What is Acceptance?
An acceptance is a formal agreement by an importer to pay for goods at a future date. This commitment is made when the importer receives specific trade documents. By signing and returning these documents with the word "accepted" or a similar phrase, the importer assumes responsibility for payment on the agreed-upon date. This creates a legal obligation for the importer to pay the exporter the full amount due.
Understanding Acceptance
Documentary collections involve an acceptance agreement as a core component in international trade. The exporter's bank acts as an intermediary responsible for collecting payment from the importer's bank. This payment is triggered when the importer receives shipping documents and agrees to the payment terms. Once accepted, the importer becomes obligated to pay the invoice amount as specified. These documents serve as evidence of ownership and are essential for taking possession of the goods at the port of entry.
Example of Acceptance
XYZ Trading Company receives a set of documents from its bank, including a commercial invoice, bill of lading, and insurance certificate, for the 1000 electronic gadgets purchased from ABC Manufacturing. The documents also include a draft for payment due in 30 days.
To accept the shipment, XYZ Trading Company's authorized representative writes "Accepted" on the draft, along with the date and company stamp. This signed draft is returned to the importer's bank, signifying the importer's agreement to pay the specified amount within the agreed-upon timeframe.
By accepting the draft, XYZ Trading Company assumes responsibility for payment and can proceed with the process of taking possession of the goods at the port of entry.