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ACCA Applied Skills · Corporate and Business Law (Global) · Transportation documents and means of payment

An exporter, Mara Co, uses a documentary collection. Its bank sends the shipping documents to the buyer's bank, which releases them to the buyer only on payment. Which description of the collection is correct?

This is documents against payment. The collecting bank holds the shipping documents and releases them to the buyer only when the buyer pays the bill. Documents against acceptance would release them on acceptance of a term bill, with payment later.

  1. ADocuments against payment, where the buyer receives the documents only after paying the billCorrect
  2. BDocuments against acceptance, where the buyer receives the documents once it accepts a term bill
  3. COpen account trading, where the documents go straight to the buyer with payment due later

Explanation

In documents against payment (D/P) the collecting bank releases documents only when the buyer pays, which gives the seller more security. In documents against acceptance (D/A) the buyer gets the documents on accepting a term bill and pays later. Open account sends documents directly to the buyer, with no bank control.

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