What is the biggest advantage of using a letter of credit system?
A)The exporter is guaranteed pre-export financing.
B)It allows the importer time to resell the merchandise before requiring payment.
C)The trust is established,for the importer and exporter,because of a reputable bank.
D)It guarantees the importer extra funds for other purposes.

Question

Quizplus · Accepted Answer

The biggest advantage of using a letter of credit system is that it establishes trust between the importer and exporter through the involvement of a reputable bank, which acts as a neutral third party. This minimizes the risk of non-payment or non-delivery and ensures that both parties fulfill their obligations. It does not guarantee pre-export financing (A), allow the importer time to resell the merchandise before payment (B), or provide extra funds for other purposes (D).

What Is the Biggest Advantage of Using a Letter of Credit