1、Chapter 9 of International PaymentsBy Edward G Hinkelman1.Definition of Documentary collections2.The uniform rules for collections(URC)3.Introducing the parties to a documentary collection4.Basic documentary collection procedure5.Three types of collections6.General notes and cautions7.Transaction do
2、cuments8.The collection order9.Important principles regarding the role of banks10.Notes,tips,and cautions for sellers11.Notes,tips,and cautions for buyers12.Notes,tips,and cautions for banks Definition Documentary collection vs.COD Documentary collections vs.documentary creditsURC522 URC522 Art.2Art
3、.2 Collections means the handling by banks,on instructions received,of documents,in order to:1)obtain acceptance and/or payment;2)deliver commercial documents against acceptance or payment;3)deliver documents on other terms and conditions.Collection is an arrangement whereby the seller draws a draft
4、 on the buyer,and/or shipping documents are forwarded to his bank,authorizing it to collect the money from the buyer through its correspondent bank.Collection is still based on commercial credit instead of bank credit and the banks act only as a collector of funds under a transaction and provide a c
5、hannel to transfer funds between the buyer and the seller.Think of A documentary collection as an international COD(cash on delivery交货付款):the buyer pays for goods at delivery.A documentary collection,however,is distinguished from a typical COD transaction in two ways:1.instead of an individual,shipp
6、ing company,or postal service collecting the payment,a bank handles the transaction,and 2.instead of cash on delivery for goods it is cash on delivery for a title document(bill of lading)that is then used to claim the goods from the shipping company.5.1.2 Documentary collections vs.COD Banks,therefo
7、re,act as intermediaries to collect payment from the buyer in exchange for the transfer of documents that enable the holder to take possession of the goods.The procedure is easier than a documentary credit,and the bank charges are lower.The bank,however,does not act as surety of payment but rather o
8、nly as collector of funds for documents.For the seller and buyer,a documentary collection falls between a documentary credit and open account in its desirability.Two major differences between a documentary collection and a documentary credit:1.the draft involved is not drawn by the seller(the drawer
9、)upon a bank for payment,but rather on the buyer itself(the drawee),and 2.the sellers bank has no obligation to pay upon presentation but,more simply,acts as a collecting or remitting bank on behalf of the seller,thus earning a commission for its services.Although documentary collections,in one form
10、 or another,have been in use for a long time,questions arose about how to effect transactions in a practical,fair,and uniform manner.The Uniform Rules for Collections(URC)is the internationally recognized codification（法典）of rules unifying banking practice regarding collection operations for drafts a
11、nd for documentary collections.The URC was developed by the International Chamber of Commerce(ICC)in Paris.It is revised and updated from time-to-time;the current valid version is ICC publication No.522.There are four main parties to a documentary collection transaction.Note below that each party ha
12、s several names.This is because businesspeople and banks each have their own way of thinking about and naming each party to the transaction.For example,as far as businesspeople are concerned there are just buyers and sellers and the buyers bank and the sellers bank.Banks,however,are not concerned wi
13、th buying and selling.They are concerned with remitting(sending)documents from the principal(seller)and presenting drafts(orders to pay)to the drawee(buyer)for payment.The principal is generally the seller/exporter as well as the party that prepares documentation(collection documents)and submits(rem
14、its)them to his bank(remitting bank)with a collection order for payment from the buyer(drawee).The principal is also sometimes called the remitter.The principal(seller/exporter/drawer)The remitting(principals/sellers/exporters)bankThe collecting or presenting(buyers)bank 代收行代收行The drawee(buyer/impor
15、ter)The remitting bank receives documentation(collection documents)from the seller(principal)for forwarding(remitting)to the buyers bank(collecting/presenting bank)along with instructions for payment.This is the bank that presents the documents to the buyer and collects cash payment(payment of a ban
16、k draft)or a promise to pay in the future(a bill of exchange)from the buyer(drawee of the draft)in exchange for the documents.The drawee(buyer/importer)is the party that makes cash payment or signs a draft according to the terms of the collection order in exchange for the documents from the presenti
17、ng/collecting bank and takes possession of the goods.The drawee is the one on whom a draft is drawn and who owes the indicated amount.The documentary collection procedure involves the step-by-step exchange of documents giving title to goods for either cash or a contracted promise to pay at a later t
18、ime.The buyer and seller agree on the terms of sale of goods:a)specifying a documentary collection as the means of payment,b)naming a collecting/presenting bank(usually the buyers bank),and c)listing required documents.1.The seller(principal)ships the goods to the buyer(drawee)and obtains a negotiab
19、le transport document(bill of lading)from the shipping firm/agent.2.The seller(principal)prepares and presents(remits)a collection order and a document package to his bank(the remitting bank)consisting of a)a collection order specifying the terms and conditions under which the bank is to hand over d
20、ocuments to the buyer and receive payment,b)the negotiable transport document(bill of lading),and c)other documents(e.g.,insurance document,certificate of origin,inspection certificate,etc.)as required by the buyer.3.The remitting bank sends the documentation package and the collection order by mail
21、 or by courier to the designated collecting/presenting bank in the buyers country with instructions to present them to the drawee(buyer)and collect payment.4.The presenting(collecting)bank a)reviews the documents making certain they are in conformity with the collection order,b)notifies the buyer(dr
22、awee)about the terms and conditions of the collection order,and c)releases the documents once the payment conditions have been met.5.The buyer(drawee)a)makes a cash payment(signing the draft),or if the collection order allows,signs an acceptance(promise to pay at a future date)and b)receives the doc
23、uments and takes possession of the shipment.7.The remitting bank then pays the seller(principal).6.The collecting bank pays the remitting bank either with an immediate payment or,at the maturity date of the accepted bill of exchange.The remitting bank may find it necessary or desirable to use an int
24、ermediary bank(called a correspondent bank)rather than sending the collection order and documents directly to the collecting bank.For example,the collecting bank may be very small or may not have an established relationship with the remitting bank.There are three types of documentary collections and
25、 each relates to a buyer option for payment for the documents at presentation.The second and third,however,are dependent upon the sellers willingness to accept the option and his specific instructions in the collection order.In D/P terms,the collecting bank releases the documents to the buyer only u
26、pon full and immediate cash payment.D/P terms most closely resemble a traditional cash-on-delivery transaction.note:The buyer must pay the presenting/collecting bank the full payment in freely available funds in order to take possession of the documents.This type of collection offers the greatest se
27、curity to the seller.Principal Payer Remitting bankCollecting bankcontractDocuments,draft andCollection order reimbursement/credit advice Presentation for payment payment documents paymentDocuments,draft and collection order In D/A terms the collecting bank is permitted to release the documents to t
28、he buyer against acceptance(signing)of a bill of exchange or signing of a time draft at the bank promising to pay at a later date(usually 30,60 or 90 days).The completed draft is held by the collecting bank and presented to the buyer for payment at maturity,after which the collecting bank sends the
29、funds to the remitting bank,which in turn sends them to the principal/seller.note:The seller should be aware that he gives up title to the shipment in exchange for the signed bill of exchange that now represents his only security in the transaction.Documents,draft and collection orderPrincipal Payer
30、 Remitting bankCollecting bankDocuments,draft andCollection Order reimbursement/credit advice Presentation for acceptance acceptance presentation for payment payment documents paymentcontractAn acceptance documents against payment has features from both D/P and D/P types.It works like this:a)the col
31、lecting bank presents a bill of exchange to the buyer for acceptance,b)the accepted bill of exchange remains at the collecting bank together with the documents up to maturity,c)the buyer pays the bill of exchange at maturity,d)the collecting bank releases the documents to the buyer who takes possess
32、ion of the shipment,and e)the collecting bank sends the funds to the remitting bank,which then in turn sends them to the seller.This gives the buyer time to pay for the shipment but gives the seller security that title to the shipment will not be handed over until payment has been made.If the buyer
33、refuses acceptance of the bill of exchange or does not honor payment at maturity,the seller makes other arrangements to sell his goods.This type of collection is seldom used in actual practice.Can you draw out the procedure of acceptance documents Can you draw out the procedure of acceptance documen
34、ts against payment?against payment?The banks involved in a documentary collection do not guarantee payment or assume any credit risk,as they do in documentary credit transactions.The banks act merely as intermediaries to facilitate payment for a shipment.If the shipper/seller sends goods directly to
35、 the buyers address,the shipment will be handed over without the buyer first making payment.The seller,therefore,will usually address the shipment to his agent in the buyers country or to the collecting bank if it is known to him and prior agreement has been obtained to do so.Goods are transported,s
36、tored,and insured at the expense and risk of the seller until payment or acceptance occurs.Generally,banks are under no obligation to protect the goods.Banks are also not responsible if the shipment is seized by customs or confiscated to cover any accrued storage costs.Documentary collections have o
37、ne additional safeguard over transactions conducted on an open-account basis.The existence of the draft itself,which has been duly presented and accepted through a bank in the buyers country,is an acknowledged evidence of debt.However,this may not be of great value against a purchaser who is determi
38、ned not to pay.In D/P terms the buyer may refuse to pay,in which case the seller maintains title to the shipment.The seller may decide to negotiate new terms with the buyer,locate another buyer,or have the goods returned,incurring the cost of shipping,insurance,and bank fees.If the goods are perisha
39、ble,the seller may be in a difficult position to find a new buyer quickly.In D/A terms the buyer may refuse to accept the draft,in which case the seller is in the same position as in D/P terms where the buyer refuses to pay the draft.(See the preceding item for details.)In D/A terms the buyer may ac
40、cept(sign)the draft,take possession of the goods,but then refuse to pay the draft at maturity.In this case the seller has neither payment nor the goods.The sellers options are effectively reduced to trying to enforce the buyers obligation to pay the draft through banking channels or legal action,bot
41、h of which involve additional costs.Since the banks are under no obligation to authenticate documents,it is possible that the seller will send a short shipment,the incorrect goods,or inferior goods.The only recourse available to the buyer is through direct contact with the seller or legal action.The
42、 documents required under a documentary collection are fundamentally the same as those in a documentary letter of credit transaction.In the original agreement between buyer and seller the buyer specifies documents that 1.make it possible to secure the shipment from the shipping company(bill of ladin
43、g),2.secure release from the customs authority(certificates of origin,commercial invoice,etc.),and 3.offer some guarantee of quality and count(inspection certificates).The collection order is the key document prepared by the seller specifying the terms and conditions of the documentary collection.It
44、 must be prepared with great care and precision as the banks are only permitted to act upon the instructions given in the order and not on instructions from past transactions or verbal understandings.On the following page is a sample collection order(p.45)and below are notes for key provisions of th
45、e document.1.The payment period as agreed with the buyer2.The name and address of the buyer3.The buyers bank4.Instructions,if any,about what to do with the accepted bill of exchange5.Notation concerning payment of charges for the documentary collection6.Notation/instructions for the lodging of a pro
46、test in the event of nonacceptance or nonpayment7.Instructions for notification of agent or representative in the buyers country It is important to note that documentary collection procedures are not infallible绝对可靠的.Things can and do go wrong.Since banks act as intermediaries between buyers and sell
47、ers,both look to the banks as protectors of their interests.However,while banks have clear cut responsibilities,they are also shielded from certain problems deemed to be out of their control or responsibility.1.Banks act upon specific instructions given by the principal(seller)in the collection orde
48、r.Sellers instructions left out of the collection order by mistake or omitted because weve always done it that way dont count.The principal,therefore,should take great care in preparing the collection order so that it gives complete and clear instructions.2.Banks are required to act in good faith an
49、d exercise reasonable care to verify that the documents submitted APPEAR to be as listed in the collection order.They are,however,under no obligation to confirm the authenticity of the documents submitted.3.Banks are not liable nor can they be held accountable for the acts of third parties.Third par
50、ties include freight forwarders,forwarding agents,customs authorities,insurance companies and other banks.Specifically,they are not responsible for delays or consequences resulting from Acts of God(floods,earthquakes,etc.),riots,wars,civil commotions,strikes,lockouts,or other causes beyond their con
