ABSTRACT
This chapter focuses on the documentary collections transaction, which is one of the common methods of mitigating the two main international sales risks-the seller-exporter's risk of nonpayment for delivered goods and the buyer-importer's risk of not receiving goods for which it has made payment. It reviews the different methods of payment utilized in the sale of goods. The common methods of payment in international trade, ranked in order from the least secure for the exporter-seller are: open account and consignment sales, documentary collection, documentary credit, and cash in advance. The chapter focuses on the most common method of payment in international transactions—the documentary collections transaction. The documentary collections transaction allows the buyer to take possession either by making payment upon the presentation of the draft or by acceptance of the draft. In the documentary transaction, the seller is paid and the buyer receives title to the goods while the goods are in transit to the port of destination.
