In which situation should a straight ocean bill of lading be used with a documentary draft for collection?

A straight ocean bill of lading is a specific type of document used in shipping that indicates that the cargo is consigned directly to a specified party, typically the consignee, and not to a bearer or holder of the document. When a straight bill of lading is used, it generally implies that the commodity is intended to reach a designated recipient without the ability to transfer ownership through endorsement.

The correct context for a documentary draft for collection involves the use of bills of lading that can be negotiated or transferred, such as a negotiable bill of lading. Negotiable bills allow the holder to take ownership of the goods and are frequently used in trade financing to facilitate the payment process. Since a straight bill of lading is non-negotiable, employing it with a documentary draft does not align with trade practices that facilitate ownership transfer through bank collections.

Using a straight ocean bill of lading with a documentary draft for collection would not operate effectively within the intended financial mechanisms because the draft would not unlock payment or transfer ownership since the goods are destined for a specified consignee only. Therefore, it is advised to avoid using a straight bill of lading in this scenario, as it does not serve its purpose in a trade finance context.