What's the difference between the two-
Documentary collection means that the exporter sends the documents of export goods to the importer's local bank (collecting bank) by entrusting the local bank (collecting bank), and the collecting bank sends instructions to the collecting bank, requiring the collecting bank to show the documents to the importer, and requiring the collecting bank to hand over the documents to the importer after the importer pays off the collection payment. This is the so-called "D/P", that is, documentary collection at sight. Thus, in the process of documentary collection, banks (whether collecting banks or collecting banks) are not responsible for payment, but only provide services and charge a certain service fee. Whether the importer pays depends entirely on the importer's reputation. Therefore, documentary collection is called "commercial reputation".
The so-called letter of credit refers to the conditional payment commitment of the issuing bank to the beneficiary, that is, as long as the beneficiary acts in accordance with the provisions of the letter of credit and submits documents that meet the requirements of the letter of credit, then the issuing bank guarantees to pay the beneficiary-note: the bank (issuing bank) here makes a conditional payment guarantee in its own name, that is, as long as the conditions are met, then the issuing bank guarantees to pay the beneficiary. Moreover, the main parties to the letter of credit are the issuing bank and the beneficiary, and the payment guarantee is independent of the contract. In other words, the letter of credit is a separate document sale independent of the contract, that is, the issuing bank purchases the documents that the beneficiary meets the requirements of the letter of credit-as long as the documents submitted by the beneficiary meet the requirements of the letter of credit on the surface, the issuing bank must pay the beneficiary, regardless of the actual goods. It can be seen that the letter of credit is paid by the issuing bank, so the letter of credit belongs to "bank reputation".
Therefore, to sum up, the difference between documentary collection and letter of credit is that the former bank does not bear the responsibility for payment, while the latter bank bears the responsibility for payment.
Isn't it discussed according to the above content?