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settlement method

In China's export business, negotiation letters of credit are widely used, and there are three main export settlement methods for such letters of credit:

1. Receipt for settlement or payment of foreign exchange.

It means that the negotiating bank, after receiving the export documents of foreign trade companies, passes them to the foreign paying bank for payment after examination and verification. After receiving the credit notice of the payment bank to transfer the payment to the account of the negotiating bank, it will be converted into RMB according to the foreign exchange quotation of the day and allocated to the foreign trade company.

Banks don't advance money, they collect money. This way is not conducive to promoting foreign trade enterprises to expand exports. But this method is relatively safe for negotiating banks, so it is often used.

2. Regular settlement of foreign exchange

Regular settlement of foreign exchange means that Chinese banks set a fixed settlement period in advance according to the time required to claim from foreign banks (such as 7 days or 14 days after the bank approves the bill), and take the initiative to settle accounts receivable into RMB and record them in the accounts of foreign trade enterprises regardless of whether they receive the ticket.

3. Export bills

Export draft, also known as bill settlement, refers to the negotiation bank buying the beneficiary's (exporter's) bills and documents according to the terms of the letter of credit, deducting the interest from the negotiation date to the expected bill receipt date from the par value, and converting the balance into RMB according to the foreign exchange rate on the negotiation date and distributing it to foreign trade companies.

After the negotiating bank advances funds to the beneficiary to purchase the documentary draft, it becomes the holder and can claim payment from the paying bank against the bill. The purpose of bank export bill is to provide financing for foreign trade enterprises, which is conducive to the capital turnover of foreign trade companies. But at present, banks can't fully guarantee the security of letters of credit, so this method of foreign exchange settlement has not been widely used at present.