Payment against Documents

Payment against Documents is a common settlement method in international trade, where the buyer (importer) pays the bank for the goods after the seller (exporter) submits a full set of documents that comply with the contract, and the bank then releases the documents to the buyer, who uses them to claim the goods. This term is typically used in conjunction with a Letter of Credit (L/C) or Documentary Collection (D/P). The core principle is that 'payment' and 'document release' occur simultaneously, ensuring that the seller receives payment before the buyer obtains title to the goods. It is commonly used in L/C settlements, with the bank acting as an intermediary to ensure the buyer receives documents of title, such as the bill of lading, after payment. Note: The buyer must carefully review the documents to ensure they comply with the L/C terms; discrepancies may lead to refusal of payment. The seller must ensure the documents are correct, otherwise payment may be refused or delayed. The difference from 'Documents against Acceptance' (D/A) is that in D/A, the buyer can obtain the documents after accepting a draft, whereas in Payment against Documents, the buyer must actually pay before obtaining the documents. Unlike 'Cash on Delivery,' Payment against Documents emphasizes the delivery of documents, not the actual arrival of the goods.