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What is Cash Against Documents?

Cash against documents is where the title to the purchased exports is given to the buyer after the total price is paid using cash.
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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 19 March 2014
  • Copyright Protected:
    2003-2014
    Conjecture Corporation
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Cash against documents is a type of transaction in which the title for purchased goods is released to the buyer after the total sale price is paid using cash. Often, a commission house or a similar financial institution upon verification of the cash payment handles the actual transfer of title. Usage of this method is commonly employed with transactions that involve the purchase of exports.

The process for CAD, or cash against documents, in an export environment is fairly straightforward. After accepting an order from an international customer, the exporter prepares the export documents required by both the country of origin and the destination. Among the documents is a form that is normally referred to as an Export Collection Form. This form, along with other manifests and copies of shipping documents, is forwarded to the bank used by the exporter. While it is not always necessary, many exporters choose to prepare a Bill of Exchange, and include that document with the other forms.

As the next step in a purchasing using the cash against documents method, the exporter’s bank forwards the necessary documents to the bank designated by the purchaser or importer. The documents are provided with a proviso that they are not to be released to the importer until payment for the shipment is made in full. Until the payment is received by the exporter’s bank, the transaction is not considered complete.

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Once the importer’s bank receives authorization to honor the exporter’s invoice, cash payment is electronically transferred to the exporter’s financial institution. After receiving confirmation that the payment was executed and posted properly, the importer’s bank releases all documents pertaining to the transaction to the buyer.

Many banks charge fees for executing a cash against documents transaction. In some instances, the seller covers all bank charges. However, it is more common for buyers to cover any charges issued by the banks at each end of the transaction. Typically, the seller adds the bank charges from the point of origin onto the invoice, while the importer’s bank normally debits the account used to issue the cash against documents payment.

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Discuss this Article

anon287257
Post 29

How long could the buyer delay getting the document? Is there any time limit, or does it depend on the buyer himself?

What can the exporter can do if the buyer refuses the document?

anon286255
Post 28

In a case of CAD, when documents arrive at the consignee bank, is there any limited time to accept document and pay its value or not?

anon284925
Post 27

Is deferred payment possible under CAD terms?

anon257443
Post 26

What is the protection for the buyer?

Anona
Post 24

What is happening if the bank has given physical control of the goods to the buyer prior to paying seller? What is the seller recourse, and under what rule?

anon181018
Post 21

which one is beneficial in imports: L/C or Cash on Delivery?

anon152752
Post 20

Agree will most of the comments made, CAD offers no security but can be enhanced by implementation of Credit Insurance cover, if you can get it. Cover may be available for certain exporters. a new policy is available search self underwriting credit insurance - where you can write your own limits in line with your normal credit control disciplines.

anon116203
Post 17

anon, you will need to get credit insurance in place before the goods are released from your manufacturer. this costs about 1.5 to 2 percent of the cost of the container. If the importer does not pay, the insurance company covers the cost!

anon86167
Post 15

Who is the consignee on the B/L and Airwaybill in case of CAD payment terms?

Bank or customer?

anon84639
Post 14

1.there is no protection, if the buyer decides not to buy. It is a risk for CAD. For protection it must be LC.

anon83753
Post 13

What is the protection for the seller as the goods have already left his country? What if the buyer decides not to buy?

anon72417
Post 12

In case of CAD, when documents arrive at the consignee bank, is there any limited time to accept document and pay its value or not?

anon70594
Post 11

My simple question is do buyer have to prepare any docs in his bank like LC for CAD?

if yes, then advise what docs.

Second, can he get also credit facility same like LC for CAD. Can anybody can help me answering my question?

anon43206
Post 9

Who is the consignee on the bill of lading or Airwaybill when payment terms are CAD?

Drillserve
Post 8

Who is the consignee on the bill of lading when payment terms are CAD?

anon37245
Post 7

What is diffirence between L/C and CAD ? And which is more essier to use for export business ?--Rafiq

ISijs
Post 6

Who is the consignee on the B/L in case of CAD payment terms?

Bank or customer?

mohamedgarad
Post 5

What is the protection for the seller as the goods have already left his country? What if the buyer decides not to buy?

anon26367
Post 4

Shipping docs are same as any normal export you process in accordance to delivery terms and regulations.

There is a risk though: if the buyer doesn't want to pay - you may have to return the goods on your account.

anon14767
Post 3

How must shipping documents be arranged when CAD is the terms? Is there a sample B/L used in CAD transaction?

mdt
Post 2

That is where the terms and conditions of the sale come into play - what provisions for protection and recourse are found there? And are those terms and conditions enforceable in both the country of origin and the country of of termination for the transaction? These need to be considered before the buyer agrees to enter into the transaction with the seller.

anon12929
Post 1

what is the protection for the seller as the goods have already left his country? What if the buyer decides not to buy?

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