D/P (Documents against Payment)
A collection payment method where banks release the shipping documents to the buyer only after the buyer pays the invoice amount.
TL;DR: Under D/P, the seller ships the goods and sends the documents through banks. The buyer’s bank hands over the documents, including the bill of lading, only when the buyer pays.
D/P is a form of documentary collection. The seller gives the shipping documents to its bank, which forwards them to a bank in the buyer’s country. That bank acts as a collecting agent. When the buyer pays, it releases the documents, and the buyer can then use the bill of lading to take the goods.
Most collections follow the ICC rules known as URC 522. Unlike a letter of credit, the banks do not promise to pay. They only pass documents and money between the two parties. This makes D/P cheaper and simpler than an L/C, but it gives the seller less security.
For the seller, the main risk is that the buyer refuses to pay after the goods ship. The seller still controls the goods through the documents, but it may face storage costs, return freight, or a forced sale at the destination port.
For the buyer, D/P means you do not pay before shipment. However, you usually pay before you can inspect the goods. D/P works best when you trust the supplier or when you arrange a pre-shipment inspection. Compare with D/A, L/C and T/T.