Glossary of international settlements
Terms you meet in the agreement, the payment order, bank requests and currency control. Short and in plain words.
A
- Ad valorem dutyA customs duty calculated as a percentage of the customs value of the goods.
- Agency agreementAn agreement under which an agent acts for a fee on the principal's instructions and at the principal's expense: for example, pays its foreign supplier.
- Agent's report and completion certificateDocuments in which the agent confirms execution of the payment order: how much it received, at what rate it paid and what fee it withheld.
- Assignment of claim (cession)Assignment of a claim: a creditor transfers to another person its right to collect a debt, such as payment under a contract.
B
- Bank guaranteeA bank's written undertaking to pay the beneficiary an agreed amount if the principal fails to meet the terms of the contract.
- Bank of Russia Instruction No. 181-IA Bank of Russia instruction on which currency transaction documents and information residents submit to their bank, and how contracts are registered.
- Bank of Russia Instruction No. 204-IA Bank of Russia instruction on how banks open, maintain and close bank accounts and deposit accounts.
- Bank statementA bank document listing all transactions on an account for a period: receipts, debits, charges, opening and closing balances.
- Bill of exchange (veksel)A security containing an unconditional obligation to pay a stated sum on a stated date.
- Bill of ladingA sea transport document: the carrier's receipt for the cargo, evidence of the contract of carriage and the right to dispose of the cargo.
C
- CHIPSA private interbank settlement system for US dollars. One of the main channels for large international payments in dollars.
- CIFAn Incoterms rule: the seller pays for sea carriage and insurance to the port of destination, and the risk passes to the buyer on loading.
- CIPSChina's cross-border interbank payment system for settlements in yuan. It has operated since 2015 under the supervision of China's central bank.
- Clearing agreementsAgreements between states under which countries keep mutual records of deliveries and settle by offset, without constant transfers of currency.
- Clearing settlementsSettlements in which the participants' mutual claims are first matched and offset, and only the difference is paid in money.
- Contract registration with the bankRegistration of a resident's foreign trade contract with its bank under Bank of Russia Instruction No. 181-I: the contract gets a unique number.
- Corporate currency transactionsA company's transactions in foreign currency and settlements with non-residents that fall under currency regulation and control.
- Correspondent accountAn account that one bank opens with another bank or with the central bank to process its clients' payments through it.
- CounterpartyThe other party to an agreement: a supplier, buyer, carrier, agent or other partner with whom a company has mutual obligations.
- Cross-border paymentsPayments where the payer and the beneficiary are in different countries and the money passes through banks in several jurisdictions.
- Cross-currency transactionsAn exchange between two currencies whose rate is calculated through a third currency. Such a rate is called a cross rate.
- Currency arbitrageProfiting from differences in the rate of one currency across markets or over time, and from discrepancies in cross rates.
- Currency controlChecks by the state and banks that residents' currency transactions comply with currency legislation.
- Currency conversionExchanging one currency for another at a rate. In a payment abroad: buying the contract currency with roubles before sending it to the supplier.
- Currency regulationState rules on who may carry out currency transactions and settle with foreign partners, how, and in which cases.
- Currency repatriationThe exporter's obligation to receive the proceeds under the contract, and the importer's to receive the goods or get the advance back on time.
- Currency riskThe risk of losses from exchange rate changes between the moment the price is agreed and the moment the money is actually transferred.
- Currency transaction codeA five-digit code the bank uses to mark the type of currency transaction: payment for goods or services, an advance, a return of funds and others.
- Customs clearanceThe steps of the declarant and customs that lead to the release of goods: filing the declaration, checks, payment of customs charges, release.
- Customs dutyA mandatory payment to the state budget when goods are imported or exported across the customs border of the EAEU.
- Customs procedureThe regime goods are placed under at the border: it defines why the goods are imported or exported and which payments and restrictions apply.
D
- Declaration of conformityA document in which the applicant itself confirms that the goods meet the requirements of EAEU technical regulations.
- Documentary collection (inkasso)A settlement method in which the seller's bank sends documents to the buyer's bank, which releases them to the buyer only against payment or acceptance.
- Duty-free tradeSale or import of goods without customs duties: in duty-free shops or under free trade agreements between countries.
E
- EAEU Commodity Nomenclature (TN VED)The Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union: a classification that assigns each product a ten-digit code.
- EscrowA deal through a third party: it holds the money or property until the parties meet the conditions, and only then passes it to the recipient.
- Excise taxAn indirect tax on certain goods: alcohol, tobacco, fuel, passenger cars and others listed in the Russian Tax Code.
- Export controlState rules under which exporting certain goods, technologies and information requires a permit or is prohibited.
- Export dutyA customs duty paid when goods are exported from a country. In Russia, it is introduced for certain groups of goods by government decisions.
F
- Federal Law No. 103-FZ on Payment AgentsThe federal law on accepting payments from individuals through payment agents: cash registers, a special account, rules for agents and sub-agents.
- Federal Law No. 164-FZ on Foreign Trade ActivityThe federal law on the fundamentals of state regulation of foreign trade: the principles, measures and bodies regulating imports and exports.
- Federal Law No. 173-FZ on Currency RegulationThe federal law on currency regulation and currency control: rules for currency transactions of residents and non-residents and how they are checked.
- Financial monitoringChecks on clients and transactions by banks and other organizations under the anti-money laundering law (Federal Law No. 115-FZ).
- FluctuationShort-term swings in an exchange rate or price around its general trend, which are hard to predict.
- Foreign economic activity (VED)Trade, services, investment and other deals a company makes with foreign partners.
- Foreign trade contractAn agreement between a Russian company and a foreign partner for goods, work, services or other deals. It is also called an international contract.
- Foreign trade settlementsA company's settlements with foreign partners under a contract: import payments, export proceeds, services. Forms: transfer, letter of credit, collection, etc.
- Forward contractAn agreement to buy or sell currency or goods on a future date at a price agreed today.
- FreightThe charge for carrying cargo, primarily by sea. The word is also used for the carriage itself or for chartering a vessel for cargo.
- FX markupThe gap between the rate applied to your payment and a benchmark: the exchange rate or the Bank of Russia rate. A hidden part of the transfer cost.
H
- HedgingProtection against adverse movements in an exchange rate or price: a company fixes the terms in advance or opens an offsetting position.
I
- Import dutyA customs duty paid when goods are imported. In the EAEU, the rates are common to all member states and set out in the Common Customs Tariff.
- Import VATThe tax paid when goods are imported into Russia: at customs or, for imports from EAEU countries, to the tax office. It can be deducted.
- Interbank rateThe rate at which banks and large market participants buy and sell currency to each other. A benchmark for judging the rate in a payment.
- International logisticsOrganizing the carriage of goods between countries: transport, warehouses, customs, documents and payments to carriers.
- International means of paymentThe currencies and instruments used to settle foreign trade deals: bank transfer, letter of credit, collection, bill of exchange, check.
- International settlements brokerAn intermediary between the client and its own network of payment agents: selects an agent and a route for the payment, prepares the documents and follows the payment through to execution.
- InvoiceA foreign seller's bill: what was sold, at what price, in which currency and to which bank details payment should be made.
- ISO 20022An international XML-based standard for financial messages, used by banks and payment systems to exchange payment data.
L
- Letter of creditA bank's undertaking to pay the seller once the seller presents the documents specified in the terms of the letter of credit.
N
- NettingOffsetting mutual claims: instead of two payments, the parties transfer only the difference between what they owe each other.
- Non-residentA foreign company or individual that the law does not treat as a Russian resident. Settlements with a non-resident are currency transactions.
- Non-tariff regulationForeign trade controls other than duties: bans, quotas, licenses, technical regulation, sanitary control, mandatory marking.
P
- Partial paymentPaying a contract in several payments: an advance and the balance, tranches on a schedule, or payments after each delivery stage.
- Participant in foreign economic activityA company or sole proprietor that makes deals with foreign partners: an importer, an exporter, and intermediaries in these deals.
- Payment advice (aviso)A notice from a bank or counterparty that a transaction has been carried out: a payment has been sent, credited or debited.
- Payment agentA company that pays a foreign beneficiary under an agency agreement, in its own name but at the client's expense and on the client's instructions.
- Payment agent feeThe agent's remuneration for transferring money on the client's instructions: a percentage of the amount, a minimum charge and related fixed charges.
- Payment agent liabilityWhat an agent is liable for to the client and to the state: executing the payment order accurately and on time, reporting, keeping the money safe.
- Payment agent rightsWhat an agent is entitled to do under an agency agreement: receive a fee, request documents, refuse a questionable payment.
- Payment agent taxationHow an agent's income under an agency agreement is taxed, including VAT on its fee, and what this means for a company paying a supplier through an agent.
- Payment intermediaryAny participant through which a payment passes from the payer to the payee: a correspondent bank, a payment system, an aggregator or a payment agent.
- Payment reserveMoney set aside for a specific payment: the executing party receives it only after execution.
- PrepaymentPayment to the supplier before the goods are shipped or the service is provided, in full or in part.
- Principal's payment orderThe client's instruction to the agent for a specific payment: whom to pay, how much, in which currency, at what rate and with what fee.
R
- Register of payment agentsRegistration of agents that accept payments from individuals under Federal Law No. 103-FZ. There is no separate state register for foreign trade payment agents.
- Risks of working with payment agentsWhat can go wrong when paying abroad through an agent: from delays and bank rejections to losing money with a dishonest intermediary.
S
- SEPAThe Single Euro Payments Area: common rules and formats for euro transfers between banks in European countries.
- Settlements through payment systemsTransfers under the rules of a payment system: the set of participants, standards and a settlement center through which the money passes.
- SPFS (Financial Messaging System of the Bank of Russia)The Bank of Russia's financial messaging system: a channel for exchanging payment messages between banks, similar to SWIFT.
- Sub-agentA company the agent engages to execute part of a payment order. In our model, only with the client's consent.
- SWIFTAn international messaging network between banks, used to send payment instructions.
- SWIFT/BIC codeAn international 8- or 11-character bank code under ISO 9362. It is how a payment finds the beneficiary's bank. BIC and SWIFT code mean the same thing.
T
- Third-party depositHanding money, documents or valuables to a third party for safekeeping until the conditions of the deal are met.
- Transaction costsAll costs of making a deal on top of the price of the goods: search, checks, paperwork, the money transfer, monitoring of performance.
- Transaction passport (pasport sdelki)A currency control document for a contract with a non-resident. It is no longer issued: instead, the contract is registered with the bank.
- Transit dutiesCharges for moving goods through the territory of a third country. Today these are mostly fees and security rather than a duty in the strict sense.
V
- VAT on exportsWhen goods are exported from Russia, the exporter applies a zero VAT rate if it confirms the export with documents, and can reclaim input VAT.
- VolatilityHow much a price or exchange rate changes over a period: the stronger and more frequent the swings, the higher the volatility.
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Describe the payment. We'll reply with a proposed route and terms. We name the agent in advance, and the rate and fee go into the payment order before your roubles are debited.