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).
