Documentary collection is a form of settlements when a bank, acting in accordance with instructions of its client (the seller), forwards the financial and/or commercial documents received from the client, confirming shipment of the goods, to the buyer’s bank with instructions to release the documents to the buyer against tpayment or acceptance of draft.
In the documentary collection form of settlements, banks manage the document-handling process and do not bear responsibility for non-payment.
The procedure for liaison between the parties regarding documentary collections is regulated by the Uniform Rules for Collections, developed by the International Chamber of Commerce, ICC publication No. 522, 1992 Revision (URC522).
For the buyer, the use of documentary collection secures the guaranteed receipt of the documents against the payment or acceptance of draft.
For the seller, the use of documentary collection secures protection of its rights for the documents until the moment of payment or acceptance of draft by the buyer.
The bank’s client must present a set of shipping documents to the bank, together with a completed documentary collection order.