For an importer, what is a disadvantage of using a letter of credit for international transactions?
A) It results in the importer losing control over the process of trading.
B) It reduces the exporter's level of trust in the importer.
C) It reduces the importer's ability to borrow funds for other purposes.
D) It requires the importer to repay the loan even before the merchandise is sold.
E) It is not issued at the importer's request.

Question

Quizplus · Accepted Answer

A letter of credit ties up the importer's credit line, reducing their ability to borrow funds for other purposes until the transaction is completed.

For an Importer, What Is a Disadvantage of Using a Letter