Documentary Collections

      Documentary Collections

      In international trade, Documentary Collection is a method of payment where the seller entrusts the handling of shipping and title documents to their bank, which then forwards them to the buyer's. Please consult with your banking before arranging for such collection since there are certain procedures to be fulfilled along with threshold in amount of such Bills.  

      Process Flow:

      1. Shipment of Goods: Seller ships the goods to the buyer.
      2. Document Submission: Seller submits shipping documents (e.g., bill of lading, invoice, certificate of origin) to their bank.
      3. Document Forwarding: The Seller's bank sends these documents to the Buyer's bank with instructions.
      4. Document Release:
        • Documents Against Payment (D/P): Buyer gets documents only after paying.
        • Documents Against Acceptance (D/A): Buyer gets documents after accepting a bill of exchange (promise to pay later).
      5. Payment: Buyer pays either immediately (D/P) or at maturity (D/A), and the Buyer's Bank transfers the funds to the Seller's bank.

      Advantages:

      • Less costly than Letter of Credit.
      • Provides some control over goods until payment or acceptance.

       Risks to Seller

      • No guarantee of payment or document acceptance.
      • Buyer may refuse to pay or accept documents.

      Buyer should fill up the following forms for settlement of such Documents received on collection (DAP or DAA) which is available under Downloads of KBL website:

      Other Notices