Introduction

Forfaiting means that Bank of China purchases the outstanding claims resulting from goods, services or asset transactions without recourse. Usually the outstanding claims have been accepted/undertaken/avalised to make payment by financial institutions. The acceptable types of outstanding claims in forfaiting by Bank of China include: L/C, bills of exchange, promissory notes, outstanding claims guaranteed by payment guarantee/standby L/C, outstanding claims guaranteed by export credit insurance, outstanding claims guaranteed by international organizations such as IFC (International Finance Corporation), and other acceptable credit instruments.

Functions

Forfaiting business enables a customer to receive non-recourse payments with fixed rate and without taking up his credit line, so that it can meet the customer's needs in avoiding risks, increasing cash flow, improving financial statements and receiving tax rebates earlier. At present, the types of forfaiting are as follows:

1.Forfaiting under a usance L/C.

As applied by the customer, Bank of China purchases non-recourse outstanding accounts receivable confirmed/undertaken by the issuing bank under the negotiation, acceptance or deferred payment L/C.

2.Forfaiting under a sight L/C.

Under sight negotiable L/C, Bank of China, as the nominated negotiating bank, purchases accounts payable of the issuing bank without recourse upon strict examination to ensure that documents are consistent with L/C.

3.Forfaiting under D/A.

Under the D/A (documents against acceptance), at the customer's request, Bank of China purchases the accepted commercial drafts avalised by a bank without recourse.

4.Forfaiting under domestic L/C.

Under the domestic deferred payment L/C and the negotiable deferred payment L/C, upon receipt of the authentic and valid payment confirmation at maturity from the issuing bank, Bank of China purchases the non-recourse outstanding claims from customers.

5.Forfaiting under the credit insurance (non-recourse Rong Xin Da).

For the export trade covered by export credit insurance, Bank of China purchases outstanding claims against documents, export credit policy and claim transfer agreement without recourse.

6.Forfaiting guaranteed by IFC or other international organizations.

As the Global Trade Finance Program Agreement participant (as a confirming bank) of the IFC, ADB, EBRD and IDB, Bank of China, with guarantees of international organizations, purchases outstanding claims from customers without recourse.

Features

1.Purchase without recourse. Bank of China purchases accounts receivable without recourse to secure customer's accounts receivable.