Which of the following is a disadvantage of using a letter of credit (L/C)?
A) A letter of credit does not give protection to the importer.
B) A letter of credit does not give protection to the exporter.
C) The exporter cannot avail pre-export financing when using a L/C.
D) The importer must pay a bank fee for the letter of credit.

Question

Quizplus · Accepted Answer

The main drawback for the importer is that she must pay the issuing bank for the letter of credit. In addition, since the letter of credit is a financial liability against her, it may reduce her ability to borrow funds for other purposes.

Which of the Following Is a Disadvantage of Using a Letter