Export bill collection refers to the sending export bills to the overseas buyer through exporter’s bank for collection of payment under export bills. The exporter prepares necessary documents for collection of money from the exported goods and then sends it to the overseas buyer after completion of export formalities. These documents include Commercial invoice, Packing List, Certificate of Origin, Bill of lading or Air way-bill, bill of exchange, quality certificate and other documents mentioned by the buyer at the time of placing the purchase order. At this stage, exporter advises his bank to send the documents to the overseas buyer to collect the money. After receiving export proceeds from the overseas buyer, the exporter bank credits the total amount to exporters account.
Step 1: the seller and the buyer will enter into a contract and will be agreed that the payment will be made on basis of the documentary collection.
Step 2: At this stage, the seller will ship the goods and tender the relating documents to remitting bank together with a corresponding collection order
Step 3: This is the stage where remitting Bank sends the documents along with collection instructions to the buyer’s bank (collecting bank).
Step 4: This is the stage where the “Collecting Bank” notifies the buyer/importer on the arrival of documents for payment/acceptance
Step 5: At this stage, The buyer will pay the amount due or accepts the draft and in turn receive the documents
Step 6: Where the Collecting bank remits the amounts to remitting bank.
Step 7: This is the Final Stage where the remitting Bank credits the amount to the seller’s account.
Sometimes the buyer may not settle out the payment of exported bills discount. In this respect, the whole amount of discounted bills with interest is debited to exporter’s account. Usually, the bank discounts all export bills of their account holders without collecting creditworthiness of the exporter. However, most of the banks demand collateral security from exporters before crediting the finance. Bank also obtains insurance against exporters to cover default of payments against the discount of export bills from credit guarantee agencies.