WITH BEST WISHES FROM MR. OLD MAN

2 Comments

1. 

   udayjoshi007

   November 11, 2013 at 8:11 pm

   Hello Mr. Old Man,Am new to your blog. Have been following your blog for sometime now and feel like thanking you for providing such valuable inputs.I need a clarification about w.r.t. forfaiting as I am new to it.So from a Bank's perspective whats the difference between "negotiation of bill under LC" and forfaiting. And whats the difference if the transaction originates from Banks counter ( i.e. one bank approaches another bank for forfaiting on behalf of it exporter client) or if it originates from exporter side ( i.e. the exporter approaches bank for forfaiting.)Many thanks in advance for your kind help.thanks and rgdsUday

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2. 

   mroldmanvcb

   November 12, 2013 at 1:11 pm

   Negotiation, according to Article 2 of UCP 600, means the purchase by the NOMINATED BANK of drafts (drawn on a bank other than the nominated) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank.Forfeiting is a financial transaction involving the purchase/discount by a forfeiter of an exporter’s receivables including but not limited to negotiable instruments under LC transactions. As forfeiting is without recourse, hence, the forfeiter would assume all risks associated with collecting the receivables.Negotiation is restricted only to the nominated bank under the LC whereas forfeiting can be done by any forfeiter.When an exporter needs to sell his/her receivables in the form of negotiable instruments, e.g., bills of exchange, promissory notes, he can approach a forfeiter directly for forfeiting. A forfeiter can transfer the bill of exchange he forfeited to another forfeiter by endorsement.

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