Question

Differentiate between the following

(i) Sight and usance drafts

(ii) Bill of lading and airway bill

(iii) Pre-shipment and post-shipment finance

Answer 1

(i)

Basis of difference	Sight draft	Usance draft
When documents are handed over	Documents are handed over to the importer once he or she agrees to sign the draft.	Documents are handed over to the importer after the acceptance of the bill of exchange.
Payment	Payment is made at the time of issuing the draft.	Payment is made on the expiry of a specified period.

(ii)

Basis of difference	Bill of lading	Airway bill
Issued by	Issued by shipping companies.	Issued by airline companies.
Mode of transportation	Goods are sent by ship.	Goods are sent by air.

(iii)

Basis of difference	Pre-shipment finance	Post-shipment finance
Time of credit	Credit is obtained before the shipment of goods.	Credit is obtained after the shipment of goods.
Use	Used for purchasing raw materials to undertake production activities, packaging of goods and transporting goods to the port of shipment.	Used for financing activities from the date of receiving credit till payment is received from the importer.