Hatfield Manufacturing wants to import an important machine from Sweden.However,the company's head of manufacturing is reluctant to spend the time required to provide the documentation required to obtain a letter of credit that the Swedish exporter insists on.You are the company's CFO.Which of the following would you use as an advantage of a letter of credit to convince the head of manufacturing?
A)The importer does not have to pay for the merchandise until the documents have arrived.
B)Obtaining pre-export financing becomes easier.
C)It helps the importer to get goods for a lower price.
D)It results in lower shipping costs.
E)The importer does not have to pay the third party a fee for facilitating the transaction.

Question

Quizplus · Accepted Answer

A letter of credit provides security to the importer since they don't have to pay for the merchandise until the required documents have arrived. This ensures that the importer only pays when they have received the goods they ordered, which can be a significant advantage when importing expensive machinery.

Hatfield Manufacturing Wants to Import an Important Machine from Sweden