International Trade Financing

Usance Credit Payable at Sight

  Introduction

  Usance Credit Payable at Sight refers to L/C arrangement where the issuing bank grants financing for the importer; the importer makes forward payment whereas the exporter makes sight collection from the drawee bank that is responsible for discounting. Generally, the importer affords the discounting expenses and interest for overdue payment.

  Function

  This service makes financing easier for the importers and enables more trade transaction to take place.

  Target Clients

  Corporate customers.

  Business Process

  If the L/C designates a bank other than the issuing bank as the drawee bank:

  1) The applicant presents the handling bank the L/C application and the relevant documents which state ‘this L/C is under usance credit payable at sight and the issuing bank or other bank designated by the issuing bank is charged for primary payment responsibility. The interest and other surcharges will be burdened by the applicant’. The handling bank will make investigation and audition before the issuance. If it does not have the appropriate authorization, it should apply approval from branches with the specified authorization.

  2) The handling bank will submit the application form, import contract, and the exemption form for L/C security deposit and other necessary documents to the international business department of the first-level branches. The international business department of the first-level branches will choose the drawee bank and make enquiries. The first-level bank will determine the financing principal amount, interest, term, payment path and other details with the drawee bank by agreement or SWFIT.

  3) The international business department of the first-level branches will notice the handling bank of the enquiries and the handling bank can determine whether to add spreads bases on the enquired interest rate. Once the interest rate is set and the exemption contract for L/C security deposit will be signed by the applicant and the issuing bank.

  4) The handling bank should state in the L/C term that it is usance credit payable at sight and should clarify the form of collection.

  5) With the arrival of the bills, the handling bank should review the bills and present them to the applicant. If bills and L/Cs correspond, or if they don’t correspond but the applicant is fine with the discrepancy and decides to pay, the handling bank should honor the L/C term and authorize the drawee bank to make sight payment or authorize the remitting bank to collect payment.

  6) The handling bank should confirm repayment with the applicant 3 days prior to the maturity of the bills. Upon maturity date, the handling bank will pay the drawee bank after deducting BANK OF KUNLUN’s spread income.

  If no drawee bank is designated:

  1) The applicant presents the handling bank the L/C application and the relevant documents which state ‘this L/C is under usance credit payable at sight and the issuing bank or other bank designated by the issuing bank is charged for primary payment responsibility. The interest and other surcharges will be burdened by the applicant’. The handling bank will make investigation and audition before the issuance. If it does not have the appropriate authorization, it should apply approval from branches with the specified authorization.

  2) The handling bank will determine the interest rate with the applicant and sign the exemption contract for L/C security deposit and issue the L/C.

  3) With the arrival of the bills, the handling bank should review the bills and present them to the applicant.

  4) If bills and L/Cs correspond, or if they don’t correspond but the applicant is fine with the discrepancy and decides to pay, the handling bank should make sight payment or authorize the remitting bank to collect payment.

  5) The handling bank should confirm repayment with the applicant 3 days prior to the maturity of the bills. Upon maturity date, the applicant should repay all the principal and interest.

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