Lesson Eight

Documentary Collection and Clear Collection

Documentary collection and clean collection are included in foreign collection, which , in international trade, is a presentation of a negotiable instrument such as a draft to a foreign country at which it is payable.

Both documentary collection and clean collection need the exporter to open up a draft after shipment of goods and effect payment through banks. Their only difference is that documentary collection is a foreign collection on documentary draft, and clean collection is a foreign collection on clean draft.

Documentary collection goes as follows in the figure:

After conclusion of the trade contract between the two contracting parties, the exporter makes shipment of goods from the port of exportation to the port of destination. Meanwhile the exporter writes a collectin order and opens up a draft and gets ready all the shipping documents concerned. The exporter sends the collection order and the shipping documents with the draft drawn on the importer for the agreed terms to his remitting bank for collection. The remitting bank will, then, forward the documents to the collecting bank ---- its correspondent’s bank overseas, which in turn will notify the importer that all the documents needed have arrived.

If the draft is a sight draft, the importer may not claim the documents and thereby obtain title to the goods unless he pays the drafts. This is known as “Documents against Payment D/P”. If the draft is a time draft, the importer will be asked by his bank to accept the draft, thereby committing himself to pay at maturity. Upon accepting the draft, the importer is permitted to obtain the documents and the goods, while not being obliged to make payment until the draft matures. This is known as “Documents against Acceptance D/A”.

If the importer has, on the sight draft, made payment of the goods to the collection bank, the collecting bank makes credit advice to the exporter’s remitting bank, which in turn notifies the exporter that the payment has been made for the goods exported.

If the importer has, on the time draft, made acceptance, the collecting bank notifies the remitting bank, which in turn notifies the exporter that the acceptance of the draft has been made.

The most important of the documents the importer has got is the bill of lading, which normally includes the date of issue, from whom and where the goods were received, to whom and where they are to be delivered, and description of the goods or packages containing them, and the carrier’s signature. With documents in hand, the importer will get the goods from aboard the ship at the port of destination.

Clean collection is a bit different from documentary collection, as in the figure below:

Clean, in international trade, means without documents, as in clean versus documentary drafts. Clean collection is also a means of clearing in foreign trade. In clean collection, the exporter, after shipment of goods, will directly post all the shipping documents concerned such as marine bill of lading, insurance policy, commercial invoice, consular invoice, certificates of origion, of weight, of quality, or of analysis etc. , to the importer.The exporter only sends the clean draft to his remitting band and advises for collection. The remitting bank sends the draft to the collecting bank and advises for collection. The collecting bank sends the draft to the importer and advises for payment. After the importer’s payment to the collecting bank, which in turn notifies the exporter that the payment has been made.

Foreign collection is a commercial credit on the part of the importer who is commited to pay for the goods specified in the trade contract. Banks, which only act as agents of the exporter for collection of payment, don’t undertake any responsibility of finance.

Foreign collection is different from letter of credit operation in that the exporter, in foreign collection, has a solid belief that the importer will pay for his goods. Banks get fees for their collection, but if it should happen that the importer refuses to pay, the banks bear no responsibilities for that.

Notes:

1.       collection 托收

2.       documentary collection   跟单托收

3.       clean collection       光票托收

4.       foreign collection    国外代收，出口托收

5.       negotiable instrument      可转让票据，流通证券

6.       documentary draft   跟单汇票

7.       clean draft              光票

8.       trade contract   贸易合同

9.       advice for collection              托收通知书

10.   remitting bank        汇款银行

11.   collecting bank        托收银行

12.   advice for payment         付款通知书

13.   documents against payment (D/P)         付款交单

14.   documents against acceptance(D/A)       承兑交单

15.   notice of payment or acceptance     付款或承兑通知

16.   make shipment of goods         发运货物

17.   collection order       托收委托书

18.   correspondent’s bank      代理银行

19.   bill of lading B/L    提单

20.   date of issue     发行日

21.   carrier’s signature    承运人的签名

22.   means of clearing    结算方式