D/P (Documents against Payment)

D/P (Documents against Payment) is one of the commonly used documentary collection settlement methods in international trade. It means that after shipping the goods, the exporter submits the full set of shipping documents (such as bill of lading, invoice, packing list, etc.) to the bank at the place of export and entrusts the bank to present the documents to the importer through the collecting bank at the place of import; the importer must pay the full amount before obtaining the documents from the collecting bank and using them to take delivery of the goods. It is typically used in transactions where the buyer and seller have a certain basis of trust but are unwilling to use open account (O/A) or a letter of credit (L/C) because of higher costs. Points to note: D/P is divided into at sight (D/P at sight) and usance (D/P after sight). Under usance D/P, the importer may first accept the draft and pay at maturity before taking up the documents, so the exporter still faces the risk of the importer refusing payment or delaying payment; the bank is only responsible for presenting and transferring documents and does not assume payment liability. Compared with L/C, D/P has lower costs and simpler procedures, but the exporter's payment security is weaker; compared with D/A (Documents against Acceptance), D/P requires payment before documents are released, so the risk is relatively smaller.