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Documentary Collection & Credit

Documentary Collection & Credit

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An Export Documentary Letter of Credit (Export L/C) issued by a reputable bank is an instrument that may provide you with a degree of comfort in knowing that your payment for the export of goods will be forthcoming, provided the terms and conditions of the letter of credit are met. 

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Your customer can arrange for their bank to issue a Documentary Letter of Credit in your favour to be advised through Bank of Sydney to you. Once you are satisfied that the wording of the letter of credit is in compliance with the contract you have entered into with the buyer, you may then proceed to lodge the required documents with Bank of Sydney.  As your bank, Bank of Sydney will check the documentation against the requirements of the Letter of Credit and, if in order, forward the said documents to the opening bank requesting payment in terms of the Letter of Credit arrangements.

The general advantages to an exporter in obtaining a Documentary Letter of Credit are:

1.  The buyer’s bank has given an undertaking to pay for the merchandise being exported PROVIDED all the terms and conditions of the Irrevocable Documentary Letter of Credit have been met. 
2.  The terms and conditions of the Letter of Credit can’t be altered without the consent of all parties. 
3.  There are set rules that banks must adhere to in checking documents under Letters of Credit.  These rules are issued by the International Chamber of Commerce (ICC) and are referred to as UCP600.

Note: The Exporter still has risk in that they need to make their own assessment of the standing of the bank issuing the letter of credit and the country of domicile of that bank in terms of possible failure to pay. Bank of Sydney can assist in the risk assessment of the bank and the country involved.

Confirmation of Export Documentary Letters Of Credit

In order to eliminate Bank and country risk the beneficiary of the Letter of Credit may seek to have the said Letter of Credit confirmed by their bank.  When a bank confirms a Documentary Letter of Credit, the confirming bank stands in the stead of the issuing bank, and provided all terms and conditions of the letter of credit are met, guarantees payment to the beneficiary of the said Letter of Credit.

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There are significant advantages in obtaining Confirmation and we recommend exporters contact a BOS Trade Finance expert via email Trade@banksyd.com.au or by telephone on (03) 9656 8531 & (02) 8262 9136  for advice on reducing Bank and Country risk.

Export Documentary Collections

Sending export documents on a collection basis is an alternative way of protecting your title over shipped goods while in the process of securing payment. The exporter still has a risk that the buyer will refuse to pay. However the control over the goods via the title documents remains with the bank, until such time as the title documents are released to the buyer on payment (sight collection) or on acceptance to pay at future date (term collection).

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You as the exporter lodge your documents and instructions with Bank of Sydney for collection. Bank of Sydney will direct your documents to our correspondent bank overseas with instructions to only release the documents, including title documents, to the buyer against payment or acceptance of the applicable bill of exchange, depending on your instructions. 

Export Documentary Collections provide a degree of security and are a favoured method of doing business once a degree of trust and experience has been built between buyer and seller.  

Some advantages to the exporter in utilising Export Documentary Collection services are:

  1. Possibly reduced bank costs compared to utilising Letters of Credit.
  2. Comfort in that the control of title documents remains in the banking system until the Bill of Exchange is either accepted (in the case of term collections) or paid (in the case of sight collections).
  3. Comfort in that banks must adhere to ICC issued Uniform Rules for Collection. (URC 522)

Import Documentary Letters Of Credit

An Import Documentary Letter of Credit is a formal undertaking by your bank to effect payment to your supplier via their bank for goods ordered provided all terms and conditions of the Letter of Credit are satisfied. It provides your supplier with the comfort of knowing that your bank is guaranteeing your ability to pay for goods ordered. As an Import Letter of Credit is a guarantee of payment, you will be required to arrange an appropriate secured trade facility with your Account Manager, thus it is important that you involve your bank as soon as possible to discuss requirements.

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Once the appropriate facility has been approved and you have lodged your request for the establishment of an Import Documentary Letter of Credit, Bank of Sydney will issue this letter of credit on your behalf to your supplier via their nominated bank, stipulating the terms and conditions that need to be met.

Upon receipt of shipping documentation from your supplier’s bank, Bank of Sydney will check the documentation against the Letter of Credit and, if all is in order, will release the documents to you making payment to the suppliers bank in terms of the Letter of Credit, or in the case of a Term Letter of Credit at the specified maturity date.


The advantages of utilising an Import Documentary Letter of Credit are:

  1. Provides your supplier with a degree of comfort in that they are guaranteed payment.
  2. Opens new opportunities for you to grow your business by entering into contracts with brand new suppliers who haven’t dealt with you previously.
  3. Allows you (the importer) to set clear shipment dates, payment terms and specify exactly the documentation required and detail required in same.
  4. There are set rules that banks must adhere to in checking documents under Letters of Credit. These rules are issued by the International Chamber of Commerce (ICC) and are referred to as UCP600

Import Documentary Collections

Import Documentary Collections are where the exporter’s bank and the importer’s bank act as intermediaries in the collection of trade payments and the subsequent release of documents. Provided title documents are included in the collection, the respective banks maintain control over the goods shipped; only releasing title documents to the importer upon either payment or acceptance of the relative bill of exchange.

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Some advantages of utilising this method of  payment are:
  1. Reduced bank costs compared to utilising Letters of Credit.
  2. Comfort in that control of title documents remains in the banking system until Bill of Exchange is either accepted in the case of term items or paid in the case of sight items.
  3. Comfort in that banks must adhere to ICC issued Uniform Rules for Collection. (URC 522)