An exporter manufacturing a specialized piece of equipment can hedge the risk that its customer will cancel the contract before shipment by obtaining a

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A letter of credit ensures payment from the customer's bank to the exporter upon completion of the contract, reducing the risk of cancellation before shipment. Consignment contracts involve transferring ownership of goods before the final sale, an open account does not provide any security for the exporter, and a bill of lading is a document that acknowledges receipt of goods and serves as evidence of the contract of carriage, but it does not protect against contract cancellation.

An Exporter Manufacturing a Specialized Piece of Equipment Can Hedge