An export remittance or collection management is a method of payment collection used when there is a certain level of trust between importer and exporter, since collection is not guaranteed.
The exporter will submit the documentation to Cajamar, Caja Rural together with a letter of instructions. We will send the documentation for collection management to the importer’s bank to be presented to your customer for payment on the agreed date.
There are two types of remittances: simple and documentary.
A simple remittance is any remittance made up of a financial document: cheque, bill, promissory note, etc.
A documentary remittance is a remittance that might or might not include a financial document, but also encompasses commercial documents: invoice, transport document, packing list, etc.
The different parties involved in a remittance are:
- Drawer: this is the exporter, in other words, the one who presents the documents for collection.
- Drawee: this is the importer, in other words, the one who must make payment.
- Assigning bank: the drawer’s bank, in other words, the bank that sends the documentation for collection management following the instructions of its customer.
- Receiving bank: this is the drawee’s bank, in other words, the bank that receives the documents and presents them to the importer for payment.
In Foreign Trade, it is very important to have a clear understanding of the conditions of purchase/sale before sending the goods and initiating payment collection management.
If you are going to use an export remittance as the method of payment collection, you must agree the following with your customer:
- Amount and currency
- Expiry/due date: method of payment.
- Delivery of documents on payment or on acceptance.
- Banking charges: you must decide who will pay the charges applied by the assigning bank and the receiving bank.
- Instructions for refusal in the event of non-payment.
These instructions will be sent together with the documentation to the importer’s bank, which must implement them.
Outline of a simple remittance:
- The exporter sends the goods directly to the importer along with the commercial documents of the operation.
- The exporter submits the financial document (bill, cheque…) to their bank for collection management.
- The assigning bank sends the financial document together with a letter of instructions to the receiving bank.
- The receiving bank presents the financial document to the importer who, on the agreed expiry/due date for payment, will decide whether to make the payment or not.
- On the expiry/due date for payment, payment will be made to the supplier.
- The receiving bank debits the relevant amount from the importer’s account and sends the funds to the assigning bank.
- The assigning bank credits the relevant amount to the exporter’s account.
Outline of a documentary remittance:
- The exporter sends the goods directly to the importer
- The exporter presents the commercial documents together with the instructions for payment collection to their bank.
- The assigning bank sends the documentation together with these instructions to the receiving bank.
- The receiving bank contacts the importer notifying them that the remittance has been received.
- If payment is on demand, before the importer can collect the documents, payment must be made. If payment is deferred, the importer will accept the remittance and collect the documents.
- The importer picks up the goods from the relevant port, airport, or their own premises if transport is by truck or lorry.
- The receiving bank sends the funds on the agreed date provided the drawee/payer authorises payment, since acceptance does not imply payment.