Documentary Collections

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Documentary Collections

description

Short and simple presentation of documentary collections in PPT format.

Transcript of Documentary Collections

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Documentary Collections

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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.

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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

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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

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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

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Importer

Remitting bank

Exporter

Instruction

Agreement

Collecting and/or presenting bank

Advice

Collectioninstruction

www.thebenche.com

Documentary Collections

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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

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From the importers point of view

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

Documentary Collections