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Cash Against Documents
Cash Against Documents
What is it?
You ship the goods before payment but dont release the documents to transfer ownership and possession of them (shipping documents) until your overseas buyer has made an irrevocable payment for the goods. Your bank and your buyers bank facilitate the transfer of the payment and shipping documents. Alternatively, you can use your agent in your buyers country.
3.
you present the relevant shipping documents, including the document of title (usually the bill of lading) and invoice, to your bank, which sends the documents to the buyers bank or you send the shipping documents to your agent in the buyers country.
Your buyer provides payment for the goods to their bank or your agent, who in turn transfers the payment to your bank.
4.
In return for the payment your buyers bank or your agent hands over the shipping documents to the buyer, who then takes control of the goods.
Notes to diagram
1. 2. 3. 4. 5. 6. 7. 8. You enter into an export contract with your overseas buyer. You ship goods to your buyer in accordance with the contract. You provide the shipping documents (including the documents of title) to your bank. Your bank sends the documents of title and invoice to the buyers bank. The buyer pays their bank for the goods. The buyers bank provides the shipping documents to the buyer. The buyers bank transfers the payment to your bank. Your bank pays you.
Cash against documents terms of payment can be arranged through the banking system or through an exporters agent working in the buyers country. If an agent is used, the agent replaces the banks in the diagram above.
If you have an agent in the If your buyer fails to make buyers country you may be able payment, your goods will be left to minimise bank fees in an overseas port and you may need to pay to have them cleared, stored, insured and resold or shipped back to Australia Your buyers promise of payment does not give you the same legal protection as an accepted bill of exchange (seedocumentary collection) If the export contract is in a foreign currency, you are
exposed to foreign exchange risk from the date of the sale contract to the time you receive payment