Understanding a Basic Documentary Collection Process

I would like to give brief information regarding the documentary collection process on this page. Before starting to read this page I strongly suggest you to have a look at our previous pages, which are given more information regarding the documentary collections or cash against documents as more commonly known by exporters and importers, indicated below.

Payment methods in international trade : You can understand payment methods in international trade from this link. After reading this page you should be able to distinguish pros and cons of each payment method in foreign trade transactions. The payment methods we discuss on this page are :

  • Cash-in-advance
  • Open Account
  • Documentary Collections
  • Documentary Credits

Documentary Collection : If you would like to learn the basics of documentary collections (cash against documents) this page would be a very good starting point for you. We discussed below topics on this page.

  • Key Characteristics of Documentary Collections
  • Documentary Collection Rules : URC 522
  • Collection instruction and its format

Parties in a Documentary Collection :     

We should be able to identify the parties in a documentary collection and understand their roles and responsibilities.

  1.  the "principal" who is the party entrusting the handling of a collection to a bank;
  2.  the "remitting bank" which is the bank to which the principal has entrusted the handling of a collection;
  3.  the "collecting bank" which is any bank, other than the remitting bank, involved in processing the collection;
  4.  the "presenting bank" which is the collecting bank making presentation to the drawee.
  5.  the "drawee" is the one to whom presentation is to be made according to the collection instruction.

Documentary Collection Process (Cash Against Document Transaction Flow)
Figure 1 : Cash Against Document Payment Transaction Diagram
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What is Documentary Collection? Detailed information related to documentary collections transaction or cash against document processs can be found on this page. Some topics are documentary collection structure, parties in a documentary collection, documentary collection process (Cash Against Document Transaction Flow) explained by figures.

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