Negotiable instruments as instruments of payment in international trade

Historically, negotiable instruments, and more specifically bills of exchange, have played an important role as payment instruments in international trade, both before and after the advent of documentary credits. In the past two decades, however, their use, both as domestic payment instruments (mainly in the guise of cheques) and international trade (as trade bills used in documentary collection practice and banker’s acceptances used in conjunction with letters of credit) has declined. Their value in international trade (the focus of this chapter) was especially to facilitate discounting, thereby enabling the seller to get its money quickly, while the buyer was given a period of credit. The International Chamber of Commerce, the body responsible for drafting the Uniform Customs and Practice for Documentary Credits, has, in a recent Guidance Paper, advised banks to move away from acceptance credits (which requires the use of a banker’s acceptance) towards deferred payment credits (which do not require the use of a bill of exchange). This development will almost certainly give further momentum to the demise of the bill of exchange - one of the most remarkable commercial instruments of all time.