Documentary Collection

Question 1

Documentary collection

Answer 1

As requested by seller(principle) the sellers bank(remitting bank) will ask the correspondent of the remitting bank(collecting bank) to present documents to buyers bank(presenting bank) or a correspondent bank in the buyers country to deliver to the buyer the documents of title to the good against payment (D/P) or against acceptance of a term draft(D/A). Which then the buyer(drawee) will take action accordingly

Collecting bank can also be buyers bank

Question 2

Documentary collection process

Answer 2

The consignee on a transport document should not be the buyers bank or any other bank unless prior arrangements have been agreed

Drafts drawn to the sellers order should be blank endorsed

Bill of lading made out to order or to order of the shipper should be endorsed in blank by or on behalf of the named shipper

D/A draft drawn on the buyer will have documents with details of acceptance terms given on collection instruction

D/P technically drafts is not required as documents are released upon payment by the buyer

Bank is not reliable for loss or delay due to factors beyond its control referring to URC 522

Question 3

Obligation of the collecting/presenting bank

Answer 3

Collecting/presenting bank will examine what has been received check the schedule of instructions and make sure documents are correct number of originals and copies.

URC522 states collecting/presenting banks are not required to look to the documents for any instructions they should then inform the buyer of the instruction it has received

However even though the collecting/presenting bank have relationship with buyer, it is working as an agent for the remitting bank. Therefore the duty and responsibility to the remitting bank overrides any duty to its customer

Question 4

Receipt of documents after arrival of goods

Answer 4

Where goods arrive before the relevant documents, the collecting/presenting bank may be willing to assist a creditworthy buyer to take delivery of the goods without delay. The buyer will be asked to provide ‘trust receipt’

Collecting/presenting bank no longer becomes agent for remitting bank when this occurs

Question 5

Finance against documentary collections

Answer 5

Seller may ask its bank for negotiation where the sellers bank will agree to pay the seller immediately the value of the draft with RECOURSE.

Buyers bank might offer AVALISATION meaning the buyers bank(collecting/presenting) will guarantee payment.

However nego and aval is outside the scope of URC522 its a product provided by banks as they will incur charges