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Drafts/Transmittal Letters Drafts/Transmittal Letters PURPOSE AND USE Form Profile: 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
Common Errors to Avoid:
Sight Draft PURPOSE AND USE Form Profile: 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
Common Errors to Avoid:
Time Draft PURPOSE AND USE Form Profile: With a Time Draft, the drawer releases the shipping papers to the drawee who in turn, agrees to pay the amount stated on the draft within a specified period of time. A draft that is drawn on and accepted by a bank results in the creation of 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 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
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