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.
A collection is a convenient method of payment if:
- The buyer does not want to pay for the goods before the seller has shipped them
- The seller wants to make sure that the buyer will not take possession of the goods before paying for them, or before receiving the documents from the bank in exchange for a payment obligation at a future date. In this case all the originals of the sea waybills must also be submitted together with the collection documents
- The seller trusts the buyer and the buyer’s ability to pay for the goods
The risk for the seller of the goods depends mainly on the buyer. The buyer might not accept the collection documents and so may refuse to pay for and collect the goods.In such a 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.
How does a collection work?
- A sales contract is signed
- The seller ships the goods
- The documents are drawn up
- The documents and an application for a documentary collection are submitted to the bank
- The seller's bank submits the documents according to the seller's instructions to the buyer's bank
- The buyer is informed of the arrival of the collection documents
- The buyer pays for the documents if the condition is 'documents against payment', or agrees to pay in the future if the condition is 'documents against acceptance', and then the bank releases the documents to the buyer
- The payment is transferred to the seller's bank either on the date when the payment for the documents is made or on a future payment date
- The seller's bank transfers the money to the seller's account
- The buyer submits the shipping documents to the carrier
- After completing the customs formalities, the buyer receives the goods
|Handling a collection||0.15 %, min 65 €|
|Amending the terms and conditions of a collection||50 e|
|Assignment of goods (if the goods are sent in the name of the bank)||50 €|
|Sending a SWIFT message||10 €|
|Postage fees||Actual costs|