Bill of Exchange

Tags: Glossary

A legal document that orders the payment of a specified amount of money from one entity to another.

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What is a Bill of Exchange?

In shipping, a Bill of Exchange is a written document that serves as a financial instrument used to facilitate international trade. It is a type of negotiable instrument that allows for the transfer of payment between buyers and sellers involved in a transaction. 

A Bill of Exchange is typically used when goods are being shipped between countries and provides a mechanism for payment to be made to the seller once the goods have been delivered to the buyer. The Bill of Exchange serves as a promise to pay and includes details such as the amount to be paid, the name of the buyer and seller, and the terms and conditions of the transaction. 

  • The process of using a Bill of Exchange in shipping typically involves the following steps: 
  • The seller ships the goods to the buyer and sends the Bill of Exchange along with the shipment documents. 
  • The buyer receives the shipment and the Bill of Exchange and acknowledges receipt of the goods.  
  • The buyer signs the Bill of Exchange, indicating their agreement to pay the amount due at a specified future date. 
  • The seller can then present the Bill of Exchange to a bank for payment or may sell the Bill to a third party in exchange for immediate payment. 

Related Glossary terms

Advance Against Documents 

Arrival Notice 

Bill of Materials 

Bill to Address 

Billing Unit 

Cash Against Documents (CAD) 

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