Clean Draft

A Clean Draft refers to a bill of exchange that is not accompanied by any commercial documents (such as bill of lading, invoice, insurance policy, etc.), and payment can be demanded solely on the basis of the draft itself. In international trade, clean drafts are typically used for non-trade settlements or small-value trade transactions, such as payment of commissions, sample fees, advertising fees, freight, insurance premiums, etc., and are also used for drafts under letters of credit. When using a clean draft, the payer pays only against the draft without any transfer of document of title, thus involving higher risk, and it is generally suitable for parties with good credit standing. Unlike a Documentary Draft, which requires a full set of commercial documents for the bank to process payment or acceptance, a clean draft has no documents and the bank handles it solely based on the draft itself. Precautions: Exporters should ensure the importer's credit is reliable to avoid losing both money and goods; clean drafts are usually collected through banks, but banks do not assume payment liability. Additionally, clean drafts are not used for bulk commodity trade but are mostly used in service trade or final payment settlements.