The nature of collection is commercial credit. When banks handle collection business, they only act according to the instructions of the client and do not assume the obligation of the payee to pay. If the importer goes bankrupt or loses the ability to repay debts, the exporter may not be able to collect the payment or receive it late. After the importer refuses to pay for the bill, the bank has no obligation to keep the goods for safekeeping unless it is agreed in advance. If the goods have arrived, there will be losses in handling the collection of goods at the import place, paying import tariffs, warehousing, insurance, resale, and even being auctioned at a low price or shipped back to the country.
Under the terms of acceptance, the importer can obtain commercial documents and collect goods by completing the acceptance procedures on the bill of exchange; the guarantee for the exporter to collect the payment is the credit of the importer. Once the importer fails to pay on time, the exporter will suffer the loss of all the payment for the goods. Therefore, acceptance is more risky than payment.
Although documentary collection has certain risks for exporters, it is very beneficial to importers. It not only avoids the formalities of applying for opening letters of credit, but also does not require prepayment of bank deposits, reduces expenses, and is conducive to financing and turnover. Since collection is beneficial to importers, the use of collection in export business is conducive to mobilizing the enthusiasm of importers to purchase goods, thereby promoting transactions and expanding exports. Therefore, many exporters use collection as a means to promote inventory and strengthen foreign competition.