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Documentary Collections

Documentary collections involve banks carrying out instructions to pay under financial and commercial documents, with no obligations or responsibilities for payments. There are two types: documentary against payment (D/P), where payment is made upon receipt of documents, and documentary against acceptance (D/A), which allows a credit period. Banks handle collections according to ICC rules. The process involves instructions from exporter to remitting bank to collecting bank to importer, with advice provided along the way. Documentary collections provide simple handling and payment assurance, but banks undertake no risks for exporters.

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Sudershan Thaiba
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414 views8 pages

Documentary Collections

Documentary collections involve banks carrying out instructions to pay under financial and commercial documents, with no obligations or responsibilities for payments. There are two types: documentary against payment (D/P), where payment is made upon receipt of documents, and documentary against acceptance (D/A), which allows a credit period. Banks handle collections according to ICC rules. The process involves instructions from exporter to remitting bank to collecting bank to importer, with advice provided along the way. Documentary collections provide simple handling and payment assurance, but banks undertake no risks for exporters.

Uploaded by

Sudershan Thaiba
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Documentary Collections

Documentary Collections

 The basis for a Documentary Collection:


– The buyer does not get access to the merchandise until
he has paid or promised to pay.
Documentary Collections
 Definitions:

– Documentary Collection - banks carry out instructions to pay


under financial/commercial documents. Banks take no
obligations or responsibility for payments.

– Financial documents - drafts, promissory notes, checks,


receipts etc.

– Commercial documents - invoices, forwarders certificates or


receipts, Bills of Lading.

– A documentary collections can either be paid at sight -


documentary against payments (D/P) - or there could be a
credit period involved - documentary against acceptance (D/A).
Documentary Collections

 When to apply a documentary collection?

– Exporter – to ensure payment from importer prior to the


release of documents/goods (only for D/P).

– Importer – to ensure shipment of purchased goods prior to


payment.
Documentary Collections

Banks handle collections under URC 522, 1995 rev. issued by


International Chamber of Commerce (www.iccwbo.org)

Remitting bank is always referring to the above mentioned


rules in their instructions to the collecting bank.
Documentary Collections

Agreement


Exporter Importer

Instruction
 Advice

  


Collection
instruction 
Remitting bank Collecting and/or presenting bank

www.thebenche.com
Documentary Collections
 From the exporters view:

– Pros:
• Simple handling
• The banks keep on reminding the buyer until
payment is settled
• Low cost

– Cons:
• The buyer may choose not to accept the document
• The banks do not undertake any risk on behalf of the
exporter
• Problems and cost to re-ship the merchandise if the
buyer do not accept the documents/merchandise
Documentary Collections
 From the importers point of view

– Pros:
• Simple handling
• Payment to be made after the goods have been shipped
• Low cost

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