Money & Finance › Payments & money movement › Documentary collections: banks swap shipping papers for payment
Documents against acceptance (D/A): sign a draft, pay later
· Concept
Fact, law or dataA rule, statute, definition or measured number.
A documentary collection in which the buyer gets the shipping papers by signing a draft promising to pay on a later date.
See it on the Money & Finance map →How it works
Same Busan-to-Los Angeles story, on 90-day terms. The US bank presents a time draft; the buyer writes 'accepted', signs and dates it, and gets the bill of lading and the goods at once. The exporter now holds only the accepted draft, a legal IOU due in 90 days. If the buyer does not pay, the exporter can sue on the draft or, in many countries, have it formally 'protested', but the goods are gone.
Why it matters
It lets an exporter give credit to a trusted buyer while holding a stronger, tradable legal claim than an ordinary invoice.
Facts, rules and data
ICC URC 522, bills-of-exchange law (UCC Article 3, the UK Bills of Exchange Act 1882, the 1930 Geneva conventions), and bank collection forms.
Debates and risks
Whether an accepted draft is worth much more than an invoice in practice, since enforcing it abroad can be slow and costly.
Connections (3)
▸Documents against acceptance (D/A): sign a draft, pay later is the riskier form of Documentary collections: banks swap shipping papers for paymentFact, law or data
The connection
D/A hands the importer the documents, and so the goods, as soon as it signs a time draft due later. The exporter has extended credit backed only by that signature, so it carries the buyer's credit risk for the whole term, often 30–180 days.
When and why
Used worldwide under URC 522, mainly between long-standing trading partners.
How we know
URC 522, bank collection forms, and the Commerce Department's Trade Finance Guide, which rates D/A close to open account in risk.
Debates and risks
How often D/A buyers pay late or not at all; banks and credit insurers keep such data private.
▸Documents against acceptance (D/A): sign a draft, pay later requires the buyer to accept Bills of exchange (drafts) and banker's acceptancesFact, law or data
The connection
The collecting bank presents a time draft drawn by the exporter on the importer. By writing 'accepted' with a signature and date, the importer becomes legally bound to pay on the due date. The accepted draft, called a trade acceptance, can be held to maturity, sued on, or sold.
When and why
Under bills-of-exchange law: Britain's 1882 Act, the 1930 Geneva conventions used across Europe and East Asia, and UCC Article 3 in the US.
How we know
Those statutes, and URC 522 rules on presenting drafts for acceptance.
Debates and risks
Whether a protested draft really speeds collection in foreign courts as much as the law suggests.
▸Documents against acceptance (D/A): sign a draft, pay later creates drafts that can be sold via Factoring and forfaiting: selling receivables for cash nowFact, law or data
The connection
An accepted draft is a clear, transferable claim, so an exporter can sell it to a bank or forfaiter for cash now, at a discount. If the importer's bank adds its 'aval', a signed guarantee on the draft, forfaiters will usually buy it without recourse, taking the risk off the exporter.
When and why
Common in exports of capital goods to emerging markets; London, Zurich and Singapore are forfaiting centers.
How we know
The ICC Uniform Rules for Forfaiting (URF 800, 2013) and banks' forfaiting product terms.
Debates and risks
How well forfaiting prices reflect country risk is hard to judge, since most deal data are private.