International Payments

What procedures are involved in a documents against payment collection?

In a documents against payment collection transaction, a seller ships goods to a buyer and routes the title documents through a collecting bank along with a draft that is payable by the buyer upon first presentation to the buyer (sight draft). The collecting bank can be either the seller's bank (standard collection) or a correspondent of the seller's bank in the buyer's country (direct collection). Exporters that want to speed up the flow of their documents generally use direct collections rather than standard collections, because the use of a standard collection almost certainly guarantees a delay in collection processing time in that the seller's bank must forward the documents it receives to its correspondent in the buyer's country for presentation to the buyer. When the collecting bank in the buyer's country receives the collection documents, it contacts the buyer and advises the buyer that: (a) it has received the title documents for a particular transaction; and (b) these documents will be released to the buyer only when the buyer pays the sight draft that accompanies the collection documents by authorizing a transfer of funds to the seller's bank.

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