Answer to Question #237879 in Economics for Sammy

Question

The three main problems facing the importer and exporter are time, distance and
by the exporter? [4marks]
4.List the advantages of “confirmed and irrevocable” L/C to the exporter.
payment.
3.Describe the open account method of payment. [4marks]
2.Demonstrate how each of the risks in ‘1.’ above can be minimised. [4marks]
1.In Documentary Collections terms of payment, what are the major risks faced
exchange risk. These give rise to consideration of the market, transport and

Answer 1

In the business age, it is not the selling side that suffers big risks, but the buyer, who is trying to protect himself in every possible way. One of the reliable ways to secure your business is an irrevocable letter of credit, which defines an agreement on the payment by the bank to the interested party of the agreed amount, subject to the timely dispatch of goods or goods.

We can say that this instrument is quite effective and safe to ensure the stability of any financial transactions. By itself, an irrevocable documentary credit cannot be canceled, and under no circumstances can its terms be amended without the consent of the parties to the agreement. It is this instrument that enjoys unspeakable success not only in Russia, but all over the world.

Certain types of irrevocable letters of credit

Irrevocable covered letter of credit is widely used - this is a special form of cashless settlement in a mortgage transaction. When using this tool, credit funds are placed by the bank into a special account and transferred to the seller after providing the necessary documents.

Another type - an irrevocable confirmed letter of credit is a documentary letter of credit confirmed by the confirming bank in the beneficiary's country. It cannot be changed or canceled without the consent of the issuing bank itself, as well as the confirming bank or the beneficiary itself.

The third type is a documentary confirmed letter of credit, which is considered the most reliable instrument for making settlements for both importers and exporters. This type of letter of credit is the obligation of the bank that opened it on behalf of the buyer to make a payment to the seller in the amount of the prescribed amount if all the required documentation is provided.

All of the listed types of letters of credit are used in international trade, they help to secure the business and get a stable return in the event of a transaction failure.