Cash Against Documents Agreement The seller receives the greatest benefit of the certification, as his payment is virtually guaranteed, except in the event of a serious violation of the agreement he has with the importer. For the buyer, this method affects their credit and credit assessment. It is potentially detrimental to their ability to deal with other suppliers or to take out commercial loans in order to increase their productivity. For some who do not have a stellar credit rating, the bank may even insist on a cash deposit to guarantee the amount indicated in the letter of credit. Even if a third party holds the transit documents, the exporter retains ownership of the goods until the transfer of funds. The importer can only acquire ownership of the property in the shipment after having the ownership and shipping documents. Cash against documents or CAD is a kind of transaction that we use in international trade. Buyers get the right for the goods they bought after paying the full amount. In other words, the importer receives the goods only after the full payment. International trade refers to trade between nations – imports and exports.

Cash against parole is a payment term that is normally used when the product is stored in a third-party warehouse. This means that the storage company will play the role of a neutral guarantor. The warehouse stores the seller`s equipment. Before the transfer of funds, the warehouse sends a « confirmation of ownership » to the buyer, confirming that the equipment is present in the warehouse. The main risk of the CAD payment period is that buyers are not allowed to retrieve goods and shipping documents after the transfer. Cash Against Document is a procedure whereby a seller orders his bank to forward documents relating to the export of goods to a buyer`s bank in order to submit these documents to the buyer for payment. It also indicates when and under what conditions the bank may disclose these documents to the purchaser. A CAD payment may also be deferred, in which case the agreement is qualified as proof against acceptance if the buyer « accepts » that he is required to pay later.

Payments are made by bank transfer or corporate cheques (in the United States). In the project equipment industry, cash payments are rather rare and can only occur in cases of storage and rapid delivery. In the case of cash against documents, banks have no responsibility to exporters. This makes money against documents a little easier to use operationally and to get much cheaper letters of credit than letters of credit – which are one of the most expensive payment methods for overseas trade – but do not offer as much security.