The documentary collection is a means of settlement when a seller, having forwarded the goods, presents commercial and/or financial documents through a bank for the buyer to pay/accept them. Having paid the commercial documents (invoices, transportation documents, certificates, etc.) or having undertaken to pay the financial documents (having accepted a draft), the buyer receives them from the bank and acquires the right to the goods.
When does the bank release the documents to the buyer?
- The bank releases documents to the buyer against payment.
- The bank releases documents to the buyer against acceptance of the draft.
When is it advisable to secure payment by means of a documentary collection?
- When trading partners do not have complete trust in one another.
- When the seller trusts the buyer's ability to pay and his intention to pay for the goods forwarded.
- When the political and economic situation in the buyer's country is stable.
How does settlement by documentary collection work?
- The seller and the buyer conclude an agreement where settlement by means of documentary collection is provided for.
- The seller forwards the goods to the buyer.
- The seller presents the documents to its bank for collection.
- The seller's bank forwards the documents to the buyer's bank.
- The buyer's bank, after the seller has paid the documents or has undertaken to pay them (having accepted the draft) releases the documents to him.
- The buyer's bank transfers the money to the seller's bank.
- The seller's bank transfers the money to the seller.
Application for Documentary Credit
Application for amendment to Documentary Credit
Application for transfer to Documentary Credit