Product Description

The Exporter uses his bank to obtain payment or a commitment to pay from the Importer. The documents evidencing the shipment of goods are sent by the Exporter through their bank to the Importer's bank so that the Importer's bank can collect the payment or obtain the commitment to pay at some future date. It is important to note that in documentary collection transactions both banks are acting as agents for the Exporter.

The documents can be released to the Importer in either of the following ways:

1. Against Payment (D/P Collection) i.e. immediate payment by the Importer.

2. Against Acceptance (D/A Collection) i.e. against a commitment to pay at some future date. This is normally evidenced by the Importer accepting a Bill of Exchange (B/E) drawn on them by the Exporter or by issuing a Promissory Note in favour of the Exporter.

Product Benefits

The Importer's own bank acts as the Exporter's agent to collect the debt or obtain the commitment to pay.

The Importer's bank may not release the shipping documents to the Importer until they have received payment or a commitment to pay at some future date. This may restrict the Importer's access to the goods upon their arrival.

Failure by the banks to comply with the Exporter's instructions may in certain circumstances, make them liable to the Exporter for the value of the goods.

Proof of the demand for payment can protect the Exporter's interest in the event of a legal dispute with the Importer.

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