Definition

Noun: A foreign draft is a type of bill of exchange. It is a written financial order drawn (created) in one country but designated to be paid in a different country.

Usage

A foreign draft is used in international trade and finance to facilitate payment across borders. The party creating the draft (the drawer) instructs another party (the drawee, typically a bank) to pay a specified sum of money to a third party (the payee) in another country.

Examples

• The exporter requested payment via a foreign draft drawn on a London bank but payable to their account in Tokyo.
• To settle the invoice, the company purchased a foreign draft from their bank.
• A foreign draft is often considered a more secure payment method than a personal check for international transactions.

Advanced Usage

• Banker's Draft: A foreign draft is often issued as a banker's draft, meaning the drawing bank guarantees the payment, making it a very secure instrument.
• Negotiability: Like other bills of exchange, a foreign draft is a negotiable instrument and can sometimes be transferred to another party before payment.

Variants and Related Words

• Bill of Exchange (Noun): A broader term for a written order to pay a specific sum; a foreign draft is a specific type of bill of exchange involving two countries.
• International Money Order (Noun): A simpler, standardized form of payment for smaller amounts across borders, similar in function to a foreign draft.
• Bank Draft (Noun): A draft drawn by one bank on another; a foreign draft is often a type of bank draft.

Synonyms

• International Draft
• Cross-border Draft

Notes

The term specifically refers to the instrument or document itself, not the act of creating it. It is a formal financial document governed by international conventions like the Geneva Uniform Law on Bills of Exchange and Promissory Notes.

Noun

1. a bill of exchange that is drawn in one country and made payable in another