Drafts/Transmittal Letters

• Drafts/Transmittal Letters
• Sight Draft 
• Time Draft
  

Drafts are widely used as instruments for payment in international trade.  As negotiable instruments, they must be signed by the drawer, be payable on demand (at sight), contain an unconditional order to pay a specified amount of money, and be endorsed either to the drawer or the drawer’s bank.

REGULATORY FACTS

Form Facts:

• Unz Stock No.:   W20-015

Common Errors to Avoid:

• Drafts do not specify either “at sight” or “time.”
• Currency of collection is not specific.
• Letter of credit required documents not same as specified on transmittal letter.
• Not specifically endorsed either to drawer’s bank or drawer.

Sight drafts require that the amount stated be paid by the drawer before shipping documents related to the transaction are released.  A draft drawn on and accepted by a bank results in a Banker’s Acceptance.

In some instances, the merchandise can be turned over to the buyer before payment, under a Trade Acceptance. A factor to consider with a Trade Acceptance is that the exporter is exposed to more risk than with a Sight Draft because the buyer has already received the goods. 

REGULATORY FACTS

Form Facts:

• Unz Stock No.: W20-030, W20-075

Common Errors to Avoid:

• Make sure that the currency of settlement of the draft is the same as the sales contract specifies.  

REGULATORY FACTS

Form Facts:

• Unz Stock No.: W20-010