The instructions are followed by a request to present the documentation to the buyer for payment. It simplifies and facilitates the import-export process. Import Documentary Collections allows the exporter to submit the documents to the bank. With a set of instructions, these documents are passed to Bill of Quantities (BOQ)for collection. After receiving the documents the exporter or seller contacts the importer or buyer and makes arrangements for you to pay or obtain a bill of exchange, release the documents to get access to the goods.

There are two types of Documentary Collections in International Trade:

1. Document Against Payment (DP/DAP) - These payments rely mainly on the bill of exchange or draft. They are also known as “Sight Draft” or “Cash against Documents”(CAD). In this method, the documents are handed over to the buyer only after receiving the payment from the buyer’s(importer’s) bank. The goods are then shipped by the exporter to the importer’s bank and instruct the bank to discharge the documents to the importer. When the documents are released from the bank, the importer needs to pay the exporter. The shipping documents including the document of title are then handed over by the collecting bank only when the importer makes the payment. In simple terms, Document Against Payment is a presentation in which the seller asks its bank to deliver shipping documents only after the importer remunerates the bill of exchange or draft.

2. Document Against Acceptance(D/A): This is another way for the buyer to obtain the documents in which the seller provides the acceptance of the bill of Exchange. In the process of Document Against Acceptance, the buyer accepts a time draft and promises to pay for the goods at a future date known as the maturity date. It gives the acceptance that goods will be transferred before payment but after accepting and signing the time draft by the importer. When the specified date in time draft is reached, the seller’s bank reaches out to the buyer for payment. After the payment has been done the buyer’s bank transfers the funds to the seller’s bank who then transfers these funds or payment to the seller.

Import Documentary Collections is an ideal process when the seller wants to manage shipping documents with the help of banks and doesn’t need the security of a Letter of Credit. It is the cheaper alternative to a Letter of Credit.

For more information visit our website: https://www.merchanttradecorp.com/

Merchant Trade Guarantee Corporation Company Limited (MTG)

Phone: +66 651209539
Email: [email protected]