Documentary collections

Documentary collection is the third method of payment commonly used in foreign trade transactions in addition to letters of credit and open accounts. A collection transaction involves the purchaser's bank handing over commercial documents to the purchaser in exchange for a payment, a fixed-term payment obligation or a bill of exchange as laid down in the collection terms and conditions. The bank's role in collection transactions is strictly that of an intermediary.

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More about documentary collections

  • Import

    Collections offer importers the following advantages:

    • A payment or a commitment to pay is made only upon receipt of the relevant documents by your bank
    • You can decide not to accept or pay the collection
    • The importer's bank will effect payment on the importer's behalf rather than the importer having to make payment by international money transfer or bank draft
    • A more simple and cheaper alternative to a documentary credit

  • Export

    Collections offer exporters the following advantages:

    • The exporter's bank monitors whether the payment is made or accepted
    • The shipping documents stay in the banking system until the collection has been paid or accepted
    • You obtain better liquidity
    • They are easier to process than documentary credits

  • International rules
    Collections are subject to a set of international rules entitled Uniform Rules for Collections (URC), ICC Publication No. 522, published by the International Chamber of Commerce (ICC) in Paris.

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