The parties involved in the collection method are mainly:
(1) Principal.
The principal is the buyer who entrusts the bank to handle the collection business, usually the exporter.
(2) Remitting Bank.
The remitting bank is also called the entrusting bank. It is the bank entrusted by the principal to handle the collection business. It is usually the bank in the export place.
(3) Collecting Bank.
The collecting bank is any bank other than the entrusting bank that participates in the collection business. It is usually the bank in the import place.
(4) Presenting Bank.
The presenting bank is the bank that presents the documents to the payee. The presenting bank can be a bank entrusted by the collecting bank that has a current account relationship with the payee, or the collecting bank itself can serve as the presenting bank.
(5) Payee.
The payee is the person who makes payment according to the collection instructions. It is usually the importer.
In the case of a refusal to pay in the collection business, the principal may designate an agent at the place of payment to handle the storage, resale, and return of the goods. This agent is called an “agent when needed”. If the principal designates an agent when needed, the authority of this agent must be stated in the collection letter of entrustment. Without such an indication, the bank will not be subject to any instructions from this agent when needed.
According to the banking practices of general countries, when the principal entrusts the bank to handle the collection, he must attach a collection letter of entrustment, in which various instructions are clearly stated. After the bank accepts the entrustment, it will handle the collection in accordance with the instructions in the letter of entrustment.