Free Online Course in International Business

Knowledge Statement

Knowledge of Types of Letters of Credit: Confirmed/ Unconfirmed, Transferable, Standby

Activities

1.                     As the exporter, you have just received a confirmed transferable letter of credit. What are the characteristics of this type of letter of credit?

2.                     As the exporter, you have just received a confirmed standby letter of credit. What are the characteristics of this type of letter of credit  and when will you use it?

3.                     As the importer, you have applied to your bank to issue a non-transferable irrevocable letter of credit. What are the characteristics of this type of letter of credit?

Assessment

1.                     A confirmed letter of credit includes a

a.      funds transfer in US Dollars only.

b.      a request for only a draft and commercial invoice.

c.       a freely negotiable credit for the seller.

d.      second bank's promise to pay upon complying document presentation.

2.                     Unless otherwise stated, all letters of credit are considered

a.      revocable.

b.      confirmed.

c.       irrevocable.

d.      transferable.

3.                     2.  A transferable letter of credit allows the beneficiary to transfer the _____________ to a secondary beneficiary.

a.      letter of credit

b.      funds

c.       documents

d.      liability

(Correct answers: 1=d, 2=c, 3=a)