Replying to [OMHMD]:

Extracted from my forthcoming book:

1.12.3 D/P bills: risk analysis

1.12.3.1 Advantages to the seller are as follow:
(a) Goods are in his effective possession till the drawee/buyer/importer pays for them;
(b) Since the bills are on D/P basis, no time is wasted. The bills are presented to the buyer at the first opportunity. The seller comes to know very early whether the drawee would pay or not. Warning signs, if at all they are to come, appear very early on his radar.
(c) The seller has a very experienced, reliable and professional banking system to work for him, acting on his precise instructions. Changes or deviations must have his prior approval.
(d) There are a clear and a definite set of rules (URC 522) to guide the collection process, and the expertise of the ICC to back it up. The entire transaction remains transparent to all parties concerned.
1.12.3.2 Disadvantages to the seller:
(a) There is no guarantee that the buyer will take delivery of the consignment. No agreement or contract can force a buyer to accept the consignment. If he does not, the buyer can be proceeded against in law for breach of contract.
(b) If buyer wishes to play truant and delays taking delivery, it may lead to demurrages and other incidental costs, compromising seller’s bargaining power.
(c) In case of failure of the buyer to pay for the goods and take delivery, the seller would either have to pay for storage (involving risk to the goods in terms of security, deterioration in quality etc. while in storage, logistics and costs), cost of carriage for return of the goods, or find an alternate buyer at the same or a new destination – leading to additional costs.
(d) Legal remedy for breach of contract can be long and a costly process. In practice, this is small consolation. For starters, the seller may not be fully aware of the legal system in the buyer’s country. The legal process can also turn out to be very long and very costly.
(e) Further, while the legal process goes on, if the consignment has been refused, the seller (or the presenting bank on his behalf) would have to consider storage of the goods.
(f) The shipper may be forced to abandon the goods altogether and write off all costs and expenses (total loss).
(g) Country risks, legal risks, market risks, failure of performance by the buyer are risks that cannot be ignored till payment is actually made by the buyer and the proceeds are received by the seller.

1.12.3.3 Disadvantages to the buyer:

(a) There is no guarantee or certainty that shipment will be made, or the shipping schedule will be adhered to by the seller.
(b) The buyer has no control over the quality, quantity, or any aspect covering the goods shipped.
(c) Unless he has paid for the goods, he is unable to either take delivery of, or inspect, the goods. He must first pay, and only then be able to obtain possession of the consignment, and only thereafter be in a position to satisfy himself as to the correctness in terms of quality, quantity, packaging or condition during transit.
(d) Once payment has been made, he cannot recall or reclaim the funds even if he is not satisfied about the quality, quantity or any other aspect of the transaction. He must pursue remedial action separately.