Cash Against Documents (CAD) is a payment method in international trade where an exporter ships goods to an importer and forwards shipping documents through banking channels, with the documents only released to the buyer upon payment. This documentary collection method serves as an intermediary risk mitigation strategy between high-risk open account terms and more secure letters of credit. Banks act as intermediaries to ensure that the buyer cannot take possession of the goods until payment obligations are fulfilled, providing a structured framework that protects both parties’ interests in cross-border transactions.
Variations: Documents Against Payment and Documents Against Acceptance
- Documents Against Payment (D/P)
- Documents Against Acceptance (D/A)
