Types of documentary collections

In practice, buyers will often delay payment and thus acceptance of the documents until the goods arrive. In order to avoid such delays, the collection instruction should state the exact period of time within which any action is to be taken by the drawee (URC Art. 5b).

However, local or national legislation may prescribe that - contrary to Art. 18 of the URC - collection documents may be released against payment in the national currency (foreign exchange authorization procedure in countries with exchange controls).

The importer takes possession of the merchandise before payment is made. The advantage of this is that he can re-sell the goods immediately, thereby raising the necessary funds to pay the draft on the due date.

The exporter thus grants the importer a period of credit and in return receives a draft accepted by the drawee. As this is all he can rely on until the draft matures, the principal bears the risk of non-payment.

If the exporter requires greater security, he can request a guarantee or surety from a prime bank. However, he must ensure that this is contractually covered and request advance confirmation from the guarantor bank.

For the legal enforcement of such a letter of undertaking, it is imperative that it is clearly and unambiguously formulated.

As with documentary collection against acceptance, the exporter grants the importer a period of credit.

The letter of undertaking is not covered by legislation governing drafts.

Despite the acceptance of the draft, the documents can only be released on payment. If the goods are required urgently, the drawee may have to consider payment prior to maturity.

The presenting bank will not be responsible for any consequences resulting from a delay in the delivery of documents.