When an exporter ships merchandise and later bills the importer for its value it is using a(n) ________ type of export/import financing.
A) advance payment
B) open account
C) letter of credit
D) documentary collection

Question

Quizplus · Accepted Answer

An open account is a type of export/import financing where the exporter ships merchandise and later bills the importer for its value, without any specific payment terms or instruments. The importer is expected to pay within a mutually agreed time frame, usually 30-90 days from the date of invoice. This is a common way of doing business when the exporter has a good relationship with the importer and/or the risk of non-payment is low. However, it also exposes the exporter to credit risk and may require additional measures to secure payment, such as credit insurance or factoring.

When an Exporter Ships Merchandise and Later Bills the Importer