Sight Draft

AAA

DEFINITION of 'Sight Draft'

A type of bill of exchange, in which the exporter holds the title to the transported goods until the importer receives and pays for them. Sight drafts are used with both air shipments and ocean shipments for financing transactions of goods in international trade. Unlike a time draft, which allows for a short-term delay in payment after the importer receives the goods, a sight draft is payable immediately.

INVESTOPEDIA EXPLAINS 'Sight Draft'

A shortcoming of sight drafts is that if the importing country disallows the shipment or the importer is unable to pay for the shipment when it arrives, the exporter will not get paid and will be responsible for return shipping or disposal costs. Sight drafts must be accompanied by a letter of credit and other required documents, such as an ocean bill of lading, in order to be paid.



RELATED TERMS
  1. Tariff

    A tax imposed on imported goods and services. Tariffs are used ...
  2. General Order - GO

    A status given to imported goods that are missing the proper ...
  3. Export

    A function of international trade whereby goods produced in one ...
  4. Import

    A good or service brought into one country from another. Along ...
  5. Certificate Of Origin - CO

    A document declaring in which country a commodity or good was ...
  6. Capital Expenditure (CAPEX)

    Funds used by a company to acquire or upgrade physical assets ...
RELATED FAQS
  1. How is reconciliation treated under generally accepted accounting principles (GAAP)?

    The generally accepted accounting principles, or GAAP, provide different reconciliation rules for balancing many kinds of ... Read Full Answer >>
  2. Where did the concept of reconciliation in accounting come from?

    Financial accountants perform reconciliation to ensure that the balances of two accounts are in agreement. The process by ... Read Full Answer >>
  3. Are all fixed costs considered sunk costs?

    In accounting, finance and economics, all sunk costs are fixed costs. However, not all fixed costs are considered to be sunk. ... Read Full Answer >>
  4. What is the difference between work in progress (WIP) and raw materials in accounting?

    Raw materials and works in progress (WIP) are distinct categories in financial accounting for business inventory. Each applies ... Read Full Answer >>
  5. What types of assets and payments are recorded in the capital account?

    In terms of international trade and the balance of payments, the term "capital account" means different things in different ... Read Full Answer >>
  6. How can industrialization affect the national economy of less developed countries ...

    Industrialization – the period of transformation from an agricultural economy to an urban, mass-producing economy – has accompanied ... Read Full Answer >>
Related Articles
  1. Economics

    In Praise Of Trade Deficits

    When a country imports more than it exports, is it a recipe for disaster or just part of a larger cycle?
  2. Economics

    NAFTA's Winners And Losers

    Read on to find out who this free-trade agreement helped, and who it hurt.
  3. Economics

    China And The Maritime Silk Road

    We provide an overview of China's planned Maritime Silk Road.
  4. Forex Education

    What Is A Currency War & How Does It Work

    We look at what a currency war is, what factors may lead to it, the impacts of such a strategy, and whether there is a currency war currently.
  5. Economics

    What is a Capital Account?

    Capital account is an economic term that refers to the net change in investment and asset ownership for a nation.
  6. Economics

    Understanding Carrying Value

    Carrying value is the value of an asset as listed on a company’s balance sheet. Carrying value is the same as book value.
  7. Economics

    Understanding the Fisher Effect

    The Fisher effect states that the real interest rate equals the nominal interest rate minus the expected inflation rate.
  8. Economics

    International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards are accounting rules and guidelines governing the reporting of different types of accounting transactions.
  9. Economics

    Explaining Property, Plant and Equipment

    Property, plant and equipment are company assets that are vital to business operations, but not easily liquidated.
  10. Economics

    How to Calculate Trailing 12 Months Income

    Trailing 12 months refers to the most recently completed one-year period of a company’s financial performance.

You May Also Like

Hot Definitions
  1. Wash Trading

    The process of buying shares of a company through one broker while selling shares through a different broker. Wash trading ...
  2. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  3. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  4. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  5. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  6. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
Trading Center