I have discussed in detail about the terms of payment in another article in same website. You may go through the same to have a clear idea about DP term of payment.
Here, let us discuss the role of Bill of Lading under DP terms of payment in a sea shipment of export and import. How does a Bill of Lading work in a payment term Documents against Payments – DP?
Bill of Lading plays a vital role in ‘Documents against Payments’ DAP – DP - terms of payment, compared to other terms of payment other than Letter of Credit. As you know, without presentation of original bill of lading with carrier of goods at port of destination the goods can not be released, unless otherwise Original bill of lading surrendered at load port or Seaway bill is issued in lieu of original bill of lading?
Can Bill of lading be surrendered under DP payment terms in Exports and Imports?
Under Documents against Payment term of payment, Original bill of lading can not be surrendered. Because, the payment against sale of goods are paid on the basis of acceptance of original bill of lading with other shipping documents required to take delivery of goods. So under a DP terms of payment in international trade, surrender of original bill lading should not be affected by seller – exporter – of goods, as original bill of lading is a hold with exporter to get his sale amount.
Normally once after releasing Bill of Lading at port of loading by carrier of goods, the exporter submits original bill of lading with other required shipping documents with his bank to deliver to his overseas buyer for import customs clearance and other reference. Once after receiving the necessary documents from the exporter, his dealer bank sends the said documents to overseas buyer’s bank after necessary noting and endorsement. Overseas buyer’s bank receives documents and notifies buyer to accept goods as per the terms and conditions of payment agreed with supplier each other. The overseas buyer accepts documents, by paying export proceeds as per purchase order against pertaining shipment and collect original bill of lading and other required shipping documents for import to take delivery of goods.
Here the point is, the buyer can take delivery of goods only by submitting original bill of lading to the carrier of goods, issued by carrier’s counter part at load port. If the terms of payment is ‘Documents against Payment (DAP or DP), the buyer’s bank can deliver original bill of lading with other documents to buyer only after receiving the amount of sale of goods pertaining to said shipment. Without original bill of lading, buyer can not take delivery of goods. In other words, under the term Documents against Payment, buyer can not take delivery of goods unless he remits invoice value of goods to his bank. In turn, after collecting the amount of sales under said consignment, buyer’s bank remits the said amount to seller through seller’s bank
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