Text V. Documentary Collection

If it is not possible for you to obtain a Documentary Letter of Credit from the overseas buyer, you can adopt the alternative method of sending the documents on a collection basis. Here, the shipping documents, including the Bills of Lading and other transport documents, are handed to your bank, which then sends them to a suitable bank in the buyer's country. Your buyer will then be notified of the arrival of these documents and the terms on which they will be released to him.

Depending on the terms of the sale you agreed originally, the Bill of Exchange may be drawn on the overseas buyer 'at sight'. This means that the documents will only be released to the buyer against payment of the bill. When documents of title are being set out, this 'documents against payment' procedure usually ensures that control over the goods is maintained by you until payment is made. However, there is always the risk that you will incur demurrage (or storage) charges and additional insurance costs should the bill not be paid promptly and the goods remain uncollected.

When your buyer's integrity is proved to be satisfactory you can then consider offering extended credit terms. In this case a 'Term Bill' may be drawn, calling for payment 30, 60, 90 or even 180 days after sight (or, in some cases, after date of shipment). Documents of title (ie proof of ownership) will be released following the buyer's acceptance of the bill. He is then able to take possession of the goods which then pass out of your control.

It should be noted that where the goods are dispatched by airfreight or parcel post direct to the buyer, control of the goods is lost immediately on dispatch.

Banks in the UK and in the majority of other countries, handle collections under the terms of the ICC 'Uniform Rules for Collections'. You can obtain a copy of these rules from The International Chamber of Commerce.

One popular misconception with regard to Documentary Collections is that the overseas bank can enforce payment, or that they have earmarked funds to meet maturing Bills of Exchange. This is not so and the local bank can only follow instructions given by the remitting bank. One of these instructions may be to 'protest' the bill is unpaid at maturity, in which case the overseas bank will be required to instruct a Notary Public to make an official protest. He will call on the buyer and note the reason for non-payment on a 'Deed of Protest' and this, together with the dishonoured bill, form the basis for taking the matter to litigation. This is as far as the overseas bank can go, however, if the bill still remains unpaid, they will either arrange to return the goods to you or release them to your local agent, perhaps for sale to a different buyer.

 

Vocabulary notes

Letter of Credit – аккредитив

collection basis – на основе инкассо

to extend credit terms – продлить сроки кредита

Bill of Exchange – переводной вексель, тратта

to dispatch by airfreight or parcel post – отправить авиагрузом или бандеролью

The International Chamber of Commerce – международная торговая палата

Uniform Rules for Collection – единые правила для оплаты инкассо

proof of ownership – доказательство права на собственность

to incur – навлекать на себя

demurrage – простой

misconception – неправильное понимание

dishonoured bill – фальшивый счёт

 

 

Text VI. Open Account

If you know you are dealing with a buyer of impeccable reputation, business can be conducted on an open account basis. In other instances competitive pressures within the market may make this a necessity.

In this case the simplest method of obtaining payment is to send any relevant documents to your customer for immediate payment, or for payment at a specified time. The customer may pay with his own cheque, but remember it is your company that will have to pay bank collection charges and take the risk of delay or even non-payment. For example, the cheque could be returned as a result of some technical irregularity as well as through lack of funds. These risks do need careful consideration. The overseas legal procedures required to enforce payment under an open account arrangement are more complicated than those to enforce payment of a bill for collection.

In order to avoid potential problems you can ask your customer to arrange for payment to be made either by banker's draft, or directly through their bank by means of a mail or cable transfer to the credit of your company's account. It is worth remembering that postal delays can occur and the expense of a cable transfer may well be worthwhile. Early receipt of funds can make a substantial contribution to your cashflow. Payment remitted in this way is by far the quickest and most effective method. To simplify such transfers, you would be well advised to quote the name and address of your bank together with your account number on the invoice.

 

Vocabulary notes

impeccable – безупречный

obtaining payment – получение оплаты

specified time – конкретно указанное время

to enforce payment – взыскать платёж

a bill for collection  - счёт инкассо

postal delays – почтовые задержки

cable transfer – перевод телеграммой

worthwhile – стоящий

substantial contribution – существенный вклад

cashflow – движение наличного капитала

 

 

 

UNIT XVI

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