Wealth Management
Products & Services - Documentary Collection

How a Documentary Collection Works

Documentary collections are an option if your buyer is unable or unwilling to work with an open account or letter of credit. Although documentary collections are cost-effective relative to letters of credit, the former do not offer the same level of security.

Risks exist such as having little recourse against the importer in case of non-payment. Credit, political and transfer risks, for instance, are not covered. Although banks do act as facilitators for their clients under collections, documentary collections offer no verification process and limited recourse in the event of non-payment.

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Craig Schmutzer
Senior Vice President
Relationship Development Strategy
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A Closer Look at Documentary Collection Process

  • The exporter entrusts the collection of a payment to the remitting bank (exporter’s bank), which sends documents to a collecting bank (importer’s bank), along with instructions for payment.
  • A draft requires the importer to pay the face amount either at sight (document against payment [D/P] or cash against documents) or on a specified date (document against acceptance [D/A] or cash against acceptance).
  • The draft gives instructions that specify the documents required for the transfer of title to the goods. Although the title to the goods can be controlled under ocean shipments, it cannot be controlled under air and overland shipments, which allow the foreign buyer to receive the goods with or without payment.
  • Funds are received from the importer and remitted to the exporter through the banks in exchange for those documents.
  • Although the banks control the flow of documents, they neither verify the documents nor take any risks. They can, however, influence the mutually satisfactory settlement of a documentary collection transaction.

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