What do you mean by documentary collection?

What do you mean by documentary collection?

Documentary collection is method of trade finance in which an exporter’s bank forwards documents to an importer’s bank and collects payment for shipped goods.

What are the types of documentary collection?

There are two types of Documentary collections: Documents against Payment Collection (D/P): The importer receives the delivery documents only against payment. Documents against Acceptance Collection (D/A):

What is the difference between open account and documentary collection?

Open Account Payment – after goods are shipped or received. Documentary Credits – payment is guaranteed by a bank subject to the fulfilment of certain terms and conditions by the importer and exporter. Documentary Collections – payment is handled by banks acting as agents for the importer and exporter.

What is the difference between clean collection and documentary collection?

Documentary collection – is an arrangement when goods are shipped to the buyer and necessary documents (financial or transport) are transfered to the seller’s bank with instructions of getting payment in the buyer’s bank. Using clean collection seller provides only draft without transport documents.

What is da terms of payment?

Document Against Acceptance DA payment term in export, is an arrangement where the buyer is required to make the payment only after a specific duration. In this mode, the buyer accepts the time draft and makes a promise to pay. Once this acceptance is received, the bank can release the documents to the buyer.

What are the advantages of documentary collection?

Advantages And Disadvantages of Documentary Collection

  • Safe and reliable assistance from the bank in obtaining export collection.
  • The process is simple, quick, and less expensive than LCs.
  • Easier handling of the documents.
  • Faster receipt of payment.
  • Seller holds the title of goods until the payment is made.

How many parties are involved in LC?

It guarantees that the payment will be made by the importer subjected to conditions mentioned in the LC. There are 4 parties involved in the letter of credit i.e the exporter, the importer, issuing bank and the advising bank (confirming bank).

What is TT and LC?

TT means Telegraphic Transfer, Telex Transfer or Wire Transfer, the transfer of funds from one bank account to another by electronic means. LC means ” Letter of credit”, an instruction from buyer to a foreign bank to pay the seller a sum of money when certain conditions are met.

What is difference between LC and DC?

DC is nothing but it is a letter of credit the difference is when the LC requires the beneficiary of the credit to submit certain documents like invoice, packing list Bill of lading or Air way bill other transport documents etc., along with any other documents prepared in compliancewith the terms and conditions of the …

What is DA and DP payment terms?

DA in payment term of international trade means, Documents against Acceptance. DP in payment term of imports and exports means Documents against Payments. Both DA and DP are the terms of payment related to acceptance of shipping documents pertaining to each consignment from buyer’s bank.

What is DP and DA?

DA means Documents against Acceptance and DP means Documents Against Payments.

What are the disadvantages of documentary collection?


  • The role of the bank is limited and they do not guarantee payment.
  • No verification of the accuracy of the documents.
  • Seller does not get the benefit of a bank guarantee of the payment provided by documentary credit.
  • Possibility of paying for the return transportation if the buyer refuses or unable to pay.

What is documentary collection?

Documentary collection is method of trade finance in which an exporter’s bank forwards documents to an importer’s bank and collects payment for shipped goods. Documentary collection is less common…

What is a’documentary collection’?

What is a ‘Documentary Collection’. A documentary collection is a trade transaction in which the exporter hands over the task of collecting payment for goods supplied to his or her bank, which sends the shipping documents to the importer’s bank together with payment instructions.

What are the payment options available under the documentary collections?

Generally, there are two payment options available under the documentary collections: Documents Against Payment (D/P) and Documents Against Acceptance (D/A). The title of goods belongs to the exporter until the exporter is paid by the importer.

What is documentary collection under customs clearance?

Under documentary collections, the documents will not be handed over to the importers unless payment or acceptance of a time draft has been obtained. As importers could not clear goods from the customs without the documents, at least in theory, documentary collections give considerable payment warranty to the exporters.