Documents against Acceptance How reliable the terms of payment in exports

Posted on 30 March 2023 Category : For Beginners

The information provided here is part of Export Import Training online

DA terms of payment

Payment terms ‘DA’ means Documents against Acceptance.

As per D.A terms, once the shipping documents along with bills of exchange received by the buyer’s bank, the buyer is informed to accept documents by buyer’s bank. The buyer accepts documents by signing bills of exchange sent by the exporter, agreeing to pay the value of goods shipped as per agreed period of time. (say, 30 days from the date of bill of lading, 60 days from the date of bill of lading or 90 days from the date of bill of lading).

Importer receives original shipping documents by ‘accepting’ bill of exchange. He completes import customs clearance procedures with the said original shipping documents and approach carrier to deliver cargo to him after completion of such import customs clearance.

The payment against sale of goods is effected up on the maturity day mentioned in the bill of exchange.

Documents against Acceptance - Is it safe for seller?

In payment terms, is DA safe for an Exporter? Does importer make payment on maturity of contracted period? How reliable DA terms in exports?

As per my opinion, the legal strength on D.A terms is very week in international legal terms. Ok, if you have a strong business relationship with your buyer, you can ship goods on ‘credit’ basis. A proper study about the buyer’s credit worthiness is a dare need while shipping under D.A.terms.

How to protect exporters (suppliers/sellers) on default of payment of sale of goods by buyer (importer/buyer)?

Most of the countries have credit agencies who provide insurance coverage against default of payment by buyers. You can approach such credit guarantee insurance agencies to cover insurance against such buyers. For example in India, Export Credit Guarantee Corporation (ECGC) is an example for such insurance agencies who protect sellers against default of payment on sale of exported goods.

How does credit guarantee Insurance agencies protect exporters on default of payment by their buyer?

Most of credit guaranteeing insurance companies is under the direct governance of government of such country. These credit guarantee agencies collect confidential financial information against each buyer.

Once after procuring export order by seller, he submits a copy of such business order with an application with credit guaranteeing insurance company to cover insurance against such buyer as per the purchase order contracted. The insurance company collects confidential financial status of buyer and gets credit worthiness of such buyer. Based on such credit worthiness of a buyer, insurance company approves credit limit to exporters.

Once after approval from such insurance company, the seller exports his product to the said buyer by obtaining an insurance policy against such buyer. If the buyer default payment on maturity time, the exporter can approach insurance company to reimburse the sale of goods. These insurance company approaches defaulted buyer and demands the compensation, failing which they black list these defaulters and circulate among the exporters where such defaulted buyers can not buy any goods from the country.

In certain circumstances, the insurance company may reject application if the credit worthiness of buyer is not at all satisfactory. Also read Also read Advance payment the best way of terms for business Letter of credit - How does LC work? Is DP terms of payment safe in export business?

In a nutshell, without an insurance cover against an importer (buyer), I do not recommend exporters to supply goods under Documents against Acceptance ( DA terms), unless otherwise the exporter has a satisfactory creditworthiness based on previous experience or strong evidencing proof.

I hope, I have explained about DA terms of payment in simple language.

Do you have different thought and experience on DA term of payment?

The above information is a part of Import Export online Training

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Comments

CHETAN: On 10 October 2013 in D.A.P terms if customer refuesed to clear goods than what is the best optio for seller , in this case routed shipment requiered buyer NOC or after refusing to clear goods buyer have any involvment .

Surendran Kollerath: On 08 March 2014 Hi Chetan, Rejection of acceptance of documents under DAP (DP) means Rejection of goods by buyer. Here, exporter (seller) can arrange to resell goods to other buyer, once after receiving written confirmation from the previous buyer. Please read my other article about 'How to handle rejected goods', How to diver t shipment from one port to another etc.

John Smith: On 17 March 2014 If the buyer checks the goods and finds them to be of inferior quality, thats a valid reason to reject goods. That probably is the reason for asking for a PAD terms in the first place. To check whether goods sent are of agreed quality. Maybe the buyer has been "sold" bad quality goods previously (in the past).

Naveen Gaba: On 11 April 2014 Hi if buyer will not pay against da terms. Is there any responsibility of bank. Can we file complaint against bank or should I go for legal matter with buyer.

RAZA ALI ABID: On 31 May 2014 MY REQUIREMENTS ARE UNDER MENTIONED 1-Rebate Calculation for Terry Towels (Dyed) 2-Rebate Calculation for Terry Towels (BLEACH) 3-Rebate Calculation for AHRAM (BLEACH) Please send me calculation rebate as per GD,S WITH EXCEL FILE Thanks Raza Cell 0313-7860064 Faisalabad

ibnay saood: On 24 June 2014 I thing DA payment terms is not safe and reliable for anyone instead of those exporters whos doing business to see all expect and credit conditions well-known

Megala Subramaniam: On 21 July 2014 very informative....

shahid umer: On 06 September 2014 IS DAP terms allowed transport documents (Consigned to Buyer) ? Further if importer signed the Bill of Exchange and confirm the due date to their bank and importer bank confirm the due date to shipper bank, then payment is secure or importer can refuse to pay at the time of due date ?

paresh: On 07 December 2014 difference between c&f and cfr.as per l/c terms gooods is cfr but the exporter mention c&f instead of cfr what impact occure

Admin: On 07 December 2014 http://howtoexportimport.com/CNF-C-F-or-CFR-Which-term-is-correct--382.aspx

deepak: On 17 May 2015 Thanks.

Md.Adnan: On 27 March 2016 Urgent Query, Please reply at the earliest. Sir, We export goods to buyer on credit . Buyer is trustworthy, and we have good relations with him. We can give credit to him fort 6-9 months. But, According to Indian Exports Law, For how many days we can give credit to him ? Thanks

ashay naik : On 24 April 2016 Myself Ashay Naik, Actually I am writing on the hope that could help me with the procedure to be followed by me to claim the benefits recently announced by RBI in the month of December, 2015 for the benefits of exporters

SriParvathiExports: On 24 April 2016 Recently we got one export order for iran.we have bank of india current account.but i got information UCO bank is the only authority to deal with the Iran. whether i get advance payment with the same bank of india account or i will open a new account on UCO bank.please clarify me

YASH : On 25 May 2016 GOODS PAYMENT NOT RECEIVED BY BUYER Dear Sir, We Are Any Exporter Of Plastic Goods We Had Export Goods From India To One MOROCCO Buyer On Dated: 21.03.2015 We Release All Goods Without Taking Payment As Per Our Terms The Buyer Has To Make The Payment Is 60 Days But Till Today We Had Not Received Any Amount Also We Had Insurance The Goods In ECGC Policy But They Are Not Giving Us Any Responsible Reply Also We Approach Indian Embassy In Morocco We Are Waiting For The Action Please suggest us how to get our pending payment for overseas buyer

sivakasi: On 12 August 2016 Recently we got one export order for iran. we have bank of india current account.but i got information UCO bank is the only authority to deal with the Iran. whether i get advance payment with the same bank of india account or i will open a new account on UCO bank. please clarify me.

Fadhi: On 08 November 2016 As a shipper, if payment is DA terms, Bill of lading must be original right? and we should not comply to consignee request to change Bill of Lading to be as surrender BL since it will be a risk to the shipper? I need someone expertise advise...THank you!!

RAJENDRAPRASAD: On 16 March 2017 Dear sir, we want to start import business of used photocopy machines from singapore to india. While discussing with exporter he was asked for 50% payment in advance and 50% while exporting the goods. Please let me know is this process is hassle free? And please also tel that what is the process for advance payment and after payment with all available options. This will be very much helpful to us. Thank you

DATTARAM KASHTE: On 12 January 2018 In DA payment 1), how to mention consignee name in Bill of Lading - is To Order or Consignee Name?. 2) if Buyer other than consignee - for Goods shipped to Sri Lanka & payment received from buyer from Hongkong? 3) DA payment in how many days as per RBI - 30/60/90/180 days?. 4) Original documents forwarded to Consingee or Buyer? - since payment will be receive from Buyer.

ramnath babu: On 18 July 2018 Sir, Once the buyer send his acceptance of documents, will the buyer's bank confirm this acceptance to Supplier's bank in overseas. Or will they do it only after the buyer make payment on maturity date. Please clarify the position. We have supplied 2 container of goods (we are indenting agents for a Chinese supplier) to our Indian buyer, who accepted the documents and even taken delivery of the cargo. Now the term is DA at 35 days. So they will make payment after 35 days from the date of BL. In the meantime, supplier complaints that his bank has not received the acceptance of documents message from the buyere's bank. Is it mandatory for the buyer's bank to send such documents accetapnce message to supplier's bank?

Imran Ahmad: On 17 April 2019 if importer's bank does not work with our bank than what we can do for DA documents

mukul agarwal: On 14 July 2019 sir if export is dine tgrough india to srilanka without ecgc approval on 120days da payment terms and buyer is not paying how to tackle tgis situation

Sheila Eikner: On 24 September 2020 I didn't ask for this and I would like my funds refunded in my bank account. Cancel this immediately!

raz: On 27 November 2021 If the Importer/Issuer of LC does not pay within the stipulated time of LC, what exporter can do? and If the Importer pays after due date , is there any problem with the Exporter bank?

gourav: On 16 June 2022 Hope this email finds you well I have exported goods to UK company, but he is not doing payment as I am an beginner so I didn't got insurance due to lack of knowledge. Payment terms with buyer:- payment will be done after 100% Quality Check. Now he has done so but not releasing my payment. Please suggest me, How can I get my payment from him and I also do not want to do business with him anymore. Can I Contact UK Police ?

Anil Patil: On 22 July 2022 We dispatched 1 container of dry Ginger to Moracco on DP terms. Due to financial constraints & drop in price + currency depreciation, buyer doesn’t want to take delivery, even after 3 wks of arrival. Tried to find other buyers with 10-15% discount, who talked to him for his concent. He is dictating us for huge discount & 30 days DA terms, or else take it back. We hv decided to take it back, as it is $55k product & taking risk of product quality, apart from tro&fro cost. ECGC may pay to&fro cost. Any other challenges we may be prepared for??? Also, how can we fix this buyer?