Documentary Collections check0 / 1 answered · 0 correct
Check 1
Does a documentary collection automatically create the same bank payment undertaking as an LC?
What is a Documentary Collection?
Learn how banks handle trade documents without giving an LC-style payment undertaking.
Simple meaning
In a documentary collection, the seller normally sends commercial and/or financial documents through banks with collection instructions. Banks handle the documents and collection process but do not automatically give an LC-style independent undertaking to pay.
Why it is used
It can be cheaper and simpler than a documentary credit where buyer and seller accept more commercial risk.
Core parties
The principal gives the collection instruction, the remitting bank sends it, a collecting/presenting bank handles presentation, and the drawee is the party from whom payment or acceptance is sought.
Key risk
If the buyer refuses to pay or accept, the seller can be left with goods or documents in a foreign market.
Remember thisCollection banks handle instructions and documents; they do not automatically become guarantors of the buyer’s payment.
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