Terms used in trade finance and logistics

The following terms are used to refer to certain instruments and artifacts that are in play in our trade scenario. The application we will build in this chapter uses very simplified forms of these instruments:

• Letter of credit: As we have seen at the beginning of the chapter, this refers to a bank's promise to pay an exporter upon presentation of documentary proof of goods having been shipped. Called L/C for short, this document is issued by the importer's bank at the request of its client: the importer. The L/C states the list of documents that constitute proof of shipment, the amount to be paid, and the beneficiary (the exporter in our case) of that amount. A sample L/C is illustrated in the following screenshot:

We will introduce small variations in our use case to make this instrument comprehensible to the reader. Firstly, the L/C will be issued to the exporter's bank rather than directly to the exporter. Secondly, the L/C states that payment will be made in two identical installments, the first upon production of two documents and the second upon the goods reaching the destination.

• Export license: This refers to the approval given by the regulatory authority in the exporter's country for the shipment of the specified goods. In this book, we will refer to it as E/L for short. A sample E/L is illustrated in the following screenshot:

• Bill of lading: This is a document issued by the carrier to the exporter once it takes possession of the shipment. Called B/L for short, it simultaneously serves as a receipt, a contract obliging the carrier to transport the goods to a specified destination in return for a fee, and a title of ownership of the goods. This document is also listed in the L/C and serves as proof of shipment that will automatically trigger a payment clearance. A sample B/L is illustrated in the following screenshot: