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Ex-Import Procedure(to Way of Payment)	Home > Helper

Export/Import procedure according to the Non-L/C method

- Trade settlement : Divide in L/C method and Non-L/C method
Non-L/C method : Divided in collection method (D/P, D/A) and remittance method.
- Although the L/C method provides payment guarantee to an exporter by a opening bank, the transaction has number of shortcomings to pay high service fee to banks by the sales involved parties and that the transaction amount is the lowest,
- In the stand point of a exporter, Non-L/C could be profitable transaction as long as a importer's creditability is definite.
- Since the Uniform Rules for Collection of the Commercial paper to regulate a collection method, there is a special trait to this method as a draft transaction, sending documents through banks and collecting payment.
- Remitting method : Since there is no international regulation to regulate this method, the contract terms can be determined freely as long as the contents are not violating the said countries' a forced legislation.

Export/Import procedure according to the collection payment method

[1] Definition

- Collection is a process to receive payment by requesting the payment through a corresponding bank or receive inquiry from a customer to purchase a check or a draft of which the place to pay is located in a foreign country.
- This is a trading method for a exporter to ship the contract goods in advance and issue a bill of change to a importer which is a debtor at the same time and request a payment to a importer through a foreign exchange bank to receive the payment.
- The importer's bank will not guarantee the payment for import earning but execute only collection task for payment.
- Since the basis for payment and receiving is "a draft", the existence of a draft is essentially indispensible requisite and the role of the related bank is mere export earning collection and remitting the payment in the behalf of the sales involved parties.

[2] A description

(1) D/P(document against payment) method

- This method is for a collection bank to present at sight documentary bill and the shipping documents to a importer, and exchange importer's cash to shipping documents.
- Usance D/P(Usance D/P)

- In principle, D/P is sight bill term in general but if a importer wants to concord payment period with goods obtain period, there is usually "D/P, 20days after B/L date" indication. At this pont, a collection bank only notifies to a importer of the shipping documents arrival and keep the documents itself. When the due date arrives, the bank reimburse the documents and cash to collection.

(2) D/A (document against acceptance) method

- A importer indicates "acceptance" on the bill of change document usance bill presented by a collection bank and hand over the shipping documents to a collection bank by signing the documents and collect cash on the maturity date.
- In the process of collection procedures, only the bill of change is received from a importer and hand over documents to a importer and receive payment on the D/A maturity date is the different process from D/P method.
- If a importer refuse a collection request of a collection bank, a collection bank should prepare a certificate of refusal and send it to a collection requested bank or deliver a collection refusal purpose to a collection requested bank.

(3) The kinds of collection according to its direction

<1> Outward collection

- If a drawee for a check or a draft is overseas, this method is used for requesting payment through a corresponding bank.

<2> Inward collection)

- Accordion to a foreign bank's request, payment is collected and remit to a debtor.

(4) The kinds of collections depends on before/after payment

<1> collection (bill purchased)

- A method while collecting a check or a draft, the payment is made to a customer in advance and request collection after to receive payment.
- Since payment is prepaid, there is a large risk possibility for unpaid.
- The kinds of foreign currency feasible to purchase before collection

1. Traveller's check
2. Bank's check, Cashier's check(A check issued by a bank)
3. Money order(Bank Money Order, Personal Money Order, Postal Money Order)
4. Bank-Certified Personal Check(A check guaranteed by a bank)
5. Bill of change or non-documentary bill by L/C.
6. A personal check guaranteed for payment (Personal check )

- Procedure

1 Collection inquiry
2 Payment
3 Send bill and check
4 Present bill and check
5 Import earning
6 Payment notification and debit authorization
7 Stand-by advise

- If a collection bank is the depositary correspondent bank of a remitting bank, payment can be directly deposit from a collection bank without passing through a paying bank.

<2> Pay after collection (bill collection)

- Method of payment to make payment when a collection bank collects a check or a draft by collection method.

[3] Procedure

(1) Contract conclusion (Contract)
(2) Export license (Request by attaching a contract on the export license)
(3) Securing required raw materials (Domestic L/C, Purchasing approval, Open import L/C)
(4) Procuring required fund (Trade fund's loan)
(5) transportation and concluding a insurance contract (transportation documents, insurance documents)
(6) Collection inquiry (bill of change, transportation documents, insurance documents, Commercial invoice, packing list,.....)
(7) Send collection documents
(8) Present / acceptance collection bank's collection documents (For D/A, prepare delivery certificate for a importer)
(9) Payment or receipt of delivery certificate
(10)Send Payment or receipt of delivery to a collection requested bank
(11)A collection transfer arrived payment or a receipt of delivery to a exporter.

[4] Things to be cautious when concluding a contract

(1) Thorough credit research of a importer

<1> Since D/A, D/P are the transaction that grants credit to a importer without the payment guarantee of a bank, they require detail and through investigation about a importer's credit in advance.

(2) Loss prevention

<1> Export draft insurance coverage

- Since the credit limit is fixed per each countries, it needs to be checked in advance.

<2> Request to importer to provide security.

- Stand-by L/C opening, making deposits and so on.