Case study · Practitioner

Case: D/A Documentary Collection

An exporter gives the buyer 60 days after acceptance and discovers why collection is not a bank guarantee.

Sale

Seller agrees D/A 60 days to win the buyer’s order.

Shipment

Seller ships goods and gives documents plus collection instruction to its remitting bank.

Presentation

Collecting bank presents documents and a time draft to buyer.

Acceptance

Buyer accepts the draft; documents are released according to the instruction.

Goods collected

Buyer takes goods before paying the seller.

Maturity

60 days later buyer has cash-flow problems and does not pay.

Bank role

Collecting bank follows instructions but is not automatically liable for buyer’s default.

Seller options

Seller pursues the accepted obligation/legal remedies; future deals may use LC, guarantee, insurance or tighter credit terms.

What this case teaches

Before looking only at the outcome, separate the instrument from the surrounding transaction. Use these questions every time.

Instrument
What undertaking, payment method or document is actually involved?

Rules & deadline
What rules, expiry, maturity or presentation deadline controls the next step?

Evidence
Which facts are independently verified and which are only counterparty claims?

Bank action
What must the bank authenticate, approve, examine or settle?

Remember: a case illustrates a method of thinking. A real bank may require different documents, approvals or procedures.

Case check0 / 1 answered · 0 correct

What would most directly change the credit risk if a bank accepted the time draft?