Finance of International Trade

Chapter 3

Bills for collection

When there is a level of trust between buyer and seller, the seller may be

prepared to agree to a method of payment which is considerably less

expensive than documentary credits. The method is entitled bill for

collection and is used throughout the world, probably accounting for the

majority of all foreign settlements. It is fundamentally simple in operation

and allows the exporter to ship his goods, obtain a bill of lading and collect

payment by way of a bill of exchange through the use of his own bank and

a bank in the importer’s country.

Parties to a collection

 Exporter (drawer)

 Remitting bank

 Collecting bank

 Importer (drawee)

 Avalising bank (exceptionally)

There are two types of bills for collection, D/P and D/A. Those terms

determine what the importer is required to do in order to obtain release of

the documents and take delivery of the goods.

D/P bill for collection (documents

against payment)

This is a sight collection where the bill of exchange is drawn payable upon

presentation to the drawee. Upon payment, the documents of title to the