Global Trade Lexicon

A bank's written undertaking to pay the seller a specified amount upon presentation of complying documents within a stipulated time.

Most secure payment method for India-EU trade. Insist on irrevocable confirmed LC for new EU buyers.

An LC that cannot be amended or cancelled without agreement of all parties.

All AJG-facilitated LCs are irrevocable. Revocable LCs offer no meaningful protection to Indian exporter.

An LC confirmed by a bank in the exporter's country, adding that bank's independent payment undertaking.

Essential for Indian exporters to higher-risk markets. Eliminates issuing bank risk and country risk.

A bank guarantee paying the beneficiary if the applicant fails to perform a contractual obligation.

SBLCs commonly used in EU distribution agreements to secure minimum purchase obligations.

An undertaking by a bank to pay the beneficiary if the applicant fails to perform. Types: performance, advance payment, bid, retention.

Used in large capital equipment mandates. Indian suppliers often require a BG from EU buyers before committing production.

Documentary collection where shipping documents are released only against cash payment by the buyer.

D/P protects the Indian exporter as they retain title through B/L until payment. Preferred over D/A for new relationships.

Documentary collection where documents are released against buyer's acceptance of a bill of exchange payable at a future date.

Higher risk than D/P. Buyer can default after receiving goods. Use only with well-known EU buyers.

Payment method where the buyer receives goods before payment, typically paying 30-90 days after shipment.

Only suitable for established India-EU relationships with trusted buyers. AJG recommends D/P or LC for new buyers.

The buyer pays before goods are shipped. Lowest risk for seller; highest risk for buyer.

Recommended for first-time small orders from new EU buyers. Typical: 30% advance + 70% before shipment.

Uniform Customs and Practice for Documentary Credits — ICC rules governing letters of credit globally. 39 articles. Current version 2007.

Standard reference for all LC disputes. Indian exporters must understand Article 14 (document examination) and Article 16 (discrepant documents).

Uniform Rules for Demand Guarantees — ICC rules governing demand guarantees and bank guarantees. In force since 2010.

Indian exporters receiving EU buyer bank guarantees should verify URDG 758 applicability.

Documents presented under an LC that do not comply with its terms. The issuing bank can refuse payment.

Most common reason for LC payment delays. Common discrepancies: late presentation, description mismatch, short shipment.

Pre-shipment finance from an Indian bank to fund packaging and preparation of goods for export.

Available from Indian banks at concessional rates under RBI guidelines. PCFC (foreign currency) available at SOFR-based rates.

An Indian bank purchases an export bill from an exporter at a discount, providing immediate liquidity.

Rate depends on whether the bill is under LC or open account and the buyer creditworthiness.

An exporter sells its accounts receivable to a third party (factor) at a discount for immediate cash.

Two-factor export factoring: export factor in India + import factor in EU. Available via FCI network.

Purchase of an exporter's medium-term receivables at a fixed discount rate, without recourse to the exporter.

Used for large capital goods exports. Indian engineering exporters can use forfaiting for 1-7 year EU buyer credit.

Financial solutions allowing buyers to extend payment terms while suppliers receive early payment using the buyer's credit rating.

EU buyers offer SCF to Indian suppliers — early payment at small discount. Growing in India-EU trade.

Supply chain finance initiated by the buyer where a financial institution pays the supplier early based on the buyer's creditworthiness.

Large EU retailers and manufacturers offer reverse factoring to Indian suppliers.

Government-backed institution providing loans, guarantees, and insurance to support domestic exporters.

ECGC (India), UKEF (UK), Euler Hermes (Germany), Bpifrance (France) are ECAs relevant to India-EU trade.

Export Credit Guarantee Corporation of India — provides export credit insurance covering 60-90% of loss from buyer default or political risk.

AJG recommends ECGC cover for all India-EU mandates involving new buyers.

Finance extended by a bank in the exporter's country to the foreign buyer to pay for goods imported.

EXIM Bank India and commercial banks offer buyer credit to EU buyers of Indian capital goods.

An LC providing for payment at a future date (30, 60, 90, 120 days) after bill of exchange date or shipment.

EU buyers often request 60-90 day usance. Indian exporters must factor the credit period cost into pricing.

An LC allowing the advising or confirming bank to make pre-shipment advances to the exporter.

Used to finance pre-shipment production. Indian exporters access working capital before shipment.

An LC allowing the first beneficiary to transfer part or all of the credit to a second beneficiary (usually a supplier).

Indian trading houses use transferable LCs when sourcing from multiple suppliers for an EU order.

A new LC opened by an exporter using the original import LC as collateral, in favour of the exporter's supplier.

Indian intermediaries open a back-to-back LC for their supplier backed by the EU buyer's master LC.

A bill of exchange payable immediately on presentation to the drawee.

Sight draft under D/P collection: buyer must pay on first presentation. Most secure form of documentary collection.

A bill of exchange payable at a specified future date, e.g., 60 days after sight or date of shipment.

Time draft under D/A: buyer accepts draft and pays at maturity. Higher default risk for exporter.

An account held by Bank A in foreign currency at Bank B in another country. From Bank A's perspective.

Indian banks maintain EUR and USD nostro accounts in EU banks for international payment settlement.

An account held by a foreign bank at a domestic bank. From the domestic bank's perspective.

EU banks maintain INR vostro accounts at Indian banks — the mechanism for rupee trade settlement.

Insurance covering exporters against non-payment by buyers due to buyer insolvency or protracted default.

Coface, Allianz Trade, Atradius, ECGC are major TCI providers for India-EU trade.

Global Payments Innovation — SWIFT initiative providing faster, transparent international payments with end-to-end tracking.

Indian exporters benefit from SWIFT GPI as EU buyers' payments can be tracked in real time.

Sale of an invoice to a lender at a discount in exchange for immediate cash.

Indian exporters use invoice discounting from Indian banks against export invoices.

An unconditional written order by one party to another to pay a fixed amount on demand or at a future date.

Bill of exchange (draft) is the instrument used in documentary collections.

An LC where payment is deferred for a specified period after presentation of complying documents. No bill of exchange used.

Gives EU buyer a credit period without issuing a bill of exchange. Increasingly common in India-EU trade.

An LC allowing the nominated bank to purchase (negotiate) the draft or documents from the exporter for immediate payment.

Indian exporters get immediate payment from their negotiating bank rather than waiting for the EU issuing bank.

Pre-Shipment Credit in Foreign Currency — concessional rate pre-export finance from Indian banks in foreign currency (USD, EUR).

PCFC rates are SOFR/EURIBOR-based. Available to Indian exporters with confirmed orders. Cheaper than INR working capital.

A guarantee added to a bill of exchange or promissory note by a bank, making the bank co-liable for payment.

Avalised bills are more easily forfaitable. Indian exporters should request aval from buyer's bank for medium-term transactions.