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Process for Documentary Collections

Documentary Collections as easy as 1,2, 3


Step 1
The Seller/Exporter ships the goods.


Step 2
After the Seller ships the goods, he will send the shipping documents (e.g., Invoice, Packing list, Bill of Lading, Certificate of Origin, etc.) to the Remitting Bank. Based on the Seller’s instructions, the Remitting Bank will prepare a cover letter, attach the cover letter to the original shipping documents then forward everything on to the Collecting/Presenting Bank. The Presenting Bank will contact the Buyer and will inform them of the documents received and of their authorization to release documents to them against Buyer's payment ("D/P") or against Buyer's acceptance ("D/A")


Step 3
If Documents Against Payment, upon Presenting Bank's receipt of funds they will release the shipping documents to the Buyer and remit the funds to the Remitting Bank for payment to the Seller.

If Documents Against Acceptance, the Remitting Bank will forward a time draft to the Buyer for their acceptance and promise to pay at a future fixed date (i.e. 30 days after the bill of lading date.) The Buyer will sign the draft and return it to the Presenting Bank who will then release the original shipping documents to the Buyer and notify the Remitting Bank of the acceptance. On the maturity date, the Presenting Bank will follow up with the Buyer to request payment and settlement of the time draft.


Advantages for the Buyer:

  • Less costly than letters of credit
  • No bank commitment to pay, therefore doesn't utilize credit line with bank.


Advantages for the Seller:

  • Control of the shipping documents thru Bank intermediaries

Unlike a letter of credit, a documentary collection does not provide a bank's promise to pay. The banks involved in this service simply act as agents to facilitate the payment process.

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