How does documentary collection work

The exporter ships the goods to the importer and receives the documents in exchange. The exporter presents the documents with instructions for obtaining payment to his bank. The collecting bank releases the documents to the importer on receipt of payment or acceptance of the draft. The importer uses the documents to obtain the goods and to clear them at customs. Once the collecting bank receives payment, it forwards the proceeds to the remitting bank. In this arrangement, the collecting bank releases the documents to the importer only on payment for the goods.

We recommend you consult with your bank before moving forward. Both the exporter and importer agree to a documentary collection for payment in the sales agreement. The Bill of Exchange - also known as a draft - provides instructions to the bank about the required documents, payment amount due, the terms of payment, and when title transfers for the goods.

If the importer does not pay, the exporter typically needs to find another buyer, pay for return transportation, or abandon the merchandise. For more information on trade finance options, visit: trade. See the procedure to update your browser. Exchange rates Take your company international. Interest Rate Forecast. You are here: Home Business International services Import and export Documentary collections How documentary collection works.

Goods are shipped. Seller drawer ships the goods and prepares the documents requested by the buyer. Collection order is issued. Seller provides his bank remitting bank with the requested documents and the collection order. Collection order is forwarded. Remitting bank examines the collection order and documents number and title of documents only and forwards them to the buyer's bank with instructions to deliver documents to the buyer only against payment.

Seller receives an acknowledgement of receipt.