Documentary Collection: Meaning, Types, and Process PDF

Documentary Collection: Meaning, Types, And Process January 7 2021 What Is A Documentary Collection? Documentary collection is a form of trade finance where an exporter is paid by an importer for his shipped goods & products after the evidenti...

Documentary Collection: Meaning, Types, And Process January 7 2021 What Is A Documentary Collection? Documentary collection is a form of trade finance where an exporter is paid by an importer for his shipped goods & products after the evidential documents are exchanged by the banks of the two parties. Merchant Credit and Guarantee Corporation Limited (MCG) assists in availing documents to importers and exporters. In other words, it is a trade financing system where the bank of an exporter forwards documents to the bank of the importer to collect payments for shipped goods. It typically occurs at the place of the importer after the shipment of products. The series of documents varies from a letter of credit. For Documentary Collection Services, exporters may obtain payments by submitting their shipping and collection documents to their remittance bank. It is the duty of the referring bank to forward these documents to the importer's bank. Then, by lending those assets, the importer's bank pays the exporter's bank. The position of banks in documentary collection, however, is limited, since they do not check the documents or guarantee payment. They're just leading you through the documents' flow. Documentary Collection Type Depending on when the payment is made to the exporter, two kinds of documentary collections exist. They are as follows here: 1. Documents Against Payment Collection - After the goods have been delivered by the exporter to the buyer, a document against payment collection is executed. With the shipping documents, the seller will present their bank and then the bank sends those documents to the bank of the buyer. This is the most popular method of the series of documentaries as it helps minimise the risk to the sellers and lets the importer pay the face price of the draught at sight. The payment has to be made to the bank when the buyer is presented with the draught. 2. Documents Against Acceptance Collection - The importer is expected to pay the exporter on a particular date for this form of documentary collection. The exporter provides the buyer with a credit agreement and the collecting bank (the buyer's bank) approaches the buyer when the stated date is reached. What is documentary Collection Process? Here's a step-by-step guide to the documentary collection process: 1. The documentary collection process starts when the purchaser and the seller agree on the amount to be paid. This needs shipping information, and that transaction will be the set of documents. 2. With the buyer, the exporter or seller makes an agreement and ships the goods to the buyer. The seller then provides his bank with a collection order so that the bank may further apply the collection order to the bank of the purchaser. 3. Then, the buyer's bank provides the buyer with a "presentation document". The buyer is now liable for making a deposit or receipt to his bank. 4. Then the invoice is sent by the buyer's bank to the seller's bank and the payment or approval is sent to the seller by the seller's bank.