Documentary collections can provide you with cost effective and secure support when trading with overseas partners.
Banks will only release documents to importers enabling them to take possession of goods against payment, or against a legally valid instrument of future payment such as a bill of exchange.
‘A bill of exchange or ‘draft’ is a written order by the drawer (the person drawing the bill) to the drawee (the party on whom the bill is drawn – often a bank) to pay a specific amount to the payee (the beneficiary) at a specified time.
The most common form of bill of exchange is a cheque. If the drawee ‘accepts’ the bill he indicates his commitment to pay the bill. The bill of exchange fulfils multiple roles: as a payment instrument, as a means of granting credit to the drawer and by providing liquidity to the beneficiary if the accepted bill can be discounted.’
Why use documentary collections?
As an importer you are able to examine the shipping documents before paying or accepting a bill of exchange. This enables you to ensure that the goods match those that you were expecting to receive.
As an exporter, your overseas customers can only take delivery of the goods once they have paid for them or accepted a bill of exchange to pay at a later date.
Documentary collections are subject to universally accepted rules set out in Uniform Rules for Collections (UCR) publication 522 issued by the International Chamber of Commerce.