GLOSSARY
Documents against payment (D/P)
A documentary-collection variant where the collecting bank releases shipping documents to the importer only upon receipt of the agreed payment.
Documents against payment (D/P), also known as Cash Against Documents (CAD), is a documentary collection variant in which the collecting bank releases the shipping documents — including the bill of lading needed to clear and collect the cargo — to the importer only upon receipt of the agreed payment.
Why it matters
D/P gives the exporter materially better protection than open-account terms: without the documents the importer cannot legally take possession of the goods. It is, however, weaker than a confirmed letter of credit because no bank has guaranteed payment. The risk is concentrated in the buyer's willingness and ability to pay on arrival; if the buyer refuses, the exporter's recourse is to ship the goods home, sell them at destination, or negotiate a discount.
The transaction follows ICC's URC 522. Practical safeguards include verifying the buyer's KYB profile, requiring shipment to a country with reliable port-side discharge handling, and avoiding D/P for highly perishable or specialized goods that cannot be redirected.