Chapter 11 - GENERAL- DOCUMENTARY COLLECTIONS

URC 522 governs the operation of Documentary Collections.

A documentary collection is a process, in which the seller instructs his bank to forward documents related to the export of goods to the buyer's bank with a request to present these documents to the buyer for payment, indicating when and on what conditions these documents can be released to the buyer.

Collections - Documents against Payment (D/P)

Both the buyer and the seller agrees that the seller will dispatch the goods to the buyer (through the Bank) and forward the documents to the buyer’s bank and the buyer will  make payment for the goods (in full or part) and take delivery of the goods.

Collections - Documents against Acceptance (D/A)

Both the buyer and the seller agrees that the seller will dispatch the goods to the buyer (through the Bank) and forward the documents to the buyer’s bank and the buyer will accept the bill of exchange and take delivery of the goods. The buyer will make payment for the goods (in full or part) at an agreed future date.

Chapter 10 - GENERAL - OPEN ACCOUNT

Seller will dispatch the goods to the buyer and the buyer will make payment for the goods (in full or part) in the future at an agreed date.

Chapter 9 - GENERAL - ADVANCE PAYMENT

The Buyer makes payment for the goods (full or partial) even before the goods are shipped.

Chapter 8 - GENERAL - CLEAN PAYMENTS

Clean Payments

In the case of Clean Payment transactions, all shipping documents, including title documents are handled directly by the trading parties, the role of banks is limited to clearing funds as required, the two types of Clean payments are

·         Advance Payment

·         Open Account

Chapter 7 - METHODS OF PAYMENT IN TRADE FINANCE

Payment Methods in Trade Finance:

In international Trade there are risk to both the buyer and the seller. The seller runs the risk of payment not being made after the goods have been delivered and the buyer runs risk of not getting the goods or getting of different type after the payment has been effected.

The amount of risk which the buyer or the seller faces will depend upon the terms and conditions of the payment.

The risk will depend upon how closely the time of payment could be matched with the time of release of goods.

The following are the various recognized ways of effecting payment in international Trade:

1.       Advance Payment

2.       Open Account

3.       Documentary Collection

. Against Payment

. Against Acceptance

4.       Documentary Credit or Letter of Credit

. Against Payment

. Against Acceptance

Chapter 6 - GENERAL - TRADE FINANCE

Trade finance signifies financing for trade, and it concerns both domestic and international trade transactions. A trade transaction requires a seller of goods and services as well as a buyer. Various intermediaries such as banks and financial institutions can facilitate these transactions by financing the trade.