An arrangement whereby the goods are shipped and the relevant Bill of Exchange (Draft) is drawn by the seller on the buyer, and/or shipping documents are remitted by the drawer (Supplier) to his Bank with clear instructions for collection through one of its correspondent bank located in the Drawee’s (Buyer) country.

[1]  the Seller ships the goods and obtains the shipping documents and usually draws a draft either at SIGHT (Documents against Payment (D/P)) or with a tenor of say 60 days (Documents against Acceptance) (D/A)) on the buyer for the value of the goods.

[2] the seller submits the draft and/or documents to his bank which acts as his agent (the remitting bank) with precise instructions.

[3] the seller’s bank (the remitting bank) send the draft and documents along with a collection letter containing precise instructions to a correspondent bank (the collecting bank) usually located in the buyer’s country.

[4] acting as an agent for the remitting bank, the collecting bank notifies the buyer of the receipt of the draft and documents.

[5] the documents are released by the collecting bank to the buyer upon his payment of the amount due or his acceptance of the draft for payment at a specified later date.