A bill of exchange is an important document in export process that contains reference details of an export shipment like amount of invoice from the buyer, time of payment, bank details, etc. It is used in international shipping
as a negotiable instrument. When a Bill of Exchange is issued by a bank, it is referred to as a bank draft. If it is issued by an individual, then it is referred to as a trade draft1
. For instance, when person ‘A’ exports goods to person ‘B’ on credit of INR 10,000 for three months. To ensure payment on the due date, ‘A’ draws a Bill of Exchange to ‘B’ for INR 10,000 payable after the time period. Before it is accepted by ‘B’, it will be called a draft. Once ‘B’ writes the word ‘accepted’ with a signature, the draft becomes a Bill of Exchange.