Glossary term
Documentary Collection
A payment method in which banks pass shipping documents to the buyer against payment or acceptance, without guaranteeing payment.
The seller ships and hands the documents to its bank, which forwards them to the buyer’s bank for release against payment or against acceptance of a draft.
Cheaper than a letter of credit and materially weaker: the banks handle documents but guarantee nothing. If the buyer declines, the seller has goods at a foreign port and the cost of bringing them back.