Documentary collection

Payment & international finance

Principles for classifying a product in the Harmonized System.

Documentary collection is an essential banking procedure in international trade. It secures transactions by ensuring that shipping documents are only handed over to the buyer after payment or acceptance of a draft. This method protects both the seller, who is assured of receiving payment, and the buyer, who obtains the necessary documents to take possession of the goods.

How Documentary Collection Works

  1. Initial Agreement: The seller and buyer agree to use documentary collection as a payment method.
  2. Sending Documents: The seller ships the goods and sends the shipping documents to their bank.
  3. Bank Transmission: The seller's bank sends the documents to the buyer's bank.
  4. Release Against Payment: The buyer makes the payment or accepts a draft to receive the documents.

Advantages

  • Security: Reduces the risk of non-payment for the seller.
  • Reliability: Ensures the buyer access to the necessary documents to retrieve the goods.

Practical Tips

  • Document Verification: Ensure all required documents are complete and comply with the contract terms.
  • Clear Communication: Maintain open communication with your bank to avoid delays.

Documentary collection is a powerful tool for securing international transactions, but it requires close coordination between the parties and their respective banks. To learn more about other secure payment methods, check out our complete glossary.