What is the name of the trade finance method in which an exporter receives payment by presenting documents to a bank?

Documentary collection is a trade finance method in which an exporter receives payment through banks after presenting shipping and commercial documents.

The exporter’s bank sends documents to the importer’s bank with instructions. Under documents against payment, the importer receives the documents needed to obtain the goods only after paying. Under documents against acceptance, the importer accepts a time draft or other promise to pay later, and the documents are released according to the collection instructions.

Banks in a documentary collection generally act as intermediaries rather than guaranteeing payment. That makes the method less expensive and less bank-secured than a letter of credit, but it also leaves the exporter exposed to the importer’s refusal or inability to pay. The banks typically do not examine the goods themselves.

Documentary collection is most useful when trading partners have an established relationship, the political and commercial risks are manageable, and the parties want more structure than open-account trade without the cost of a documentary credit.