Documents against payment procedure indicate those documents required to facilitate trade between two parties, importer and exporter. It refers to documents available to the importer against payment necessary to receive and collect the shipped goods from a port or other location.

The delivery versus payment settlement system ensures that delivery will occur only if payment occurs. The system acts as a link between a funds transfer system and a securities transfer system. From an operational perspective, DVP is a sale transaction of negotiable securities (in exchange for cash payment) that can be instructed to a settlement agent using SWIFT Message Type MT 543 (in the ISO15022 standard)

The cash against documents is a payment tool or method used in international transactions between a seller and buyer. Basically, it is a process where an importer pays for the ordered goods before they are received.

Typically, the cash against document is when an exporter (seller or vendor) instructs his bank to release shipping documents to the importer upon the full payment of shipment. After payment, the importer receives the documents.

The cash against documents is beneficial to the parties involve in this method of payment. For the exporter, it guarantees the payment of goods. In the case of the importer, it ensures that the precise products paid for are received.

Documents against payment definition explain a method for documentation and collection of documents on payment to facilitate trade. On the other hand, documents against acceptance or a time draft accepted by the buyer legally obligate them to make payment for goods sometime soon, allowing them to take possession of goods from the exporter.

Documents against payment procedure explain the transaction of payments and shipping documents in international trade and business cases.
It is a measure that primarily protects the interests of the sellers and assures them of receiving payment from the buyer or importer on the shipping sight. In addition, it eliminates the delaying of payments to a later date.

This mechanism is helpful, especially in countries with weak measures to enforce contracts and ensure supplier payments. Thereby, banks in the respective jurisdictions of the importer and exporter facilitate the exchange of shipping or other documents in return for payments.

Document against payment process flow explains the transaction of payment and goods between a seller and buyer. Firstly, the seller and buyer agree upon a price that confirms the purchase and starts the supply chain. Additionally, the two parties also decide the payment method and timeline.

In case of documents against payment at sight, the exporter generates a sight draft or a bill of exchange. It is a document that ensures immediate trade financing and payment for the exporter. Comparatively, in case of a time draft or documents against acceptance, the buyer will delay the payment to the exporter to a further date.

The next step in the process involves shipment. The exporter or seller of any good holds the initial ownership of the good until the buyer makes the payment. Thus, in documents against payment process flow, a sight draft obligates the importer to make the payment immediately to the importer’s bank before possessing the goods.

Hence, the parties facilitating the D/P process or transaction are the exporter, importer, exporter’s bank, and importer’s bank. The presence of a bank regulates and speeds up the transaction process. The importer’s bank is also known as the collecting bank. It collects the required document from the exporter’s bank and processes the payment to the exporter’s bank after collecting it from the importer.

Similarly, after shipping the goods to a port or freight carrier, the exporter submits necessary documents with instructions to the exporter’s bank. The exporter’s bank passes these documents to the importer’s bank with the same instructions from the exporter.

Thus, per the decided payment schedule, the importer shall collect these documents after transacting the payment to the importer’s bank. As the importer or buyer accepts the time draft or sight draft, it completes the transition of goods.