WASHINGTON, D.C. – BAFT (Bankers Association for Finance and Trade), the International Chamber of Commerce (ICC), and Trade Treasury Payments (TTP) have published a new guide on documentary collections, released at the BAFT Global Annual Meeting in Orlando, USA.
The guide examines the role of documentary collections in international trade, which, despite carrying a distinctive position within trade finance, generally tends to be misunderstood in the market.
Collections exist in the middle of a spectrum that spans from open account trading on the one side (where there is minimal banking involvement) to documentary credits on the other (where banks assume a central, risk-bearing role). As a result, they provide traders with greater documentary control than open account, but at a lower cost and with fewer formalities than a documentary credit.
Historically, these tools have been widely used in established trading relationships where there is already some degree of commercial trust, but where the seller still wishes to retain documentary control over the release of goods. They also tend to be particularly attractive in cost-sensitive markets, or where a transaction does not justify the complexity of a documentary credit.
Collections, however, are often mischaracterised as a form of “light” trade finance, which is not really the case. As the new guide explores in detail, they are governed by a well-defined international framework – the Uniform Rules for Collections (URC 522) – which sets out the specific roles and responsibilities for the banks involved.
Deepesh Patel, Managing Director of TTP, said, “We’re delighted to launch this important guide with BAFT and ICC. Unlike documentary credits, collections do not shift commercial risk onto the banking system. The seller remains exposed to the buyer’s willingness and ability to pay, and banks act primarily as intermediaries, handling documents in accordance with instructions. This distinction shapes everything from document examination standards to risk management and dispute resolution, which is why we felt that it was important to launch this guide now.”
Dave Meynell, Founder of TradeLC Advisory, and co-author of the publication, said, “The new guide sets out the fundamentals of how collections operate, the key parties involved, and the typical release conditions used in practice. It also addresses common areas of confusion, including the use of terminology such as ‘collecting’ and ‘presenting’ banks, and the circumstances in which banks may assume a more active role through instruments such as avalised drafts or promissory notes.”
Tod Burwell, President and CEO of BAFT, said, “In preparing the guide, reference has been made to the BAFT Collections Manual (2018), published by the BAFT Commercial Letter of Credit Committee. That manual remains a valuable industry resource, particularly in its treatment of US market practices and its coverage of clean, cheque, and documentary collections.”
Jon Boran, Head of Future Trade Product at Lloyd’s Bank and co-author, said that the guide “takes a more internationally oriented perspective and focuses exclusively on documentary collections. While drawing on certain elements from the BAFT Collections Manual (2018), the publication narrows the scope to the documentary process itself, its practical application under URC 522 and eURC 1.1, and the operational considerations most relevant to exporters, importers, and trade professionals engaged in goods-related transactions.”
The guide is available to download here: https://baft.org/document/baft-icc-and-ttp-documentary-collections-guide/
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About BAFT (Bankers Association for Finance and Trade)
BAFT is the leading global industry association for international transaction banking. Bringing together financial institutions, service providers, and the regulatory community, BAFT provides thought leadership, advocacy, education, and a platform for collaboration to promote sound financial practices that foster innovation, efficiency, and commercial growth. The association engages in a broad range of issues affecting transaction banking, including trade finance, payments, and compliance, helping members navigate a rapidly evolving global landscape. For more information about BAFT, visit baft.org, or follow BAFT on X (Formally Twitter), LinkedIn, and YouTube.