Entrusted by a foreign correspondent bank or an affiliated bank, and according to their instructions, KBL collects import payments and delivers relevant commercial documents to the importer.
Upon receipt of documents from the remitting bank, in accordance with instructions received, the bank (collecting bank) collects payment/acceptance from the importer (the drawee) and releases the relevant commercial documents to the importer. There are two types of inward collection: DAP and DAA. Under DAP terms, import documents are released to the importer against payment. Under DAA terms, documents are released to the importer against acceptance.
- Low cost - low banking fees, help reduce financial expenses and control the costs;
- Easy to use - simple procedures and easy to use compared to L/Cs;
- Reduce funds occupation - no advance payment required when the exporter prepares and ships the goods, the goods documents can be obtained immediately and the goods become disposable upon payment or acceptance;
- Improve cash flow - with DAA, the importer can immediately obtain the goods document and dispose the goods after acceptance, and can make payments later as the inflow of cash are generated by the sale of goods. With almost no occupation of funds, the company’s financial position and solvency can be greatly improved.
- Importers who wish to pay to exporters with lower cost and simpler procedures than L/Cs.
- Importer with sufficient liquidity may use DAP.
- Importers with insufficient liquidity who need exporters to grant financing facility of forward payment may choose DAA provided that they have a good business relationship with exporters.
- The foreign exporter initiates collection by submitting relevant documents to its bank after the preparation and shipment of goods.
- Exporter's bank mails the collection documents to KBL and we will notify the importer to pay (DAP) or accept (DAA) as instructed.
- After the importer has made payment or acceptance to the exporter via KBL, we shall release the documents to the importer.
- When the acceptance under DAA is due, the importer shall pay to the exporter via Bank of China.
- Under DAA terms, the exporter should accept the draft in accordance with relative local law and pay at maturity.
- Importers are welcome to apply for KBL’s trade finance under such inward collection.