Bill of Exchange

A bill of exchange, or draft, is a negotiable instrument that is both drawn upby and made payable to the exporter/seller. Although written by the seller, it has the equivalent effect of a check written by the buyer. It is generally a three-party instrument consisting of a:

1. Drawer – the party issuing the bill of exchange; usually the exporter/seller.

2. Drawee – the recipient of the bill of exchange for payment or acceptance; usually the buyer.

3. Payee – the party to whom the bill is payable; usually the seller’s bank.

Bills of exchange are either payable at sight (sight drafts) where the bank pays the full amount upon presentation, or payable at some future date (time or term drafts).