Documents Against Payment (D/P) – The buyer must pay before receiving the documents.

Documents Against Acceptance (D/A) – The buyer accepts a draft (promissory note) committing to payment at a later date.

The exporter appoints a bank as an agent to collect payment from the importer in exchange for shipping and transaction documents.

The bank has no obligation to guarantee the payment.

The importer and exporter are familiar with and trust each other.

The importer’s financial stability is not in question.

The importer’s country has a stable political, economic, and legal environment.

There are no foreign exchange controls, import restrictions, or necessary permits have been obtained.

Simplified document transfer with lower banking fees.

Faster payment processing compared to open account transactions.