transfers risk on delivery to the carrier. DAP, DPU and DDP transfer risk at destination.

URDG 758 examination period

Under Article 20, a guarantor has five business days following presentation of a demand to examine it and decide whether to pay or reject, then notify accordingly.

URDG 758 statement of breach

Article 15 requires a demand to be supported by a statement of breach indicating in what respect the applicant is in breach, examined by the guarantor for form only.

URDG 758 force majeure extension

If a guarantee expires during force majeure, it is extended by 30 calendar days after the place of presentation resumes business, unless the guarantee states otherwise.

ISP98 standby examination

Under ISP98 Rule 5.01, the issuer must examine a presentation and decide whether to honour or reject within three business days after presentation, unless a shorter period applies.

Counter-guarantee chain

A structure where an instructing party's bank issues a counter-guarantee to a guarantor abroad, which then issues the guarantee to the beneficiary. Each undertaking is independent.

Automatic reduction clause

A guarantee term reducing the guaranteed amount automatically on stated events, such as partial payment or presentation of shipment documents, without requiring an amendment message.

FEMA export realisation period

Under FEMA and RBI directions, exporters must repatriate full export proceeds within nine months from shipment, unless RBI or the authorised dealer bank permits an extension.

EDPMS monitoring

The Export Data Processing and Monitoring System records shipping bills and export bills in authorised dealer banks, enabling tracking of realisation and identification of overdue export proceeds.

IDPMS monitoring

The Import Data Processing and Monitoring System matches import bills of entry against outward remittances, flagging unmatched entries that require closure or regulatory write-off approval.

Current versus capital account

Trade in goods and services is a current account transaction generally permitted under FEMA. Loans, guarantees and overseas property are capital account and need specific limits or approval.

FEMA compounding

Contraventions of FEMA can be compounded by RBI under the Compounding Proceedings Rules 2000. The compounding amount reflects the nature and quantum of the contravention.

Packing credit

Pre-shipment export credit that finances procurement, processing or manufacture of goods before shipment, repaid from export proceeds or adjusted against post-shipment credit.

Forfeiting without recourse

The exporter sells accepted term bills or availed promissory notes to a forfeiter at a discount without recourse, so the forfeiter bears importer and country risk.

Forfaiting versus factoring

Forfeiting is transaction-based, medium-term and typically backed by a bank aval. Factoring is relationship-based, short-term receivables finance, often with recourse to the seller.

ECGC export credit cover

The Export Credit Guarantee Corporation insures export credit risks under specific and whole-turnover policies, covering buyer default and country risks up to stated percentages.

Duplicate financing detection

Cross-checking shipping documents against EDPMS and IDPMS records, verifying carrier bills of lading, and using electronic bill of lading platforms helps detect duplicate or phantom trade financing.

MT700 issue of credit

The SWIFT message used by an issuing bank to issue a documentary credit, carrying fields such as applicant, beneficiary, amount, expiry and required documents.

MT202 COV cover payment

A general financial institution transfer that carries underlying customer party details to support a related MT103 payment, improving transparency in cross-border cover payments.

ISO 20022 coexistence end

SWIFT's MT and MX coexistence period ran from March 2023 to November 2025. After that date, in-scope trade and payment messages must be sent in MX format.