Documentary collection/bill collection
What is documentary collection/bill collection?
Documentary collection describes a procedure in which the exporter orders its house bank to forward certain documents (e.g. invoices, transport documents) and to turn these over in return for payment or a bill of acceptance.
The benefit to the exporter – given the corresponding collection terms – is that the importer will only receive the documents necessary for surrendering the goods once payment has been made or a bill of acceptance has been submitted. Unlike a letter of credit, documentary collection does not constitute a bank’s payment obligation. Acceptance risk remains with the exporter.
Bill collection describes a procedure in which the collecting bank submits only a bill of exchange to the drawee for payment or acceptance. Documentary collection with a bill of acceptance or pure bill collection should only be used for business relationships with countries providing a high level of legal security and with customers of excellent creditworthiness.
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