Documents Against Acceptance (D/A)

(2 Points)

This is type of transaction that for the importer is more costly than a Letter of Credit and may provide formal/legal means to collect unpaid obligation however the importer takes on the risk of non-acceptance of documents and also commercial and country risks are not hedged. Although if bill of exchange/draft is accepted by the exporter, there is no guarantee of payment by the banks involved. Legal enforcement of unpaid obligation are costly and time-consuming. On the other hand the exporter will receive goods before having to make payment but dishonouring an accepted draft is a legal liability and may ruin business reputation.

This is type of transaction that for the exporter is less costly than a Letter of Credit and may provide formal/legal means to collect unpaid obligation however the exporter takes on the risk of non-acceptance of documents and also commercial and country risks are not hedged. Although if bill of exchange/draft is accepted by the Importer, there is no guarantee of payment by the banks involved. Legal enforcement of unpaid obligation are costly and time-consuming. On the other hand the importer will receive goods before having to make payment but dishonouring an accepted draft is a legal liability and may ruin business reputation.

This is type of transaction that for the exporter is less costly than a Clean Payment and may provide formal/legal means to collect unpaid obligation however the exporter takes on the risk of non-acceptance of documents and also commercial and country risks are not hedged. Although if bill of exchange/draft is accepted by the Importer, there is guarantee of payment by the banks involved. Legal enforcement of unpaid obligation are not costly and time-consuming. On the other hand the importer will receive goods after having to make payment but dishonouring an accepted draft is not a legal liability and does not injure business reputation.