Documentary Collections
INTRODUCTION:
Documentary Collection or “Collection Against Bills’ is a method of payment used in international trade whereby the Exporter entrusts the handling of commercial and often financial documents to banks and gives the banks instructions concerning the release of these documents to the Importer. Banks involved do not provide any guarantee of payment.
After the Importer and the Exporter have established a sales contract and agree on a Documentary Collection as the method of payment, the Exporter ships the goods. In a Documentary Collection, the Importer is the “drawee”, and the Exporter is the “drawer”. After the goods are shipped, documents originating with the Exporter (e.g., commercial invoice) and the transport company (e.g., bill of lading) are delivered to a bank, called the Remitting Bank in the Collection process. The Remitting Bank sends these documents accompanied by a Collection Instruction, giving complete and précised instructions, to a bank in the Importer’s country, referred to as the Collecting/Presenting Bank in the Collection process.
The Collecting/Presenting Bank acts in accordance with the instructions given in the Collection Instruction and releases the documents to the Importer against payment or acceptance, according to the Remitting Bank’s Collection instructions.
Payment is forwarded to the Remitting Bank for the Exporter’s account. And the Importer can now present the transport/title document to the carrier in exchange for the goods.
There are 2 types of Documentary Collection transactions:
Documents Against Payment
Documents are released to the Importer only against payment.
Documents Against Acceptance
Documents are released to the Importer only against acceptance of a draft.
Import Collection
Business Sector (‘BC’)
Introduction:
Import Collections are documentary collections received from another bank (normally from abroad) and are usually intended for the customer of the bank (the drawee), which is the payee of the collection.
Before the documents are received, it is quite possible that goods have already been released or that a shipping guarantee has been issued. In either case, a reference number for an import collection will already exist. When processing the import collection, the user should check for the existence of such a contract.
Document Collection
Document collection is the collection of trade documents like invoices or transport documents which can also be accompanied by financial documents. Depending on the collection conditions the documents are presented to the drawee on payment, acceptance, usance payment or mixed payment.
Clean Collection
Clean collections are collections of financial documents as opposed to trade documents. These documents represent a promise to pay a certain amount on a specified due date. They are typically issued in relation to trade, but do not represent goods or the trade itself.
Examples of such financial documents are drafts, documents of exchange, promissory notes, etc.
In a clean collection financial document that are reaching their due date are presented to the drawee via a collecting bank.
Upon request, ordering customers can be paid under reserve, i.e., at the time of presentation to us and thus before the funds are received from the collecting bank. If the collection is rejected, the funds will be debited back from the ordering customer account.
The collection condition “Clean Collection” is designed to process individual financial documents. It does not support the SWIFT Message MT405, as it can only be used by banks that subscribe to the Message User Group (MUG) for this message.
Flowchart Business Sector Import Collection
System Outgoing Messages (Swift/Letter):
Transaction |
Name of Message |
Receiver |
Swift/Letter |
Pre-Opening an Import Collection |
Pre-Advice |
Drawee/2nd Collecting Bank
|
Letter |
|
Acknowledgment |
Drawer/Remitting Bank
|
Letter / 499 |
|
Rejection Information |
Drawer/Remitting Bank
|
Letter / 499 |
Advising Documents |
Advice of Documents 1st mail
|
Drawee/2nd Collecting Bank |
Letter |
|
Advice of Documents 2nd mail
|
Drawee/2nd Collecting Bank
|
Letter |
|
Reply Letter Payment Instr. |
Drawee/2nd Collecting Bank |
Letter |
|
Reply Letter of Undertaking |
Drawee/2nd Collecting Bank
|
Letter |
|
Acknowledgment of Collection |
Drawer/Remitting Bank
|
Letter / 410 |
|
Shipping Guarantee
|
Carrier |
|
|
Release of Goods
|
Carrier |
|
Amending |
Amendment |
Drawee/2nd Collecting Bank
|
Letter / 499 |
|
Acknowledgment |
Drawer/Remitting Bank
|
Letter / 410 |
Liability Adjustment |
Maturity Amendment
|
Drawee/2nd Collecting Bank
|
Letter / 499 |
|
Acknowledge Maturity Amendment |
Drawer/Remitting Bank
|
Letter / 499 |
Transferring the Liability Party |
Transfer Message New En. Party |
Selected New Account Party
|
Letter |
|
Transfer Message Old Eng. Party |
Selected Old Account Party
|
Letter |
Advising Documents in 2nd Mail |
Advice received 2nd mail Docs |
Drawee/2nd Collecting Bank
|
Letter |
|
Advice of 2nd mail Documents |
Drawee/2nd Collecting Bank
|
Letter |
|
Acknowledgment of Collection |
Drawer/Remitting Bank
|
Letter / 410 |
Rejecting Documents |
Acknowledgment of Rejection
|
Drawee/2nd Collecting Bank
|
Letter / 499 |
|
Rejection
|
Drawer/Remitting Bank
|
Letter |
|
Rejection 2nd mail
|
Drawer/Remitting Bank
|
Letter |
Sending Tracer / Advice of Fate |
Tracer
|
Selected Party
|
420 / Letter |
|
Advice of Fate
|
Selected Party
|
Letter |
Accept and Settle Documents |
Advice to Debit Party
|
Drawee/ 2nd Collecting Bank
|
Letter / 499 |
|
Advice to Debit Party 2nd mail
|
Drawee |
Letter |
|
Advice of Acceptance
|
Drawer/ Remitting Bank
|
Letter / 412 |
|
Advice of Payment
|
Drawer/ Remitting Bank
|
Letter / 499 |
|
Redemption of Shipping Guarantee
|
Carrier
|
Letter |
Settle Usance Documents at Maturity |
Advice to Debit Party
|
Drawee/ 2nd Collecting Bank
|
Letter |
|
Advice of Payment (Credit Party)
|
Drawer/ Remitting Bank
|
Letter / 499 |
Liability Approval |
Liability Approval |
Own
|
Letter |
Release of Goods |
Advice of Release
|
Drawee/ 2nd Collecting Bank
|
Letter |
|
Reply Letter of Undertaking
|
Drawee/ 2nd Collecting Bank
|
Letter |
|
Shipping Guarantee
|
Carrier |
Letter |
|
Release of Goods
|
Carrier |
Letter |
Closing |
Advice of Cancellation
|
Drawee/ 2nd Collecting Bank
|
Letter |
|
Acknowledgment of Cancellation |
Drawer/ Remitting Bank
|
Letter / 499 |
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