Who provides it?

Banks are intermediaries in cash against documents transactions, or you can use your agent in the buyer's country.

Banks which can assist are:

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 Cash against documents 

How can it help me?

In a cash against documents transaction, you ship the goods but retain ownership and control of them until your buyer pays for them.

What is it?

You ship the goods before payment but don’t release the documents to transfer ownership and possession of them (‘shipping documents’) until your overseas buyer has made an irrevocable payment for the goods. Your bank and your buyer’s bank facilitate the transfer of the payment and shipping documents. Alternatively, you can use your agent in your buyer’s country.

How does it work?

The main steps in a cash against documents transaction are:

  1. You ship the goods to your buyer in accordance with the export contract.
  2. Either:
    • you present the relevant shipping documents, including the document of title (usually the bill of lading) and invoice, to your bank, which sends the documents to the buyer’s bank or
    • you send the shipping documents to your agent in the buyer’s country.
  3. Your buyer provides payment for the goods to their bank or your agent, who in turn transfers the payment to your bank.
  4. In return for the payment your buyer’s bank or your agent hands over the shipping documents to the buyer, who then takes control of the goods.

The diagram below shows the main steps in a transaction involving payment by cash against documents.

Cash against documents diagram



Notes to diagram

  1. You enter into an export contract with your overseas buyer.
  2. You ship goods to your buyer in accordance with the contract.
  3. You provide the shipping documents (including the documents of title) to your bank.
  4. Your bank sends the documents of title and invoice to the buyer’s bank.
  5. The buyer pays their bank for the goods.
  6. The buyer’s bank provides the shipping documents to the buyer.
  7. The buyer’s bank transfers the payment to your bank.
  8. Your bank pays you.

Cash against documents terms of payment can be arranged through the banking system or through an exporter’s agent working in the buyer’s country. If an agent is used, the agent replaces the banks in the diagram above.

How risky is it?

A range of payment methods is used in international trade, with payment taking place at a different stage of the export transaction in each. In general, this means that each method has a different level of non-payment risk for you, the exporter, and non-delivery risk for your buyer.

The diagram below illustrates the risk of payment by cash against documents compared with other payment methods.

Risk diagram - cash against documents image


What are the pros and cons?

Pros Cons
You retain control and ownership of the goods until your buyer pays in full The banks don’t verify the shipping documents or guarantee payment by the buyer
Transaction costs are generally lower than with a documentary credit As you don’t receive payment until after you’ve shipped the goods, payment by cash against documents may strain your cash flow
If you have an agent in the buyer’s country you may be able to minimise bank fees If your buyer fails to make payment, your goods will be left in an overseas port and you may need to pay to have them cleared, stored, insured and resold or shipped back to Australia
  Your buyer’s promise of payment does not give you the same legal protection as an accepted bill of exchange (see documentary collection)
  If the export contract is in a foreign currency, you are exposed to foreign exchange risk from the date of the sale contract to the time you receive payment

What costs are involved?

Banks charge fees for facilitating cash against documents transactions. You and your buyer will agree who will pay each of the charges and advise your banks. Your agent may also charge you for their services.


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