I have a customer in Korea that wants to purchase under payment terms of Cash Against Documents. My understanding is that we hold the original documents the need for importing until we receive payment, less costly than LC's. Can anyone offer me their input/advice on this?
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Posted 1 year ago #
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I hope below clarification would be helfull for you to understand the the term
CAD(Cash Against Documents)
Method of payment for goods in which documents transferring title are given the buyer upon payment of cash to an intermediary acting for the seller, usually a commission house.Best regards
Aftab A Khan
mbckhan@gmail.comPosted 1 year ago # -
Michele,
CAD is less costly than an L/C but there are still fees on both sides. Usually the intermediary is still a bank. You would not be actually holding the documents until payment - - the intermediary would. The documents could actually arrive prior to the shipment. The danger is that the draft might not be honored because the buyer has no funds or changed his mind about purchasing. You are still relying on the credit worthiness and ability of the buyer to pay. You maintain title to the goods but they could be sitting in Korea with no home. CAD is also known as D/P (Documents Against Payment) or Sight Draft.
Posted 1 year ago # -
We occasionally use this method in Korea and Hong Kong with no problems. The risk that you run is that the product is in the foreign country if the customer does not pay. You could be forced to pay freight charges to get your product back, or incur storage fees while you try to make another deal.
Posted 1 year ago #
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