Recourse

Recourse in international trade and finance refers to the right of the holder of a negotiable instrument, when the drawee refuses acceptance or payment, to demand repayment of the instrument amount and related expenses from prior parties (endorsers, drawer) or relevant guarantors. It is commonly seen in letters of credit, collections, bill discounting, factoring, etc. When exercising recourse, note: 1) A protest must be made and a notice of dishonor must be given within the statutory time limit, otherwise the right of recourse may be lost; 2) Recourse is joint and several, and the holder may seek recourse from any prior party; 3) It is opposite to 'Without Recourse', which means the holder waives the right of recourse against prior parties and bears the risk itself. In foreign trade practice, when an exporter negotiates or discounts through a bank, if the bank reserves recourse, it may recover the funds from the exporter when the importer refuses payment; if the bank waives recourse, it bears the bad debt risk. Therefore, clarifying whether recourse exists directly relates to risk allocation and financing costs.