GLOSSARY
Documentary collection
A trade-finance instrument where banks act as agents to deliver shipping documents against either payment (D/P) or acceptance of a bill of exchange (D/A).
A documentary collection (D/C) is a trade-finance instrument in which the exporter's bank ("remitting bank") sends shipping documents to the importer's bank ("collecting bank") with instructions to release them only against either payment ("documents against payment", D/P) or acceptance of a bill of exchange ("documents against acceptance", D/A). The transaction is governed by the ICC's URC 522 rules.
Why it matters
Documentary collections sit between open account and a letter of credit on the risk-and-cost spectrum. They give the exporter more control than open account — the buyer cannot release the cargo without the bill of lading — but they do not carry a bank's payment guarantee. Banks act only as intermediaries; if the buyer refuses payment, the goods may be stuck at the destination port.
D/P keeps tighter control: documents are released only on payment. D/A trades that control for credit terms, releasing documents on acceptance of a future-dated draft, with payment due at maturity. D/A is materially riskier and is typically used only with established, creditworthy buyers.