Bills of Exchange

XII. Complete the sentences using your own words:.

Herald of the National Bank of Ukraine. May 2000

1. The National Bank of Ukraine, as the central bank, carries out ….

2. The NBU maintains relations with other countries’ ….

3. The NBU has the exclusive right to ….

4. The NBU determines ….

5. The NBU accumulates, stores and uses ….

6. To support the banking system liquidity and stability the NBU ….

7. Loans are given to commercial banks by ….

8. The NBU provides cash management of the Ukrainian State Budget through ….

9. Special software – hardware package secures ….

10. Starting January, 1, 1998 the banking system of Ukraine switched over to ….

XIII. Match the words and word combinations given on the left with their dictionary definitions given on the right.

1) central bank	a) the process of paying outstanding accounts between banks;
2) to issue currency	b) to print cash in the form of notes and coins;
3) to put currency into circulation	c) the authority of regulating and control character;
4) cash supply	d) the main bank in each country which acts as an arm of the government more than it does a bank. It is responsible for the regulation of the financial system, the establishment of rates of interest and the issue of currency notes;
5) gold and foreign exchange reserves	e) the quantity of cash available;
6) the Treasury	f) to issue currency and make use of it in each country;
7) the foreign exchange policy	g) safe investment condition;
8) supervisory body	h) the government department responsible for administering the financial affairs of the country;
9) interbank settlements	i) the policy regulating the rate at which one currency can be exchanged for another. A government may influence the rate at which the domestic currency is exchanged for another currencies by entering the market itself to buy or sell its own currency;
10) financial reliability	j) an amount of gold and foreign currency retained by a state;

XIV. Point all possible advantages and disadvantages (if may be) of the bills of exchange (b/e) given bellow.

A bill of exchange is an order sent by the drawer (the person asking for the money) to the drawee (the person paying) stating that the drawee will pay on demand or at a specified time the amount shown on the bill. If the drawee accepts the bill, he will sign his name on the face of it and date it. The bill can be paid to a bank named by the drawer, or the drawee can name a bank he wants to use to clear the bill. If this is the case, the bill will be kept in the drawer's bank until it is to be paid. When the bill is due it is presented to the paying bank. Such bills are said to be domiciled with the bank holding them.

A sight draft or sight bill is paid on presentation. In a documents against payment (D/P) transaction, the sight draft is presented to the importer with the shipping documents, and the importer pays immediately, i.e. 'on presentation' or 'at sight'.

A bill paid 'after date' or 'after sight' can be paid on or within the number of days specified on the bill. Therefore, '30 days after sight' means that the bill can be paid 30 days after it has been presented.

Overseas bills in the UK are known as foreign bills, and those used within the UK as inland bills. A clean bill is one that is not accompanied by shipping documents.

The advantage for the exporter of payment by bill is that the draft can be discounted, i.e. sold, to a bank at a percentage less than its value, the percentage being decided by the current market rates of discounting. So even if the bill is marked 90 days, theexportercan get his money immediately. The advantage for the importer is that he is given credit, provided the bill is not a sight draft. The bank, however, will only discount a bill if the buyer has a good reputation.

Bills can be negotiable if the drawer endorses the bill. If Mr. Panton, the beneficiary of the bill at 9.6.2, wanted to pay another manufacturer, he could write on the back of the bill, i.e. endorse it, and the bill would become payable to the person who owned it. Mr. Panton can endorse it specifically, i.e. make it payable only to the person named on the bill.

It is possible to send the bill direct to the importer, if he is well known to the exporter, or if not, to his bank which will hand it to him with the documents for either acceptance or payment.

A dishonored bill is one that is not paid on the due date. In this case the exporter will protest the bill, i.e. he will go to a notary, a lawyer, who will, after a warning, take legal action to recover the debt.

The abbreviations B/E for bill of exchange and d/s for days after sight' are often used. And you are now familiar with D/P, documents against payment and D/A, documents against acceptance.

XV. A. Study the letter advising dispatch of a sight draft. If the supplier wants immediate payment or does not have time to check the customer’s credit-worthiness, he may send a sight draft, as in this example:

Panton Manufacturing Ltd. Panton Works, Hounslow, Middlesex, TW6 2BQ Tel: [phone] Registered No. England 266135 Telex: 21511 Fax: [phone] Mr. J.Lindquvist, 10th June 20— LindquvistA.S., Vesteigade 190-2, DK 1171, Copenhagen K, DENMARK Dear Mr. Lindquvist, We have made up your order, No. 8540, which is now aboard the SS Leda, which sails for Copenhagen tomorrow. We are sure you will be pleased with the selection of items that we were able to get from stock. As there was no time to check references, we have drawn a sight draft, which will be sent to Nordbank, Garnes Vej, Copenhagen, and will be presented to you with the documents for payment. If you can supply two references before placing your next order, we will put the transaction on a documents against acceptance basis with payment 30 days after sight. Yours sincerely, D. Panton Managing Director

Do you think the supplier is fully protected in case of a sight draft?

B. Study the letter to a bank with a request to forward a bill:

Panton Manufacturing Ltd.   Panton Works, Hounslow, Middlesex, TW6 2BQ   Tel: [phone] Registered No. England 266135 Telex: 21511 Fax: [phone]   The Manager, 4th July 20— Midland Bank Ltd., Portman House, Great Portland Street, London W1N 6LL   Dear Sir,   Please would you send the enclosed draft on J.K.B. Products Pty. and documents to the National Australian Bank, 632 George Street, Sydney, Australia, and tell them to release the documents on acceptance.   Yours faithfully,   D. Panton Managing Director   Encl.  

Why do exporters sometimes ask their banks to forward bills to importers’ banks?

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