Collection means; acceptance of the documents, payment and/or realization of the acceptance in accordance with the orders; delivery of the documents against payment and/or acceptance; or else putting the documents into process by the bank for the delivery of the documents depending on other conditions. Exporter benefits from a bank in order to make a collection of the goods sold from the importer.
For cash against documents process, after the shipment the exporter sends the documents in the enclosed of the collection order to the bank in the importer’s country via a bank in his own country or a representative in the importer’s country and the exporter wants that the documents are to be delivered to the importer after he gets his money or the acceptance of the bill by the importer. The bank of the importer will not deliver the documents (shipment documents, invoice, etc.) that are required to clear the goods from the customs unless the importer makes the payment and accept the bill for transactions with a bill.
For collection processes, the banks do not guarantee any payment to the exporter.
Collection processes are subjected to the leaflet named “Uniform Rules for Collections” numbered 522 of the International Chamber of Commerce.
An exporter, who decides to make a collection of his goods or services on the basis of collection process, definitely takes a risk whatever its degree. Because he makes the shipment of the goods or the delivery of the services before he guarantees that the payment will be done. Therefore, for collection processes,
•Exporter should have a great trust in the importer,
•Exporter should have no doubts about the ability to pay of the importer,
•Political, economic and legal status of the country that the goods are imported should be stable.
Cash Against Goods is the form of payment made after the arrival of the goods their destination and delivered to the importer.
After the delivery of the goods on behalf of the buyer, the exporter sends the documents of the goods to the importer either direct or free of charge delivery via the bank. The importer makes the payment after he clears the goods from the customs. This payment method is advantageous for the importer as he has room to clear the goods from the customs and check them before the payment is made. When it comes to the exporter he is at risk since the importer may not make the payment. Payment of the goods can only be guaranteed when the bill destined for the importer is accepted. By this way the bank may give a sign of surety to the exporter.
For this payment method, the exporter bases his rights of receivables on a short-dated bill and a payment is made within the maturity to the exporter.
In practice, the issuing bank can sign a surety for the bills after the acceptance within the issuer, so the bills will be under the payment guarantee of the bank. That’s why there is no difference between the company acceptance/ bills with bank surety and bills with bank acceptance related to payment commitment.
On condition that the bills issued on behalf of a foreign corresponding bank, an order to the correspondent is given by our bank for the acceptance of the bills and then the bills are accepted by foreign bank.
For acceptance credit process, if the creditor in abroad demands and accepts, promissory note may be accepted in accordance with the principles related to the bill.