Trade and customs
DP (documents against payment)
Definition
A documentary collection where the buyer's bank releases the shipping documents only when the buyer pays.
Under DP, also called cash against documents, the seller ships the goods and sends the documents through its bank to the buyer's bank. The buyer pays, receives the documents and uses them to collect the goods. Collections usually follow the ICC's URC 522 rules.
DP is cheaper than a letter of credit, but the banks do not guarantee payment. If the buyer refuses, the seller still controls the goods through the documents but has to find another solution at the destination.
Related terms
- Letter of credit (LC)A bank's undertaking to pay the seller when the seller presents documents that comply with the credit's terms.
- TT (telegraphic transfer)A direct bank wire transfer, used for advance payment or payment after shipment.
- DA (documents against acceptance)A documentary collection where documents are released when the buyer accepts a bill of exchange to pay at a later date.
- Proforma invoiceA preliminary invoice that sets out the offer before shipment, used to confirm the order, open an LC or make an advance payment.