DOCUMENT AGAINTS PAYMENT OR LC FOR INTRA ASIA TRADING

D/P (Document Againts Payment)


UD. Thessa Indonesia - Exporting and Importing can often be an extremely complicated and mundane process as there are so many rules, regulations as well as countless number of procedures to do to.

This, need so many times, may require to prepare and submit documents for import and export. Usually, freight forwarders would prepare it for us, but it is also good to know for ourselves as to how to complete the relevant documents by understanding what the terms mean. 

So here, UD. Thessa Indonesia would introduce you to all  some of terms of payment that's used in the intra asia trade, actually on sea freight/ocean freigh. 

We would roll out one related article on a regular basis, which would help you to get a comprehensive understanding as to the document preparation for the purpose of doing trade in intra asia. Here, there would be a coverage of Documents Against Payment (D/P).

So What is Documents Against Payment (D/P)?

A D/P essentially refers to an arrangement that involves the exporter giving the key title documents to the importer only when the importer has paid the full amount due in accordance to the Bill of Exchange.

The exporter would instruct his corresponding bank to hand over the documents to the importer. In some case, this term is known as "Cash Against Documents".

Document Collection Process, generally, the goods are first shipped to the buyer right after the sales contract has been negotiated. After which, the key documents relating to the title of the goods are sent to the buyer through 2 banks, known as the remitting (exporter’s) bank and the collecting (importer’s) bank.

After the documents have reached the importer, the documents can only be released upon payment or acceptance (D/P) The documents would allow the importer to collect the goods from the port as they act as a proof.

If the collection mode is D/P, the importer has to pay the exact amount stated on the Bill of Exchange so as to receive the documents. 

Document Flow for D/P Payment
Here you can see the original document that's ensure the D/P Payment Methods by UD. Thessa Indonesia below:
Certificate Of Origin
Bill Of Lading
Commercial Invoice
Packing List

LC (Letter Of Credit)

A Letter of Credit is also known as an L/C. An L/C is essentially a written commitment to pay the amount due, by the importer to the exporter. The importer’s bank is known as the issuing bank in this case, while the exporter’s bank is known as the accepting or the negotiating bank. As such, in business transactions where a Letter of Credit is Involved, there are usually four parties.

By issuing the L/C to the exporter, it is as equal as guaranteeing the exporter that the importer would make the payment to him in a sum and currency that is specified in the L/C. However, this can only take effect if the exporter fulfills all of his required duties.

An L/C is a formal document that is usually used when the seller is unwilling to extend credit to the buyer. As such, the L/C substitutes the creditworthiness of the bank for that of the importer. The Letter of Credit Document is also a non negotiable document. This is unlike other documents such as the Bill of Exchange (B/E). Letter of Credit exists in the form of Revocable Letter of Credit as well as Irrevocable letter of credit
Revocable Letter of Credit, in essence, the revocable Letter of Credit can be modified or cancelled by the bank at any time. This is done without the approval of the seller. However, revocable L/Cs are not commonly used.

Un-revocable Letter of Credit,  The Un-revocable L/C on the other hand cannot be modified or cancelled unless all the parties which are involved in the transaction agree to do so. The Exporter also needs to approve of the modifications first.

The process of L/C, the Process of a transaction involving the L/C is as follows:
  • Importer and Exporter enter into a contract
  • Importer applies for an L/C with the Issuing Bank.
  • Issuing Bank sends the L/C to the Advising Bank which goes to the exporter as a result.
  • Exporter then sends the goods to the importer.
  • Exporter submits all relevant documents to the Advising bank which upon reaching the importer, the importer makes the payment through the banks.
Here you can see the sample of Letter Of Credit by UD. Thessa Indonesia below:

LC Page I
LC Page II
LC Page III

Thank you.

UD. Thessa Indonesia. We are offering Damar Batu. The Damar Batu offered by us are standard quality products that are highly demanded in the market. These Batus are appreciated by large number of customers. These are available in market at competitive rates.
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UD. Thessa Indonesia

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