In a documentary collection transaction,the exporter has an increased risk that is not so prominent in a letter of credit transaction? What is that risk?

Question

Quizplus · Accepted Answer

In a documentary collection transaction, the exporter is dependent on the importer to make payment and take title to and possession of the goods. If the importer does not do that, the exporter has an inventory of unsold goods in a foreign country, which is not a risk in a letter of credit transaction. Therefore, option D is the correct answer. Option A is not correct because in a letter of credit transaction, the exporter can take action through the issuing bank to force payment. Option B is incorrect because the fee is a common requirement in both transactions. Option C is incorrect because if the importer rejects the goods in either transaction, the exporter may not receive payment.

In a Documentary Collection Transaction,the Exporter Has an Increased Risk