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Documentary Collections

Documentary Collection offers companies far greater security than selling on open account, but not as much as a documentary credit. Credit, political and transfer risks, for instance, are not covered. Companies should therefore analyze before starting sales negotiations whether documentary collection is the right method of payment for them as exporters.

Key principles

As the exporter is exposed to a certain risk by producing/shipping the goods or providing another service before receiving payment, the Bank would only recommend documentary collections under following circumstances:

  • There needs to be a relationship of trust between the exporter and the importer.
  • There must be no doubt as to the importer's willingness and ability to pay.
  • The importing country must be politically, economically and legally stable.
  • International payment transactions with the importing country must not be hampered or threatened by currency controls or any other such restrictions.

Legal aspects – Global Guidelines

The Uniform Rules for Collections (URC) form the basis for the processing of documentary collections. They govern the essential rights and obligations of the parties to the agreement. The current URC 522 guidelines, published by the International Chamber of Commerce, Paris, have been in force since 1 January 1996 and are extremely well established internationally.

  • Art. 1-3 General Provisions and Definitions
  • Art. 4 Form and Structure of Collections
  • Art. 5-8 Form of Presentation
  • Art. 9-15 Liabilities and Responsibilities
  • Art. 16-19 Payment
  • Art. 20-21 Interest, Charges and Expenses
  • Art. 22-26 Other Provisions

Alongside the URC 522, local legislation governing documentary collections also remain important.

Types of documentary credits

  • Documents against payment
  • Documents against acceptance
  • Documents against a letter of undertaking
  • Collection with acceptance: release of documents only against payment