Lesson 10 International Trade Documentary Collections
Learning Objectives
Procedures of Documentary collections
Advantages and disadvantages of documentary collections
Parties involved in a documentary collection
Forms of documentary collections
Documentary collections
Procedure
1. The exporter will issue instructions to his banker (remitting bank) as to how the transaction is to be handled
2. The remitting bank encloses the bill and documents with its own detailed instructions (from the lodgement by the exporter) to the collecting bank
Documentary Credit Procedure
Importer
Exporter
1. Sale Contract
3. The overseas collecting bank will arrange ‘presentation’ of the Bill of Exchange to the buyer
The exporter retain control of goods until payment or at least promise of payment is received
based on the use of a Bill of Exchange
Bill of Exchange, or draft, is a cheque that the exporter draws on the importer’s bank account
Before it is valid, the importer must sign it, thereby signifying acceptance to pay
2 types of Bill of Exchange - ‘on demand’/at sight, or at term
Document against Payment (D/P) - at sight
instructions will be to release documents after payment
the seller instructs that the draft be presented on arrival of the goods (goods by e later after documents)
the collecting bank will send the funds to the remitting bank where, they will be credited to the expo
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