The information provided here is part of Export Import Training course online
What is DP term of payment? How does DP term of payment work?
DP OR DAP term of payment is one of the terms of payment in international trade.
D.A.P or D/P terms of payment means, Documents Against Payment.
Once cargo shipped out from supplier’s premises, after completing necessary export legal formalities of exporting country, he hands over goods to the carrier who transport to the final destination of buyer. After delivery of goods, exporter is issued Bill of Lading (under sea shipment) or Airway Bill (under air shipment) by Carrier or his agent.
Exporter submits all required documents along with Bill of Lading /Airway bill, invoice, packing list, bill of exchange with the bank to send to buyer through buyer’s bank.
The seller’s bank, once after verification sends these shipping documents to buyer through buyer’s bank. After receipt of such shipping documents by buyer’s bank notifies buyer on receipt of documents and advise to ‘accept’ the documents by effecting payment of export proceeds. Under a DP terms of payment (DAP terms of payment), the buyer collects original shipping documents from his bank after making necessary payment against sale of goods.
The buyer, once after collecting shipping documents from bank completes necessary customs clearance procedures in importing country and collects goods from carrier.
Why delay to receive money from overseas buyer under DP terms?
Although terms of payment under sale contract is against DP basis, some of the exporters (sellers) receives sale amount late. This happens commonly under sea mode of shipment. Why?
As you are aware, the transit time to arrive goods under sea shipment is more than air shipment. The original shipping documents are required mainly for the purpose of taking delivery of goods from carrier after necessary legal import customs clearance procedures and formalities. Under DP terms, some of the importers do not accept documents immediately from bank even after notifying by his bank. He delays to accept documents from bank till arrival of goods at port of destination. So, under DP terms of payment, the buyer drags to collect original shipping documents from his bank till arrival of goods at port of final destination. Also read Advance payment the best way of terms for business Letter of credit - How does LC work? Documents against Acceptance. - How reliable the terms of payment in exports
I hope, I could explain you the mechanism of DP terms of payment in simple language.
Do you have any other experience under DP terms of payment?
Discuss below your thoughts on DP terms of payment under exports and imports.
The above information is a part of Import Export Training course online
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