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Trade Finance & Payment

Documentary Collection

Also known as: D/C, Collection

A documentary collection is a payment method in which the exporter entrusts the shipping documents to its bank with instructions to release them to the importer only against payment or against acceptance of a draft, using the banking system as a conduit rather than a guarantor. It is cheaper and simpler than a letter of credit but offers less security, because the banks do not undertake to pay if the importer defaults; they merely control the documents. Documentary collections suit established trading relationships where the parties trust each other but still want the discipline of exchanging documents for payment.

The JFS takeLicensed customs broker · Filer 82G

Cheaper than a letter of credit and weaker: the bank passes documents against payment or acceptance and guarantees nothing. Reasonable where the relationship is established and the goods readily resold; poor where the buyer can simply walk away and leave cargo accruing charges at destination.

Related terms

Letter of CreditA letter of credit is a written undertaking by a bank, issued at the request of a buyer, to pay a seller a defined amount provided the seller presents documents that strictly comply with the terms stated in the credit.Bill of ExchangeA bill of exchange, or draft, is a written, unconditional order by one party (the drawer, typically the exporter) instructing another party (the drawee, usually the importer or its bank) to pay a specified sum either on sight or at a defined future date.Open AccountOpen account is a sale in which the exporter ships the goods and sends the invoice with payment due at a later agreed date — commonly thirty, sixty, or ninety days after shipment or delivery — extending unsecured credit to the buyer.

Reviewed by a licensed customs broker. Definitions are general information, not legal or customs advice for a particular shipment. Duty rates, tariff programs and agency requirements change frequently.