Dec17
DOCUMENTARY COLLECTION
WHAT IS A DOCUMENTARY COLLECTION ?
A documentary collection is the collection by a bank
of funds due from a buyer against the delivery of
documents. The bank, acting as agent for the seller
(exporter), presents documents to the buyer
(importer) through the buyer’s bank and in
exchange receives payment of the owned amount,
or obtains acceptance of payment.
The liability of the bank under a documentary
collection is primarily restricted to following the
seller's instructions in forwarding and releasing
documents against payment or acceptance.
HOW IS DOCUMENTARY COLLECTION
DIFFERENT FROM AN L/C OR OPEN ACCOUNT ?
Unlike a letter of credit, the bank does not assume
any liability to pay if the buyer does not want or is
unable to pay. Compared to open account sales,
the documentary collection offers more security to
the seller, but less than a letter of credit
WHEN SHOULD A DOCUMENTARY COLLECTION
BE USED ?
In trade Business, several criteria have to be
discussed between the parties regarding the means
of payments. Generally, a documentary collection
would be most appropriate when :
1) The seller and the buyer know trust each
other
2) There is no doubt about the buyer's
willingness or ability to pay
3) The political and economic conditions of the
buyer's country are stable
4) The importer's country does not have
restrictive foreign exchange controls
WHAT ARE THE ADVANTAGES OF A
DOCUMENTARY COLLECTION ?
1) Cheaper banking fees and easier handling
charges compared to letters of credit
2) The receipt of funds are often faster than
open account terms or letter of credit terms
3) Seller retains title to the goods until
payment or acceptance is made
WHAT ARE THE INCONVENIENTS OF
DOCUMENTARY COLLECTION ?
If the buyer refuses or is unable to pay, the seller
has three options, which could be expensive :
1) Find another buyer.
2) Pay for return transportation
3) Abandon the merchandise.
WHAT ARE THE URC 522 OF INTERNATIONAL
CHAMBER OF COMMERCE ?
These are the common international rules to
regulate the documentary collection, governed by
the International Chamber of Commerce.
WHO ARE THE PARTIES INVOLVED?
1) PRINCIPAL - exporter, seller, remitter,
drawer of the draft
2) REMITTING BANK - exporter's bank
handling the collection
3) PRESENTING OR COLLECTING BANK -
the buyer's bank.
4) DRAWEE - importer, buyer, drawee.
TWO DIFFERENT TYPES OF PAYMENT :
1) Documents against Payment (D/P) also
known as "Sight Draft" or "Cash against
Documents” (CAD). The buyer must pay
before the collecting bank releases the title
documents.
2) Documents against Acceptance (D/A).
The buyer accepts a time draft, promising
to pay for the goods at a future date. After
acceptance, the title documents are
released to the buyer.
3) Discount may be proposed : see on the
reverse
WHAT ARE THE STEPS IN DOCUMENTARY
COLLECTION ?
1) The buyer (importer) and seller (exporter)
agree on the terms of sale, shipping dates,
etc., and that the payment will be made on a
documentary collection basis.
2) The exporter arranges for the delivery of goods
to the port/airport of departure and prepares
the necessary documentation based on
Instructions received from the exporter
3) Export documents and instructions are
delivered to the exporter's bank by the
exporter
4) Following the instructions of the exporter, the
bank processes the documents and forwards
them to the buyer's Bank.
5) The buyer's bank, on receipt of documents,
contacts the buyer and requests payment or
acceptance of the trade draft.
6) After payment or acceptance of the draft,
documents are released to the buyer, who
uses them to pick up the merchandise.
7) The buyer's bank remits funds to the seller's
bank or advises that the draft has been
accepted at expecting maturity date .
8) On receipt of the funds, seller's bank credits
the account of the exporter.
 Dec17

HOW DOES IT WORK ? to his bank to deliver documents against

“UPAS” for “Usance Paid At Sight”:
Although a documentary collection is payable
par differed payment at maturity date, Crédit
Agricole Ile de France may pay the drawer on
his request at sight.
In case of Documents against
Acceptance (D/A), the buyer accepts to
pay for the goods at a future date.
After acceptance of payment at maturity date
by the buyer, Exporter may require Crédit
Agricole Ile de France to guarantee the
payment:
This action is known as an "avalisation" or
« Aval » and can be requested on behalf of
the exporter. By endorsing the bill on the
front, the bank commits itself unconditionally
to pay should the drawee default.
This avalised draft may be also discounted by
Credit Agricole Ile de France upon request of
Exporter.
:
- Acceptance of importer to pay at
maturity date and
- Aval/Discount of importer’s bank (Crédit
Agricole)
4) Following the instructions of the
exporter, the bank processes the
documents and forwards them to the
buyer's Bank.
5) The buyer's bank, on receipt of
documents, contacts the buyer and
requests his acceptance of the trade
draft.
6) After acceptance of the draft, documents
are released to the buyer, who uses
them to pick up the merchandise.
7) The buyer's bank discounts the draft at
sight and remits funds to the seller's
bank
8) On receipt of the funds, seller's bank
credits the account of the exporter.

HOW TO PROCESS TO BE FINANCED ?

WHAT ARE THE ADVANTAGES OF A
1) The buyer (importer) and seller DISCOUNTED COLLECTION ?
(exporter) agree on the terms of sale,
shipping dates, etc., and that the - Simplify and accelerate the process of
payment will be made on a documentary payment unlike a documentary credit
collection basis on acceptance basis. - No need to following the outstanding
amounts of L/Cs
2) The exporter arranges for the delivery of - Huge reduction of handling tasks (no
goods to the port/airport of departure document examination)
and prepares the necessary - No need to release irregular
documentation based on Instructions documents
received from the exporter - Better discount charges (European
Rate)
3) Export documents and instructions are
delivered to the exporter's bank by the COMPULSORY BANK AGREEMENT
exporter. FACILITY
To be financed, the Exporter should indicate
UPAS collection clause in his instructions For the buyer, compulsory bank agreement is
requested.