Documentary collection is necessary when the draft is drawn on the importer. The exporter must give instructions to the collecting bank on what to do with the draft and shipping documents in documentary collection instructions, also known as a collection letter or letter of instructions. Such letter provides the conditions under which the collecting bank can release documents to the importer and the actions to be undertaken.

Please see the sample collection letter below. The format of the instruction forms and drafts may vary from bank to bank, but they basically have the same information. The forms and drafts are available at banks.

Uniform Rules for Collections

The Uniform Rules for Collections, ICC Publication No. 322, which describes the conditions governing collections (including those for the presentation, payment and acceptance terms), is issued by the International Chamber of Commerce (ICC) in Paris, France. The Uniform Rules for Collections and other ICC publications are available at your local Chambers of Commerce affiliated with the International Chamber of Commerce.

" TENOR "

The tenor is the credit term of the draft. It can be at sight (in a sight draft) or after sight or after date (in a term draft).

" ... CASE OF NEED ... "

The case of need is the party in the importer's country named by the exporter who may assist in obtaining payment or acceptance of draft or who may be empowered by the exporter to act fully on his/her behalf---waiving of protest, allowing a discount, etc.. Whether the case of need is 'for guidance' or 'accept their instructions', put an X in the appropriate box.

" REMIT PROCEEDS ... "

When the payment is received by the collecting bank, it remits the proceeds to the remitting bank. The remitting bank then credit the account of the exporter, less applicable charges.

" PROTEST "   and
" DO NOT PROTEST "

The protest is the legal action to be undertaken by the collecting bank, at the instructions of the exporter, in case the importer does not pay a sight draft, or does not accept a term draft, or does not pay an accepted draft on maturity. In practice, the protest usually is required by the exporter and it is made within three (3) working days after the presentation or maturity date. In certain countries, failure to protest may cause the exporter to lose the legal rights against the importer.

In cases where the instruction is 'do not protest', such instruction may encourage inaction or deferred payment by the importer. In some countries, particularly in the West, protest against the importer may spoil his/her credit standing. Hence, the importer is encouraged to act promptly if 'protest' is instructed by the exporter.

" COLLECT INTEREST ... "

The interest charge, if any, normally is agreed upon between the exporter and importer. It is either built into the export price or collected separately. Under certain pre-arranged credit terms, a discount may be allowed on the early payment of a term draft.

" COLLECT ALL YOUR BANK CHARGES ... "

In practice, the collecting bank may not collect some of their charges despite that instructions to collect all their charges is given.

" ___ DAYS AFTER _____ OF THIS SOLE OF EXCHANGE "
(Field in the draft or bill shown below)

• Bills of Exchange (Drafts)
• The Parties in the Collection of Drafts
• Ocean (Marine) Bills of Lading
• Air Waybills