Unit 9 Instruments of International Settlements

B. 3 Parties of Draft
A bill of exchange has three parties: the drawer, the drawee and the payee: • The drawer is one who issues the bill of exchange, and he demands the drawee to pay a certain sum of money to the payee. He signs his name on the bill, and guarantees that the payer will pay the money or accept the bill upon the presentation of the draft. He draws the bill of exchange upon the drawee presumably because the drawee owns or is expected to pay him a certain sum of money. • The drawee of the bill of exchange is required by the bill of exchange to pay a certain sum of money to the payee upon the presentation of the bill or, if the bill is a time bill, he is required to accept the bill and effect the payment at the maturity of the bill. • The payee of the bill of exchange is the creditor of the bill of exchange. He is entitled to ask the drawee for the payment. If refused, he is entitled to have recourse to the drawer for the payment. The payee is generally the one that is listed on the bill. But for a negotiable bill, the payee listed on the bill may transfer the bill to someone else. He then becomes the prior endorser or transferor, when the man to whom the bill is transferred is the subsequent party.
C. Types of drafts
1) Commercial bills and banker’s bill Commercial bill is drawn by commercial companies, which is often used in foreign trade finance, while banker’s bill is drawn by banks, which is chiefly used in remittance. 2) Clean bill (光票) and documentary bill (跟单汇票) In the transfer of the bill of exchange, if the bill of exchange is accompanied by the relevant documents, it is a documentary bill. If there’s no attachment of documents, it is a clean bill. In international trade, mostly it is the documentary bill that is used, occasionally the clean bill is used to collect payment in small amount or sundry charges. 3) Sight bill (即期汇票) and time bill (远期汇票) A sight bill demands immediate payment by the drawee at the sight of the bill. In case of the time bill, the drawee is to accept it first and pay it at a later date. The date may be in a certain number of days after the acceptance, such as “30 days after sight”. 4) Commercial acceptance (承兑) bill and banker’s acceptance bill If the drawee of a time bill is a commercial firm, it becomes a commercial acceptance bill after it is accepted by the drawee. If the drawee of a time bill is a bank, it becomes a banker’s acceptance bill after it is accepted by the bank. Banker’s acceptance bill can be very useful for financing the importer.
款已收讫 Value received ABC公司 ABC CORP. 此致 To :
王明
DEPT. MANAGER.
Commercial Draft
D. Stages in handing a bill of exchange
• To draw (出票) • Presentation (提示) and acceptance (承兑) • Payment （支付） • Endorsement (背书)
I. Draft (Bill of Exchange) (汇票)
A. The definition of the draft
• Definition-A bill of exchange (draft) is an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a certain sum of money to the order of a specified person or to the bearer.
B Parties of Promissory Note
• As a promissory note is a promise by the maker (not drawer) to pay to the payee, there are only two parties concerned, i.e. the maker and the payee. The maker of a promissory note can be more than one person, they are jointly and separately responsible for the payment of the bill. • Promissory notes can be sight promissory notes or time promissory notes. • Promissory notes can be made by commercial firms or bankers. Promissory notes made by the bankers are usually called cashier’s order or cashier’s check (银行本票).They are all sight notes. And in international trade, most promissory notes are drawn by bankers which are mostly not negotiable.
BANK OF CHINA
号码No. 30007611 本汇票有效期为一年 This draft is valid for one year from the date of issue 金 额AMOUNT
中 国 银 行
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请 付 PAY TO
pay to
金 额 THE SUM OF
pay to
Unit 9. Instruments of International Settlements
In international trade practice, the buyer is obliged to make payment to the seller. The instruments (or bills) used for payment or transfer of money in international trade practice, including draft, promissory note, and check.
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中国银行上海分行
pay to
PAY AGAINST THIS DRAFT TO THE DEBIT OF OUR ACCOUNT pay to