Page 63 - Export and Trade

Finance

Bills for collection acceptance of the terms and agreement to settle the bill
The collection of commercial documents through the on its maturity date. The importer’s acceptance on the
banking system provides a more secure method of trading bill of exchange establishes a legal undertaking to pay
than Open Account for the exporter. For the importer but does not guarantee payment to the exporter; an
this method offers a simple and lower cost alternative to accepted bill may still be dishonoured on the due date.
settlement by Documentary Credit. Collections are also a
convenient mechanism for the agreement of a period of Documents against Payment (D/P) or Cash against
credit between buyer and seller allowing the buyer time to Documents (CAD)
re-sell the goods before having to make payment. In either case, the collection is payable upon
Documentary collections are those which include SUHVHQWDWLRQ DW VLJKW DQG GRFXPHQWV UHOHDVHG WR WKH
shipping/commercial documents – for example a bill importer against payment of the amount due. CAD terms
of exchange, bills of lading, invoices and insurance are used when a collection order does not contain a bill
documents. These are submitted to the exporter’s bank of exchange.
and then forwarded to the importer’s bank for release Collections on D/P or CAD terms provide the exporter
to the importer against acceptance or payment in with more security than D/A bills or Open Account trade
accordance with the terms set out in the remitting bank’s because title documents such as bills of lading (or, in
collection order. In many areas of the world it is common FHUWDLQ FDVHV WKH JRRGV WKHPVHOYHV DUH UHOHDVHG WR WKH
practice to defer presentation for payment or acceptance importer only when payment has been made.
until arrival of the carrying vessel. For the importer, there are few risks associated with
A documentary collection will take one of the following bills for collection. However, unlike a documentary
forms: credit, shipment schedules and documentation cannot
Documents against Acceptance (D/A) be controlled and, if payment has been made against a
Documents are released to the importer against D/P or CAD collection, the importer runs the risk that the
WKHLU DFFHSWDQFH RI D WHUP ELOO SD\DEOH DW D ¿[HG RU goods shipped may be of inferior quality.
determinable future date. The importer’s acceptance, For the exporter, control of the goods is lost once a
QRUPDOO\ ZULWWHQ RQ WKH IDFH RI WKH ELOO VLJQL¿HV D/A bill has been accepted and the documents released

NZ Export & Trade Handbook 2018 61