Documents against payment, commonly referred to as D/P, is a banking arrangement used in international trade. In this setup, an exporter instructs their bank to release shipping and title documents to the importer only after the importer has paid the accompanying draft. This process ensures that the exporter receives payment before transferring ownership of the goods.
The term "documents against payment" is primarily used in international banking and trade law. It is relevant in transactions involving the sale of goods across borders. This arrangement provides a level of security for exporters, as it ensures that they receive payment before the buyer gains access to the goods. Users can often manage these transactions using legal templates provided by services like US Legal Forms, which offer documents tailored to facilitate D/P arrangements.
Here are a couple of examples of abatement:
Example 1: An American company exports machinery to a buyer in Germany. The American company instructs its bank to release the shipping documents to the German buyer only after the buyer pays the agreed amount. Once payment is confirmed, the bank provides the documents, allowing the buyer to take possession of the machinery.
Example 2: A hypothetical example would be a Canadian exporter selling textiles to a retailer in Japan. The exporter uses a D/P arrangement to ensure that the Japanese retailer pays for the goods before receiving the shipping documents.
| Term | Definition | Key Difference |
|---|---|---|
| Documents Against Acceptance (D/A) | Documents are released to the importer based on a promise to pay at a later date. | D/A allows the importer to receive documents before payment, unlike D/P. |
| Letter of Credit | A financial document issued by a bank guaranteeing payment to the exporter. | A letter of credit provides more security for the exporter than D/P. |
If you are involved in an international trade transaction that may require a D/P arrangement, consider the following steps:
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| Attribute | Details |
|---|---|
| Typical Fees | Varies by bank; typically includes service fees for document handling. |
| Jurisdiction | International trade law applies, with specific bank regulations based on the countries involved. |
| Possible Penalties | Failure to comply with D/P terms may result in financial loss or legal disputes. |
D/P stands for documents against payment, a banking arrangement where shipping documents are released only after payment is made.