Drawn bill

The drawer of a foreign bill of exchange calls on someone to pay a sum of money to a third party according to the conditions specified on the promissory note.

A bill of exchange is a security document embodying a monetary claim, which may contain a demand for payment (foreign bill of exchange) or a promise to pay (own bill of exchange). In international business life, the foreign bill of exchange is more popular and widespread.

The foreign bill of exchange is executed by the drawer/issuer of a bill of exchange of the promissory note: he calls upon someone to pay a specified amount to a named third party at a specified time and place. It is not necessary that any of these be financial institutions. In this case, the promissory note transaction has three parties: in addition to the issuer and the drawee called to pay on the promissory note, the third party is the beneficiary, who receives the amount of the bill of exchange from the promissory note from the debtor at maturity. 

It is important to know that the drawee is not obliged to pay simply because he was asked to pay on the bill of exchange. On the other hand, if, as a customer, we concluded a loan transaction secured by a foreign promissory note, we must acknowledge our payment obligation on the promissory note itself. By signing the first page of the bill of exchange note, we become the acceptor instead of the drawee. This operation is acceptance of a bill of exchange acceptance. The acceptor will henceforth be the principal debtor of the foreign bill of exchange primary debtor.

A foreign bill of exchange draft can be a bill of exchange or an acceptance according to the identity of the promissory note debtor. (The name of the foreign bill of exchange of exchange accepted by the drawee is acceptance. The non-accepted foreign bill of exchange is the draft.) The special feature of the draft note is that the instrument is also a valid bill of exchange, if it contains all mandatory features of a bill of exchange. According to the Bills of Exchange Act, all those who sign the bill of exchange anywhere are responsible for paying the amount of the bill of exchange. 

The draft bears the issuer 's signature, so he is also the debtor, even though he intended to pay the amount indicated on the promissory note to someone else (the named drawee). It is therefore in his best interest to turn the draft into an acceptance, i.e. to acknowledge his payment obligation with the drawee (who owes him). 

If you don't do this, it's easy to turn from a creditor to a debtor in a promissory note transaction. (Unless you chose this version as acknowledgment of your debt because your creditor insisted on using a foreign bill of exchange note instead of your own bill of exchange note.)

All of this becomes understandable if we assume that two independent sales transactions lie behind a foreign bill of exchange. In the first transaction, the issuer bought goods on credit from the beneficiary named on the promissory note, so he owes it to him. In the second transaction, however, he sells goods to the drawee named on the bill of exchange. Simplifying subsequent cash flows, he agrees with both business partners that his debt to the beneficiary be settled by the drawee of a bill of exchange of exchange (his buyer). The drawee acknowledges this with his acceptance signature, and the original seller named as beneficiary on the promissory note, to whom the issuer owes as the buyer of the other transaction, also agrees with this solution. If the acceptor pays the amount of the bill of exchange at maturity, in addition to his own debt, he has also settled the issuer's debt to the beneficiary. (All of this could be solved by issuing two independent bill of exchange of exchange.) 

The above explains that by accepting the bill of exchange of exchange, the issuer is not exempted from its payment obligation, in addition to the principal obligee (direct debtor) the acceptor becomes a so-called underwriter (together with the possible promissory note guarantor). 

The version (draft) of the foreign bill of exchange of exchange is a mandatory accessory to the worldwide commercial letter of credit (L/C) as a document accompanying the bill of exchange. 

As a variant of the foreign bill of exchange promissory note, the foreign bill of exchange to one's own decree is often used in international business, behind which there is only a single sale transaction. Here, the drawer/issuer of a bill of exchange of exchange is the seller of the goods, who is also the beneficiary ("Pay me..."), and the drawee is the buyer of the goods. If we work with such a promissory note, it is in our well-understood interest as a seller that the promissory note be accepted by our buyer as an acknowledgment of his obligation to pay. 

Foreign bill of exchange to one's own decree are often used in international business life for the documentary collection (D/A) version, mainly in overseas trade.