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TeachMeFinance.com - explain Documentary bill for payment historic definition...
Documentary bill for payment -- A draft (bill of exchange)
drawn on the receiver or consignee of a shipment of property
to which are attached documents, comprising the bill of lading,
policy of insurance, etc. On the payment of the draft the bill
of lading, together with the other papers, is surrendered to the
consignee so that he may obtain possession of the property.
Example : A in New York makes a shipment of goods to B
in London for which immediate payment is to be made. A
makes a draft on B for the amount of the goods (that is, for
the amount in money) and attaching to it the bill of lading
for the goods sells the draft to a dealer in foreign exchange in
New York, who forwards it to his correspondent in London
for collection from B in London. Thus, A receives pay for
his goods as soon as they are shipped. He has not to ship the
goods, wait for them to reach London, and then wait for a
ship to bring back gold in payment for them, nor even to wait
for the mail to bring back a draft bought by B in London on
some bank or banker in New York ; much less has he to wait
for B to receive the goods, draw a check on his own (B's)
bank in London, and send it to him (A in New York), who
would have to sell the check to some dealer in foreign exchange
in New York. B, by receiving the bill of lading for
the goods when the draft is presented to him for payment,
knows not only that the goods have been shipped to him, but
also, by possession of the bill of lading, holds actual title
to them.
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