Document Against Acceptance (DA) – Term Documents
In Documents Against Acceptance (DA), the seller/exporter extends credit to the importer/buyer by using a time draft. The documents are released to the importer/buyer to title the goods upon his signed acceptance of the time draft. By accepting the draft, the importer/buyer becomes legally indebted to pay at a specific date.
At maturity, the collecting bank contacts the importer for payment. Upon receipt of payment, the collecting bank transmits the funds to the remitting bank for payment to the exporter/seller.
An overview of this type of collection:
Time of Payment: On maturity of the draft at a specified future date
Transfer of Goods: Before payment, but upon acceptance of draft
Exporter Risk: Has no control over goods after acceptance and may not get paid at the due date
The DA transaction utilizes a term or time draft. In this case, the documents required to take possession of the goods are released by the clearing bank only after the buyer accepts a time draft drawn upon him. In essence, this is a deferred payment or credit preparation. The buyer’s assent is referred to as a trade acceptance.
Documents Against Acceptance (DA)terms are usually after sight, for example “at 90 days sight”, or after a specific date, such as “at 150 days bill of lading date.”
As with open account terms, there are some intrinsic risks in exporting on DA
- As with a DP, the importer can refuse to accept the goods for any reason, even if they are in good condition.
- There is a slight risk that the importer will receive their goods without the original shipping documents (such as a bill of landing, commercial invoice, or certificate of origin)
- The buyer can default on the payment of a trade acceptance. Unless it has been guaranteed by the clearing bank, the seller will need to institute collection procedures and/or legal action.