Cash against documents is a type of transaction in which the title for purchased goods is released to the buyer after the total sale price is paid using cash. Often, a commission house or a similar financial institution upon verification of the cash payment handles the actual transfer of title. Usage of the cash against document method is commonly employed with transactions that involve the purchase of exports.

The process for CAD, or cash against documents, in an export environment is fairly straightforward. After accepting an order from an international customer, the exporter prepares the export documents required by both the country of origin and the destination. Among the documents is a form that is normally referred to as an Export Collection Form. This form, along with other manifests and copies of shipping documents, is forwarded to the bank used by the exporter. While it is not always necessary, many exporters choose to prepare a Bill of Exchange, and include that document with the other forms.

As the next step in a purchasing using the cash against documents method, the exporter’s bank forwards the necessary documents to the bank designated by the purchaser or importer. The documents are provided with a proviso that they are not to be released to the importer until payment for the shipment is made in full. Until the payment is received by the exporter’s bank, the transaction is not considered complete.

Once the importer’s bank receives authorization to honor the exporter’s invoice, cash payment is electronically transferred to the exporter’s financial institution. After receiving confirmation that the payment was executed and posted properly, the importer’s bank releases all documents pertaining to the transaction to the buyer.

Many banks charge fees for executing a cash against documents transaction. In some instances, the seller covers all bank charges. However, it is more common for buyers to cover any charges issued by the banks at each end of the transaction. Typically, the seller adds the bank charges from the point of origin onto the invoice, while the importer’s bank normally debits the account used to issue the cash against documents payment.