What Is Documents Against Payment (DP)?

Under DP, the exporter ships the goods and sends the shipping documents to the buyer through banks instead of sending them directly. The exporter's bank forwards them to a bank in the buyer's country, called the collecting or presenting bank. That bank releases the documents only after the buyer pays the amount shown on the bill of exchange. A sight bill is payable on presentation, so payment comes at the start. Because the buyer cannot clear the goods without the original bill of lading, the exporter keeps control until the money is paid. DP is cheaper than a letter of credit, but no bank promises to pay if the buyer refuses.

For example, a Tirupur garment exporter ships goods worth USD 20,000 to a retailer in the UK. The exporter's bank sends the invoice, bill of lading and a sight bill of exchange to a UK bank. The UK bank gives the documents to the retailer once the retailer pays USD 20,000.

• Payment risk: The buyer's bank only acts as an agent. If the buyer does not pay or collect the documents, the exporter bears the loss and may need to find another buyer or bring the goods back.
• FEMA realisation: The export proceeds still have to come into India within the period set by Regulation 5 of the 2026 FEMA export regulations, so a DP bill that stays unpaid needs early follow up with your AD bank.
• Bank compliance: Your AD bank handles the collection, tracks the bill and links the receipt to your export records. See what an Authorised Dealer bank is and EDPMS.
• Cost: Collection charges are usually lower than letter of credit fees, because no bank adds its own payment undertaking. Ask your bank for its charges.

A DP collection moves documents through two banks, and the buyer pays before receiving them. The exporter keeps control of the goods until that payment is made.

1. The exporter and buyer agree on DP terms in the sales contract.
2. The exporter ships the goods and collects the bill of lading or airway bill and other shipping documents.
3. The exporter gives the documents and a sight bill of exchange to the AD bank with a collection instruction.
4. The AD bank sends them to the collecting bank abroad.
5. The collecting bank asks the buyer to pay and releases the documents only against payment.
6. The foreign bank remits the money, and the AD bank credits the exporter and updates the export records.

You get DP terms by agreeing them in the contract or proforma invoice before shipment, then instructing your bank on every shipment. Buyers who prefer open credit may ask for DA or an advance instead, so settle this in writing.

1. State 'documents against payment' and the payment bank details in the sales contract and proforma invoice.
2. Check the buyer's track record and the destination country's risk before shipping.
3. Choose a consignee line on the bill of lading that matches the collection arrangement; ask your bank how it wants this written.
4. Prepare the invoice, transport document, packing list and any certificates the buyer needs.
5. Lodge the documents and bill with your AD bank with clear written instructions on charges and what to do if the bill is unpaid.
6. Follow up through the bank until payment arrives and keep the proof with your records.

Under DP the buyer pays first and then gets the documents. Under DA the buyer signs the bill to accept it and gets the documents, then pays on the due date. DP is the lower risk option for the exporter.

• Bank guarantee: The banks in a DP collection do not promise payment. They only pass on documents and money.
• Same as LC: A letter of credit carries a bank's payment undertaking, and DP does not. See what a letter of credit is.
• Risk free: The buyer can refuse the documents. Storage, demurrage and return costs can then fall on the exporter.
• Skips FEMA: A bank collection is still an export transaction and the usual realisation and reporting rules apply.
• Only for sea freight: DP can work with air shipments too, but the airway bill is not a document of title, so ask your bank how to structure it. See what an airway bill is.

• Documents against acceptance (DA): A collection where the buyer accepts a time bill and pays later.
• Bill of exchange: The written order to pay that travels with the documents.
• Bill of lading: The transport document the buyer needs to take delivery.
• Letter of credit: A bank's undertaking to pay against complying documents.
• Commercial invoice: The seller's invoice sent with the shipping documents.

Every rule and definition on this page is linked to its official source, checked on the dates below.

1. RBI, FEMA (Export and Import of Goods and Services) Regulations, 2026 (FEMA 23(R)/2026-RB), Regulation 5 (realisation period) (checked 9 Oct 2026)
2. RBI, A.P. (DIR Series) Circular No. 20 dated 16 January 2026, Supersession of the Master Directions on export and import of goods and services (checked 9 Oct 2026)