D/P -- Documents Against Payment
Posted by Ripon Abu Hasnat on Friday, June 13, 2014 | 0 comments
The D/P
transaction utilizes a sight draft. Payment is on demand. After the
goods are shipped, the exporter sends the sight draft to the clearing bank,
along with documents necessary for the importer/buyer to obtain the goods from
customs. The buyer has to settle the payment with the bank before the
documents are released and he can take delivery of the goods. If the buyer
fails or refuses to pay, the exporter has the right to recover the goods and
resell them. On the surface, D/P transactions seem fairly safe from the
seller’s perspective. However, in practice there are risks involved.
The buyer can refuse to honor payment on any grounds.
When the goods are shipped long distances, say from Hong Kong to the
United States, it is usually impractical and too expensive for the seller to
ship them back home. Thus, the seller is forced to sell the goods in the
original country of destination at what is usually a heavy discount.
In cases of
shipments by air freight, it is possible that the buyer will actually receive
the goods before going to the bank and paying for them.
You can subscribe by e-mail to receive news updates and breaking stories.
0 comments for "D/P -- Documents Against Payment "
Leave a reply