DCW maintains a list of recently-decided court cases involving commercial letters of credit, demand guarantees, and other trade finance instruments.
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Expressing concern that a poorly constructed definition of trade finance could cause unintended negative consequences for the business, the ICC Banking Commission’s Steering Committee felt the need for issuance of a paper which defines, from ICC’s perspective, how trade finance is to be interpreted. Technical Advisory Briefing No. 11, “Definition of Trade Finance”, was released 18 September 2024.
The definition offered by ICC:
“Trade finance is a financial service facilitating the real economy, enabling businesses to finance, monetise, risk mitigate and settle trade flows, thus supporting the movement of goods and/or the performance of services regardless of maturity, both internationally and domestically.”
Prior to giving its definition, the brief briefing identified elements that are unhelpful in defining what is trade finance: tenor; maturity; and destination of goods. It then listed factors integral to trade finance: at least three key players involved (seller, buyer, financial institution); covering a specific underlying trade transaction; and facilitating risk mitigation and settlement.
see also: Trade Finance Magic
Curiously, the briefing made no mention of letters of credit, but took the opportunity to explain that: “Guarantees are considered as trade finance instruments only if the underlying transaction involves trade flows of goods or performance of services, regardless of maturity, explicitly excluding off-balance sheet instruments having the character of credit substitutes.”
Without critiquing any of the various market definitions of trade finance that have been advanced in the past and may have induced release of this one at this time, the briefing opined on the attributes of a cogent definition, including that the definition “remains accessible and comprehensible to a wide audience.”
TAB-11 and previously issued technical advisory briefings are freely available at the ICC Digital Library.
All the applicable international rules and laws for commercial and standby LC, guarantees, trade and treasury in one place.
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