D-2-5- The bill of exchange for your international transaction.


2-5-1- The bill of exchange: definition

La lettre de change est un outil de paiement. The bill of exchange is a paper instrument that can be transmitted. The exporter, the drawer, mandates payment from the importer, the drawee, or a representative, the bank, by the due date, in the specified currency. The exporter sends the bill of exchange to the importer, who then returns it as accepted, or signed.

As with other payment tools, the bill of exchange has its own advantages and drawbacks.

2-5-2- The bill of exchange: legal framework

A legal framework regulates, in part, the rules that apply to the bill of exchange. In 1930, Geneva, Switzerland, produced an international convention that defined the laws applicable in cases of dispute. The applicable laws are those in the country where the importer contracted to pay the exporter; the importer country.

2-5-3- The bill of exchange: Terms of use

Within the bill of exchange, the exporter gives its clients an extension on payment terms. This credit can be obtained with the bank by requesting a discount on the bill of exchange. The holder of a bill of exchange can also retain and collect at the due date, or remit for payment to a creditor through endorsement.

The bill of exchange can be endorsed, backed or negotiated. The first two terms of use provide the exporter a more secure payment:
  • a bill of exchange endorsed,
  • a bill of exchange backed,
  • a bill of exchange negociated.

2-4-4- The endorsed bill of exchange

  • The endorsed bill of exchange: definition A bill of exchange may be endorsed by signature. The endorsement may leave the beneficiary consisting solely of this signature. The inclusion of "no" to order means the title cannot be transferred in ordinary form. Similarly, an endorsement by the holder is considered a blank endorsement.
  • The endorsed bill of exchange: Implications An endorsement transfers all the rights arising from the bill of exchange. If the endorsement is in blank the holder may:
    • fill in the blank with their name or that of another person,,
    • endorse the bill to another person, ,
    • deliver the bill to another party blank, and without endorsing it.

2-4-5- The endorsed bill of exchange

  • The endorsed bill of exchange: definition The endorsement of a banker primarily ensures the payment at the due date. It is a commitment whereby a third party or a signatory is the guarantor under the bill of exchange. The endorsement can be given in part, or for the total amount of the bill. Based on this mechanism, it is recommended to ask the buyer upon signing the contract for a guarantee from its bank.
  • Advantages of the endorsed bill of exchange The benefits of the endorsed bill of exchange for import or export include speed, the simplicity of implementation, and the ability to anticipate and diversify risks.
  • Disdvantages of the endorsed bill of exchange The major drawback of the endorsed bill of exchange lies in the fact that the exporter must repatriate goods at its own expense, and at a premium, in the event of nonpayment because of the bank guarantee.

2-4-6- The traded bill of exchange

In the case of a traded bill of exchange, a claim has been negotiated/discounted by the bank. -->

2-5-4- The bill of exchange: advantages

The advantages of the bill of exchange for an international operation include the speed and ease of use, and providing recourse in case of default. It's also a well-known instrument of payment (payment tool) to importers.

2-5-5- The bill of exchange: drawbacks

The major drawback for this mode of payment is that the exporter must return goods at its own expense in case of non-payment.