If You Import Goods, You Need to Understand The Cash Against Documents Process

Cash Against Docs

If your company imports finished products, raw materials, or components into the U.S., you need to know about the Cash Against Documents (CAD) payment method.

CAD is a process in which an importing firm must pay for goods it purchases in full before it takes ownership of those goods. The transaction typically involves a third party that retains possession of the shipping papers until it receives payment from the buyer.

In recent years, Cash Against Documents transactions has been particularly important in importing goods from China, a major trading partner of U.S. companies.

CAD financing can be used by businesses of all sizes — small and medium-sized businesses, commercial companies and corporations.

Cash Against Documents Process

Under CAD, the pricing of imported items will be different depending on the shipping terms of the sale. For example, an item may cost $10 per item FOB China, or $25 FOB Miami, FL. In the case of FOB China, the importer transfers the funds before they are shipped and cannot inspect them for quality and/or quantity. If it is FOB Miami, the importer is able to physically inspect the goods before making the funds transfer to pay for the items. Of course, the lower price for FOB China comes with a potentially higher risk that the goods may be damaged, or may not be made exactly to specifications.

As an importing company, you or a logistics consultant that you hire will need to weigh the risks of your shipping options against the benefits.

As part of the Cash Against Documents process, the exporting firm, e.g., in China or another country, retains ownership of the goods you are importing until payment is made in full to the exporter. Once the payment is made through your financing firm, all documents related to the transaction are released to your firm.

Paragon Financial, with a two-decade history of working with small and mid-sized firms, can provide you with the highest-quality Cash Against Documents financing for importing the goods you need to conduct your business. With a superior level of international trade finance experience, we can not only provide the financing for your transaction but make sure that all documentation is completely and accurately fulfilled.