Documentary collections, bills of lading and the control of the goods

Documentary collections under URC 522

A documentary collection is a cheaper and weaker instrument than a credit. The seller ships the goods and hands the documents to its bank, the remitting bank, with instructions to deliver them to the buyer through a collecting bank in the buyer's country. Delivery takes place either against payment (documents against payment, D/P) or against acceptance of a bill of exchange (documents against acceptance, D/A). The banks act as agents of the seller and give no undertaking of payment. If the buyer refuses to pay or accept, the seller keeps control of the goods through the documents but must find another buyer or bring the cargo home. The ICC's Uniform Rules for Collections, Publication 522, govern most international collections and have been in force since 1 January 1996. Their electronic supplement, the eURC, was revised as version 1.1 on 29 June 2023 and aligned with the Model Law on Electronic Transferable Records together with the eUCP.¹

Under URC 522 the banks must act in good faith and with reasonable care, but they need only verify that the documents received appear to be as listed in the collection instruction (Art. 12 URC 522). They have no obligation to examine the documents further. A bank that receives goods consigned directly to it without its prior consent has no obligation to take delivery (Art. 10 URC 522).² Under Swiss law the relationship between the seller and its bank is a mandate, and the collecting bank acts as a substitute or sub-agent. A mandatee must conduct the business in person unless it is authorized or compelled by circumstances to delegate it, or delegation is admissible by custom (Art. 398 para. 3 CO), and Article 399 CO governs its liability where it delegates. Collections tend to be used in the Lugano cluster mainly for sales to established buyers in Italy and other European countries, where the trader trusts the buyer but wants to retain the documents until payment. For new counterparties and for sales to emerging markets, the documentary credit or an advance payment remains the rule.³

The bill of lading as the key to the goods

All documentary trade finance in seaborne commodities depends on the bill of lading. Chapter F.II described its three functions as receipt, evidence of the contract of carriage and document of title.⁴ For the financing bank the third function is decisive. A bank that holds a full set of original bills of lading made out to its order, or endorsed to it, controls the goods. The carrier will deliver the goods only to the holder of an original bill. Under Swiss law the transfer of a document of title to goods transfers possession of the goods (Art. 925 ZGB), and a pledge over goods can be created by pledging the document of title that represents them (Art. 902 ZGB). Swiss maritime law contains its own provisions on the bill of lading in Articles 112 ff. of the Federal Act on Maritime Navigation under the Swiss Flag (Maritime Navigation Act). Article 116 of that Act provides that the original bills are documents of title to goods within the meaning of Article 925 ZGB, that the carrier delivers the goods at destination only against return of the first original presented and that it is liable to the lawful holder for any damage caused by a breach of these rules.⁵

The weakness of the system lies in its dependence on paper and on honesty. Original bills must travel by courier from the port of loading to the seller, the seller's bank, the buyer's bank and the buyer, often through several intermediate traders in a string. In fast trades such as oil products the vessel frequently arrives before the bills. Bills can be forged, issued twice or issued for goods that were never loaded. The 2020 frauds discussed below involved, among other techniques, the use of the same bills of lading, or copies of them, to obtain financing from several banks at once.⁶ For this reason the post-2020 industry guidance asks banks to verify bills of lading randomly with the carrier and to track the vessel. It also limits the period for which a bank should finance against copies of bills of lading.⁷

Notes

1. ICC, "URC 522 – ICC Uniform Rules for Collections – Supplement for Electronic Presentation (eURC) Version 1.1", 29 June 2023, https://iccwbo.org/news-publications/policies-reports/urc-522-icc-uniform-rules-for-collections-supplement-for-electronic-presentation-eurc-version-1-1/; Trade Finance Global, "Released: eUCP Version 2.1 aligning with MLETR", 3 July 2023, https://www.tradefinanceglobal.com/posts/released-eucp-version-2-1-aligning-with-mletr ("We were able to align both eUCP and eURC with the MLETR"). ICC, Uniform Rules for Collections, ICC Publication No. 522 (Paris 1995), in force since 1 January 1996. ↩
2. ICC, URC 522 , Arts. 9, 10 and 12. ↩
3. CO, Art. 398 para. 3 and Art. 399 ("In the event of delegation"), official English translation at droit-bilingue.ch, https://www.droit-bilingue.ch/en-de/2/22/220-398-583.html. The use of collections in the Lugano cluster. ↩
4. See Chapter F.II, section on bills of lading, letters of indemnity and demurrage. ↩
5. Federal Act of 23 September 1953 on Maritime Navigation under the Swiss Flag (Maritime Navigation Act, SSG), SR 747.30, Arts. 112 ff. and Art. 116 paras. 1, 2 and 4 ("Die Originalausfertigungen des Konnossementes sind Warenpapiere im Sinne von Artikel 925 des Zivilgesetzbuches"), German and French text at droit-bilingue.ch, https://www.droit-bilingue.ch/de-fr/7/74/747.30-116-123.html. The reference to Art. 925 ZGB in the context of electronic bills of lading is confirmed by Raphael Brunner, "Electronic bill of lading legally permissible as ledger-based securities", MME, 3 July 2026, https://www.mme.ch/en/magazine/articles/electronic-bill-of-lading-legally-permissible-as-a-ledger-based-securities. Swiss Civil Code of 10 December 1907 (ZGB), SR 210, Art. 902 (pledge of documents of title). ↩
6. Free Malaysia Today, "Collapse of Singapore commodity firm leaves lenders exposed", 28 February 2020, https://fmtv5.freemalaysiatoday.com/category/business/2020/02/28/collapse-of-singapore-commodity-firm-leaves-lenders-exposed (ING alleged that "overlapping" bills of lading had been issued to obtain financing from multiple banks for the same shipment). ↩
7. GTR, "Swiss banks take on fraud with tough commodity finance standards", Global Trade Review, 3 November 2021, https://www.gtreview.com/news/europe/swiss-banks-take-on-fraud-with-tough-commodity-finance-standards/. ↩

For general information only. This article does not constitute legal or tax advice, does not replace advice on an individual case and creates no lawyer-client relationship. It reflects the legal position as of October 2026.