PAYMENT FOR PURCHASE

In international trade, the main instruction of payment in settlement of the purchase price is the currency and bill.

I-    Currency:

There are different cases in using currency; adopting the currency of the seller’s country, or that of the buyer’s country, or even that of a third country.

When we decide which country shall be used, we should take the following two points into consideration: one is the convertibility and stability of the currency; the other is the tendency of fluctuation of the currency adopted.

II-   Bill of Exchange (B/E):

An unconditional written demand (order) by one party (a drawer) that a second party (the drawee) pays a fixed sum to the named party on a certain date.

* Drawer         : The party who receives the payment on B/E.

* Drawee        : The party who pays and accepts B/E.

Kinds of Bill of Exchange:

1- Clean Bill:

A bill of exchange is called a clean bill when no shipping documents are accompanied with it.

     2- A Documentary Bill:

It is the bill which is accompanied with the shipping documents (chiefly the bill of lading (B/L) commercial invoice, insurance policy… etc).

     3- Sight (Demand) Bill and Time (Usance) Bill:

     According to the time of payment, a bill of exchange may be either a sight bill or a time bill. If the draft is payable at sight on the presentation, it is a sight bill. If the drawee is required to pay the bill at the later date, the bill is called the time or usance bill. It requires acceptance before payment.

    A drawee is required to pay the bill a certain number of days after sight such as: 30 days, 60 days, 90 days, 120 days … etc.

*         Payable certain days after the date of draft.

*         Payable certain days after the date of bill of lading (B/L).    

*         Payable certain days after the date of arrival of goods.

     *   Payable certain days after the fixed date.

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