Documents against payment or sometimes called DAP is one of part of term payment in trade for especially in international trade. With using this payment term shipper or beneficiary or drawer having an obligation to provide the shipping documents as agreed that mentioned on purchase order or PO, and then send the documents through bank to pass to buyer's or consignee's bank. After consignee's bank received the documents, they proactively send a notification of this arrival. Before consignee can collect or pick the documents up they must settle the payment according notification from their bank then the documents for clearance the goods can be released.
This is important that don't proactively arrange the payment by transfer to shipper account directly. This will effect the payment status still in blank in your bank records, because this payment not follow the DAP line. Then the impact you can't release the documents. The such case was happened to our trade. View months ago one of our buyer from France putted an order or bought some sweaters to us with a little quantities. Before the order is confirmed, they send us a sample to follow for making sample with some modifications and the measurements are included. Then we directly made the sample that followed their requirements and instruction. When the sample was being ready we directly send it to buyer to get their approval.
Fortunately they gave their approval and the purchase order was made up and sent to us by email. Then we sent them an order confirmation which was mentioning the payment term was in DAP or documents against payment and they have agreed of this payment term.
After that we did further process to order the yarns as the raw material for knitting then the bulk production was done. After the production was finished and the quantity was full then we exported the goods with using a nominate forwarder that pointed by buyer. Then we made the transport document and finance document to send to our bank for beneficiary. We sent to our bank all documents require covering Bill of Lading , Certificate of Origin GSP Form A, Commercial Invoice, packing list, and consignee's bank details.
Our bank did not checked the contents of documents, because those documents were not under Letter of Credit or L/C. Our bank only checked whether the documents presented were complete or not. After that our bank sent them to consignee's bank. When the documents was already received and then the bank sent an the acknowledgement to applicant or our buyer.
Our buyer wired the payment to our account directly or this transfer is called T/T payment. Of course, this was wrong, they didn't arrange their payment by followed DAP line and this brought to impact they could not took the documents from bank, because the payment status is still empty.
Many times they sent me an email to release the documents, we said that the documents will be released after they settled the payment. Then they sent a telex through their bank that mentioned that they have wired the payment and asked us to release the documents. When we received this telex from our bank we directly called our bank concerning this telex and our bank said that they was false by wiring the payment by T/T instead of follow the DAP line, so that their bank could not release the documents. Then I realized this situation or condition and directly instructed our bank to send a telex which is having the contents " We already received the payment in these amount and please release the document free of payment. All charges if any will born to applicant and our bank may close the file". Finally, our buyer as applicant could picked up the documents to release the goods from customs.
This case show us that DAP is different with T/T payment and can not be mixed up one to each other, and by understanding both payment terms and conditions will make a short time in releasing the documents and of course, safe a couple of money.
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