Documentary Collections

An exporter may be confronted with circumstances in which they cannot obtain advance payment, but the commercial relationship is of a high level. In situations like these, an alternative approach from an exporter's point of view is to structure the export on a documentary collection basis. When this mode of payment is preferred, the exporter submits the required documents to the remitting bank, which in turn remits such documents to the collecting bank, located in the proximity of the importer. The collecting bank releases subject documents only against payment or the importer's acceptance of the accompanied bill of exchange prepared by the exporter.

In case such payment or acceptance is not made by the importer, the presented documents related to the goods shall not pass to the importer, and the subject documents may be requested back by the remitting bank.

It may be convenient for the exporter to structure its trade receivables under documentary collections if a well established commercial relationship with the buyer exists. For exporters, such documentary collections may be the founding base of a self liquidating financing structure.