Interesting as the movement of gold and the international money markets may be, it is in its application to the every-day importing and exporting of merchandise that foreign exchange has its greatest interest for the greatest number of people. Every bale of cotton exported from the country, every pound of coffee brought in, is the basis of an operation in foreign exchange, such operations involving usually the issue of what is known as "commercial credits." Broadly speaking, commercial credits are of two classes, those issued to facilitate the import of merchandise and those issued to facilitate its export. Considering the question from the standpoint of New York, import credits are so much more important than export credits and issued in so much larger volume, they will be taken up first. Not all the merchandise imported into the United States is brought in under commercial letters of credit, but that is coming to be more and more the way in which payment for imports is being arranged. Formerly an importer who had bought silk or white-goods in France went around to his banker, bought a draft on Paris for the required amount of francs and sent that over in payment. In some cases that is still the method by which payment is made, but in the very great majority of cases where the business is being run on an up-to-date basis, a commercial letter of credit is arranged for before the importation is made. Of how great advantage such an arrangement is to the merchant importing goods the following practical illustration of how a "credit" works will show. [Illustration: Form of Commercial Letter of Credit] To exemplify the greatest number of points of importance possible in connection with the commercial credit business, the case of a shipment of raw silk from China will, perhaps, serve best. A silk manufacturer in Paterson, New Jersey, we will assume, has purchased by cable ten bales of raw silk in Canton, China. Understanding of the successive steps in the financing of such a transaction will mean a pretty satisfactory understanding of the general principles under which the financing of most of our imports is arranged.