It is used before concluding the transaction

1. Answer the following questions:

1. What is the legal definition of the Bill of exchange? A bill of exchange is legally defined as “a conditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to which it is addressed to pay on demand or at a fixed or determinable future time a certain sum of money, to or to the order of a specified person, or to the bearer”.

2. Who and how prepares the BILL of exchange? an exporter prepares a bill of exchange which is drawn on an overseas buyer, or even on a third party as designated in the export contract, for the sum agreed as settlement.

3. What are the duties of buyer concerning B’S? the buyer is receiving a period of credit, known as the tenor of the bill. The buyer sings an agreement to pay on the due date by writing an acceptance across the face of the bill.

4. How does B’S ensure banking operations? By using a bill of exchange with other shipping documents through the banking system, an exporter can ensure greater control of goods, because until the bill is paid or accepted by the overseas buyer the goods cannot be released.

5. What is the clean bill collection? the buyer does not have to pay or agree to pay by some Agreed date until delivery of the goods from the exporter.

And exporter can pass a bill of exchange to a bank in the UK. The UK bank forwards the bill to its overseas branch or to a correspondent bank in an overseas buyer’s country. This bank, known as the collecting bank, presents the bill to whomever it is drawn upon, for immediate payment if it is a sight draft, or for acceptance if it is a term draft. This procedure is known as a clean bill collection because there are no shipping documents required.

6. What is a cash against documents (CAD) collection? An exporter can even use the banking system for a cash against documents (CAD) collection. In this case only the shipping documents are sent are sent and the exporter instructs the bank to release them only after payment by the overseas buyer. This method is used in some European countries whose buyers often prefer CAD to a sight draft if the exporter insist on a documentary collection for settlement of the export contract.

7. How does the bank ensure the system of direct collection? It is even possible to send the documents and bill of exchange directly to an overseas buyer’s bank, bypassing the UK bank. This system of direct collection is widely supported by US banks, but it dispenses with the help of the UK bank whose aid can be invaluable if something goes wrong in the collection.