Types of Documentary Collection
- Documents against payment: the collecting bank releases the documents to the buyer only against payment in definite currency.
- Documents against acceptance (of bills of exchange): the collecting bank releases documents only against the buyer’s acceptance of the bill of exchange payable in a future date.
Documentary collection is subject to the “Uniform Rules for Collections” (URC) of Publication No 522 of the International Chamber of Commerce (Paris).
- Opportunity to choose whether to pay or not.
- Possibility to pay against the documents that confirm the delivery of goods instead of advance payment.
- Opportunity to obtain deferred payment (if documents are to be released against acceptance of bill of exchange).
- The fees and commissions for the services of the bank are less compared to letters of credit.
- The documents are released to the buyer only in exchange for charges or acceptance of the bill of exchange payable in a future date.
- Possibility to retain control over the goods until the buyer has effected payment or accepted the bill of exchange.
- More efficient administrative routines since the bank follows up the payments.
- Possibility to obtain guarantee of the buyer’s bank.
The fees and commissions for the services of the bank are lower in comparison with the letters of credit