1.CAD terms definition
CAD (Cash Against Documents) is a document payment, and some people also believe that it stands for cash on delivery or cash on delivery. Under the definition of document payment, the buyer must first receive the goods and related documents delivered by the seller before paying the seller, and can only pay the payment after they are inspected; while in the definition of cash on delivery, the buyer must pay the seller when the goods are delivered.
2.Nature
CAD belongs to the category of remittance and has the nature of commercial credit. In international trade, the commonly used payment methods are remittance, collection and letter of credit. The first two are commercial credit, and the latter is bank credit. There are three ways of remittance: mail transfer (M/T), telegraphic transfer (T/T), and bill transfer (D/D). CAD is a practice of cash on delivery in international trade practice, that is, the buyer's payment is a prerequisite for the seller to deliver the documents. This method is adopted when the seller does not know the buyer's credit, which has a certain protective effect on the seller.
3.Characteristics
Guarantee for the seller: The seller can get full payment before delivering the goods, thereby reducing trade risks. In many cases, the seller will require the buyer to pay the full amount before delivery to ensure the security of the transaction.
Guarantee for the buyer: The buyer can inspect the goods before shipment and ensure that the quality and quantity of the goods meet the contract agreement. Both parties can avoid disputes caused by problems such as the quality and quantity of the goods.
4.Advantages:
Reduce seller risk: The seller receives full payment before the goods are delivered, reducing the risk of not being able to recover the payment
Protect the buyer's rights: The buyer can inspect the goods before payment to ensure that the quality and quantity of the goods meet the contractual agreement and avoid unnecessary disputes
5.Disadvantages
High time cost: The buyer must be required to check the size before paying for the goods, which takes up time.
Possible loss for the seller: For the seller, if the buyer cannot pay for the goods, it may result in a loss. Therefore, the appropriate debtor and guarantee method must be carefully considered.
