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FEDERAL RESERVE BANK
OF DALLAS

BULLETIN No. 3
SEPTEMBER 1 5 ,1 9 3 9

DISCOUNT OR PURCHASE OF SIGHT AND DEMAND DRAFTS

To the Member Banks of the
Eleventh Federal Reserve District:
For your information, we quote below the fourth paragraph of Section 13
of the Federal Reserve Act as amended:
“ Upon the indorsement of any of its member banks, which shall be
deemed a waiver of demand, notice, and protest by such bank as to its
own indorsement exclusively, and subject to regulations and limitations
to be prescribed by the Board of Governors of the Federal Reserve
System, any Federal reserve bank may discount or purchase bills of
exchange payable at sight or on demand which grow out of the domestic
shipment or the exportation of nonperishable, readily marketable agri­
cultural and other staples and are secured by bills of lading or other
shipping documents conveying or securing title to such staples: Pro­
vided, That all such bills of exchange shall be forwarded promptly for
collection, and demand for payment shall be made with reasonable
promptness after the arrival of such staples at their destination: Pro­
vided further, That no such bill shall in any event be held by or for the
account of a Federal reserve bank for a period in excess of ninety days.
In discounting such bills Federal reserve banks may compute the inter­
est to be deducted on the basis of the estimated life of each bill and
adjust the discount after payment of such bills to conform to the actual
life thereof.”
METHOD OF HANDLING

Pursuant to the foregoing, drafts o f the kind mentioned above which meet
the requirements of eligibility, and which are acceptable from a credit stand­
point, will be discounted or purchased under the following terms and con­
ditions :
Drafts must be endorsed by the member bank over manual signature of an
authorized officer, and must be listed on special application blank, Form L & D
62. A supply of these forms will be furnished upon request.
Drafts must have attached negotiable shipper’s order bills of lading or
other shipping documents and be accompanied by instructions to surrender
documents only upon payment.
Unless otherwise advised, member banks will be credited with the face
amount of drafts accepted, subject to final payment, and interest will be
charged at the current rate of discount to date actually collected funds are
received by the Federal Reserve Bank of Dallas. When collection is made
through another Federal Reserve bank or branch, interest will be charged to
the date that this bank receives final credit.

This publication was digitized and made available by the Federal Reserve Bank of Dallas' Historical Library (FedHistory@dal.frb.org)

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BULLETIN No. 3

Sight and demand drafts will be forwarded with instructions to the collect­
ing bank to present immediately and to return if not paid upon presentation;
provided, however, should it be desired that presentation for payment be with­
held until arrival of shipment, such instructions will be followed if included in
letter of transmittal from the member bank, or if attached to an individual
item. These instructions must not be incorporated in the wording of the drafts
themselves, but may be shown separately, over the authorized signature of the
drawer.
Any sight or demand draft discounted or purchased by the Federal Re­
serve Bank of Dallas will be handled by it for collection in the same manner
as noncash collection items, and it is understood and agreed that all of the
terms and conditions of the current bulletin of this bank relating to the collec­
tion of noncash items shall apply to the collection of these items; it being
understood and agreed that if the Federal Reserve Bank of Dallas does not
receive actually collected funds within what it deems to be a reasonable time,
it shall have the right to charge the amounts of such drafts back at any time
to the account of the member bank from which received.
PROTEST INSTRUCTIONS

In the absence of instructions to the contrary, the Federal Reserve Bank
of Dallas will, at its discretion, forward drafts with protest instructions, but
should the member bank prefer that they be sent “ no protest,” such instruc­
tions will be followed where drawers insert proper waiver of protest above
their signatures. The following clause is suggested for this purpose:
“ Waiving demand, protest and notice of nonpayment.”
Drafts will, of course, be sent subject to protest if member banks so in­
struct.
COST OF COLLECTION

Member banks will be charged with actual expenses incurred in the collec­
tion of bill of lading drafts, such as exchange charges, cost of telegrams, etc.,
but no service charge will be made by the Federal Reserve Bank of Dallas.
Every bank discounting sight or demand drafts with, or selling them to,
the Federal Reserve Bank of Dallas will be understood to have agreed to the
terms, conditions and all provisions of this bulletin.
The right is reserved to withdraw, add to, or amend at any time, any of
the provisions of this bulletin.
Yours very truly,
P. E. Coldwell
President

April 10, 1969