Documentary collection, documents against payment (D/P)
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The banks hold the shipping documents until the importer pays. Once the importer pays, it gets the papers it needs to claim the goods.
Terms like this have a quick explainer. Tap or hover on them.
01 · In plain words
Your bank sends the shipping documents to the buyer's bank, and the buyer gets them only by paying
In a , the exporter asks its own bank to collect the payment. That bank sends the shipping documents to the importer's bank, with instructions on when to hand them over (US International Trade Administration).
With , or D/P, the instruction is simple. The importer pays the full amount at sight, which means when the documents are presented. Only then does the importer get the documents. D/P is also called (US ITA).
The banks handle the papers, but they make no promise to pay. They check that the documents listed in the instruction are there (ICC, URC 522). They do not check what the documents say, and they take no payment risk (US ITA). So the exporter still relies on the importer to pay.
Who is involved
- The exporter, called the , hands the collection to its bank.
- The exporter's bank, the , sends the documents abroad.
- The importer's bank, a , receives the documents. The bank that deals with the importer is the .
- The importer, called the , is the one asked to pay.
- The exporter can also name a , a representative who can act for the exporter if the importer does not pay, with powers set out in the instruction.
02 · How it works
Eight steps take the documents to the buyer and the money back to the exporter
Figure 1 · Interactive
A D/P collection, step by step
Read down the steps. The last step is where the exporter is paid.
Source: US International Trade Administration, Trade Finance Guide, July 2022 (step illustration); ICC, URC 522 on the collection instruction, presentation without delay and payment advice.
03 · What it means for you
The exporter keeps hold of the documents until the buyer pays, and the importer pays when the papers arrive
Figure 2 · Interactive
What D/P means for each side
Choose your side of the trade.
04 · Worked example
On a $1 million D/P collection, illustrative costs add up to $4,966.67
This example uses round, made-up numbers. It adds the bank fees to the cost of waiting for the money while the documents travel and the importer pays. We price that wait at 6.00% a year, counting a year as 360 days. Real fees and rates vary by bank, country and deal.
Figure 3 · Illustrative
Costs on a $1,000,000 D/P collection paid 25 days after shipment
Illustrative inputs. The total is highlighted.
Made-up rates, worked out by our checking script. Your bank's fees will differ by bank, country and deal.
05 · When to use it
D/P suits trusted buyers and sea shipments where open account is too risky and the buyer will not accept an LC
Good fit when
- You and the buyer have a well-established relationship (US ITA).
- Selling on open account is too risky, and the importer will not accept an LC (US ITA).
- The goods go by sea and the documents control delivery (US ITA).
- Both sides want something simpler and cheaper than an LC (US ITA).
Another tool may suit better when
- The goods go by air or overland. The importer can then get the goods without paying (US ITA). Look at cash in advance.
- You need a bank's promise to pay. In a collection the banks take no risk (US ITA). Look at a sight letter of credit.
- The buyer needs time to pay. Look at documents against acceptance (D/A).
06 · Rules and a real case
A collection follows the ICC rules it names, and a bank that released papers early was found in breach
When the collection instruction says it follows , those ICC rules apply (ICC). They are the Uniform Rules for Collections, 1995 Revision, ICC Publication No. 522 (ICC). The , version 1.1, adds rules for documents sent electronically (ICC).
Under URC 522, banks must act in good faith and with reasonable care. They have no duty to store or insure the goods. Ship goods to a bank, or make them out to a bank, only when that bank agrees first. The instruction should say whether to if the importer does not pay. A protest is a formal legal record that a bill was not paid. The importer's bank must report non-payment without delay (ICC, URC 522).
A real case. In ICC DOCDEX Decision No. 370, under URC 522, the collections all said the documents were to be released against payment. The importer's bank released them before it was paid. The decision found that the bank went beyond the exporter's bank's instructions. Putting money into a local currency account did not meet those instructions. The bank breached the instruction to release the documents only against payment (ICC DOCDEX Decision No. 370).
Summary
D/P keeps the documents in the banks' hands until the buyer pays
The exporter ships, and the banks hold the documents until the importer pays at sight. It costs less than an LC and is simpler. The trade-off is that no bank promises to pay, so it works best with a buyer you know and goods that travel by sea.
Related guides: Documentary collections; The payment terms spectrum; The trade documents checklist. Related cards: Documentary collection, documents against acceptance (D/A); Letter of credit (sight). Every term is in the Trade Finance Glossary.
Sources
- US International Trade Administration, The Trade Finance Guide: A Quick Reference for U.S. Exporters, 2022 edition, July 2022. Supports: definition, D/P at sight, the step flow, who carries the risk, when a collection fits, ocean versus air and overland shipments, cost compared with an LC
- International Chamber of Commerce, URC 522 rules text, ICC Digital Library, 1995. Supports: the parties, the collection instruction, presentation without delay, bank duties, protest, case-of-need, payment and non-payment advice
- International Chamber of Commerce, URC 522, Uniform Rules for Collections Including eURC Version 1.1 (ICC Knowledge 2 Go), 1995. Supports: the rules a collection can follow
- International Chamber of Commerce, URC 522: ICC Uniform Rules for Collections, Supplement for Electronic Presentation (eURC), June 29, 2023. Supports: electronic presentation
- International Chamber of Commerce, DOCDEX Decision No. 370 (URC 522), ICC Digital Library, undated. Supports: the real case
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