chapter4 Collection

1、Chapter4 Collection 4.1 An Overview of Collection 4.2 Parties to Collection 4.3 Types of Collection 4.4 Responsibility and Obligation under Collection 4.5 Points for Attention under Collection 4.6 International customs and practice for CollectionURC522 4.1 An Overview of Collection 1.General Definit

2、ion of Collection Collection is a kind of payment method in international settlement. It means when exporter (or the creditor) has shipped the ordered goods or provided the regulated services, he will submit financial documents or commercial documents or both, which evidence the fulfillment of the c

3、ontract obligation and claim thereto, to his bank, request his bank, to entrust the importers bank ( normally the exporter banks correspondent bank ) to present the documents to the importer (or the debtor), and to collect money for goods or service from the importer. Definition of Collection Under

4、the Uniform Rules for Collection (URC522): collection means: the handling by banks of documents, in accordance with instructions received, in order to: Obtain payment and / or acceptance; Deliver documents against payment and /or against acceptance; Deliver documents on other terms and conditions. C

5、ollection is a reverse remittance. Collection is based on commercial credit. Attention: Financial documents: bills of exchange, promissory notes, cheques, or other similar instruments used for obtaining the payment. Commercial documents: invoices, transport documents, documents of title or other sim

6、ilar documents, or any other documents whatsoever, not being financial documents. 托收方式的特点托收方式的特点 parison with other terms of payment Four Basic Terms of Payment: Under cash in advance, the importer pays the exporter before delivery of goods by the exporter, the importer extend credit to the exporter

7、 and bears the risk of exporters non-delivery.(in favor of the exporter) (2)Under open account, the exporter ships the goods and send the shipping documents directly to the importer, the importer will settle the debts at a definite future time. The exporter will bear the risk of importers non- payme

8、nt.(in favor of the importer) (3)Collection is a effective method that can compromise the interest conflict between importer and exporter. Relative advantage over cash in advance and open account The exporter should pay attention to: the importers creditworthiness; importers countrys political and e

9、conomical situation; arrange an agent to handle the goods in the event of nonpayment. When compared with the simple price terms cash on delivery( COD), collection is distinguished from the typical COD in two ways: instead of an individual or a shipping company collecting for payment, it is the bank

10、handle the transaction; instead of cash on delivery for goods, it is cash on delivery for title document( bill of lading) that is then used to claim the goods from the shipping company. (4) When compared with documentary letter of credit, the handing procedures under collection is much the same as f

11、or the documentary credit. However, there are still two major different exists: the draft involved under collection is not drawn on the bank for payment, bur rather on the importer itself; the seller bank has no obligation to pay upon presentation but only act as a agent bank on behalf of the seller

12、, thus earning commissions for the services provided. Form the perspective of the importer, a documentary collection falls between open account and documentary credit. 1.Parties Principal: It is a party that entrusts the bank to handle collection business. He hands commercial documents or financial

13、instruments or both to the bank, instructing the remitting bank to collect money for goods or service for him. Remitting Bank: It is a bank that principal has entrusted to handle collection business. It is usually located in the exporters country. Collecting Bank: It is a importers bank which accept

14、s the remitting banks instructions and involved in the collection process. It receives commercial documents and/or financial documents from the remitting bank, and follows collection instruction to obtain payment from the drawee. Drawee: Drawee is a party to whom presentation is to be made according

15、 to the collection instruction, it is usually the importer or buyer under a sales contract. 2. Relationship Between the Parties principal drawee collecting bank remitting bank sales contract collection application collection instructions 3. Liabilities of the Parties (1) Principal: Deliver goods sti

16、pulated in the contract; Submit documents complying with contract; Fill in the Application form for collection and etc. (2) Remitting Bank: Create collection instruction according to the application form submitted by the principal; Exam documents and send them to collecting bank etc. (3)Collecting B

17、ank Execute the remitting banks collection instruction; Exam documents and delivery them to importer against payment and/or against acceptance and/or on other terms and conditions; When finding any inconsistence among the collection instruction and accompanied documents, it should notify the remitti

18、ng bank without delay Collect proceeds strictly according to the instructions of the remitting bank. (4) Drawee Examine the documents to determine whether it will accept or not. Pay or accept the draft based on the terms of the collection. The drawee may refuse to pay, however, once the drawee pays

19、the draft or accepts and pays the draft at maturity, it has the right to retain the draft, evidencing the discharge of his liability. (5) Presenting Bank The presenting bank is responsible for confirming that the acceptance of bill appears to be complete and correct, but is not responsible for the a

20、uthenticity of the signature or for the authority of the signatory. In the event of non-payment or non-acceptance, the presenting bank should ascertain the reasons for dishonorable and advise the remitting bank accordingly without delay. (6) Case-of-need It is a representative nominated by the princ

21、ipal to store, resell, convey back the cargo or alter the terms of releasing documents in the event of non-payment and/or non-acceptance. The power of such Case-of need should be clearly and fully indicated in the collection instruction. In the absence of such indication, banks will not accept any i

22、nstructions from the Case-of-need. 4.3 Types of Collection 4.3.1 Clean Collection Definition: It is collection of financial documents not accompanied by commercial documents. Based on the tenor, the clean collection can be classified into sight clean collection and usance clean collection. The expor

23、ter will bear great risk under clean collection. 4.3.2 Documentary Collection Documentary collection means collection of : (1) commercial documents accompanied by financial documents. (2) commercial documents not accompanied by financial documents. It refers to the process by which the principal sub

24、mits financial documents accompanied by commercial documents or commercial documents only to remitting bank for collecting proceeds from the drawee. Under a documentary collection, the collecting bank will only release the documents to the drawee against payment or acceptance of the financial docume

25、nts. 1. Documents against Payment (D/P) D/P means documents will be released only against payment. The principal or his agent submits the documents to the remitting bank with an order to deliver the documents to the drawee or his agent only when the documents have been paid. The Overview of D/P at s

26、ight Under D/P at sight, the colleting bank present documents to the payee for payment. Only after the payment has been effected on demand( at sight), can the documents be released to the importer. The Overview of D/P after sight Under D/P after sight, the collecting bank first presents the draft to

27、 the drawee for acceptance, but does not release the documents to the drawee, and when the accepted bill matures, the collecting bank presents it to the drawee for payment, and only against the payment will the collecting bank release the documents to the drawee. The Procedures of D/P at sight Princ

28、ipal Collecting bank Remitting bank Drawee (8) (7) (3) (2) (4) (5) (1) (6) The Procedures of D/P after sight Principal Collecting bank Remitting bank Drawee (10) (9) (3) (2) (4) (5) (1) (8) (6) (7) 2. Documents against Acceptance (D/A) Documents against acceptance means that the collecting bank is a

29、llowed to release the documents to the drawee against the drawees acceptance of a draft. The draft under D/A is a time draft. It may be made payable after date or after sight. The Procedures of D/A Principal Collecting bank Remitting bank Drawee (10) (9) (3) (2) (4) (5) (1) (8) (6) (7) 不 同 点 付款交单承兑交

30、单 实质不同 交单的依据不同 收款的时间不同 委托人风险不同 相 同 点 付款交单与承兑交单付款交单与承兑交单 4.3.3 Direct Collection Direct collection is an arrangement which the principal obtains remitting banks pre-numbered direct collection instruction, which is filled by the principal himself enabling him to send the documents directly to collecti

31、ng bank for collection. Procedures of Direct Collection 3. The principal forwards the filled collection instructions accompanied by documents directly to the collecting bank; Principal Collecting bank Remitting bank Drawee 7.Credits principals account 6.transfers 2. pre- number collection instructio

32、n 4. presents the documents for acceptance/pay ment 5. effects payment and releases the documents 1. sign a contract and indicate collection 3 4.4 Responsibility and Obligation under Collection 1. responsibility and obligation of principle To the importer (drawee) Establish the sales contract relati

33、onship; Prepare and ship the goods in strict compliance with the quality and quantity requirement in the sales contract; To the remitting bank Establish the principle-agent relationship; Present the stipulated documents to the remitting bank for collection. The principle-agent relationship with the

34、remitting bank is established by collection application made by the principal and confirmed by the remitting bank. The main contents of the collection application include: documents releasing terms. the reimbursement method when funds has been collected by the collecting bank. warrant and insurance

35、under D/P after sight. banking charges. when dishonored by importer, whether its necessary to make protest. 2.responsibility and obligation of remitting bank Check the collection application and special instruction from the principal. Verify the type and number of documents to be apparently in consi

36、stent with those appeared on the collection application. (Attention: The remitting bank is not responsible for checking content of documents. For the purpose of providing high quality services to the customer, remitting bank will take the reasonable care to make simple checking of the presented docu

37、ments. ) Create the collection instruction (collection order). 3. responsibility and obligation of collecting bank Collecting bank Handle the instruction received from remitting bank; Confirm documents received are in accordance with those listed on the collection instruction; Create the necessary d

38、ocument to facilitate the collection business as per the instruction from the remitting bank; Effect payment without delay; Notification of the collection situation 4. responsibility and obligation of drawee Drawee Fulfill the payment obligation under sales contract. If the drawee refuse to make acc

39、eptance or effect payment, it must state the reason to the collecting bank( presenting bank, if any), otherwise it will constitute default. Has the right to check documents before acceptance or payment 4.5 Points for Attention under Collection 1. Transport Documents Goods should not be delivered dir

40、ectly to the address of a bank or consigned to or to the order of a bank without prior agreement on the part of that bank. In order to transfer the real right following the documents released, the consignee must be written as “To order” or “To order of shipper”, and the correct sample is given below

41、: Bill of lading Shipper: The Exporting Company, Tianjin Consignee:To order Notify party: The Importing Company 25 Queen Street, Hong Kong 2. Interest If the collection instruction specifies that interest is to be collected and the drawee refuses to pay such interest, the presenting bank may deliver

42、 the document(s) against payment or acceptance or on other terms and conditions as the real facts without collecting such interest. Where such interest is to be collected, the collection instruction must specify the rate of interest, interest period and basis of calculation. Where the collection ins

43、truction expressly states that interest may not be waived and the drawee refuses to pay such interest, the presenting bank will not deliver documents and will not be responsible for any consequences arising out of any delay in the delivery of document(s). The interest instructions in the collection

44、instructions must be marked in the following squares: Please collect interest for delay in payment calculated from the maturity to the date of actual payment at the rate of % p.a. on the basis of 360 days a year from the drawee. Waive/ (do not waive ) interest if refused by the drawee. 3. Charges an

45、d Expenses If the collection instruction specifies that collection charges and/or expenses are to be paid by drawee and the drawee refuses to pay them, the presenting bank may deliver the document(s) against payment or acceptance or on other terms and conditions as the real facts without collecting

46、charges and/or expenses. Whenever collection charges and/or expenses are so waived, they will be paid by principal and may be deducted form the proceeds. Where the collection instruction expressly states that charges and/or expenses may not be waived and the drawee refuses to pay such charges and/or

47、 expenses, the presenting bank will not deliver documents and will not be responsible for any consequences caused by the delay in the delivery of the document(s). When payment of collection charges and/or expenses has been refused, the presenting bank must inform the remitting bank by telecommunication or other expedi