Sight Draft Definition
A sight draft is a document held by an exporter that allows him or her receive payment for goods that have been shipped to an importer as soon as the importer confirms the receipt. A sight draft is a form of bill of exchange which is payable as soon as it is presented for payment. Oftentimes, sight drafts are used for sea shipments and air shipments, this draft allows an exporter hold the title to goods being transported to an importer until the importer acknowledges their receipt and pays for them. There is no delay to the payment of a sight draft, once presented, payment follows.
A Little More on What is a Sight Draft
Sight drafts are payable of demand, these drafts are drawn by banks on another bank. That is, banks draw sight drafts to show that payment will be made once the importer receives the goods being transported by an exporter.
A sight draft allows an exporter to retain title to goods being transported until they are received by an importer and paid for. Goods being shipped by water or transported by air often have sight drafts. However, one of the drawbacks of a sight draft is that an exporter does not receive payment for goods until an importer receives and pay for them. Therefore, if an importer is unable to pay or a country disallows the import of thegoods, no payment is made and the exporter bears all the costs of returning the goods.