Bill of Exchange
A bill of exchange is defined as documentation for the payment of a financial transaction. It is very similar to a promissory note that legally requires a buyer to make the payment of an agreed upon amount to a seller for the transaction by a certain date. This document of the bill of exchange is used for international shipping as a negotiable instrument which is created by a seller (or an exporter) and handed to the buyer (or an importer). It is a legally binding document which instructs the buyer to pay the transaction amount to the seller on a specific date upon the receipt of the goods or on a specified day, post the receipt of goods (for example, 30 days after the receipt of goods).
Bills of exchange are similar to checks in that they can be drawn on banks and can be transferred through an endorsement of the bill of exchange. When a bill of exchange is issued by a bank, it is referred to as a bank draft; if issued by an individual, it is commonly referred to as a trade draft. A bill of exchange provides details related to the goods that are shipped to the buyer, invoice amount for the payment, date when the payment is due and the bank details.
Bill of Lading
A bill of lading helps to list the details of all the items which are being received by the shipper and the place where they are being shipped. It also acts as a receipt of the transaction for the second party after the items are received. A bill of lading helps to provide details of the transaction within a document from the shipper of the goods, and it describes the goods that are being shipped, their quantity and destination.
The bill of lading also helps to serve as the receipt for when the goods arrive at the destination. The destination is also noted in the bill of lading. It is evidence of the shipment and a proof of receipt for the goods from the individual or company providing the goods for the purpose of shipment.
Difference between Bill of Exchange and Bill of Lading
There are some major areas of difference between bill of exchange and bill of lading, and we shall focus on them below to get a better understanding of the topic:
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A bill of exchange is defined as an endorsed document that is issued by a seller (or a drawer) to a buyer (or drawee) as a promise to pay the money for the transaction at an agreed date in the future. |
A bill of lading is a shipping document which a freight forwarder or a shipping carrier issues to a cargo owner as the contract of the carriage of goods. |
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The main purpose of a bill of exchange is to facilitate the financing of a transaction between two parties. |
The main purpose of a bill of lading is that it acts as an underlying document that allows a cargo owner to enter a contract with a logistics provider for shipping the cargo internationally. |
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The seller is the issuing entity for a bill of exchange. |
The logistics provider is the issuing entity for a bill of lading. |
Conclusion
There are a number of points of difference between bill of exchange and bill of lading. However, both of them play a crucial role in financial transactions. With the advancement of technology and logistics, the role of both these documents continue to be vital for the success or failure of any business transaction.
Frequently Asked Questions
What are some of the details that are covered in a bill of lading related to the cargo in transit?
Some of the details that are covered in a bill of lading are mentioned below:
- Weight and dimensions of the cargo in transit
- Description of the cargo in transit
- Packing material of the cargo in transit
- Hazardous cargo detail
- Information related to the vessel used for cargo in transit
- Terms of contract for affreightment
What are some of the details that are included in a bill of exchange?
Some of the details included in a bill of exchange are mentioned below:
- Drawer of a bill of exchange
- Drawee of a bill of exchange
- Endorsee or payee of a bill of exchange
- Date of the maturity of a bill of exchange
- Stamp duty
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