Instruments Should be Carefully Drawn Drafts and bills of exchange should be most carefully drawn, as improperly and carelessly drawn instruments are likely to create an unfavorable impression of the concern issuing same, to say nothing of the expense which might be occasioned by a refusal.

Foreign banks do not allow unofficial signatures or endorsements. It is advisable to issue in duplicate all drafts on oversea customers, particularly if accompanied by shipping documents, enabling the bank to attach part of the set to the original draft and the remainder to the duplicate, thus guarding as far as possible against loss of all documents and consequent inconvenience and expense to the consignee, besides loss of interest and trouble for the parties at this end.

The following is the most common form of draft or bill of exchange, and most large exporters have their own distinct forms, but the occasional exporter may obtain blanks from his foreign exchange banker.

to the value of $2,707.79, payable by draft at sixty days sight, against documents delivered upon acceptance, in accordance with mutual understanding apply to their bank for its buying rate of exchange for the draft in question, and obtain the net rate of 4.70, on the basis of which they convert the invoice amount, drawing for £576.2.6. Jackson & Company then deliver the bill to the bank and receive immediate credit for $2,707.79, and have no further concern unless the bill be unaccepted or unpaid.

The bank does not carry a direct account in Liverpool, and remit all exchange on that city to the Liverpool branch of one of the large London banks. Consequently, the bill is sent by first mail to, let us say, the London City & Midland Bank, Limited, Liverpool, for collection and credit with the head office. The London City & Midland Bank, Limited, Liverpool, presents the draft on arrival at the office of Williams & James at Liverpool, and leaves same for acceptance, as customary, until the next business day, when a messenger is sent around to "pick up" the bill, now a trade acceptance and discountable in the English market, or with the addition of an English endorsement, at the Bank of England.

It will be noticed that the bill is drawn "payable in London" for the purpose of giving it a more ready negotiability in the London bill market, and requiring Williams & James to domicile their acceptance at a London address. Williams & James, having no London account, accept the bill payable at, say, Glyn, Mills, Curie & Company, the London correspondents of their local bank, the Bank of Liverpool, Limited, by writing or stamping across the face of the bill the following form of acceptance:

At sixty days after sight of this First of Exchange (Second Unpaid) pay to the order of

Ourselves in London

Five Hundred Seventy-Six Pounds 2'6 Sterling Value received and charge the same to account of To Messrs. Williams & James

No. 472

Liverpool

FORM OF DRAFT OR BILL OF EXCHANGE

As the handling of a bill on one direct exchange country is typical of all, it may be of sufficient general interest to digress from our topic to follow an example through to the final payment.

Example in Handling a Bill on Direct Exchange

Country

Jackson & Company, New York, having sold to Williams & James, Liverpool, merchandise

Accepted

Liverpool, January 17, 1916
payable at

Glyn, Mills, Currie and Company
67 Lombard Street, London, E. C.
adding their firm signature.

This acceptance falling due March 20, 1916, including the three days' grace, Williams & James will fill out a blank obtainable for the purpose, a day or two before maturity, instructing the Bank of Liverpool, Limited, to cover the bill, for which the Liverpool bank will make a small charge.

Sixty days after date of acceptance, the New York bank receives

for collection, for its account, it may request the London bank by cable or letter to discount same, under usual reserve (i. e., with recourse).

Such

Bills on Foreign Buyers at 60 or 90 Days Sight Bills are often drawn on foreign buyers at 60 to 90 days sight, with documents deliverable only upon payment (called D/P Bills). bills may be retired (paid) by the drawees any time before maturity at the established rate, in Great Britain and Ireland, generally 1 per cent. under Bank of England minimum rate of discount (called Bank Rate) and on the European continent at the official bank rate of the country. Documents are invariably delivered only upon payment of bills covering raw products, except such bills as are drawn upon banks and bankers for account of buyers, in which case they are always delivered upon acceptance. Every draft should be accompanied by instructions emanating from the drawer, indicating whether the documents must be surrendered upon acceptance or payment, and naturally the presenting bank delivering documents upon acceptance in accordance with instructions, incurs no liability in so doing.

Del Credere

In some foreign countries it is possible to sell a draft after acceptance, without recourse, subject to a special commission depending upon the credit and responsibility of the acceptor, in addition to regular interest, which kind of operation is known as "Del Credere." The selling of paper without recourse, to the drawer, or any other party to the bill, is very unusual here, and not very well understood, possibly for the reason that paper which the drawer would thus dispose of would be practically unsalable, or only subject to Del Credere at an impossible price.

1. Payable at bank's drawing rate on day of payment for sight bills on......

2. Payable at bank's drawing rate with interest added thereto at % per annum from date of draft until approximate due date of arrival of remittance in......

3. Payable at check rate on Paris (payable au cours du cheque sur Paris).

4. Payable by approved bank check on......

5. Payable with exchange and stamps added at current rate in London for negotiating bills on the Colonies. 6. Payable at exchange as per endorsement.

* Occasionally in Dollars with Clause 1.

Bills of Lading

Bills of lading accompanying drafts are generally required by the negotiating bank to be issued to the order of the shippers and endorsed in blank, so that the bank or its agent can, if necessary, take possession of the relative goods, and furthermore, every valid or negotiable copy of each bill of lading, should be delivered to the bank whether the draft is advanced upon or not, for the reason that foreign drawees frequently insist upon full set of documents or bank guaranty covering same.

Banks forwarding items abroad for collection or credit always inform their correspondents in regard to the duplicate documents in order to avoid any delay in acceptance or payment of remittances.

Shipments to Columbia, Dominican Republic, Panama and Venezuela, cannot be consigned "to order" under the laws of those countries and are therefore frequently consigned to a local bank or banker. Shipping companies operating with neutral European countries are not at present accepting "to order" shipments, neither are they as a rule, allowing consignments of goods to a bank having only the usual banking interest, but are requiring bills of lading to show the name and address of the actual buyer. Articles for Holland and Swiss consumption must be consigned to the Nether

lands Oversea Trust Company (De Nederlandsche Overzeetrust Maatschappij) and the Societe Suisse de Surveillance Economique, respectively.

Insurance

It is vitally important to see that all waterborne shipments are adequately covered by marine insurance and, during war time, by insurance covering the risks of war. It is customary to insure for about 10 per cent. over the value of the goods.

War risk premiums are naturally subject to greater fluctuation than any other kind of insurance and the conditions have until now been subject to many changes.

Policies of war risk may be divided into two general classifications: 1. Covering only the risks of war excluding capture. 2. Covering capture besides the other risks of war. It is hardly necessary to add that insurance policies and certificates should be carefully studied. Banks prefer negotiable insurance certificate payable to the order of the shipper and endorsed by him in the same manner as the draft:

A foreign buyer may have his own insurance arrangements and requests the exporter to advise each shipment to a certain insurance company, which if it has not office or agent in this country, will probably have one in London, so that instead of attaching the usual negotiable insurance certificate to the draft, the shipper will attach the acknowledgment of the insurance company or its agent, called a "cover note," or for want of time may attach the carbon or press copy of the letter of advice to the insurance company, which letter should direct the insurance company to hand the cover note to the interested foreign bank. This form of insurance is quite common for shipments to Australia and other British Colonies.

Consular Documents

Nearly all the Latin-American Republics require a certification of invoice and bill of lading for which in some cases a rather heavy charge is made, amounting practically to a duty on the goods. A few countries not requiring certification on these papers, require a certificate of origin covering such goods as enjoy a preferential tariff, which in some cases must be sworn to before the consul for the district in which the exporter has his place of business.

The exporter's shipping agent in New York will attend to all necessary formalities.

Consular charges are always understood to be at the expense of the buyer on C & F and CIF, as well as F.O.B. (except F.O.B. destination) quotations.

It is very unusual to. quote F.O.B. foreign port and no seller should do so without fully realizing that he not only assumes all, the risk

and expense of forwarding the goods to the foreign port but in the event of loss would have to replace the shipment regardless of any advance in price.

Invoices

Foreign invoices should invariably be signed by someone having authority to sign on behalf of the company or firm, as in many foreign countries invoices have no legal effect unless so signed. It is customary to sign invoices with the addition of the letters "E&O,E" (Errors and Omissions Excepted) to formally reserve the right to make subsequent corrections. Invoices should not be receipted as regards payment unless presented to a bank under a letter of credit and receipted invoices demanded.

Marks, measurements, gross and net weight of packages are usually shown on foreign invoices, and this information supplemented by a packing list showing the contents of each package. Incorrect stating of weight may result in heavy loss of duty or even confiscation of goods to countries imposing duty according to weight.

There are a great many other documents in connection with foreign shipments, such as: Charter Party, Letter of Hypothecation, Letter of Advice from Drawer to Drawee, Letter of Credit, which space will not permit of explanation here, but will be treated in another article in the near future.

Making the Shipment

The shipper arranges for cargo space and rate, either through a freight broker or direct, at the company's office and obtains a permit, which he sends, either by mail or truckman to the receiving clerk of the steamship and is then in a position to deliver, or order the railroad to deliver, the shipment alongside the vessel. After receipt of the goods, but generally not until after they have been put aboard the vessel, the delivery clerk issues a dock receipt.

The shipper fills out and presents to the shipping company for signature, the number of negotiable copies of the bill of lading which he requires, together with a certain number of copies for the company and the ship and usually one "not negotiable" copy for his own files. The number of copies affirmed by the steamship company does not include these extra copies. Shipping companies do not fill bills of lading except for inland shippers and then a charge is invariably made to cover the work involved.

Except in the case of a few of the American Republics, whose consular regulations prescribe certification up to six copies, bills of lading are usually made out in sets of two or three copies. Bill of lading forms are, with few exceptions, furnished by the shipping company without charge.

When the financial world began to recover from the paralysis brought about by the opening of hostilities in Europe, it was at once evident that there were enough individuals with funds available for investment who believed that prices were at a bargain level to bring about an almost immediate upward trend in the prices of high grade bonds. At the same time, there was a large number of investors, institutional and private, and a few investment bankers, who predicted that the enormous destruction of capital abroad and expenditures for war materials on a scale heretofore undreamed of would bring about such a demand for money that lower prices for all long term securities was the inevitable result. A short analysis of what has happened during the fifteen months' period from October, 1914 to the end of 1915, will probably be of interest and may help to forecast the future trend of prices.

Low Money Rates and Rise in Security Prices It will be recalled that during the latter part of the year 1914 money rates were comparatively low but many bankers predicted that with the resumption of business activity there would be a decided increase in money rates without regard to the purely "war order" business. The revival of business throughout the country has exceeded the expectations of the most optimistic. Money rates are still very low and give every promise for continuing so for an indefinite time. Low money rates for protracted periods have always been recognized as a potent factor in the rise of security prices.

During the past year the supply of new issues of bonds of the better grade has been fairly heavy and it is therefore evident prices have risen because of excessive demand and not because of lack of new issues appearing on the market. A recently published compilation by the Daily Bond Buyer of new municipal bonds put out during the year 1915 has been construed by a number of financial writers to indicate an increased amount over 1914 of $38,000,000 and well over the average for

the past ten years. However an examination of the figures from an expert point of view disproves this conclusion and discloses the fact that the amount is somewhat below the average of recent years but above the ten year average. Effect of Foreign Liquidation on Security Prices

The United States securities of all kinds held abroad at the time of the outbreak of the European war and since disposed of in this country have been estimated to exceed one and one-half billion dollars in value. The resale of this huge amount of stocks and bonds in this country has been expedited by the low rates of exchange on all of the belligerent nations and the rapid and steady rise in prices of our securities. Recently foreign exchange rates have risen so sharply, except in the case of Germany and Austria which countries hold a negligible amount of saleable securities of ours, that the supply of foreign held bonds coming to us is certain to be retarded unless extreme pressure is put upon the holders abroad or prices continue to advance materially here. Foreign exchange experts claim to see a continuance of the rise of rates toward their normal levels. Therefore, it seems reasonable to expect that the foreign selling for the coming year is not likely to be an important factor in prices when last year's selling did not prevent a continuous and substantial advance. Well posted bankers, who at the opening of the financial markets in September, 1914, did not believe that any advance in high grade bonds would be sustained even for a short time, almost without exception gave as their chief reasons for this opinion the large amount of foreign held bonds which would be sold here and new issues of Government loans from Europe and elsewhere which. would be made in this country.

Foreign Financing and Loans

We have considered above the reselling of our securities to us and come now to the new foreign financing done here since the war began. The most accurate compilation which the writer has been able to find shows loans of