Under Bills for collection, there is an underlying credit from the supplier for which a Bill of Exchange (an IOU) properly executed by the importer and endorsed by his bank is the underlying “Eligible Instrument”
Features
- Used mostly by parties with long standing relationship or related entities.
- Documents are released against accepted bill of exchange (payable at a future date).
- Payment is made only after goods are cleared
- It is operated under guidelines clearly by the Uniform Rules for Collection, ICC Publication No. 522
Benefits
- It is straight forward and not as complicated as letters of credit.
- Cheaper to use by importers.
- Foreign exchange can be procured from the official market
