ABSTRACT
There are a number of methods of organizing an international sale of goods transaction. This chapter will focus 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 does this by changing the sale of goods transaction to a sale of documents. In this way the buyer does not receive the documents to take control of the goods until making payment. In the same way, the seller does not give up the controlling documents without receiving payment. To accomplish this exchange while the goods are in transit to the buyer, the use of trusted third parties is required. Commercial banks located where the seller and buyer are located provide the role of “escrow agents,” collecting the documents from the seller and exchanging them for the payment provided by the buyer.
