Definition
Clearing has two distinct legal meanings, both rooted in mercantile and regulatory law.
1. Banking and Finance. The process by which banks and financial institutions exchange claims against one another — checks, drafts, and other instruments — and settle the resulting net balances without requiring full payment in cash for each individual transaction. Instead of each bank paying every other bank separately, claims are pooled and offset, with only the net differences exchanged. This process is typically administered through a clearinghouse, a central facility established for that purpose.
2. Maritime and Customs Law. The act of a vessel departing from port after satisfying all applicable customs, health, and local regulatory requirements. A vessel that has "cleared" has obtained official permission to depart and has complied with inspection, documentation, and duty requirements. The clearance papers issued to the vessel serve as formal evidence of this compliance.
A third usage — record clearing — has emerged in modern criminal law as a near-synonym for expungement or the sealing of criminal records, though this meaning is not reflected in the historical legal dictionaries and is better understood as a statutory and administrative term rather than a term of art in the traditional sense.
Common Language
Modern common usage (Wiktionary): Present participle and gerund of "clear" — a general-purpose word meaning to remove obstruction, to make free of something, or to pass through a process successfully.
Historical common usage (Webster's 1913): A tract of land cleared of wood for cultivation; also, the banking method of exchanging checks and settling balances through a clearinghouse.
Webster's 1913 is notable for capturing both the agrarian sense (a cleared tract of land) and the banking sense simultaneously — a rare case where a general-purpose dictionary kept pace with emerging commercial law vocabulary. The legal meaning diverges from the everyday sense in an important way: in law, clearing does not mean simply removing something. In banking, it describes a structured multilateral netting process; in maritime law, it describes regulatory compliance and official departure authorization. Neither carries the informal sense of merely passing something through or getting something done.
Recognized Forms
/SUBTYPES
Bank Clearing / Clearinghouse Settlement: The original and most developed legal form. Banks submit mutual claims to a central clearinghouse; net balances are calculated and settled, historically by end-of-day transfers. Modern electronic clearing (ACH, wire systems) descends directly from this concept.
Vessel Clearance: The maritime regulatory form. Involves customs inspection, payment of duties, health certification, and issuance of clearance papers. Failure to obtain clearance before departure can expose a vessel and its owners to seizure and penalty under customs law.
Record Clearing: The contemporary criminal law usage. Refers to statutory processes — expungement, sealing, vacatur, or certificate-based relief — that limit public access to or legal effect of prior criminal records. This meaning is jurisdiction-specific and highly variable in scope.
Why It Matters in Research
The term clearing is a structural trap for researchers who encounter it across different areas of the Law Mind corpus without recognizing that it carries distinct meanings depending on context. A researcher working in banking law and a researcher working in admiralty law are reading entirely different concepts when they encounter the same word in a historical source.
In banking law sources, clearing is the conceptual foundation for the entire modern payment system. Historical sources discuss it in terms of bilateral exchange and balance settlement among a relatively small number of local banks; modern law has evolved this into multilateral electronic systems governed by federal regulation and private network rules. The clearinghouse mechanism is also the conceptual ancestor of securities clearing and derivatives settlement, so researchers in financial regulation will encounter the term used by analogy in contexts the historical dictionaries never anticipated.
In maritime sources, clearing is embedded in customs and admiralty law. Historical entries will reference compliance with port authority requirements; modern sources layer on international conventions, Coast Guard regulations, and customs documentation requirements. The term "clearance papers" or "bill of health" will appear as companion terms in older admiralty materials.
The modern criminal law usage — record clearing — appears nowhere in the historical dictionaries and has developed almost entirely through state statutory schemes since the mid-twentieth century. Researchers using historical sources to understand this meaning will find nothing useful there. The term is best researched through state statutes, administrative regulations, and the Encyclopedia entry below.
Researchers should also note that Burrill's entry contains a partially corrupted text that begins to define clearing in the banking sense but then fragments into a discussion of benefit of clergy (clerimonia) — an artifact of the original typesetting. This is not a separate legal meaning of clearing; it is a printing error in the source document and should be disregarded.
Historical Dictionary Support
The historical dictionaries are in close agreement on both core meanings. Black's (both editions) and Bouvier's present nearly identical language for the banking definition; Black's adds the maritime definition; Bouvier's omits it. Burrill's offers the same banking definition with a citation to Gilbert on Banking before the text degrades into the clergy passage described above.
What the historical dictionaries do not capture: the institutional infrastructure of clearing. By the time Black's first edition was published, the New York Clearing House Association (established 1853) had been operating for decades and had become a model for clearinghouses worldwide. Burrill's references an appendix on the New York Clearing House that did not survive cleanly in the available source text, but the reference itself signals that contemporary practitioners understood clearing as an institutional system, not merely a bilateral practice. Modern researchers should treat the dictionary definitions as conceptual starting points only — the operational and regulatory dimensions require additional sources.
None of the historical dictionaries address securities clearing or the use of clearing in derivatives markets, both of which became legally significant in the twentieth century and are now heavily regulated under federal law.
Jurisdictional Note
Bank clearing is governed at the federal level in the United States through the Federal Reserve System and the Uniform Commercial Code as adopted by individual states. Vessel clearance is primarily federal, governed by customs statutes and Coast Guard regulations. Record clearing is exclusively a matter of state law, with no uniform national standard — eligibility, procedures, and effects vary dramatically across jurisdictions.
Encyclopedia Cross-Reference
Criminal Law Encyclopedia: Expungement, Sealing, and Record Clearing (criminal_243) — covers the modern statutory meaning of clearing as applied to criminal records.