Documentation in International Trade: Document Processing by a Bank PDF

Documentation in international trade Document Processing by a Bank 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...

Documentation in international trade Document Processing by a Bank 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. Document Processing by a Bank:involves the processing of documents by a bank with the purpose of obtaining acceptance and/or payment. involves a bank processing documents to obtain acceptance and/or payment Banks : ​ Banks are only authorized to act according to the instructions received and in accordance with the established rules. ​ Banks are not responsible for the good result of the collection management. ​ The remittance does not guarantee collection, it only guarantees that the delivery of the documents is conditioned on the fulfillment of the instructions received. that they are not responsible for the result of the collection, and that the remittance itself does not guarantee collection, but only the delivery of the documents conditioned on the fulfillment of the instructions. Typology:  ​ Simple: This is the most basic, where money is sent from one place to another without much documentation. ​ Documentary: In this case, money is sent accompanied by commercial documents such as invoices, bills of lading, etc. This provides more information and security to the transaction. ​ Collection (D/P) (also CAD, COD): In this type of remittance, the documents are delivered to the recipient against payment (D/P, from the English "Documents against Payment"). It is also known as CAD (Cash against Documents) or COD (Cash on Delivery). ​ Acceptance (D/A): Here, the documents are delivered to the recipient against acceptance of a bill of exchange or promissory note. That is, the recipient agrees to pay on a future date. ​ Acceptance with bank guarantee: This is similar to acceptance (D/A), but in this case, a bank guarantee is also required to ensure future payment. Documentary Credit The Documentary Credit is used when the transaction amounts are very high or when one party has doubts about the morality or solvency of the other. It provides security for both the exporter and the importer. The seller (the exporter) receives an advance assurance of payment upon presentation of documents listed in the agreement, and the buyer is assured that the bank will not pay unless the seller has submitted all the documents strictly complying with the documentary credit. The credit worthiness of the importer is substituted by the guaranty of a bank (usually his own bank). ​ The documentary credit is a form of guarantee that the issuing bank can execute upon first request, accompanied by commercial documents. ​ The issuing bank's obligation is towards the beneficiary (seller), and only the beneficiary can accept any modification (= irrevocability).  ​ The orderer (buyer) and the advising bank are also parties involved in the documentary credit process. In essence, the documentary credit is an irrevocable commitment by the issuing bank to honor a compliant presentation of documents by the beneficiary (seller). The beneficiary has control over the terms and cannot be unilaterally modified by the other parties. ​ Credit means any agreement, by whatever name or description it may be known, that is irrevocable and constitutes a firm commitment by the issuing bank to honor a complying presentation. ​ In summary, the image defines "documentary credit" according to the Uniform Customs and Practice for Documentary Credits. The key points are that the credit is irrevocable and constitutes a firm commitment by the issuing bank, and that revocable credit is not covered in these international rules. Final Presentation Date: 1. Expiry Date for Presentation ​ Must specify an expiry date for presentation. ​ The expiry date for presentation. 2. Time Limit for Presenting Original Transport Documents ​ Presentations including original transport documents must be made by the beneficiary no later than 21 calendar days after the shipment date. ​ Presentations cannot occur after the expiry date of the documentary credit.