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Zorluk: OrtaMeans of Payment in Foreign Trade

A cocoa exporter in Ghana agrees to sell a shipment of raw cocoa beans to an overseas purchaser, but has serious concerns regarding both the buyer's creditworthiness and potential foreign exchange transfer restrictions in the buyer's country. To guarantee payment by having a bank in the exporter's own country add its independent undertaking to pay, which payment instrument should the exporter request?

  1. Confirmed irrevocable letter of creditCevap
  2. B
    Unconfirmed irrevocable letter of credit
  3. C
    Documentary collection under documents against acceptance
  4. D
    Bill of lading endorsed in blank

Cevap

The confirmed irrevocable letter of credit is the required payment instrument because it provides an additional guarantee from a bank in the seller's home country.
A confirmed irrevocable letter of credit involves an explicit guarantee from both the buyer's issuing bank and a confirming bank in the seller's home country. This protects the seller against buyer credit default as well as sovereign and foreign exchange transfer risks in the buyer's jurisdiction.

Adım Adım Çözüm

1
Identify the risk exposure in the scenario
The exporter faces two distinct risks: buyer default risk and foreign country/political transfer risk.
Choosing the appropriate payment mechanism requires matching the instrument's security level against the specific commercial and sovereign risks identified.
2
Evaluate the protection level of foreign trade payment instruments
An unconfirmed credit protects only against buyer default via the foreign bank. A confirmed credit brings in a local confirming bank to cover foreign country/bank risks as well.
Confirmation adds an irrevocable commitment from a bank located in the exporter's jurisdiction.
3
Distinguish between payment instruments and shipping documents
Instruments like the Bill of Lading serve as transport/title documents rather than financial guarantees.
Titles to goods safeguard possession but do not constitute a bank guarantee of cash payment.

Anahtar Kavram

Confirmed Irrevocable Letter of Credit as a Risk Mitigation Tool in International Trade
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Konular

Means of Payment in Foreign Trade

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