TradeFinance Academy
Modules/Documentary Collections/D/P vs D/A: The Two Collection Types
Lesson 2 of 312 min read

D/P vs D/A: The Two Collection Types

Visual InfographicStudy this diagram as you read the lesson

Documentary Collections — D/P vs D/A

Governed by ICC URC 522

Exporter(Principal)Remitting BankExporter's BankCollecting BankImporter's BankImporter(Drawee)① Docs + Instructions② Forward Docs (SWIFT)③ Present DocsPaymentMethod?D/P — SightImporter pays now→ documents releasedD/A — TermAccepts Bill of Exchange→ pays at maturityPaymentremitted⑤ Pay at maturity (30/60/90 days)Documents AgainstPAYMENT (D/P)Documents AgainstACCEPTANCE (D/A)Governed by ICC URC 522
D/P — Documents Against Payment
  • • Lower risk for exporter
  • • Importer pays before receiving goods
  • • Also called “sight collection” or CAD
  • • Goods at risk if importer refuses to pay
D/A — Documents Against Acceptance
  • • Higher risk for exporter
  • • Importer gets goods before paying
  • • Creates a negotiable Bill of Exchange
  • • Can be discounted/forfaited by exporter

Documents Against Payment (D/P) vs Documents Against Acceptance (D/A)

Documents Against Payment (D/P) — Sight Collection

Also called a Sight Collection or Cash Against Documents (CAD).

Process:
  1. Exporter ships goods and sends documents to remitting bank
  2. Remitting bank forwards documents to collecting bank
  3. Collecting bank presents documents to importer and demands immediate payment
  4. Upon payment, documents released — importer can claim goods
  5. Collecting bank remits payment to remitting bank, who credits exporter
Risk Profile: Lower risk for exporter — the importer cannot obtain the goods without paying first. However, the exporter cannot force the importer to pay; they can only refuse to release documents. What if the importer refuses? The goods sit in the port accumulating storage charges. The exporter must arrange for re-export or local sale — potentially at a loss.

Documents Against Acceptance (D/A) — Term Collection

Process:
  1. Exporter ships goods and draws a Bill of Exchange (draft) on the importer, payable at a future date
  2. Documents sent to collecting bank with instruction: "Release documents against acceptance of the draft"
  3. Importer signs (accepts) the Bill of Exchange, promising to pay on the due date
  4. Documents released to importer — goods can be claimed immediately
  5. On the due date, collecting bank presents the accepted bill for payment
Risk Profile: HIGHER risk for exporter — the importer receives the goods before paying. If the importer defaults at maturity, the exporter has an accepted bill of exchange (a legal claim) but has already lost the goods. The Accepted Bill of Exchange becomes a negotiable instrument. The exporter can:
  • Hold it until maturity and collect
  • Discount it at a bank for immediate cash (at a cost)
  • Forfait it — sell it without recourse

URC 522 Key Obligations

ObligationRemitting BankCollecting Bank
Follow principal's instructionsMustMust
Verify documents as listedYesYes
Guarantee paymentNONO
Protest on non-paymentOnly if instructedOnly if instructed
Store goodsNOT responsibleNOT responsible
Collections vs Letters of CreditRoles of the Banks in Collections