Risks and Prevention Measures of D/P Usance Transactions: A Study Based on Two Agricultural Product Trade Cases

Purpose – D/P usance is a widely utilized collection method in international trade. However, due to the lack of explicit provisions in URC 522 and the inconsistent practices of collecting banks, some of which mistakenly treat D/P usance as D/A upon encountering a usance draft, sellers face elevated risks. This paper aims to investigate the underlying causes of these risks and propose practical countermeasures. Design/Methodology – This study employs a combined approach of literature review and case analysis. Theoretical insights are drawn from URC 522 to identify risk factors inherent in D/ P usance transactions. Subsequently, two representative trade cases are analyzed to explore effective strategies for risk mitigation. Findings – The analysis indicates that D/A combined with factoring can serve as a viable alternative to D/P usance. In cases where D/P usance is unavoidable, sellers should perform thorough due diligence regarding both the importing country’s banking practices and the buyer’s creditworthiness. In the event of disputes, the collecting bank should be primarily held accountable for any deviations from the collection instructions. Originality/value – Despite its widespread use, D/P usance remains under-researched and is often overlooked in risk assessments of international settlements. This paper illuminates the regulatory ambiguities surrounding D/P usance under URC 522 and offers actionable strategies to mitigate associated risks, providing practical guidance for exporters and trade finance professionals.