Escrow service

Bona Trust Corporation provide Escrow Service.

Escrow import export

What is Escrow service

The escrow service is a third-party institution called an “escrow”, (1) once deposit the purchase funds from the buyer side, then (2) the buyer confirmed the delivery of the goods and the provision of the services, etc. were completed without incompleteness at the time, (3) the service to hand the payment to the seller side.

Essence of the transaction: Both the buyer and seller enter into a direct sales contract, and the intermediary as a third party secures the credit of the transaction.

For example, when purchasing something, usually the purchase funds are delivered and the goods are delivered at the same time.

However, when time lag occurs in the meantime due to some circumstances, such as the characteristics of the products or geographical circumstances, a mechanism is required to ensure payment settlement.

Like the above transactions are “anxiety about whether the seller side really pays for the purchase funds from the buyer side“, but on the other hand, from the buyer side’s point of view, “anxiety about whether the seller side really provides products / services“. As such, both buyer side and seller side are concerned about “settlement”.

Especially when the credit status of the counter party is unknown, we cannot make the transaction smoothly. Escrow is an intermediary service fills in the distortion of this time lag, carries out right handover and fund settlement at the same time to secure the safety of the transaction.

Reasons to utilise Escrow service

Escrow operators must be in a neutral position and be a trusted third party entity (or individual).

Escrow Service

Since the purchase fund is deposited to the escrow business entity which is a neutral third party and then the purchase fund is paid to the seller side (through the escrow business operator) for the first time when the products and services are received from the seller side, we can avoid circumstances we cannot deliver products or services even if we pay the purchase fund”.

In this way, the escrow service can be said to eliminate the concern about the settlement of both sides by securing ‘simultaneous fulfillment‘ between seller side and buyer side.

Difference in essence from trilateral trade (offshore trade)

Trilateral trade (offshore trade) is to conduct trade transactions between the 3 countries.

Essence of the transaction: Both the buyer and the seller enter into a sales contract with the intermediary, and the intermediary deals directly with both.

For example, assume that Labuan Company A dealt with products from Australian company B as a distributor, and Company A signed products sales agreement with Chinese company C .

In the case of trilateral trade, the products themselves are sent directly from Company B to Company C, and the products price is from C “the seller” to A “the buyer”, and A also pays B, the flow of “products” and the flow of “capital” will move differently.

In the above-mentioned trade transaction, A is not an exporter or importer, but as a mediator (third party), A is a seller of the product for C, A will be the standing position of the buyer of goods to B.

In trade transaction between 2 parties, it is in principle that shippers and sellers , importers and buyers agree, but in the case of “trilateral trade” it is different.

In trilateral trade, paper work becomes slightly more complicated than transaction between 2 parties, but it will be done because there are merits for each of the 3 parties.

Benefits of Company A (Labuan)A is neither an exporter nor an importer, but profits can be obtained by selling it to C at a price adds margin (profit) to the purchase price from B.
Benefits of Company B (Australia)If B can substitute A for selling, B can expand the sales channel without paying sales promotion expenses by itself.
Benefits of Company C (China)If C is the 1st time transaction directly with B, it must take the trouble of negotiating conditions such as prices, etc., which must clear the credit problem, but by buying from AC can save time and effort.

Should you have any queries, please do not hesitate to contact us.

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