Questions and Answers
Which payment method incurs the LEAST risk for the buyer?
Which type of documentary credit would BEST meet the requirements of an importer who needs goods of a stipulated quality and an exporter who requires certainty of payment?
What type of documentary credit allows a beneficiary to obtain pre-shipment financing without impacting their facility?
Which statement is correct regarding transferable documentary credits?
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What is the primary benefit of a confirmed documentary credit to an exporter?
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What is a key feature of an irrevocable documentary credit?
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Study Notes
Risk in Payment Methods
- The buyer incurs the least risk by agreeing to a Documentary Credit, as it provides assurance that the payment will be made only when the goods meet the required specifications.
Meeting Importer and Exporter Requirements
- A confirmed documentary credit payable at sight calling for beneficiary's quality certificate would best meet the requirements of both the importer (goods of stipulated quality) and the exporter (certainty of payment).
Documentary Credit Types
- A Red Clause documentary credit enables a beneficiary to obtain pre-shipment financing without impacting their facility.
Transferable Documentary Credits
- Key characteristics of transferable documentary credits:
- The first beneficiary cannot cancel the transferred credit without the second beneficiary's consent.
- A transferred credit can be further transferred to a subsequent beneficiary at the request of the second beneficiary.
- The transferred credit may expire in the second beneficiary's country of domicile on the expiry date of the first beneficiary's credit.
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Description
This quiz assesses knowledge of various payment methods in international trade, including documentary credits, payment in advance, and open account trading.
