A documentary collection is an arrangement where the issuing bank presents documents to the buyer for payment or releases documents to the buyer, depending on the terms and conditions of the collection claim, either in exchange for payment (documents against payment) or for a promise to pay at a fixed date in the future (documents against acceptance, where the seller allows the buyer to pay within a certain time limit).
- A documentary collection is a convenient method of payment with relatively little risk for a buyer. It is up to the buyer whether and when to go to the bank to redeem the collection documents. In most cases the buyer waits until the goods have arrived at the agreed point of destination and only then goes to the bank to redeem the collection documents
- The seller should bear in mind that with a documentary collection a lot depends on the buyer. The buyer may not accept the collection documents presented for payment and may then refuse to pay for and refuse to collect the goods
- In such case the banks involved in the collection transaction have no right to impose sanctions on the buyer and force the buyer to make the payment. The bank does not actually check the content of the documents that it receives for a documentary collection and is not liable for their accuracy.
Collection transactions are regulated by the "Uniform Rules for Collections" (URC 522) published by the International Chamber of Commerce.