There are three main export methods: 1. Receipt and Settlement of foreign Exchange Receipt and settlement of foreign exchange means that the negotiating bank, after receiving the export documents from the foreign trade company, will, after verification, hand the documents to the foreign paying bank for payment.
Upon receipt of a credit note from the paying bank to the negotiating bank’s account, the credit note will be converted at present and transferred to the Foreign Trade Company.
The bank does not advance funds, it is collection and payment.
This way is not conducive to promoting foreign trade enterprises to expand exports.
However, this method is relatively secure for the negotiating bank and is often used.
2. Regular settlement of foreign exchange Regular settlement of foreign exchange means that Chinese banks voluntarily remit receivables to RMB and record them to the accounts of foreign trade enterprises in accordance with the time required for compensation from foreign banks, regardless of whether the bills are received or not, and determine a fixed period for settlement of foreign exchange in advance (e.g., 7 or 14 days after the bank reviews and approves the documents).
3. Export Escort Export escort, also known as bill purchase and exchange settlement, means that the negotiating bank purchases the beneficiary’s (exporter’s) draft and documents according to the terms of the letter of credit, deducts the interest from the face value from the date of negotiation to the expected date of receipt of the draft, converts the balance into RMB according to the exchange rate on the date of negotiation and transfers it to the foreign trade company.
After the NEGOTIATING BANK ADVANCES FUNDS TO THE BENEFICIARY TO PURCHASE THE DOCUMENTARY DRAFT, THE BENEFICIARY BECOMES THE HOLDER OF THE DRAFT AND MAY DEMAND PAYMENT FROM the DRAWING BANK.
The purpose of the export documentary bill issued by the bank is to provide financing for foreign trade enterprises, which is conducive to the capital turnover of foreign trade enterprises.
However, banks cannot fully guarantee the security of letters of credit, so this method of exchange settlement is not used much.