TRADE FINANCE FOCUS ON : Export Bills Purchased

Export Bills Purchased is the discounting of a D/P bill (Documents Against Payment) or D/A bill (Documents Against Acceptance) to grant an advance to the customer against export documents.

The discounting of the bill is made with recourse to drawer subject to final payment. In addition, the customer agrees to assign the title of the documents to the bank including the rights to dispose the goods at the discretion of the bank.

In most cases, the customer will have a credit facility established for this purpose. Export bill under LC is financed under this credit facility if the LC issuing bank risk is unavailable or when documents are presented with discrepancies.

Conditions for Discount/Purchase of Bill

The conditions for discount/purchase of a bill are:

• Purchase/discount for a customer may be undertaken only if a pre-established D/A or D/P limit is in place. Any excess in limit or violation of the limit terms must be approved by the Marketing Officer and /or the appropriate level of authority.

• Drawee, For documentary collection (documents not under LC) the drawee is the primary source of payment of the bill. Therefore his financial conditions and credit standing are important. For risks control exposure purposes, the guidelines for drawee mentioned below should be followed:

Outstanding bills under each drawee for each customer must not exceed 20% for the customer’s bill discount limit. Any excess in this drawee limit should be referred to the Marketing Officer and/or the appropriate level of authority for approval. 

Drawees’ reports to be obtained every 12 months and held on file for records.  Where a drawee has been blacklisted or an unfavourable report has been received, this has to be highlighted to the Marketing Officer. Any subsequent purchase of the bill on the drawee must be referred to the Marketing Officer and/or the appropriate level of authority for approval.

Where the drawee is new, it must be highlighted to the Marketing Officer and/or the appropriate level of authority for approval. A drawee report should be obtained subsequently.

Where the drawer and drawee belong to the same group of companies, referral to the Marketing Officer and/or the the appropriate level of authority for approval should be obtained before finance is granted.

Bill drawn on the drawee should be denominated in a freely traded currency, and country of the drawee should not be subject to exchange control restrictions.

Finance Against Bills Insured under Export Credit Insurance Policy

Where the Bank is financing export bills covered under an Export Credit Insurance Policy, all such applications for financing must be checked for eligibility for coverage and observance of the policy terms and conditions especially those relating to the following:

Declaration of corporate sales

Obtaining the Letter of Assignment duly acknowledged by The Insurer (if applicable)

Drawee’s limits

Reporting of overdue and unpaid bills