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Methods of Payment: Documentary Collections
Explore your options for using Documentary Collections to help simplify your export transaction, get faster payment, and reduce costs.

Documentary Collections

Download Video: Trade Finance Series: Documentary Collections
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The Documentary Collections payment method is an approach used for merchandise and commodity exports. Generally recommended in situations where there is an established and ongoing trade relationship with a trusted buyer, this method can simplify your export transaction, offer faster payment, and reduce costs when compared to Letters of Credits. 

In a Documentary Collections transaction, the exporter’s and the importer’s banks facilitate the export sale by exchanging shipping documents for payment. However, the banks do not verify that the documents are accurate and do not guarantee payment as they do with Letters of Credit. As a result, Documentary Collections are only recommended for established trade relationships in economically and politically stable markets. 

While there are several benefits to the Documentary Collections payment method, each export transaction is unique. We recommend you consult with your bank before moving forward. 

Ask your bank 

  • How a documentary collection is different from a letter of credit.
  • What type or size of transaction is suitable. 
  • How disputes are resolved between the importer and exporter. 

How the Documentary Collections Payment Method Works 

  1. Both the exporter and importer agree to a documentary collection for payment in the sales agreement 
  2. The exporter prepared a Bill of Exchange and sends it to their banks for forwarding to the importer’s bank 
  3. The Bill of Exchange - also known as a draft - provides instructions to the bank about the required documents, payment amount due, the terms of payment, and when title transfers for the goods
  4. The importer’s bank releases the documents according to one of two options specified in the bill of exchange, outlined below:
    + Release of documents upon receipt from the importer of full payment
    + Release of documents upon receipt of the importer’s signed acceptance of the terms that commit to future payment 
  5. The importer uses the documents to clear the goods through the foreign customs agency 
  6. The importer’s bank forwards the importer’s payment back to the exporter’s bank account 

What if they don’t pay? 

If the importer does not pay, the exporter typically needs to find another buyer, pay for return transportation, or abandon the merchandise. 

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Global Business Navigator Chatbot Beta

Welcome to the Global Business Navigator, an artificial intelligence (AI) Chatbot from the International Trade Administration (ITA). This tool, currently in beta version testing, is designed to provide general information on the exporting process and the resources available to assist new and experienced U.S. exporters. The Chatbot, developed using Microsoft’s Azure AI services, is trained on ITA’s export-related content and aims to quickly get users the information they need. The Chatbot is intended to make the benefits of exporting more accessible by understanding non-expert language, idiomatic expressions, and foreign languages.

Limitations

As a beta product, the Chatbot is currently being tested and its responses may occasionally produce inaccurate or incomplete information. The Chatbot is trained to decline out of scope or inappropriate requests. The Chatbot’s knowledge is limited to the public information on the Export Solutions web pages of Trade.gov, which covers a wide range of topics on exporting. While it cannot provide responses specific to a company’s product or a specific foreign market, its reference pages will guide you to other relevant government resources and market research. Always double-check the Chatbot’s responses using the provided references or by visiting the Export Solutions web pages on Trade.gov. Do not use its responses as legal or professional advice. Inaccurate advice from the Chatbot would not be a defense to violating any export rules or regulations.

Privacy

The Chatbot does not collect information about users and does not use the contents of users’ chat history to learn new information. All feedback is anonymous. Please do not enter personally identifiable information (PII), sensitive, or proprietary information into the Chatbot. Your conversations will not be connected to other interactions or accounts with ITA. Conversations with the Chatbot may be reviewed to help ITA improve the tool and address harmful, illegal, or otherwise inappropriate questions.

Translation

The Chatbot supports a wide range of languages. Because the Chatbot is trained in English and responses are translated, you should verify the translation. For example, the Chatbot may have difficulty with acronyms, abbreviations, and nuances in a language other than English.

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