Collection Instruction

A Collection Instruction is a written directive issued by the principal (exporter) to the remitting bank in a collection transaction, specifying the detailed requirements for the collection. Its contents typically include: method of document delivery (Documents against Payment D/P or Documents against Acceptance D/A), drawee information, types and number of documents, payment/acceptance conditions, bearing of bank charges, and handling of non-payment. Usage scenario: When an exporter collects payment from an importer through a bank, a Collection Instruction must be completed and submitted to the remitting bank along with the documents. Precautions: Instructions must be clear and complete to avoid ambiguity; if instructions are unclear, the bank may refuse to process or delay collection; banks act only according to instructions and do not examine the substance of documents. Difference from Letter of Credit: Collection is based on commercial credit, and the bank does not assume payment liability; L/C is based on bank credit, and the issuing bank assumes payment liability. Difference from Remittance: Collection is a reverse exchange, requiring document delivery through a bank; remittance is a direct exchange, with funds flowing opposite to the goods.