Import Documentary Bill for Collection
This refers to the payment whereby local bank of importer collects payment from importer according to instructions from the foreign correspondent bank, and release commercial documents to the import.
Features
Cost saving - Bank charges less for import collection compared with import L/C, which saves the importer’s trading cost. The procedures are quite simple to operate.
Reduced funding requirements - Under Document against Acceptance, since importer can pick up goods upon commitment of payment, it has plenty of time to make actual payment after sale/re-sale of the goods, which requires few working capitals.
Applicable situations
1. For importers who want to make payment to exporters in an easy and low-cost way.
2. For importers who have sufficient working capital and would like to use Document against Payment.
3. For importers who have insufficient working capital, requires financing from the exporter, and would like to use Document against Acceptance.
Kind reminder
Under D/P terms, bills will be released only when payment is made.
Under D/A terms, importers must apply for the acceptance of time draft, and make payment at due day.
Export Documentary Bill for Collection
This refers to the payment whereby the export forwards commercial documents through its bank to importer’s bank for collection. Importer’s bank will release the documents to importer against cash payment (D/P) or against acceptance of (D/A)
Features
Cost saving - Bank charges less for export collection compared with export L/C, which saves the exporter’s trading cost. The procedures are quite simple to operate.
Opening new market – if it is a buyer’s market, and the importer asks for favorable financing condition, the export can select D/A for the benefit of developing new market.
Risk control – since importer can only pick up goods upon D/A or D/P, risks are more controllable than sales on credit.
Applicable situations:
1. The bank understands well the credit standing of the exporter, and the exporter has plenty of funds for stocking and shipment.
2. If it is the seller’s market, would be better to choose D/P.
3. If it is the buyer’s market, and the importer asks for favorable financing condition, would be better to select D/A, which gives more guarantee on payment than sales on credit.
Kind reminder
When importer refuse to make payment or acceptance, the exporter would be better to authorize the bank promptly to arrange the goods.
Under D/A terms, exporter is actually granting longer payment period to import. Suggest the exporter to take time value of money into account.
Exporter can apply for SRCB trade financing products such as Export Bill Purchasing, etc.
