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How does payment against documents work in an international sale?
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Commercial transaction
Portrait of King Louis XIV, by Charles Le Brun, c. 1655.
In international trade, payment against documents—often facilitated through a documentary bill or documentary draft—is a mechanism used to secure payment for goods.
In this process, the seller draws a bill of exchange on the buyer (the consignee). Crucially, the seller attaches the necessary shipping documents, such as the bill of lading, to this draft. These documents serve as collateral security for the transaction. The buyer typically cannot obtain the documents required to claim the goods from the carrier until they have accepted or paid the bill of exchange. This arrangement provides the seller with a level of protection, ensuring that the buyer must fulfill their payment obligations before taking possession of the shipment.1