What is Documents Against Payment (D/P) and Documents Against Acceptance (D/A)
Exporting and Importing can often be an extremely complicated and mundane process as there are so many rules, regulations as well as countless number of procedures to adhere to. This, many a times, may require to prepare and submit documents for import and export. Usually, freight forwarders would prepare it for us, but it is also good to know for ourselves as to how to complete the relevant documents by understanding what the terms mean. As such, in our new article series titled “Export Terms”, we would introduce you to all the various terms used in the international trade, be it through air, land or sea freight. We would roll out one related article on a regular basis, which would help you to get a comprehensive understanding as to the document preparation for the purpose of doing trade internationally. In Today’s article, there would be a coverage of Documents Against Payment (D/P) and Documents Against Acceptance (D/A)
What is a D/P
A D/P essentially refers to an arrangement that involves the exporter giving the key title documents to the importer only when the importer has paid the full amount due in accordance to the Bill of Exchange. The exporter would instruct his corresponding bank to hand over the documents to the importer. In some scenarios, this term is known as ‘cash against documents’.
What is a D/A
A D/A on the other hand is a different form of arrangement where the importer does not have to pay in order to receive the title documents. Instead, the importer needs to show that he agrees with the payment amount and as such, needs to sign the accompanying Bill of Exchange and send it back to the Exporter. The exporter, upon receiving the signed Bill of Exchange, would send the documents to the importer through the corresponding bank.
Document Collection Process
In general, the goods are first shipped to the buyer right after the sales contract has been negotiated. After which, the key documents relating to the title of the goods are sent to the buyer through 2 banks, known as the remitting (exporter’s) bank and the collecting (importer’s) bank.
After the documents have reached the importer, the documents can only be released upon payment or acceptance (D/P or D/A). The documents would allow the importer to collect the goods from the port as they act as a proof.
If the collection mode is D/P, the importer has to pay the exact amount stated on the Bill of Exchange so as to receive the documents. As for D/A, the documents would be released as long as the importer acknowledges the amount he has to pay the exporter by signing on the Bill of Exchange.
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