Collection, along with a letter of credit, is a widespread method of settlements used in international trade operations where the bank acts as the intermediary in the transfer of the accompanying documents of goods and payment for goods.
In a documentary collection transaction the buyer’s bank delivers the documents evidencing the shipment of goods to the buyer in accordance with the collection instructions either against payment, against commitment of deferred payment or against acceptance. Since the buyer needs the commercial documents in order to receive and use the goods and the seller does not want to hand them over to the buyer before the buyer has agreed to pay, the bank as an intermediary assumes the obligation to strictly follow the seller’s instructions regarding how and when to release the documents to the buyer.
For the purpose of regulation and harmonisation of handling collections the International Chamber of Commerce (ICC) has issued Publication No. 522, ICC Uniform Rules for Collections (URC 522).TBB pank carries out operations on export documentary collection (bank`s client is the seller of the goods / services, the Drawer) and import documentary collection (bank`s client is a buyer of goods / services, the Drawee).
Documentary Collection Order