1、Chapter Five CollectionDefinitionAn arrangement whereby the goods are shippedand a relevant bill of exchange is drawn by selleron buyer, and/or shipping documents are forwarded to sellers bank with clear instructions for collection through one of its correspondentbank located in the domicile of buye
2、r.Parties to collection operationPrincipal = exporter = seller = drawer =remitterRemitting bank = exporters bank in exporting countryCollecting bank = importers bank in importingcountryImporter = buyer = draweePresenting bank = bank at importers placeDelivering documents = Delivering goodsbill of La
3、ding(B/L), receipt issued by carrier when receiving goods delivered by seller for transportation. For sight payment, pay the sight draftFor time bill, accepts time draftDocuments against documents D/AExporter 1Time draft &other docs+applicationRemitting bank 2Collection order& time draft & docs Coll
4、ecting bankImporter 4Accepteddraft3Present time draftfor acceptance 5docs6Collecting bank keeps accepteddraft for exporter and at maturity, presents it for payment.The risk is that buyer would not pay after taking the goods， thoughgoods have been taken away.6Present accepteddraft for payment 7pay= g
5、oodsDocument against payment D/P at sightExporter1Sight draft& other docs， etc.Remitting bank2CollectionOrder & sightDraft and docs CollectingbankImporter 4Pay afterchecking3Presents forpayment5docsOnly one presentmentfor paymentImporter would try to delaypayment to wait the arrivalof goodsSo, it is
6、 demandedthat payment mustbe made on first presentation.Documents against payment at tenor D/P at tenorExporter 1Time draft & other docs，applicationRemitting bank2Collection order& time draft andother docs CollectingbankImporter 4No docs after acceptance3Present timedraft foracceptance 6docs5After p
7、ayment at maturity, buyer gets documents.5payWhy doing so ?Documents against time promissory note made by buyerExporter 1Apply Docs.Remitting bank2Collection order & docs demanding time promissory note made by buyer Collecting bankImporter 4Timepromissory note3Advise and demandingdocuments against t
8、ime promissory note made by importer.5docs6Collecting bank keeps promissorynote for seller and at maturity, presents it for payment.The risk is that buyer wouldnot pay after taking the goods.6Present timePromissory Note for payment7payPresenting bankUSAexporter1Application& documentsUSARemitting ban
9、k2Collection order& documentsHong KongCollecting bankTianjinimporter3ForwarddocumentsTianjin Presenting bank4presentCorrespondentrelationshipCorrespondentrelationshipNo correspondent relationshipIn case of needExporter1Documents(Application)RemittingBank2Collection Orderand documentsCollecting Bank3presentImporter4refuse5presentCase of needXXX6Pay & takeover docs.Case of need mightbe sellers close friendor agency in importing country, who would arrange shipping backthe goods or selling the goods to other buyer in importing country.2In case of need, look for XXX
