Peterson Manufacturing wants to import a machine from Germany. However, the company's head of manufacturing is reluctant to spend the time required to obtain a letter of credit that the German exporter insists on. You are the company's CFO. What advantage of a letter of credit will help convince the head of manufacturing that this is worthwhile?
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 assures the exporter that payment will be made once the required documents are presented, which means the importer does not have to pay until the documents arrive, providing a secure transaction for both parties.

Peterson Manufacturing Wants to Import a Machine from Germany