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Domestic Trade Finance

Date: 2016-04-19

Negotiation of Domestic L/C

Description

Negotiation of domestic L/C refers to that the Bank deducts the negotiated interest, and makes the payment to the beneficiary after it receives the letter of confirmation for due payment from the issuing bank. If the issuing bank does not make payment at maturity, the Bank enjoys the right of recourse against the seller.

Features

1. Accelerating the fund turnover. The product can reclaim forward claims on demand, thus accelerating fund turnover and easing financial pressure;

2. Simplifying the financing formalities. The financing formalities are simpler than those of working capital loans.

Interest rate

The negotiated interest rate is subject to RMB discounting interest rate.

Applicable customers

1. Any seller who has limited working capital and has to conduct business by quick fund turnover;

2. Any seller who suffers temporary difficulty in capital turnover during the period after the confirmation of payment from the issuing bank but before the receipt of payment;

3. Any seller who gets a new investment opportunity during the period after the confirmation of payment from the issuing bank but before the receipt of payment, and the expected yield is higher than the interest rate on bill advance.

Condition for application

1. Any applicant who was registered upon the approval according to the law, and holds the legal-person business license subject to annual inspection or other effective evidences sufficient to prove the validity of its operation and business scope;

2. Any applicant who has the loan card;

3. Any applicant who has the permit for account opening and has opened a settlement account with the Bank;

4. Any applicant who has the outstanding forward claims with the confirmation of payment by the bank; and

5. The issuing bank confirming the payment must be a financial institution with relatively sound credit standing approved by the Bank (except for the institutions under the jurisdiction of the Bank).

 

Domestic L/C

Description

Domestic L/C is a settlement method by which the seller is paid against documents complied with terms and conditions of L/C, whereby the Bank, upon the request of the buyer in a domestic trade, issues a written commitment to the seller. Various financing services can be offered to meet the customers' needs under the domestic L/C.

Features

The product can meet customers' demand for domestic trade settlement and financing.

Applicable customers

1. Where the buyer and the seller are not familiar with each other in a domestic trade, hoping to enhance the credibility of trade by a bank’s L/C;

2. Where both the buyer and the seller have the need of trade finance due to shortage of sufficient working capital.

Conditions for application

1. Any applicant who was registered upon the approval according to the law, and holds the legal-person business license subject to annual inspection or other effective evidences sufficient to prove the validity of its operation and business scope;

2. Any applicant who has the loan card;

3. Any applicant who has the permit for account opening and has opened a settlement account with the Bank;

4. Any applicant who has received the guarantee deposit in full amount, or take T- bonds, certificates of bank deposit, or other bank acceptance drafts acceptable to the Bank as full pledge, or whose credit risks primarily attribute to the financial institution credit risks and occupation of the line of credit in financial institutions (such as under the bank guarantee) can apply for the issuing of domestic L/C, and are not restricted by the applicant' credit rating and other access standards; and

5. Any applicant who falls out of the circumstances as stated in the preceding paragraph applies for the issuing of domestic L/C will be free from the restriction on the credit rating, but it should have the credit line in the Bank.

 

Self-operated Forfeiting under Domestic L/C

Description

Under the negotiable deferred payment domestic L/C, the Bank, upon receipt of authentic and valid payment confirmation at maturity from the issuing bank, purchases the non-recourse outstanding claims from the beneficiary of the L/C, and charge the interests and relevant handling fee, the Bank thus holds the claims till the date of maturity and then realizes the claims from the issuing bank.

Features

The amount of commitment payment herein is the business amount, and the book-entry amount thereof is the figure after the interest rate and the bank’s charges are deducted.

Interest rate

The quotation of the business is determined by the front-end business departments of the branches in accordance with the guiding price published by the headquarters of the international business department and in combination with local market situation.

Applicable customers

Any customer who aims at refining the financial statements and completely deleting the accounts receivable of export from the balance sheet. 

Conditions for application

1. The applicant shall be the beneficiary of domestic L/C and present the documents through the Bank;

2. Any applicant who keeps good trading records and was never involved in any trade dispute over the same type of commodities, and the trade background is authentic; 

3. Any applicant who operates legally and normally , and the existing financing with the banks incurs no overdue repayment, malicious arrears in interest or advances; 

4. Any applicant who renders high-quality products and services, remains strong ability of performance, good performance records and maintains good supply-sales relations with the upstream and downstream customers. 

Buy-out Forfeiting under Domestic L/C

Under the negotiable deferred payment domestic L/C, the Bank, upon receipt of the seller’s bank of forfeiting, purchases without recourse the accounts payable for which the honoring bank committed it would make payment at maturity.

Resell Forfeiting under Domestic L/C

Under the negotiable deferred payment domestic L/C, the Bank transfers (without recourse) the claims against L/C under the undue forfeiting to a forfeiter for which an accepting bank committed it would make payment, and the forfeiter realizes the claims from the issuing bank or the accepting bank. In this case, the forfeiter itself shall undertake the risk of receiving the payment from the issuing bank or the accepting bank.
Letter of Guarantee

Financing Guarantee

Description

Financing guarantee is a written document issued by the Bank, upon the request of the borrower to the lender, guaranteeing the borrower will fulfill the obligation of repaying the borrowed fund.

Product type

Financing guarantee mainly includes: loan guarantee, overdraft guarantee, securities issuance guarantee and credit line guarantee.

Functions 

Facilitating the financing for the applicant.

Features

1. Solving the problem of mutual mistrust between both parties of a transaction. With good reputation, the Bank involves in the transaction and acts as a guarantor to promote smooth transaction by providing a guarantee for the concerned parties.

2. It can enhance the borrower's credit standing and facilitate its financing.

3. It can reduce the financing cost.

4. Compensation to the damaged party and penalty on the defaulting party in case of breach of contract. In case of the breach of contract, the Letter of Gurantee(“L/G”) can be executed to indemnify the damaged party and penalize the defaulting party, so as to avoid and reduce contract breaching activities, thus avoiding troubles and expenses arising from litigation or arbitration.

Fees

Fees for financing guarantee shall be charged based on the principles and rate determined in accordance with relevant rules of the Bank, and fees for Letter of Gurantee  in foreign currency shall be charged in the same way as for Letter of Gurantee  in RMB.

Applicable customers

Key industrial and commercial customers supported by the Bank.

Conditions for application

1. Any applicant who holds the legal-person business license subject to annual inspection or other effective evidences sufficient to prove the validity of its operation and business scope;

2. Any applicant who has the loan card;

3. Any applicant who has the permit for account opening and has opened a settlement account with the Bank; and

4. Any applicant who has the line of credit in the Bank or pays the guarantee deposit in full amount or provides the full guarantee acceptable to the Bank.