The Export Bill Discount is a kind of financing where customers sell the drafts under a usance L/C accepted by the issuing bank or documentary collection drafts with "Per Aval" by a bank to ABC prior to the maturity of such drafts while ABC pays customers the amount of the face value of the bills minus the discount charges and related fees. Export Bill Discount is different from forfaiting that the discount bank reserves the right of recourse.
Functions
1. It is procedurally simple without the need of additional security.
2. The drafts are accepted or endorsed with "Per Aval" by the correspondent bank and therefore are highly secure in collection of payment.
3. Customers are able to immediately receive payments, speed up the funds turnover and be relieved from shortage of funds.
4. The importers have access to deferred payments and have more trade opportunities.
Procedures
1. The customer signs an Export Bill Discount Contract with ABC to specify the rights and obligations of the parties at the time of application. On a case-specific manner, the customer submits the Application for Export Bill Discount to ABC together with the time drafts with bank acceptance or "Per Aval" as well as other documents required by ABC.
2. The discounted amount will be transferred into the customer's account opened with ABC after approval of ABC. The discounted amount equals to the face value of the draft minus the discount interest for the period from the date of payment to the maturity date plus certain days for collection of payment.
3. ABC collects payment from the acceptance bank or confirming bank at maturity.
Tips
1. The export contract shall provide that the payment method shall be usance L/C or D/A.
2. Only time drafts accepted by the issuing bank or drafts endorsed with "Per Aval" by the importers' bank are acceptable.
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