In this kind of payment, shipment documents which represent the goods are sent to the importer's bank through the exporter's bank or representative to be delivered in exchange for the collection of the charges after the loading of the goods. Importer's bank doesn't deliver the documents, which are required for clearance from customs, to the importer unless the importer makes the payment.
Transactions against documents are subject to the brochure of International Chamber of Commerce numbered 522 titled "Uniform Rules for Collections".
How Does It Work?
After the exporter ships the goods, it submits the loading documents and its order to its bank. Importer's bank sends the loading documents to Aktif Bank which is the collecting bank. Aktif Bank receives the payment and then delivers the loading documents to the importer.
1. Do not inspect loading documents.
2. Do not get into the liability of payment.
3. Do act independently from sales contract.
1.Low cost – it enables cost controlling with the help of low expenses of the banks.
2.It's a simpler and easier payment method compared letter of credit.
3.Importer has a chance to control the goods until the payment is made.
1.Exporter faces the risk that the importer may not make the payment for the goods although it has shipped them.
2.Importer cannot be sure that the shipped goods are in accordance with the contract, it can receive the goods after making a payment.