This is a means of receiving/making a payment, whereby the exporter’s bank orders the importer’s bank to provide the importer with the remittance documents (commercial documents) upon payment or acceptance.
This product does not guarantee collection of the goods, and can be considered a simple management and collection procedure subject to the regulations of the International Chamber of Commerce (ICC Publication n. URC 522).
The exporter will take the documents pertaining to the operation to their bank or financial entity with instructions to send for collection. The bank will send the financial documents (simple remittance) or commercial documents (documentary remittance) to the importer’s bank for collection. They will be sent with instructions to supply the documents to the drawee upon payment or acceptance.
Upon payment means that the documents will be provided when the corresponding payment is made on its due date. This is usually the case for all simple remittances and documentary remittances with payment on demand.
Upon acceptance means that documents will be provided to the drawee when they accept the remittance, with no commitment to honour the payment on their part. This is usually the case of documentary remittances with differed payment.
In both cases, there is no guaranteed collection since the remittance can be returned to the issuing bank without the collection of documents and, therefore, without payment being made.
Let’s have a look at the structure of a simple remittance:
Structure of a documentary remittance:
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