Collection

Collection is a common settlement method in international trade, where the seller collects payment from the buyer through a bank, with the bank acting as an intermediary to handle documents and fund flows. It is typically used when the buyer and seller have a certain level of trust but are unwilling to use open account or advance payment. Collection is divided into clean collection and documentary collection, with the latter being more common. Key points to note include: banks do not examine the contents of documents and act only on instructions; the buyer can only obtain documents after payment or acceptance; the seller bears the risk of the buyer's refusal to pay. Compared with a letter of credit (L/C), collection has lower fees and simpler procedures, but the bank does not provide a payment guarantee, so the seller bears greater risk; compared with remittance, collection involves the bank presenting documents, offering slightly higher security. In practice, the seller should understand the buyer's creditworthiness, choose a reliable bank, and clearly specify document release conditions (such as D/P documents against payment, D/A documents against acceptance) to control risk.