documentary collection

(banking) A method of effecting payment for goods whereby the seller/exporter ships goods to the buyer, but instructs his bank to collect a certain sum from the buyer/importer in exchange for the transfer of title, shipping and other documentation enabling the buyer/importer to take possession of the goods. The two types of documentary collection are:
(a) Documents against Payment (D/P) where the bank releases the documents to the buyer/importer only against a cash payment in a prescribed currency; and
(b) Documents against Acceptance (D/A) where the bank releases the documents to the buyer/importer against acceptance of a bill of exchange (draft) guaranteeing payment at a later date.
In documentary collections, banks act in a fiduciary capacity and make every effort to ensure that payment is received, but are liable only for the correct execution of the collection instructions, and do not make any commitment to pay the seller/exporter themselves.
Documentary collections are subject to the Uniform Rules of Collections, Brochure No. 322, revised 1978, of the International Chamber of Commerce (ICC) in Paris.
See Uniform Rules for Collections; International Chamber of Commerce.

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