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Bill of Exchange

A bill of exchange is a kind of check or promissory note without interest.  It is used primarily in international trade, and is a written order by one person to pay another a specific sum on a specific date sometime in the future.  If the bill of exchange is drawn on a bank, it is called a bank draft.  If it is drawn on another party, it is called a trade draft.  Sometimes a bill of exchange will simply be called a draft, but whereas a draft is always negotiable (transferable by endorsement), this is not necessarily true of a bill of exchange.

As with all financial documents, the source, i.e. the drawer or issuer of the bill of exchange, must be carefully investigated.  If it is a bank, then the bank must be contacted to verify the authenticity of the document, and the creditworthiness of the bank must be established through independent research.  If the bill of exchange is drawn on a private party, then the risk depends on the creditworthiness of the drawer. 

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