The process by which a foreign commercial bill of exchange drawn against commodities exported is created and handled, and reaches its termination, may best be illustrated by an actual transaction, and I give below exact terms of a commercial bill of exchange drawn against a shipment of flour made by a leading exporter - flour being one of our chief exportable commodities.

The shipment of flour in question, destined to Liverpool, England, was delivered to the Soo freight line at Minneapolis, operating over the Minneapolis, St. Paul & Sault Ste. Marie and Canadian Pacific Railroads, and a through bill of lading in duplicate was obtained. This through bill of lading is a form of contract, issued by special arrangements with connecting ocean steamship lines, by the terms of which it is agreed, under conditions printed thereon, to transport the shipment through to the destination at the foreign port (Liverpool). It states the number of packages, how they are marked, their contents, the particular grade or brand of flour, and the name and location of the party for whom the goods are intended. It is negotiable only by indorsement of the exporter.

Upon presentation of this evidence of shipment, a marine insurance company has issued a certificate of insurance, under the terms of which it agrees to reimburse the owner of the goods in case of the loss of the shipment by fire or accident while en route on the ocean. This shipment, as is the usual custom, is insured for about 10 per cent in excess of its billed value.

The exporter then attaches to these documents a draft for the amount for which the flour was sold, namely, £457 12s 10d. Had his shipment been destined to a point in Germany, the draft would have been drawn in marks; if to France, in francs, and so on; usually in the money of the country where it is going; but quite often it will be drawn in English money, although going to some other country, by reason of English exchange being preferred.

In this case the exporter agreed to allow the buyer sixty days' time in which to pay the draft, after its presentation. The draft reads "60 days after sight of this first of exchange (second unpaid), pay to the order of ourselves 457 pounds 12 shillings and 10 pence, against Soo line, through B. L. No. B. 1548, dated....., 19..., for 2,000 sacks of flour branded Dakota," and is signed "Northwest Consolidated Milling Co., by H. E. Kent, cashier," who are termed the drawers. In the left corner it reads: "To James Corwith & Co., Liverpool, Eng." They are the buyers, or, as we term them, the drawees.

Now, these three documents, drawn to the order of the exporters (Northwestern Consolidated Milling Co.), comprise a commercial bill of exchange.

Upon the same day that these documents were issued, and practically before the flour had started on its long journey, the exporters offered this bill of exchange for sale. It was sold to the Security Bank of Minneapolis (that being highest bidder) at the rate of $4.84 per pound, who in turn resold it to the American Express Co. at $4.84 1/8 per pound. The indorsements on the back of the draft read:

Northwestern Consolidated Milling Co., H. E. Kent, Treasurer.

Security Bank of Minnesota, Thos. F. Hurley, Cashier.

Pay to the order of the National Provincial Bank, Liverpool. American Express Co., By Jas. F. Fargo, Treasurer.

The latter indorsement shows the papers to have been sent to Liverpool for collection. The bank at Liverpool notified Corwith & Co. to call and accept the draft, which they did, by writing the word "accepted" and the date over their signature.

About fifteen days afterward the flour arrived by slow steamer, and, being in immediate need of it, Corwith & Co., in order to obtain the bill of lading, had to pay the draft; the instructions stamped on same being: "Surrender documents upon payment only."

Now, as Corwith & Co. paid this draft forty-five days before it was due, the bank, as is customary, allowed them the prevailing rate of discount applicable to that class of bills, which was 2 per cent (or £l 3s. 5d.). The difference, £456 7s. 5d., less cost of revenue stamps, was placed to the credit of the American Express Co. by the bank which closed the transaction.

Had the instructions on draft read "Surrender documents upon acceptance of draft," the bill of lading would have been delivered when draft was accepted, thus enabling Corwith & Co. to obtain goods at once and pay draft sixty days afterward if they desired.

The method used in determining what this commercial bill was worth when buying it here was based upon the following:

1. What demand exchange upon Liverpool could be sold for.

2. The cost of revenue stamps to be affixed when draft was accepted abroad.

3. The interest for the number of days for which draft was drawn, plus three days' grace, at the rate per cent bill could be discounted. For illustration: $4.8775 Demand rate on Liverpool. 0.00244 Cost of revenue stamp (1-20 of 1 per cent, of rate or 1 shilling per 100 pounds). $4.87506 0.01676 Interest 63 days 2 per cent (disct. rate).

$4.85830 Parity or cost per pound at maturity or if discounted. 4.84125 Rate per pound at which purchased.

$0.01705 Profit per pound.

Or $7.78 on £457 12s. 10d.