Glossary of Industry Terms
The Berne Union has compiled a glossary of terms relating to trade / export finance and export credit and political risk insurance. The definitions are collected from a variety of original sources (which are all linked for reference). Where multiple sources exist for a given defiendum, all sources are included. Where there is no suitable source we have provided an original definition.
|main insurer||A primary insurer, which is the insurance company from which an individual or business purchases a policy, transfers risk to a reinsurer through a process called cession. Just as insurance policyholders pay premiums to insurance companies, insurance companies pay premiums to reinsurers.||Investopedia|
|maintenance guarantee||A maintenance bondis a type of surety bond purchased by a contractor that protects the owner of a completed construction project for a specified time period against defects and faults in materials, workmanship, and design that could arise later if the project was done incorrectly. Pricing a maintenance bond is very different from pricing regular coupon paying bonds.||Investopedia|
|manufacturing risk||see pre-credit risk|
|margin (above LIBOR)||The percentage usually added over a reference rate to reflect characteristics of the receivable including obligor/guarantor and country risk, tenor, specifics of the underlying trade and other macro economic conditions.||ITFA|
|Margin is the money borrowed from a brokerage firm to purchase an investment. It is the difference between the total value of securities held in an investor's account and the loan amount from the broker. Buying on margin is the act of borrowing money to buy securities. The practice includes buying an asset where the buyer pays only a percentage of the asset's value and borrows the rest from the bank or broker. The broker acts as a lender and the securities in the investor's account act as collateral.
In a general business context, the margin is the difference between a product or service's selling price and the cost of production, or the ratio of profit to revenue. A margin can also refer to the portion of the interest rate on an adjustable-rate mortgage (ARM) added to the adjustment-index rate.
|market window||A market window is a government-owned or directed institution claiming to operate on a commercial basis, but that benefits from some level of government support.
In trade policy, especially export promotion activities, market windows most often provide financing/lending activities that offer flexible terms and conditions that fall outside of the discipline of the Organisation for Economic Co-operation and Development (OECD) Arrangement for Official Export Credit Agencies.
|marketable risks||Commercial and political risks with a maximum risk period of less than two years, on public and non-public buyers in the countries listed in the Annex; all other risks are considered non-marketable for the purposes of this Communication.||EUROPEAN COMMISSION|
|Marketable risks are commercial and political risks of debtors and guarantors in all EU countries and the OECD countries: Australia, Canada, Iceland, Japan, New Zealand, Norway, Switzerland and the USA, with a risk duration (production period and repayment term) of less than two years. Marketable risks are insured by private credit insurance.||OEKB|
|Commercial risks involving short-term transactions with repayment terms of up to two years and private buyers in OECD countries with the exception of Mexico, Poland, South Korea, the Czech Republic, Turkey and Hungary. For such risks, cover facilities are offered by the private insurance market. In application of the subsidiarity principle, official export guarantees may therefore no longer be issued for such risks.||Berne Union|
|maximum extension period (for payment)||The maximum due date extension allowed under a policy.||ICISA|
|maximum liability||The maximum amount of claims payable by the insurer during a policy period.||HKEC|
|mean delivery date||Average period between date of order and date of delivery or shipment of goods or completion of services.||ICISA|
|mean length of credit||Average period between delivery or shipment of goods and due date of invoice.||ICISA|
|minimum premium||The agreed minimum amount of premium to be paid for a specified period regardless of the volume of declared turnover or outstanding balances.||ICISA|
|minimum premium benchmark||In 1997, the Participants established a methodology for assessing country credit risk and classifying countries in connection with their agreement on minimum premium fees for official export credits.
The Participants’ country risk classifications are one of the most fundamental building blocks of the Arrangement rules on minimum premium rates for credit risk. They are produced solely for the purpose of setting minimum premium rates for transactions supported according to the Arrangement, and are made public so that any country that is not an OECD Member or a Participant to the Arrangement may observe the rules of the Arrangement. Neither the Participants to the Arrangement, nor the OECD Secretariat, endorse nor encourage their use for any other purpose.
|Mini-Perm||Mini-perm is short-term financing used to pay off income-producing construction or commercial properties. This type of funding is usually payable in three to five years.||Investopedia|
|mixed credit||A mixed credit is a financing package consisting of a non-repayable grant from the Federal Ministry of Finance and a soft loan.||OEKB|
|moratorium, respite for payment of debt||A delay or suspension of payments, usually by a government, to the creditors.||HKEC|
|A cessation of payments, usually by a government, to all or a class of creditors.||ICISA|
|A moratorium is a temporary suspension of an activity or a law until future events warrant lifting the suspension or related issues have been resolved. A moratorium may be imposed by a government or by a business.
Moratoriums are often enacted in response to temporary financial hardships. (Both "moratoriums" and "moratoria" are acceptable as plural forms of the word moratorium.) For example, a business that has exceeded its budget might place a moratorium on new hiring until the start of its next fiscal year.
In legal proceedings, a moratorium can be imposed on an activity such as a debt collection process. The moratorium will be lifted when a related issue is resolved.
|most favored nation||A most-favored-nation (MFN) clause requires a country to provide any concessions, privileges, or immunities granted to one nation in a trade agreement to all other World Trade Organization member countries. Although its name implies favoritism toward another nation, it denotes the equal treatment of all countries.||Investopedia|
|multisourcing||The division of activities or services involved in the execution of an essential business function among a combination of providers, both internal and outsourced, in order to gain more control over costs and accountability while reducing dependence on any one provider.||businessdictionary|
|multi-year rescheduling agreement (Paris Club) (MYRA)||Multi-year rescheduling agreement (MYRA) is an agreement that is made up of successive stages or tranches to be implemented only after certain specified conditions are met. Each tranche of the MYRA legally comes into force only when Paris Club creditors are satisfied that the conditions have been fulfilled. These agreements should be reported in Development Assistance Committee (DAC) statistics in stages as each tranche of the MYRA comes into force.||OECD|
|nationalisation||Nationalization refers to when a government takes control of a company or industry, which generally occurs without compensation for the loss of the net worth of seized assets and potential income. The action may be the result of a nation's attempt to consolidate power, resentment of foreign ownership of industries representing significant importance to local economies or to prop up failing industries.||Investopedia|
|negotiable instrument||A written financial undertaking by means of which ownership to a future payment claim can be transferred between two parties, usually by endorsement. Promissory Notes and Bills of Exchange are the most common types of claim used in forfaiting.||ITFA|
|A negotiable instrument is a transferable, signed document that promises to pay the bearer a sum of money at a future date or on demand.Because they are transferable and assignable some negotiable instruments may trade on a secondary market.||Investopedia|
|negotiation||The purchase of documents, typically under a Letter of Credit.||ITFA|
|Non-disclosure Agreement (NDA)||A non-disclosure agreement is a legally binding contract that establishes a confidential relationship. The party or parties signing the agreement agree that sensitive information they may obtain will not be made available to any others.Non-disclosure agreements are common for businesses entering into negotiations with other businesses. They allow the parties to share sensitive information without fear that it will end up in the hands of competitors. In this case, it may be called a mutual non-disclosure agreement.||Investopedia|
|non-transferable currency||A nonconvertible currencyis one that is used primarily for domestic transactions and is not openly traded on a forex market. This usually is a result of government restrictions, which prevent it from being exchanged for foreign currencies.
Because of the high restrictions, a nonconvertible currency is otherwise known as a "blocked currency."
|notice of claim||The notice must contain the date of injury, how it occurred, the nature of the claim and other facts that establish that the prospective plaintiff has a viable cause of action against the government. Failure to file a notice of claim within the prescribed time period prevents a plaintiff from filing a lawsuit unless exceptions to this requirement are provided by statute or ordinance.||uslegal|
|An application by the insured for indemnification of a loss under the policy.||ICISA|
|notification of default||Notice of default is a public notice filed with a court stating that a mortgage borrower is in default on a loan. This is one of the first steps toward foreclosure.||Investopedia|
|A notice of default is a notification given to a borrower stating that he or she has not made their payments by the predetermined deadline, or is otherwise in default on the mortgage contract. Other ways a borrower may be in default include not providing proper insurance coverage for the property, or not paying due property taxes as agreed. It dictates that if the money owed (plus an additional legal fee), or other breach(es) are not paid/remedied in a given time, the lender may choose to foreclose the borrower's property. Any other people who may be affected by the foreclosure may also receive a copy of the notification.||wikipedia|
|offer of cover, official indication of cover||Declaration of intent to provide cover if the factual and legal basis of the relevant transaction does not change.||Berne Union|
|official development assistance (ODA)||Official development assistance (ODA) is defined by the OECD Development Assistance
Committee (DAC) as government aid that promotes and specifically targets the economic
development and welfare of developing countries. The DAC adopted ODA as the
“gold standard” of foreign aid in 1969 and it remains the main source of financing for
ODA flows to countries and territories on the DAC List
of ODA Recipients and to multilateral development
i. Provided by official agencies, including state and
local governments, or by their executive agencies;
ii. Concessional (i.e. grants and soft loans) and
administered with the promotion of the economic
development and welfare of developing countries as
the main objective.
|offshore account||An account held in a foreign offshore bank, is often described as an offshore account. Typically, an individual or company will maintain an offshore account for the financial and legal advantages it provides, including: Greater privacy (see also bank secrecy, a principle born with the 1934 Swiss Banking Act)||wikipedia|
|offtake agreement||An offtake agreement is an arrangement between a producer and a buyer to purchase or sell portions of the producer's upcoming goods. An offtake agreement is normally negotiated prior to the construction of a production facility—such as a mine or a factory—to secure a market for its future output.Offtake agreements are typically used to help the selling company acquire financing for future construction, expansion projects, or new equipment through the promise of future income and proof of existing demand for the goods.||Investopedia|
|open account||The buyer pays the exporter at an agreed time after the exporter has shipped the goods or delivered the service.||ITFA|
|A mode of payment whereby a seller ships the goods and all the necessary shipping and commercial documents directly to a buyer who agrees to settle the payment at a future date.||HKEC|
|Where goods are shipped to a foreign buyer and payment is made on the basis of invoices, usually in cash. Because there are no bills of exchange or promissory notes, the exporter has no guarantee of payment and therefore this trade arrangement is most commonly used where the exporter and buyer have a strong, long-standing trading relationship.||NZECO|
|Business transacted on credit terms where no security, e.g. bills of exchange, promissory notes, letters of credit etc., are obtained from the buyer.||Berne Union|
|1. Accounting: (1) Account that has a nonzero debit or credit balance.
(2) An Account with an unpaid balance.
2. Commerce: Credit relationship in which the buyer pays upon the receipt of goods, or on deferred payment basis.
|operational lease, operating lease||An operating lease is a contract that allows for the use of an asset but does not convey ownership rights of the asset. Operating leases are counted as off-balance sheet financing—meaning that a leased asset and associated liabilities of future rent payments are not included on a company's balance sheet, to keep the ratio of debt to equity low. Historically, operating leases have enabled American firms to keep billions of dollars of assets and liabilities from being recorded on their balance sheets.||Investopedia|
|Type of lease designed to produce earnings on a capital asset, as compared to a financial or full payment lease which is effectively a substitute for a contract of sale.||Berne Union|
|ordinary/unsecured creditor||An unsecured creditor is an individual or institution that lends money without obtaining specified assets as collateral. This poses a higher risk to the creditor because it will have nothing to fall back on should the borrower default on the loan. If a borrower fails to make a payment on a debt that is unsecured, the creditor cannot take any of the borrower's assets without winning a lawsuit first.
A debenture holder is an unsecured creditor.
|origin of goods||The origin of the goods is the location where the essential processing and finishing of the product was carried out.||dbh|
|out-of-court composition||There are several ways to cope with an economically troubled debtor. Sometimes, the creditors may prefer to rehabilitate the debtor through out-of-court settlements. Generally, this occurs when the procedure of restoration is impossible.An out-of-court settlement includes the resolution of an argument prior to the key decision by the bankruptcy judge. To resolve arguments between debtors and creditors, out-of-court settlements include or require negotiations. These negotiations typically include creditors recognizing a portion of their outstanding balance due as payment in full. The debtors may sell their resources outside of bankruptcy procedure through a general assignment between the debtor and creditor for the benefit of creditors or, a settlement agreement between creditors and the debtor.||US Legal|
|outstandings (on a buyer)||Payment that has not been received for products or services rendered.||businessdictionary|
|overinvoicing||1. An invoice with a price listed that is higher than a company actually intends to charge a client.
2. The act or practice of billing more hours than one actually works. For example, a lawyer may meet with a client for 10 minutes and bill for half an hour. Overinvoicing is difficult to track, but common in many white collar professions.
|parallel financing||A parallel loan is a four-party agreement in which two parent companies in different countries borrow money in their local currencies, then lend that money to the other's local subsidiary.
The purpose of a parallel loan is to avoid borrowing money across country lines with possible restrictions and fees. Each company can certainly go directly to the foreign exchange market (forex) to secure their funds in the proper currency, but they then would face exchange risk.
The first parallel loans were implemented in the 1970s in the United Kingdom in order to bypass taxes that were imposed to make foreign investments more expensive. Nowadays, currency swaps have mostly replaced this strategy, which is similar to a back-to-back loan.
|parallel insurance||Refers to when each exporter covers his risk with the national ECA, but - in contrast to joint insurance - both the main contractor and the subcontractor have an own claim to payment vis-à-vis the buyer.||Berne Union|
|Paris Club Agreed Minute||Paris Club document detailing the terms for a debt rescheduling between creditors and the debtor. It specifies the coverage of debt-service payments (types of debt treated), the cutoff date, the consolidation period, the proportion of payments to be rescheduled, the provisions regarding the down payment (if any), and the repayment schedules for rescheduled and deferred debt.
Creditor governments commit to incorporate these terms in the bilateral agreements negotiated with the debtor government that implements the Agreed Minute. Paris Club creditors will agree to reschedule only with countries that have an IMF upper credit tranche arrangement (Stand-By Arrangement or Extended Fund Facility (EFF)), a Poverty Reduction and Growth Facility (PRGF) arrangement, or a Rights Accumulation Program.
|The Agreed Minute is signed at the Paris Club by the rescheduling country and participating creditor countries and sets out the terms and conditions of the debt rescheduling.The Agreed Minute is not legally binding, but a recommendation to member governments of the terms on which they should conclude their bilateral debt agreements. De Minimis creditors do not sign the Agreed Minute.||Berne Union|
|payment against documents||Payment Against Documents (PAD) is an arrangement where an exporter instructs the presenting bank to hand over the shipping documents and tittle documents to the importer only if the importer fully pays the accompanying bill of exchange or draft.||accountantskills|
|payment default||The failure of the buyer to meet their contractual payment obligations.||HKEC|
|The failure by a buyer to make payment for delivered goods or services by the due date specified in the invoice or sales contract. A default is an event that could lead to a loss for the credit insurer such as bankruptcy, Chapter 11 (or any other failure to pay of the buyer) which is covered under the insured’s policy.||ICISA|
|pending orders, orders taken||A pending order is an order that was not yet executed, thus not yet becoming a trade. It can, for example, be an order that states that you do not want to buy before the price of a financial instrument reaches a certain point.||tradimo|
|percentage of cover, insured percentage||insured percentage means the percentage of coverage, applicable to the buyer credit limit, as specified in the declarations or in a special buyer credit limit endorsement.||lawinsider|
|performance guarantee bond||A bond issued by an insurance company or a bank to guarantee satisfactory completion of a project by a contractor.||ATI|
|A performance bond is a surety bond that covers the risks of a contract not being fulfilled.||OEKB|
|(performance bond)A facility normally issued by a surety company or commercial bank to a buyer to guarantee that the exporter will fully implement the terms of its contract. Performance bonds are normally conditional; that is, they can usually only be called if the buyer can demonstrate (in accordance with the terms of the facility) breach of contract by the exporter.||NZECO|
|A performance bond is issued to one party of a contract as a guarantee against the failure of the other party to meet obligations specified in the contract. It is also referred to as a contract bond. A performance bond is usually provided by a bank or an insurance company to make sure a contractor completes designated projects.||Investopedia|
|pledge||Pledging of shares is one of the options that the promoters of companies use to secure loans to meet working capital requirement, personal needs and fund other ventures or acquisitions. A promoter shareholding in a company is used as collateral to avail a loan. While pledging shares, promoters retain their ownership. However, as the share price keeps fluctuating, the value of the collateral also changes. When the value of the shares pledged with a lender falls below a certain level, it triggers ‘margin call’, requiring the promoters to make up for the shortfall in the value of the collateral.||The Economic Times|
|policy||The insurance contract entered between the insurer and the policyholder. The contract together with the Proposal, Schedules, Endorsements and any other documents issued under that contract constitute the Policy.||HKEC|
|policy period, life of the policy||The amount of time during which the policy is valid.||businessdictionary|
|policyholder||Also known as Insured. The party that purchases the insurance policy and assumes rights and obligations under the policy.||HKEC|
|political risk||risks including, in particular:
— the risk that a public buyer or country prevents the completion of a transaction or does not pay on time;
— a risk that is beyond the scope of an individual buyer or falls outside the individual buyer’s responsibility;
— the risk that a country fails to transfer to the country of the insured the money paid by buyers domiciled in that country;
— the risk that a case of force majeure occurs outside the country of the insurer, which could include warlike events, in so far as its effects are not otherwise insured.
|The risk of borrower-country government actions preventing or delaying payment of funds due to parties in other countries. Many government export credit agencies also include war, civil war, revolution, or other military or civil disturbances in their definition of political risk. Some also include physical disasters such as cyclones, floods or earthquakes.||ITFA|
|(Country risk) 1.The risk that a government buyer or country prevents the fulfilment of a transaction or fails to meet payment obligations in time; 2.a risk that is beyond the scope of an individual buyer or falls outside the individual buyer’s responsibility; 3.the risk that a country prevents the performance of a transaction; 4.the risk that a country remains in default to transfer to the country of the insured the moneys paid by buyers domiciled in that country.||ICISA|
|The risk of loss arising from political, economic, legal or social factors in a particular country, including any adverse actions – or inactions – of governments. For example: expropriation of assets, changes in tax policy, restrictions on the exchange of foreign currency, selective discrimination, or other changes in the business climate of a country.||ATI|
|One of the two main categories of risk covered by credit insurers (the other is commercial risk). Political risks are linked to non-payment of an export transaction due to financial and political conditions in the buyer's country. These may include acts of war or civil disturbances, imposition of laws that prevent the transfer of payments, cancellation of your buyer's import permits, or default of a sovereign buyer.||NZECO|
|Political risks include extraordinary government measures or political events such as war, revolution, annexation and civil unrest abroad or domestic government measures (export prohibitions).||SERV|
|Political risk is the risk an investment's returns could suffer as a result of political changes or instability in a country. Instability affecting investment returns could stem from a change in government, legislative bodies, other foreign policymakers or military control. Political risk is also known as "geopolitical risk," and becomes more of a factor as the time horizon of investment gets longer.||Investopedia|
|positive/negative covenants||A negative covenant is a bond covenant preventing certain activities unless agreed to by the bondholders. Negative covenants are written directly into the trust indenture creating the bond issue, are legally binding on the issuer, and exist to protect the best interests of the bondholders. (also referred to as restrictive covenants).||Investopedia|
|potential loss||Potential Loss means the discovery by a Party that a representation or warranty of another Party contained in this Agreement was not true in all respects when made and such inaccuracy may result in a Loss to such discovering Party.||lawinsider|
|power of attorney||A power of attorney (POA) is a legal document giving one person (the agent or attorney-in-fact) the power to act for another person (the principal). The agent can have broad legal authority or limited authority to make legal decisions about the principal's property, finances or medical care. The power of attorney is frequently used in the event of a principal's illness or disability, or when the principal can't be present to sign necessary legal documents for financial transactions.
A power of attorney can end for a number of reasons, such as when the principal dies, the principal revokes it, a court invalidates it, or the agent can no longer carry out the outlined responsibilities.
|preferred creditor status (PCS)||As a multilateral development institution, IFC enjoys a de facto Preferred Creditor Status. This means that member governments grant IFC loans preferential access to foreign currency in the event of a country foreign exchange crisis. The Preferred Creditor Status therefore mitigates transfer and convertibility risk for IFC and its B Loan participants.As is the case for the World Bank and other multilateral development institutions, Preferred Creditor Status is not a legal status, but is embodied in practice, and is granted by the shareholders of IFC (over 180 member governments). The Preferred Creditor Status of IFC has received consistent universal recognition from entities such as bank regulators, the Bank of International Settlement, rating agencies, and private PRI providers. Additional information on the Preferred Creditor Status of multilaterals can be found in an article published by S&P called "How Preferred Creditor Support Enhances Ratings".IFC loans, including the portions taken by participants, have never been included in a general country debt rescheduling, and have never been subject to mandatory new money obligations under a country debt rescheduling.||IFC|
|A preferred creditor is an individual or organization that has priority in being paid the money it is owed if the debtor declares bankruptcy. Because bankrupt entities do not have enough money to fulfill all of their financial obligations, some investors that are owed money will get paid in part or not at all. A preferred creditor has the first claim to any funds that are available from the debtor. A preferred creditor is also known as a "preferential creditor."||Investopedia|
|premium||Premium has multiple meanings in finance:
(1) It's the total cost to buy an option, which gives the holder the right but not the obligation to buy or sell the underlying financial instrument at a specified strike price.
(2) It's the difference between the higher price paid for a fixed-income security and the security's face amount at issue, which reflects changes in interest rates or risk profile since the issuance date.
(3) It's the specified amount of payment required periodically by an insurer to provide coverage under a given insurance plan for a defined period of time. The premium compensates the insurer for bearing the risk of a payout should an event occur that triggers coverage.
|prepayment||Prepayment is an accounting term for the settlement of a debt or installment loan before its official due date. Prepayments are the payment of a bill, operating expense, or non-operating expense that settle an account before it becomes due. Prepayment is an action taken by a single individual, a corporation, or another type of organization.||investopedia|
|pre-shipment risk, manufacturing risk||(Contract risk, Pre-credit risk, Pre-shipment risk, Work in process) The commercial risk of insolvency of a buyer before delivery or shipment of the goods or performance of a service, and/ or the political risk of any interruption of the manufacturing of the goods or performance of a service.||ICISA|
|The risk an exporter runs of nonpayment for costs incurred in concluding and executing an export contract inasmuch as it has failed to deliver the contracted goods and/or services to the buyer.||ATRADIUS|
|Risk of loss of the prime costs required to manufacture the supplies and/or perform the services specified in the export contract in the event that fulfilment of the export contract becomes impossible or unacceptable.||Berne Union|
|principal (amount)||The principal is a term that has several financial meanings. The most commonly used refers to the original sum of money borrowed in a loan or put into an investment. Similar to the former, it can also refer to the face value of a bond.||Investopedia|
|private buyer||Private purchase refers to an investment in which an individual or institutional investor purchases shares in a privately-held firm. The investor may buy all of the company's shares, or just a portion of them. The fact that a private purchase does not involve the use of capital markets means that a broker is usually required to complete the deal.||Investopedia|
|procurement, sourcing||Procurement is the act of obtaining goods or services, typically for business purposes. Procurement is most commonly associated with businesses because companies need to solicit services or purchase goods, usually on a relatively large scale.
Procurement generally refers to the final act of purchasing but it can also include the procurement process overall which can be critically important for companies leading up to their final purchasing decision. Companies can be on both sides of the procurement process as buyers or sellers though here we mainly focus on the side of the soliciting company.
|progress payments||Payments made in stages in the course of a supply contract.||ITFA|
|Periodic payments to an exporter during the manufacturing period or a contractor during the completion period for work as it is completed as per the contract terms, made from a bank loan.||ATRADIUS|
|project company, special-purpose company||Project Company means a Subsidiary of a company (or a person in which such company has an interest) which has a special purpose and whose creditors have no recourse to any member of the Bank Group in respect of Financial Indebtedness of that Subsidiary or person, as the case may be, or any of such Subsidiary’s or person’s Subsidiaries (other than recourse to such member of the Bank Group who had granted an Encumbrance over its shares or other interests in such Project Company beneficially owned by it provided that such recourse is limited to an enforcement of such an Encumbrance).||lawinsider|
|project financing, limited-recourse financing||Project finance is the funding (financing) of long-term infrastructure, industrial projects, and public services using a non-recourse or limited recourse financial structure. The debt and equity used to finance the project are paid back from the cash flow generated by the project.
Project financing is a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary collateral. Project finance is especially attractive to the private sector because companies can fund major projects off-balance sheet.
|Financing scheme applied to complex export transactions where the buyer’s credit standing is inadequate and other traditional securities are not available, but where the project itself generates sufficient income to cover the operating costs and the debt service for borrowed funds.||Berne Union|
|A loan structure where a bank grants finance to a joint venture company that has been formed to implement a specific project. In return, the bank gains primary access to the future cash flow, assets and contracts of the joint venture company. The forecasted earnings of the project thus provide the essential security for the lender.||NZECO|
|Project finance is the funding (financing) of long-term infrastructure, industrial projects, and public services using a non-recourse or limited recourse financial structure. The debt and equity used to finance the project are paid back from the cash flow generated by the project.Project financingis a loan structure that relies primarily on the project's cash flow for repayment, with the project's assets, rights, and interests held as secondary collateral. Project finance is especially attractive to the private sector because companies can fund major projects off-balance sheet.||Investopedia|
|promissory note||A promissory note is normally issued by a buyer, such as an importer for example, promising to pay the seller at a future date – effectively like an IOU. The right to receive payment under a promissory note may be transferred by endorsement unless endorsement or transfer is expressly prohibited.||ITFA|
|A written promise made by the issuer of a bill to pay the amount owed to the holder of the bill at an agreed upon time.||OEKB|
|A written document, drawn up by the importer in favour of the exporter, which contains an unconditional promise to pay a definite sum of money on demand or on a specified future date. The only difference between a promissory note and a bill of exchange is that the maker of the note pays the exporter personally, rather than ordering a third party to do so. When endorsed by the exporter, and if the buyer is creditworthy, a promissory note can be used in forfaiting.||NZECO|
|property reservation, retention of ownership, retention of title||Legal rule that sold and delivered merchandise remains the property of the seller until the buyer pays the purchase price in full.||Business Dictionary|
|protest||A legal document showing that a Bill of Exchange/Promissory Note (debt instrument) was presented to the drawee/issuer for acceptance/payment and was refused.||ITFA|
|protracted default||The failure by a buyer to pay the contractual debt within a pre-defined period calculated from the due date or extended due date of the debt.||ICISA|
|Failure by the buyer to pay the contractual debt after the waiting period (see below), which is not due to a dispute nor verifiable political or commercial factors.||ATRADIUS|
|Protracted default which is the failure by a customer to pay the contractual debt within a pre-defined period calculated from the due date or extended due date of thedebt.||financial and credit|
|Non-payment which persists for a longer period. If an account receivable from a foreign buyer is not settled within a specified period after due date, this is considered as a protracted default.||Berne Union|
|provisional acceptance||The Provisional Acceptance (PA) is a conditional acceptance by owner, usually noticed at the mechanical work is completed (Mechanical Completion (M/C)) that means an owner has accepted the project but the plant performance test is needed to have a verification or confirmation at the actual operation conditions within an agreed period. The plant is handed over to the owner when the contractor achieves the Provisional Acceptance. The Final Acceptance to be achieved after the plant performance is verified or confirmed (Performance Test) based on the agreed contractual requirement.||theprojectdefinition|
|provisions (loss provisions)||A provision is a stipulation in a contract, legal document, or law. Often the stipulation requires action by a specific date or within a specified period of time. Provisions are intended to protect the interests of one or both parties in a contract.||Investopedia|
|proviso||Provision upon whose compliance the application or validity of a legal document depends.||businessdictionary|
|proxy (agent)||A proxy is an agent legally authorized to act on behalf of another party or a format that allows an investor to vote without being physically present at the meeting. Shareholders not attending a company's annual general meeting (AGM) may vote their shares by proxy by allowing someone else to cast votes on their behalf, or they may vote by mail.||Investopedia|
|proxy (letter of authority)||letter of authorization: Written confirmation of a person's rank, authority, or ability to enter into a legally binding contract, take a specific action, spend a specified sum, or to delegate his or her duties and powers.||businessdictionary|
|public buyer||Government department or agency (such as a ministry, central bank, public sector firm) which carries the 'full faith and credit' of its government, and whose obligations are guaranteed by the government.||businessdictionary|
|pure cover||Official support provided by or on behalf of a government by a way of export credit guarantee or insurance only, i.e. which does not benefit from official financing support||OECD|
|quotation||Offer by the exporter to sell the goods at a stated price and under certain conditions.||U.S. Commercial Service|
|Quotations refer to the most recent sale price a stock, bond, or any other asset traded. In addition, most asset classes also quote the bid and ask price that determines the final sale price. The bid is defined as the highest price a buyer is willing to pay for the assets while the ask is the highest price a seller is willing to receive for selling. It's common for stable, liquid assets to record narrow bid-ask spreads in a normal trading environment. The pair will usually divert following systemic concerns like geopolitical events or broad market downturns. The onset of volatility and uncertainty moves the supply and demand mechanisms undermining quotations into flux.||Investopedia|
|receivership, sequestration||When a concern or person has lent a company money, or a bank has granted borrowing facilities and a secured charge has been created, if the chargee finds the company cannot pay the interest due to them or cannot pay the sum involved at the due date etc., in many cases the terms of the charge give the chargee (the lender) the power to appoint an Administrative Receiver to protect his interests. Where there are no such powers, the chargee may apply to the Court for the appointment of an Official Receiver.||HKEC|
|Receivership is a step in which a trustee is legally appointed to act as the custodian of a company's assets or business operations. It's typically invoked during legal proceedings, with the goal of returning the company to a profitable state and thereby avoiding bankruptcy. Typically appointed by a bankruptcy court, creditor, or governing body, the receiver is usually given the ultimate decision-making power over company assets, including the authority to cease dividend or applicable interest payments. The company's directors remain as material contributors, but their authority is limited.||Investopedia|
|Sequestration is the process by which property or funds are attached pending the outcome of litigation.||Berne Union|
|recourse||The right to recover funds (plus interest where appropriate) from counterparties if the financier is not reimbursed as a result of risks not covered by it.||ITFA|
|Recourse is the recovery from a third party of losses suffered.||ATRADIUS|
|A recourse is a legal agreement which gives the lender the right to pledged collateral if the borrower is unable to satisfy the debt obligation. Recourse refers to the legal right to collect.
Recourse lending provides protection to lenders, as they are assured of having some repayment, either in cash or liquid assets. Companies that issue recourse debt have a lower cost of capital, as there is less underlying risk in lending to that firm.
|recoveries||Proceeds received from the buyer or a third party, whether before or after a claim has been indemnified.||ICISA|
|Amounts collected on overdue payments after indemnification of the insured.||ATRADIUS|
|recovery action||Recovery Actions means, collectively and individually, preference actions, fraudulent conveyance actions, rights of setoff and other claims or causes of action under chapter 5 of the Bankruptcy Code and other bankruptcy or non-bankruptcy law.||lawinsider|
|rediscounting||The purchase of any payment instrument of payment at a discount to allow for the cost of interest on the funds until the receivables mature.||ITFA|
|Rediscount is the act of discounting a short-term negotiable debt instrument for a second time. Banks may rediscount these short-term debt securities to assist the movement of a market that has a high demand for loans. When there is low liquidity in the market, banks can generate cash by rediscounting short-term securities.||Investopedia|
|refinancing||A refinance occurs when an individual or business revises the interest rate, payment schedule, and terms of a previous credit agreement. Debtors will often choose to refinance a loan agreement when the interest rate environment has substantially changed, causing potential savings on debt payments from a new agreement.||investopedia|
|reinsurance||Insurance that is purchased by an insurer from another insurer to manage risk by lowering its own risk;||EUROPEAN COMMISSION|
|Insurance purchased by an insurance company from one or more other insurance companies as a means of sharing risks.||ATI|
|A form of insurance where one insurance institution (e.g. an export credit agency) assumes part of the risk initially assured by insurance institution. Reinsurance serves several functions, including as a means of spreading risk.||NZECO|
|Reinsurance is also known as insurance for insurers or stop-loss insurance. Reinsurance is the practice whereby insurers transfer portions of their risk portfolios to other parties by some form of agreement to reduce the likelihood of paying a large obligation resulting from an insurance claim. The party that diversifies its insurance portfolio is known as the ceding party. The party that accepts a portion of the potential obligation in exchange for a share of the insurance premium is known as the reinsurer.||Investopedia|
|repatriation||Repatriation refers to converting any foreign currency into one’s local currency. Repatriation sometimes becomes necessary due to business transactions, foreign investments, or international travel.
Repatriation in a larger context refers to anything or anyone that returns to its country of origin, which can include foreign nationals, refugees, or deportees.
|repayment||Repayment is the act of paying back money previously borrowed from a lender. Typically, the return of funds happens through periodic payments which include both principal and interest. Loans can usually also be fully paid in a lump sum at any time, though some contracts may include an early repayment fee.
Failure to keep up with any debt repayments can lead to a trail of credit issues including forced bankruptcy, increased charges from late payments, and negative changes to a credit rating.
|repayment term||The period beginning at the Starting Point of Credit and ending on the contractual date of the final repayment of principal.||OECD|
|replacement value||The term replacement cost or replacement value refers to the amount that an entity would have to pay to replace an asset at the present time, according to its current worth.
In the insurance industry, "replacement cost" or "replacement cost value" is one of several method of determining the value of an insured item. Replacement cost is the actual cost to replace an item or structure at its pre-loss condition. This may not be the "market value" of the item, and is typically distinguished from the "actual cash value" payment which includes a deduction for depreciation. For insurance policies for property insurance, a contractual stipulation that the lost asset must be actually repaired or replaced before the replacement cost can be paid is common. This prevents overinsurance, which contributes to arson and insurance fraud. Replacement cost policies emerged in the mid-20th century; prior to that concern about overinsurance restricted their availability.
|Replacement cost is a term referring to the amount of money a business must currently spend to replace an essential asset like a real estate property, an investment security, a lien, or another item, with one of the same or higher value. Sometimes referred to as a “replacement value”, a replacement cost may fluctuate, depending on factors such as the market value of the asset, and the expenses involved in preparing assets for use. Insurance companies routinely use replacement costs to determine the value of an insured item. Replacement costs are likewise ritually used by accountants, who rely on depreciation to expense the cost of an asset over its useful life. The practice of calculating a replacement cost is known as “replacement valuation”.||Investopedia|
|repossession||To recover goods sold on credit or in instalments when the buyer fails to pay for them.||Berne Union|
|repudiation of a contract||The commercial risks that arise from: (1) the buyer's cancellation of sales contract before the shipment of goods; or (2) the buyer's failure to take delivery of goods after the shipment.||HKEC|
|Contract repudiation: An arbitrary withdrawal of a party from its duties and responsibilities imposed by a contract.||ICISA|
|repudiation||Repudiation involves disputing the validity of a contract and refusing to honor its terms. In investing, repudiation is most relevant in fixed income securities, particularly sovereign debt. Fixed income instruments are fundamentally contracts where the borrower lends a certain amount of principal in return for payments of interest and principal on a preset schedule.||Investopedia|
|rescheduling||The changing of the arrangements for paying back loans, usually because the borrower is unable to pay them back at the time originally agreed:||cambridgedictionary|
|(Paris Club) Debt rescheduling is about restructuring an over-indebted country's obligations. The debtor country and its creditor countries in the Paris Club conclude a special agreement (debt rescheduling agreement) for the country’s specific debts on the basis of a multilateral framework agreement.
Debt rescheduling aims to redistribute the debt burden, ensuring equal participation of each creditor country, and to restructure the external debt of the rescheduling country. Extremely poor debtor countries can also obtain debt reduction agreements such as interest rate reductions or debt cancellation.
|Debt rescheduling refers to the formal deferment of debt-service payments and the application of new and extended maturities to the deferred amount. Rescheduling debt is one means of providing a debtor with debt relief through a delay and, in the case of concessional rescheduling, a reduction in debt-service obligations.||OECD|
|restructuring (of buyer debt)||Restructuring involves measures to restore the profitability and financial equilibrium of debtors who are not members of the Paris Club and are over-indebted or at risk of insolvency. It includes the redistribution of the debt burden. In restructuring, outstanding claims are renegotiated in a contract between SERV or the policyholders and the debtor.||SERV|
|Restructuring is an action taken by a company to significantly modify the financial and operational aspects of the company, usually when the business is facing financial pressures. Restructuring is a type of corporate action taken that involves significantly modifying the debt, operations or structure of a company as a way of limiting financial harm and improving the business.
When a company is having trouble making payments on its debt, it will often consolidate and adjust the terms of the debt in a debt restructuring, creating a way to pay off bondholders. A company restructures its operations or structure by cutting costs, such as payroll, or reducing its size through the sale of assets.
|retention bond||Type of performance bond that protects the customer after a job or project is finished. It guarantees that the contractor will carry out all necessary work to correct structural and/or other defects discovered immediately after completion of the contract, even if full payment has been made to the contractor.||Business Dictionary|
|revolving credit||A credit where the value of available drawings is reinstated automatically once drawn and within a stated period of time.||ITFA|
|Revolving credit refers to a situation where credit replenishes up to the agreed upon threshold, known as the credit limit, as the customer pays off debt. Revolving credit is a line of credit where the customer pays a commitment fee to a financial institution to borrow money and is then allowed to use the funds when needed. It usually is used for operating purposes and the amount drawn can fluctuate each month depending on the customer's current cash flow needs. Revolving lines of credit can be taken out by corporations or individuals.||Investopedia|
|risk sharing||Risk management method in which the cost of the consequences of a risk is distributed among several participants in an enterprise, such as in syndication.||businessdictionary|
|roll-over credit/loan||A loan or advance under a revolving facility that is drawn by a borrower to repay a loan or advance under that facility which is maturing. The new loan will only be a rollover loan if it is:
Drawn on the same day that the maturing loan is due to be repaid;
In an amount equal to or less than the maturing loan;
In the same currency as the maturing loan.
|Roll-over credits link medium and long-term lending to the money market rates by adjusting the interest rate at regular intervals. This procedure enables the lending bank to obtain the funds it needs on the market at all times at the prevailing terms and conditions. Roll-over credits are above all used to finance large investment projects, exports and imports (in particular the down-payments and local costs not covered by the official ECAs.||Berne Union|
|royalties||A royalty is a payment to an owner for the ongoing use of their asset or property, such as patents, copyrighted works, franchises, or natural resources. The legal owner of the property, patent, copyrighted work, or franchise receives a royalty payment from licensees or franchisees who wish to make use of it to generate revenue. In most cases, royalties are designed to compensate the owner for the asset's use, and they are legally binding.||Investopedia|
|secondary market||Under the URF the market where the payment claim is purchased by the Buyer from the Primary Forfaiter or another seller.||ITFA|
|The secondary market is where investors buy and sell securities they already own. It is what most people typically think of as the "stock market," though stocks are also sold on the primary market when they are first issued.||Investopedia|
|sector understandings||Some of the rules laid out in the Arrangement are sector-specific and are detailed in the sectoral annexes of the Arrangement (called “Sector Understandings”). There are currently six Sector Understandings that cover export credits in the area of (I) ships, (II) nuclear power plants, (III) civil aircraft, (IV) renewable energy, climate change mitigation and adaptation, and water projects, (V) rail infrastructure, and (VI) coal-fired electricity generation projects. The Ship Sector Understanding and the Aircraft Sector Understandings are special, as their Participants are different from those of the general Arrangement, which is not the case for the other sector understandings.||OECD|
|secured creditor||A secured creditor is any creditor or lender associated with an investment in or issuance of a credit product backed by collateral. Secured creditors have a first-order claim on the payouts of a distressed credit investment. If a borrower defaults on a secured credit product the secured creditors have a legal right to the secured asset used as collateral which can be seized and sold to pay off remaining obligations.||Investopedia|
|secured loan||A secured loan is a loan in which the borrower pledges some asset (e.g. a car or property) as collateral for the loan, which then becomes a secured debt owed to the creditor who gives the loan. The debt is thus secured against the collateral, and if the borrower defaults, the creditor takes possession of the asset used as collateral and may sell it to regain some or all of the amount originally loaned to the borrower. An example is the foreclosure of a home. From the creditor's perspective, that is a category of debt in which a lender has been granted a portion of the bundle of rights to specified property. If the sale of the collateral does not raise enough money to pay off the debt, the creditor can often obtain a deficiency judgment against the borrower for the remaining amount.||wikipedia|
|security||A mortgage, charge, pledge, lien or other security interest securing any obligation of any person or any other agreement or arrangement having a similar effect.||ITFA|
|Forms of security include: a bank guarantee; a guarantee from a parent company; a guarantee from the Government of the buyer's country; or mortgage on the goods to be financed (e.g. on aircraft).||NZECO|
|The term "security" is a fungible, negotiable financial instrument that holds some type of monetary value. It represents an ownership position in a publicly-traded corporation—via stock—a creditor relationship with a governmental body or a corporation—represented by owning that entity's bond—or rights to ownership as represented by an option.||Investopedia|
|seizure||Taking possession of property, or a person into custody, by legal right or due process.||businessdictionary|
|The act of taking possession of property, e.g. for a violation of law or by virtue of an execution of a judgment.||Berne Union|
|shipping agent||A person or company whose business is to prepare shipping documents, arrange shipping space and insurance, and deal with customs requirements.||collinsdictionary|
|shipping documents||These documents relate to the circumstances of conveyance and delivery of goods, and their possession normally represents title to those goods. The stage at which these documents are handed over to the buyer is important, not least in terms of whether payment is made at this stage or whether the documents are to be exchanged for some form of promise to pay (e.g. a bill of exchange or promissory note).||NZECO|
|Air waybill, bill of lading, or truck bill of lading, commercial invoice, certificate of origin, insurance certificate, packing list, or other documents required to clear customs and take delivery of the goods.||businessdictionary|
|Treasury Bill||A Treasury Bill (T-Bill) is a short-term debt obligation backed by the U.S. Treasury Department with a maturity of one year or less. Treasury bills are usually sold in denominations of $1,000. However, some can reach a maximum denomination of $5 million on noncompetitive bids.
The Treasury Department sells T-Bills during auctions using a competitive and noncompetitive bidding process. Noncompetitive bids—also known as noncompetitive tenders—have a price based on the average of all the competitive bids received.
|sight draft||Document used when the exporter wishes to retain title to the shipment until it reaches its destination and payment is made. Before the shipment can be released to the buyer, the original “order” ocean bill of lading (the document that evidences title) must be properly endorsed by the buyer and surrendered to the carrier. It is important to note that air waybills do not need to be presented in order for the buyer to claim the goods. Thus, risk increases when a sight draft is being used with an air shipment.||U.S. Commercial Service|
|A sight draft is a type of bill of exchange, in which the exporter holds the title to the transported goods until the importer receives and pays for them. Sight drafts are used with both air shipments and ocean shipments for financing transactions of goods in international trade. Unlike a time draft, which allows for a short-term delay in payment after the importer receives the goods, a sight draft is payable immediately.||Investopedia|
|soft currency||A soft currency is one with a value that fluctuates, predominantly lower, as a result of the country's political or economic uncertainty. As a result of the of this currency's instability, foreign exchange dealers tend to avoid it. In financial markets, participants will often refer to it as a "weak currency."||Investopedia|
|soft loan||A loan made at below market rate of interest.||ITFA|
|A soft loan is a loan with no interest or a below-market rate of interest. Also known as "soft financing" or "concessional funding," soft loans have lenient terms, such as extended grace periods in which only interest or service charges are due, and interest holidays. They typically offer longer amortization schedules (in some cases up to 50 years) than conventional bank loans.
Soft loans are often made by multinational development banks (such as the Asian Development Fund), affiliates of the World Bank, or federal governments (or government agencies) to developing countries that would be unable to borrow at the market rate.
|solvency||The ability of a buyer/borrower to meet payment obligations as they fall due. The opposite is insolvency.||ATI|
|Solvency refers to the extent to which banks and insurance companies are provided with funds (equity). The higher the solvency, the better the customer's payment claims are secured.||OEKB|
|Solvency is the ability of a company to meet its long-term debts and financial obligations. Solvency is essential to staying in business as it demonstrates a company’s ability to continue operations into the foreseeable future. While a company also needs liquidity to thrive and pay off its short-term obligations, such short-term liquidity should not be confused with solvency. A company that is insolvent will often enter bankruptcy.||Investopedia|
|sovereign debt||Sovereign debt is a central government's debt. It is debt issued by the national government in a foreign currency in order to finance the issuing country's growth and development. The stability of the issuing government can be provided by the country's sovereign credit ratings which help investors weigh risks when assessing sovereign debt investments.
Sovereign debt is also called government debt, public debt, and national debt.
|sovereign guarantee (SG)||An irrevocable guarantee by a Government that commits itself to full payment of an export transaction.||NZECO|
|Government's guarantee that an obligation will be satisfied if the primary obligor defaults.||businessdictionary|
|sovereign risk||Sovereign risk is the chance that a central bank will implement foreign exchange rules that will significantly reduce or negate the worth of its forex contracts. It also includes the risk that a foreign nation will either fail to meet debt repayments or not honor sovereign debt payments.||Investopedia|
|special conditions (of a policy)||Provisions of a contract that are peculiar to the project under consideration and do not fall under the general conditions or supplementary conditions.||businessdictionary|
|specification||Exact statement of the particular needs to be satisfied, or essential characteristics that a customer requires (in a good, material, method, process, service, system, or work) and which a vendor must deliver. Specifications are written usually in a manner that enables both parties (and/or an independent certifier) to measure the degree of conformance. They are, however, not the same as control limits (which allow fluctuations within a range), and conformance to them does not necessarily mean quality (which is a predictable degree of dependability and uniformity).||businessdictionary|
|spot contract||In finance, a spot contract, spot transaction, or simply spot, is a contract of buying or selling a commodity, security or currency for immediate settlement (payment and delivery) on the spot date, which is normally two business days after the trade date. The settlement price (or rate) is called spot price (or spot rate). A spot contract is in contrast with a forward contract or futures contract where contract terms are agreed now but delivery and payment will occur at a future date.||wikipedia|
|spread of risk||The pooling of risks from more than one source. Can be achieved by insuring in the same underwriting period either a large number of homogeneous risks or multiple insured locations or activities with noncorrelated risks.||irmi|
|stage of production||The classification of goods and services according to their position in the chain of production, but allowing for the multi-function nature of products.
Unlike the classification by stage of processing, a product is allocated to each stage to which it contributes and not assigned solely to one stage. Goods and services are classified as primary products and/or intermediate products and/or finished products.
|standby fee||Standby fee is a term used in the banking industry to refer to the amount that a borrower pays to a lender to compensate for the lender’s commitment to lend funds. The borrower compensates the lender for guaranteeing a loan at a specific date in the future. In exchange, the lender provides the assurance that it will provide the agreed loan amount at a particular date in the future at an agreed rate of interest, even if there are changes in the financial markets in the interim.||CFI|
|standby letter of credit||A Letter of Credit which acts as a form of security for an advance, when a guarantee cannot be obtained, for example in the USA. They can be governed either by the UCP or by the International Standby Practices (ISP 98) a set of rules also published by the ICC and designed for use in Standby Letters of Credit only.||ITFA|
|A standby letter of credit is a bank's commitment of payment to a third party in the event that the bank's client defaults on an agreement. It is a "standby" agreement because the bank will have to pay only in a worst-case scenario.
A SLOC is most often sought by a business to help it obtain a contract. There are two main types of SLOC:
A financial SLOC guarantees payment for goods or services as specified by an agreement. An oil refining company, for example, might arrange for such a letter to reassure a seller of crude oil that it can pay for a huge delivery of crude oil.
The performance SLOC, which is less common, guarantees that the client will complete the project outlined in a contract. The bank agrees to reimburse the third party in the event that its client fails to complete the project.
|starting point of credit||1) Parts or components (intermediate goods) including related services: in the case of parts or components, the starting point of credit is not later than the actual date of acceptance of the goods or the weighted mean date of acceptance of the goods (including services, if applicable) by the buyer or, for services, the date of the submission of the invoices to the client or acceptance of services by the client. 2) Quasi-capital goods, including related services - machinery or equipment, generally of relatively low unit value, intended to be used in an industrial process or for productive or commercial use: in the case of quasi-capital goods, the starting point of credit is not later than the actual date of acceptance of the goods or the weighted mean date of acceptance of the goods by the buyer or, if the exporter has responsibilities for commissioning, then the latest starting point is at commissioning, or for services, the date of the submission of the invoices to the client or acceptance of the service by the client. In the case of a contract for the supply of services where the supplier has responsibility for commissioning, the latest starting point is commissioning.3) Capital goods and project services - machinery or equipment of high value intended to be used in an industrial process or for productive or commercial use:-In the case of a contract for the sale of capital goods consisting of individual items usable in themselves, the latest starting point is the actual date when the buyer takes physical possession of the goods, or the weighted mean date when the buyer takes physical possession of the goods.-In the case of a contract for the sale of capital equipment for complete plant or factories where the supplier has no responsibility for commissioning, the latest starting point is the date at which the buyer is to take physical possession of the entire equipment (excluding spare parts) supplied under the contract.-If the exporter has responsibility for commissioning, the latest starting point is at commissioning.-For services, the latest starting point of credit is the date of the submission of the invoices to the client or acceptance of service by the client. In the case of a contract for the supply of services where the supplier has responsibility for commissioning, the latest starting point is commissioning. 4) Complete plants or factories – complete productive units of high value requiring the use of capital goods:-In the case of a contract for the sale of capital equipment for complete plant or factories where the supplier has no responsibility for commissioning, the latest starting point of credit is the date when the buyer takes physical possession of the entire equipment (excluding spare parts) supplied under the contract.-In case of construction contracts where the contractor has no responsibility for commissioning, the latest starting point is the date when construction has been completed.-In the case of any contract where the supplier or contractor has a contractual responsibility for commissioning, the latest starting point is the date when he has completed installation or construction and preliminary tests to ensure it is ready for operation. This applies whether or not it is handed over to the buyer at that time in accordance with the terms of the contract and irrespective of any continuing commitment which the supplier or contractor may have, e.g. for guaranteeing its effective functioning or training local personnel.-Where the contract involves the separate execution of individual parts of a project, the date of the latest starting point is the date of the starting point for each separate part, or the mean date of those starting points, or, where the supplier has a contract, not for the whole project but for an essential part of it, the starting point may be that appropriate to the project as a whole.-For services, the latest starting point of credit is the date of the submission of the invoices to the client or the acceptance of service by the client. In the case of a contract for the supply of services where the supplier has responsibility for commissioning, the latest starting point is commissioning.||OECD|
|For most export transactions the credit period starts at the time of delivery of goods (although there may be exceptions for some industries). In connection with sales of capital equipment for turnkey installations the credit period can begin from the day of final delivery. If the exporter has responsibility for assembling and commissioning the equipment according to the agreement, the credit period can begin on the day it is ready for commissioning.||NZECO|
|The starting point of credit is the date at which the buyer has to start repaying an export credit loan being guaranteed by us. It is fixed according to the type of goods or services being supplied and the contractual responsibilities of the exporter.
Broadly, where the exporter is supplying goods only, the starting point of credit will be after all the goods have been exported and accepted by the buyer or, if the goods are being supplied over a long period of time, a point in time during the period of supply. If the exporter has responsibilities for installing and commissioning the goods, the starting point of credit may be when this has been completed.
|statutory maximum exposure limit||Maximum amount up to which liability may be accepted for export guarantees under national budget law.||Berne Union|
|subcontract||Subcontracting is the practice of assigning, or outsourcing, part of the obligations and tasks under a contract to another party known as a subcontractor.
Subcontracting is especially prevalent in areas where complex projects are the norm, such as construction and information technology. Subcontractors are hired by the project's general contractor, who continues to have overall responsibility for project completion and execution within its stipulated parameters and deadlines.
|subcontractor||A subcontractor is an individual or in many cases a business that signs a contract to perform part or all of the obligations of another's contract.
A subcontractor is a company or person who is hired by a general contractor (or prime contractor, or main contractor) to perform a specific task as part of the overall project and is normally paid for services provided to the project by the originating general contractor. While the most common concept of a subcontractor is in building works and civil engineering, the range of opportunities for subcontractor is much wider and it is possible that the greatest number now operate in the information technology and information sectors of business.
|subordinated loan||Subordinated debtis a loan or security that ranks below other loans or securities with regard to claims on assets or earnings. Subordinated debt is also known as a junior security or subordinated loan. In the case of borrower default, creditors who own subordinated debt won't be paid out until after senior debt holders are paid in full.||Investopedia|
|subrogation||The right of an insurer that has indemnified an insured party to take over any legal rights the insured may have had in respect of that particular claim, whether already enforced or not. This principle is important, as it emphasises that the insured is not entitled to receive more than the indemnity, as this would constitute a profit and would therefore undermine the very basis of insurance.||ATI|
|Subrogation is a term describing a legal right held by most insurance carriers to legally pursue a third party that caused an insurance loss to the insured. This is done in order to recover the amount of the claim paid by the insurance carrier to the insured for the loss.
When an insurance company pursues a third party for damages, it is said to "step into the shoes of the policyholder," and thus will have the same rights and legal standing as the policyholder when seeking compensation for losses. If the insured party does not have the legal standing to sue the third party, the insurer will also be unable to pursue a lawsuit as a result.
|subsidiarity principle||In the context of export credit insurance, the application of this principle results in the withdrawal of official ECAs from cover of marketable risks.||Berne Union|
|subsidiary (company)||In the corporate world, a subsidiary is a company that belongs to another company, which is usually referred to as the parent company or the holding company.
The parent holds a controlling interest in the subsidiary company, meaning it has or controls more than half of its stock. In cases where a subsidiary is 100% owned by another firm, the subsidiary is referred to as a wholly owned subsidiary.
|subsidy||A subsidy is a benefit given to an individual, business, or institution, usually by the government. It is usually in the form of a cash payment or a tax reduction. The subsidy is typically given to remove some type of burden, and it is often considered to be in the overall interest of the public, given to promote a social good or an economic policy.||Investopedia|
|(maximum) sum insured||Sum insured is the amount of money that an insurance company is obligated to cover in the event of a covered loss.||Insuranceopedia|
|The maximum amount that the insurer is liable to pay in respect of all losses during a policy period.||ICISA|
|supplementary agreement||Mutually consented agreement that modifies (but does not replace) an existing agreement.||businessdictionary|
|supplier||A party that supplies goods or services. A supplier may be distinguished from a contractor or subcontractor, who commonly adds specialized input to deliverables. Also called vendor.||businessdictionary|
|supplier credit||A financing arrangement under which an entity, which may be an exporter, extends credit to its buyer.||ITFA|
|Goods or services received on deferred payment terms. Also called supplier financing.||businessdictionary|
|Credit given by a national exporter to a foreign buyer. In such cases, the normal method of financing this contract is for a bank to lend the exporter money and for the exporter to repay, usually when he receives payment from his buyer after the agreed credit period.||Berne Union|
|supply contract||An agreement by which a seller promises to supply all of the specified goods or services that a buyer needs over a certain time and at a fixed price, and the buyer agrees to purchase such goods or services exclusively from the seller during that time.||globalnegotiator|
|surety||Surety is the guarantee of the debts of one party by another. A surety is the organization or person that assumes the responsibility of paying the debt in case the debtor policy defaults or is unable to make the payments.
The party that guarantees the debt is referred to as the surety, or as the guarantor.
|swap||A swap is a derivative contract through which two parties exchange the cash flows or liabilities from two different financial instruments. Most swaps involve cash flows based on a notional principal amount such as a loan or bond, although the instrument can be almost anything. Usually, the principal does not change hands. Each cash flow comprises one leg of the swap. One cash flow is generally fixed, while the other is variable and based on a benchmark interest rate, floating currency exchange rate or index price.
The most common kind of swap is an interest rate swap. Swaps do not trade on exchanges, and retail investors do not generally engage in swaps. Rather, swaps are over-the-counter contracts primarily between businesses or financial institutions that are customized to the needs of both parties.
|syndicated loan||A facility which is provided by a group of lenders known as a syndicate. A syndicated loan agreement simplifies the borrowing process as the borrower uses one agreement covering the whole group of banks and different types of facility rather than entering into a series of separate bilateral loans, each with different terms and conditions. The most common type of agreement used is that provided by the LMA.||ITFA|
|A syndicated loan, also known as a syndicated bank facility, is financing offered by a group of lenders—referred to as a syndicate—who work together to provide funds for a single borrower. The borrower can be a corporation, a large project, or a sovereign government. The loan can involve a fixed amount of funds, a credit line, or a combination of the two.
Syndicated loans arise when a project requires too large a loan for a single lender or when a project needs a specialized lender with expertise in a specific asset class. Syndicating the loan allows lenders to spread risk and take part in financial opportunities that may be too large for their individual capital base. Interest rates on this type of loan can be fixed or floating, based on a benchmark rate such as the London Interbank Offered Rate (LIBOR). LIBOR is an average of the interest rates that major global banks borrow from each other.
|take and pay clause||Buyer-seller agreement where (unlike in a take or pay contract) the buyer's obligation to pay is not unconditional, but is contingent either upon the delivery of purchased goods or services or upon the buyer's consent to take the delivery.||businessdictionary|
|tax haven||A tax haven is generally an offshore country that offers foreign individuals and businesses little or no tax liability in a politically and economically static environment. Tax havens also share limited or no financial information with foreign tax authorities. Tax havens do not typically require residency or business presence for individuals and businesses to benefit from their tax policies.
In some cases, intranational locations may also be identified as tax havens if they have special tax laws.
|temporary import||It allows goods to be brought into a country for a brief period of time. It’s beneficial for businesses who ship internationally because the import duties are totally or partially suspended.||Theshippingchannel|
|temporary withdrawal of cover (TWC), suspension of cover||Suspension of coverage occurs when an insurance company stops covering a policyholder even though their policy is still in force. This typically happens because the insured fails to meet the terms of the insurance contract. A suspension of coverage can be temporary, and the insured may be able to restart their coverage if they address the issue.||Insuranceopedia|
|tender a contract||To tender a contract means to present to another person or a company an offer of money for a service. Tendering a contract is a common legal process for bigger projects -- those in which a business offers to supply goods, perform a job or buy another business.||Berne Union|
|To tender is to invite bids for a project or accept a formal offer such as a takeover bid. Tendering usually refers to the process whereby governments and financial institutions invite bids for large projects that must be submitted within a finite deadline. The term also refers to the process whereby shareholders submit their shares or securities in response to a takeover offer.||Investopedia|
|terms of delivery||The part of a sales contract that indicates the point at which title and risk of loss of merchandise pass from the seller to the buyer.||financial-dictionary|
|terms of payment||The conditions under which a seller will complete a sale. Typically, these terms specify the period allowed to a buyer to pay off the amount due, and may demand cash in advance, cash on delivery, a deferred payment period of 30 days or more, or other similar provisions.||businessdictionary|
|threshold||Minimum or maximum value (established for an attribute, characteristic, or parameter) which serves as a benchmark for comparison or guidance and any breach of which may call for a complete review of the situation or the redesign of a system.||businessdictionary|
|tied aid credit, trade-related concessional credit||Tied aid credits are official or officially supported Loans, credits or Associated Financing packages where procurement of the goods or services involved is limited to the donor country or to a group of countries which does not include substantially all developing countries (or Central and Eastern European Countries (CEECs)/New Independent States (NIS) in transition).||OECD|
|An expression used in the Consensus to refer to a commercial export credit blended with aid monies to produce a concessional package, in which the concessional-ity level must always be at least 35%.||Berne Union|
|Tied aid credits are development aid loans that are tied to exports from the respective donor country.||OEKB|
|tied credit/loan||Tied Loan. A loan that a government makes to a foreign borrower in exchange for the promise that the borrower will use the loan to purchase goods from the lender's country. A tied loan may be mutually beneficial; for example, it may spur business in the lending country while aiding the borrower's economic development.||financial-dictionary|
|total commitments limit (TCL)||Commitment Limitmeans, at any particular date, the lesser of (a) the Amount (as it may be increased by the Banks from time to time) or (b) the Borrowing Base as most recently determined and in effect (including the effect of any Periodic Reductions), provided, however, that when a Defaulting Bank shall exist, Commitment Limit shall mean, at any particular date, the lesser of (x) the Amount minus the Defaulting Bank Unfunded Portion or the Borrowing Base minus the Defaulting Bank Unfunded Portion.||lawinsider|
|trade agreement||A trade agreement (also known as trade pact) is a wide-ranging taxes, tariff and trade treaty that often includes investment guarantees. It exists when two or more countries agree on terms that helps them trade with each other. The most common trade agreements are of the preferential and free trade types are concluded in order to reduce (or eliminate) tariffs, quotas and other trade restrictions on items traded between the signatories.||wikipedia|
|tranche (of a loan)||Tranches are pieces of a pooled collection of securities, usually debt instruments, that are split up by risk or other characteristics in order to be marketable to different investors. Each portion, or tranche, is one of several related securities offered at the same time but with varying risks, rewards and maturities to appeal to a diverse range of investors.||Investopedia|
|transfer (into another guarantee)||A change in ownership of an asset, or a movement of funds and/or assets from one account to another. A transfer may involve an exchange of funds when it involves a change in ownership, such as when an investor sells a real estate holding. In this case, there is a transfer of title from the seller to the buyer and a simultaneous transfer of funds, equal to the negotiated price, from the buyer to the seller.||Investopedia|
|transfer (of a right)||1. Banking: Moving funds among two or more accounts held by the same or different entities.
2. Real estate: Conveyance of title to a property from the seller to the buyer through a deed of transfer, following payment of the price.
3. Securities trading: Delivery of a stock (share) certificate by the seller's broker to the buyer's broker followed by conveyance of the title by recording the change in the stock (share) register.
|transshipment||Transfer of a shipment from one carrier, or more commonly, from one vessel to another whereas in transit. Transshipments are usually made (1) where there is no direct air, land, or sea link between the consignor's and consignee's countries, (2) where the intended port of entry is blocked, or (3) to hide the identity of the port or country of origin. Because transshipment exposes the shipment to a higher probability of damage or loss, some purchase orders or letters of credit specifically prohibit it.||businessdictionary|
|transfer risk||Political events, economic difficulties, or legislative or administrative measures which occur or are taken outside the country of the insurer, and which prevent or delay the transfer of funds paid in respect of the loan agreement or the commercial contract.||EU definition|
|trust account||1. An account in which a bank or trust company (acting as an authorized custodian) holds funds for specific purposes such as to pay property taxes and/or insurance premiums associated with a mortgaged property. Also called escrow account.
2. A savings account established under a trust agreement whereby a trustee administers the funds for the benefit of one or more beneficiaries.
|trustee||A trustee is a person or firm that holds and administers property or assets for the benefit of a third party. A trustee may be appointed for a wide variety of purposes, such as in the case of bankruptcy, for a charity, for a trust fund, or for certain types of retirement plans or pensions. Trustees are trusted to make decisions in the beneficiary's best interests and often have a fiduciary responsibility to the trust beneficiaries.||Investopedia|
|turnkey contract||A turnkey contract is one under which the contractor is responsible for both the design and construction of a facility. The basic concept is that in a Turnkey Contract the contractor shall provide the works ready for use at the agreed price and by a fixed date.||globalnegotiator|
|umpire||An umpire clause refers to language in an insurance policy that provides for a means of resolution by an unbiased third party if an insurer and an insured cannot agree on the amount of a claim payment. An umpire clause is the same thing as an arbitration clause. The arbitration process requires both the insurance company and the policy holder to hire an appraiser of their choosing to assess the damages and the cost to repair them. The umpire will agree with one or perhaps both of the resulting appraisals and that amount will be used to satisfy the claim.||Investopedia|
|underwriter||An underwriter is any party that evaluates and assumes another party's risk for a fee. The fee is often a commission, premium, spread, or interest. Underwriters are critical to the financial world including the mortgage industry, insurance industry, equity markets, and common types of debt security trading.||Investopedia|
|underwriting||Underwriting is the process through which an individual or institution takes on financial risk for a fee. The risk most typically involves loans, insurance, or investments. The term underwriter originated from the practice of having each risk-taker write their name under the total amount of risk they were willing to accept for a specified premium. Although the mechanics have changed over time, underwriting continues today as a key function in the financial world.||Investopedia|
|unfair calling insurance||Insurance which protects the exporter against a bond which they have issued being called without good reason.||ITFA|
|unrecoverable debt||irrecoverable debt/bad debt:Accounts receivable that is unlikely to be paid and is treated as loss. A firm may use one of the two methods in writing off such losses against its sales revenue: (1) by deducting the uncollectible amounts from revenue in the accounting period they are deemed uncollectible (see direct write off method), or (2) by deducting an estimated amount from revenue in each accounting period and adjusting any excess or shortfall in the following accounting period (see allowance method). The ratio of bad debt losses and the open account (credit) sales is an indicator of the quality of a firm's collectibles, and the efficiency of its credit monitoring efforts.||businessdictionary|
|unsecured credit||Credit extended only on the basis of the debtor's promise to repay, without any collateral security.||businessdictionary|
|untied aid loan||Untied aid is Official Development Assistance for which the associated goods and services may be fully and freely procured in substantially all countries.||OECD|
|upfront fee||A fee paid before a good is produced or a service is performed. The upfront fee is generally a portion of the total fee that the buyer must pay. For example, one may commission an artist to paint a portrait and pay a 20% upfront fee, paying the remainder when the portrait is finished. It is also called an advance fee.||Farlex Financial Dictionary|
|verification of debts||Debt validation, or "debt verification", refers to a consumer's right to challenge a debt and/or receive written verification of a debt from a debt collector.||wikipedia|
|waiting period||A waiting period is the amount of time an insured must wait before some or all of their coverage comes into effect. The insured may not receive benefits for claims filed during the waiting period. Waiting periods may also be known as elimination periods and qualifying periods.||Investopedia|
|waiver||A waiver is the voluntary action of a person or party that removes that person's or party's right or particular ability in an agreement. The waiver can either be in written form or some form of action. A waiver essentially removes a real or potential liability for the other party in the agreement.||Investopedia|
|warranty||A warranty is a type of guarantee that a manufacturer or similar party makes regarding the condition of its product. It also refers to the terms and situations in which repairs or exchanges will be made in the event that the product does not function as originally described or intended.||Investopedia|
|warranty period||The time period in which a purchased product may be returned or exchanged; may be extended through extended warranty plans purchased from the retailer or the manufacturer.||businessdictionary|
|wholeturnover policy, comprehensive policy, global policy||A credit insurance policy other than single risk-cover; that is to say, a credit insurance policy that covers all or most of the credit sales of the insured as well as payment receivables from sales to multiple buyers.||EUROPEAN COMMISSION|
|Revolving type of cover under which the exporter can cover all or an acceptable spread of his short-term business for a varying number of receivables with several foreign buyers.||ATI|
|winding-up order||An incorporated company itself, a creditor, a contributory, or an official receiver may present a petition for winding-up a company. If the petition is sanctioned by a Court, a “Winding-up Order” would be issued.||HKEC|
|working capital||The cash required to fund inventories and accounts receivables. Accounting definition is current assets less current liabilities.||NZECO|
|Working capital, also known as net working capital (NWC), is the difference between a company’s current assets, such as cash, accounts receivable (customers’ unpaid bills) and inventories of raw materials and finished goods, and its current liabilities, such as||Investopedia|
|write off||A write-off is an accounting action that reduces the value of an asset while simultaneously debiting a liabilities account. It is primarily used in its most literal sense by businesses seeking to account for unpaid loan obligations, unpaid receivables, or losses on stored inventory. Generally it can also be referred to broadly as something that helps to lower an annual tax bill.||Investopedia|
|written consent||An official binding agreement signed either on paper or digitally by parties involved, which is recognized legally.||businessdictionary|