Back-to-back letters of credit: Arrangement used by intermediaries to give payment security to their suppliers. The beneficiary of one L/C (prime or 'master' letter of credit) offers this as security for the issuance of a further L/C (second or 'slave' letter of credit) in favour of the supplier of the goods. The bank issuing the second L/C (usually Advising bank to the prime L/C) is called the second Issuing bank. This is regarded by many banks as risky - if the prime L/C runs into problems, it will no longer serve as security for the second L/C.
Balance of Trade: The difference between a country's total imports and exports; if exports exceed imports, a favorable balance of trade exists; if not, a trade deficit is said to exist.
Bank guarantee: Undertaking given by a bank on behalf of a customer to pay the guaranteed party a sum of money if the customer cannot or will not pay. This should not be confused with the payment undertaking given under a letter of credit.
Banker's draft: A payment instrument used to make international payments.
Bargain Purchase Option: A lease provision allowing the lessee, at its option, to purchase the equipment for a price predetermined at lease inception, that is substantially lower than the expected fair market value at the date the option can be exercised.
Barter: Trade in which merchandise is exchanged directly for other merchandise without the use of money. Barter is the oldest form of trade and is currently widely in use in trade with countries using currency that is not readily convertible on world exchange markets.
Beneficiary: a party who receives a legal benefit. In a letter of credit situation, the party to whom payment will be made. Normally, but not always, the seller or exporter.
Bill of exchange: The most commonly-used financial instrument in international trade. An unconditional payment demand for a specific sum of money, payable either at sight or at a specified future date. This is drawn up by the seller and presented to the buyer. This is sometimes called “the draft.”
Bill of Lading: Transport document issued by the carrier or a document establishing the terms of a contract between a shipper and a transportation company under which the freight is to be moved between specific points for a specified charge.
An ocean shipment requires two documents: an Inland Bill of Lading to cover the domestic movement of the cargo, and an Ocean Bill of Lading to cover the international carriage; an Air Way Bill is essentially a through Bill of Lading for an air cargo shipment, domestic and/or international.
Bill of lading - Serves as:
Blank endorsement: The method whereby a bill of lading is made into a freely negotiable document of title. Any bearer of a blank endorsed bill of lading has title to the goods and may claim them from the carrier. Insurance documents can also be blank endorsed, so that any party can make a claim if necessary.
Bonded Warehouse: A warehouse authorized for storage of good on which payment of duty is deferred until the goods are removed from the warehouse.
Broker: A company or person who arranges, for a fee, purchase or sales or transactions between lessees and lessors of an asset.