Documentary Collection is the Collection by a bank of funds due from a buyer against the delivery of documents. Among the different types of payment methods, Documentary Collection is the second most important method. International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). Industrialization, advanced transportation, globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. Without international trade, nations would be limited to the goods and services produced within their own borders.
International trade is, in principle, not different from domestic trade as the motivation and the behaviour of parties involved in a trade do not change fundamentally regardless of whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or culture. 1.2 Objectives
This study is basically an attempt of assessing the status of Documentary Collection as an international trade payment methods practiced in Bangladesh.
The specific objectives of the study are:
I) To identify the existing practice of Documentary Collection incorporating its procedure, documentation, cost, risks and time involvements. II) To analyze the legal and regulatory aspects of Documentary Collection and deviation in operation in Bangladesh. III) To identify the difficulties from the points of view of traders and bankers while practicing Documentary Collection as international trade payment method. IV) To find out the prospect of Documentary Collection in Bangladesh as a method for international trade.
To complete the study, two types of data were collected. They are i) Primary data and
ii) Secondary data
For Primary data Collection, personal interviews were conducted. The data was collected from AD branch of Rupali Bank (paltan branch), Exim Bank (International division), UCB (Foreign Exchange Branch). The sampling of branches was selected on a random basis for the convenience of my study. Secondary data refers to the data collected from a secondary source i.e. from someone other than the users. This study relies heavily on the websites for the secondary data. Webs used as data source are- www.wikipedia.com, www.bangladesh-bank.org, www.standardbank.co.za etc.
Concept of International Trade payment methods
The International trade is the exchange of goods and services across national borders. In most countries, it represents a significant part of GDP. Methods those are used to receive or to make payment in international trade is known as International Trade Payment Methods. 2.2 Different types of trade payment methods
There are four different types of payment methods:
i) Cash in advance
ii) Open account
iii) Documentary Credit
iv) Documentary Collections
Figure: Risk in different Payment methods
With cash-in-advance payment terms, the exporter can avoid payment risk because payment is received before the ownership of the goods is transferred. Wire transfers and credit cards are the most commonly used cash-in-advance options available to exporters. However, requiring payment in advance is the least attractive option for the buyer, because it creates cash-flow problems. Foreign buyers are also concerned that the goods may not be sent if payment is made in advance. Thus, exporters who insist on this payment method as their sole manner of...