James has been appointed as the Manager of Vibrant Co Ltd who will be in charge of international trade dealing with Documentary Collections. James seeks your advice on the documentary collection process. Advise James. (15Marks)

Guide of Answering:

1. The parties in Documentary Collection process: - (3 Marks)
2. The Steps-By-Steps Process: 6 to 8 steps ( 12 Marks)

Guide: (References) Ans something like the below...

1. The buyer and seller agree on the terms of sale of goods by: (a) specifying documentary collection as the means of payment; (b) naming a collecting/presenting bank (usually the buyer's bank); and (c) listing required documents. The exporter/seller (i.e., principal) ships the goods to the importer/buyer (i.e., drawee) and obtains a negotiable transport document (i.e., bill of lading) from the shipping firm/agent.
2. The seller prepares and presents (i.e., remits) a document package to his bank (i.e., the remitting bank) consisting of: (a) a collection order specifying the terms and conditions under which the bank is to hand over documents to the buyer and receive payment; (b) the negotiable transport document (i.e., bill of lading); and (c) other documents (e.g., insurance document, certificate of origin, inspection certificate) as required by the buyer.
3. The remitting bank sends the documentation package by mail or by courier to the designated collecting/presenting bank in the buyer's country with instructions to present them to the buyer (i.e.,drawee ) and collect payment.
4. The presenting (i.e., collecting) bank: (a) reviews the documents making certain they are in conformity with the collection order; (b) notifies the buyer about the terms and conditions of the collection order; and (c) releases the documents once the payment conditions have been met.
5. The buyer: (a) makes a cash payment (by signing the draft), or if the collection order allows, signs an acceptance (i.e., promise to pay at a future date); and (b) receives the documents and takes possession of the shipment.
6. The collecting bank pays the remitting bank either with an immediate payment or at the maturity date of the accepted bill of exchange.
7. The remitting bank then pays the seller (i.e., principal).