1.

In negotiating price and payment, What should the price the exporter quotes Normally, the exporter onlyaccepts open account method of payment if he has 18.What payment does the importer have to pay the exporter in case of late
relate to? known the buyer quite well and they haveestablished a long-term and trustworthy payment? Compensation for losses due to late payment.
business relationship
The complete set of contract terms: size of order, terms of delivery, terms of
19.What may reduce risk for exporters?
payment,warranty 7. What are methods of payment in small purchases?
Exporter may reduce risk by spreading risk with the third party.
provisions and -Cash on delivery.
so on. -Cash against invoice. 20.In order to take out non- payment risk insurance, what does the exporter have
=> -Cash with order todo?
Contact an insurance company and explain the details of the business, applies for
2. How can the exporter avoid the "price trap" occurred in many negotiations 8. What are payment insurances? a quotationfrom the insurance.
-Bank guarantee.
when the buyer demands concessions about delivery time, method of -Export credit insurance.
payment, etc? 21What can we imply when the insurance company refuses to offer an
9. Who can offer bank guarantee? insurancequotation?
=> As items in the contract are negotiated, the exporter should assess the influence A bank.
-The insurance company knows the buyer’s
of each factoron price, and adjust the price accordingly. Sometimes the exporter
10.Who can offer export credit insurance? uncreditworthiness. -The business is risky.
improves his terms withoutadjusting the price, but only in order to create goodwill An insurance company.
for future deals, to ensure that theexporter gets the order, or for some other
11.What are the two main elements in payment? 22. What does the insurance premium depend on?
business reason.
-Time. -The type of the goods.
3. What are the 5 steps in negotiating payment? -Structure. -The creditworthiness of the buyer.
=> - Mode of payment: How will payment be made? -The stability of the buyer’s country and so on.
12. What does the exporter have to suffer from late payment?
-Timing: What is the date of payment? Bank interest.
23. What is the guarantee triangle?
-Place of payment: Where must the money be before payment is considered 13. What is an incentive for early payment? That is the relationship of the principal, guarantor and beneficiary in terms of
Offer a discount. guarantee. The principal (the buyer) makes a promise to pay the contract price to
complete?
- Delay: What delay in payment is excusable? the beneficiary (the seller).Then the principal ask the guarantor (the bank) to issue
14. How to fix payment date? a guarantee. In case the principal failsto pay, the guarantor will pays money to the
-Results of delay: What are the results of non-excusable delay in payment?
To use a calendar date or interval times. beneficiary.
4. Why payment in international trade tightly controlled?

=>Because in international business, trust is rare, court is far away and
unpredictable
5. What are the common methods of payment in international trade?
=> There are 4 common methods of payment in international trade:
-Payment on open account with no security.
-Payment on open account secured by export credit insurance.
-Payment on open account secured by a payment
guarantee -Payment by letter of credit
6. What is payment by open account? What are the risks for the exporter if he
accepts payment by open
account?
=>Open account means the exporter ships the goods to the buyer and just waits
till a forced dateas agreed in their contract for payment from the the buyer.
15. What points at which money is deemed to be paid does the Buyer prefer? 24.What is Export credit insurance?
-When the buyer instructs the bank to pay. It is a guarantee of payment for the exporter from a third party, an insurance
-When the buyer pays the money into his bank. company, whichissues an export credit insurance policy covering the risk of non-
payment. The exporter has to pay the costs for that guarantee. The insurance
16.What points at which money is deemed to be paid does the Seller prefer? company will pay the exporter in case the buyer fails to do so.
-When the buyer’s bank transfers funds.
-When funds reach the seller’s bank account. 25.What is a bank guarantee ?
It is a guarantee of payment for the expoerter from a third party, a bank. The bank
17. When delay in payment is may issue a bank guarantee assuring in case the bank will pay for the exporter in
excused? -Delay happens in the case the buyer fails to doso. The buyer has to pay the costs of that guarantee.
grace period. 26.Distinguish Export credit insurance and Bank Guarantee ?
-Delay is caused by force majeure events. -Both of them are guarantee of payment from a third party, providing the exporter
withsome level of security in terms of payment.

-For export credit insurance, the exporter has to pay for that guarantee while it is
the buyerwho pays for a bank guarantee. The third party offering export credit
insurance is theinsurance company while the bank offers a bank guarantee.
27. What are some limitations of Export Credit Insurance?
-There is always a long wait between the time when the buyer fails to pay and the
timewhen the insuarance company compensates the exporter, says six months
typically.
-When compensates is paid, it is unlikely to cover 100% of the original invoice
price.So with export credit insurance, the export is covered against the worst.
28. What are some common guarantees in business? Explain each of them
briefly.
-For the risk of non-payment: Payment guarantee.A payment guarantee makes
sure that the exporter will receive payment. It commits the bankto pay if the buyer
defaults. The payment guarantee is usually for 100% of the contract price.
-For the risk of revocation: Tender guarantee.This type of guarantee is used in
case that the exporter who bids on a contract to supply goodsor materials to a
government department or agency is withdrawn. A normal figure for
tenderguarantee is usually from 1.5% to 5% of the contract price.
-For the risk of non-performance: Performance guarantee.Performance
guarantee makes sure that if the exporter works badly or not at all, the guarantor
will pay, within stated limits, the costs of the exporter’s failure to perform. A
figure for performance guarantee is from 5% to 10% of the contract price.
-For the risk of losing prepayment: Prepayment guarantee.This guarantee
promises the buyer that the bank will return advance payments if the exporterfails
to deliver. The guarantee is often for 100% of the prepayment.
29. In terms of guarantee, what does it mean by “without demur or objection”?
It means “on first demand”. Whenever the beneficiary demands payment under
the guarantee,the bank will pay.
32.What kind of method of payment makes late payment
impossible? The confirmed, irrevocable, at-sight L/C.
33. What are steps in issuing an
L/C? There are 4 steps in issuing
an L/C:
-The exporter and the buyer sign a contract.
-The buyer asks a local bank to open a letter of credit.
-The issuing bank asks a bank in the exporter’s country to advise the exporter that
the letter of credit has been opened.
-The advising bank advises the exporter that the letter of credit has been opened.
34.What are the steps in presenting a Letter of Credit?
There are 6 steps in presenting a Letter of Credit:
-The seller ships the goods.
-The seller gets shipping documents.
-The exporter presents the shipping documents to the advising bank.
-The advising bank checks the documents and (if appropriate) pays the exporter.
-The advising bank notifies the issuing bank that the credit has been presented and
forwardsthe shipping documents.
-The issuing bank transfers necessary funds to the advising bank.
35. Explain the two principles that make letters of credit safe for both exporter
and buyer: Autonomny
and Strict.
compliance
-Autonomy means that the L/C is a contract in its own right, entirely separate from
thecontract for the safe of goods.
-Strict compliance means that the exporter must present to the bank shipping
documentsthat comply in all respects with the terms of the credit. Small deviations
will result inrefusal by the bank to pay.
37. What are the 3 ways the exporter can proceed once the bank has
indicateddiscrepancies? -Provide the missing paperwork or correct errors.
-Ask the buyer to instruct the bank to change the terms of the letter of credit, i.e.,
to issue anamendment. -Ask the bank to process the letter of credit with the
discrepancies but to pay only when(and if) the issuing bank permits payment.
38.Distinguish Irrevocableand Revocable Letter of Credit.
-A revocable L/C is the L/C that can be cancelled at any time by the buyer or by
the issuing bank -An Irrevocable L/C is the L/C that can only be cancelled with
the written consent of theexporter.
39.Distinguish the Confirmed and Unconfirmed L/C.
-The Unconfirmed L/C is less secure than the Confirmed one. Normally, the
exporter hasgot certain security for the non-payment risk when using the L/C as a
method of paymentin their sales of goods to the buyer. The issuing bank will have
to pay the exporter for thegoods in case the buyer fails to do so.
-With the Confirmed L/C, there is a promise from another bank, the confirming
bank, usually the advising bank too, to pay for the goods, if the buyer fails to do
so. It’s a kind of double guarantee for the exporter so he knows for sure that he
will get money as long as hesubmits a set of documents, strictly complying with
the terms and conditions stated in the L/C.
40.What is the term “Settlement by Sight Payment”?
-The Seller presents the documents to the Paying bank.
-The Paying bank immediately pays the Seller.
41.What is the term “Settlement by Deferred
Payment”? -The Seller presents the documents to
the Paying bank.
-The Paying bank agrees to pay the Seller the face value of the credit when it
matures.

30. What is a Conditional Guarantee ?

It is a guarantee from a bank but with serious, objective conditions that must be
met before payment by the bank is possible.
31.What is a Letter of Credit ? Why it is also called Documentary Credits?
A letter of credit is a binding agreement by a bank to pay a certain sum of money
when theexporter presents the necessary documents to the bank. In a letter of
credit transaction,documents are exchanged for money, so they are formally also
called Documentary Credits.
36. What are the most common problems with L/C that cause discrepancies? 42.What is the term: “Settlement by Acceptance”?
-Documents required by the credit are missing. -The Seller presents to the Accepting bank the documents and bill of Exchange
-Documents required to be signed are not signed. (time draft)drawn usually on the Buyer.
-The credit amount is exceeded. -The Accepting bank agrees to pay the bill when it matures.
-The credit has expired.
-Documents are not presented within the required time. 43.What is the term: “Settlement by Negotiation”?
-Shipment was short. The Seller presents to the Negotiating bank the documents and a Bill of Exchange
-Shipment was late. drawnusually on the buyer.The Negotiating bank negotiates the bill.
44. What are the associated documents with the L/C?
-Commercial invoice. -Incoterms.
-Transport document. -Documents.
-The insurance document. -Presentation period.
-Other documents such as: certificate of origin, certificate of analysis, packing list, -Additional Instructions -
weightlist, phytosanitary certificate, etc. Authorization to Debit.
-Signature.
45. If a Letter of Credit requires“ a full set of original air waybills” to be submitted,
what will be the problem for the exporter? 48. About the expiry date of a Letter of Credit, why does buyer wants an early
Normally, an air waybill is issued in 03 originals and 09 copies. If a L/C requires datewhile exporter wants
“a full set oforiginal air waybills”, this is obviously a mistake or an incorrect
requirement. a later The buyer will want an early date to save bank charges.
Only the secondoriginal goes to the buyer or consignee. The exporter cannot date?
submit that full set and may berefused by the issuing bank when asking for -
payment as the bank must insist on strictcompliance. -The exporter will want enough time after delivery to present the documents and
to correctany discrepancies that might be discovered by the bank.
46. What are steps in negotiating the terms of a Letter of Credit?
-Agreement: The exporter and the buyer discuss and list all required 49. Distinguish Partial shipments and Shipment in installment.
documentation. -Shipment in installments means that an agreed schedule has been set up, for
-Incorporation: The list is incorporated into the contract. example, threeequal shipments in March, August and October 2012.
-Specification: The buyer applies for the letter of credit specifying the -A Partial Shipment is simply an incomplete shipment with some part of the goods
agreeddocumentation. tofollow later.
-Verification: The exporter checks the credit to see that required documentation is
asagreed. -Compliance: The exporter rigorously checks documentations and 50. Name types of L/C you know?
submits it to the bank.
-At-sight L/C.
47. What are different segments in a Letter of Credit? -Advised L/C.
There are 21 segments in a Letter of Credit: -Back-to-back L/C.
-Applicant. -Confirmed L/C.
-Issuing bank. -Deferred Payment L/C.
-Application date. -Irrevocable L/C.
-Date and place of expiry of the Credit. -Red Clause L/C.
-Benificiary. -Revocable L/C.
-Method of issue. -Revolving L/C.
-Transfer of the credit. -Stand-by L/C.
-Confirmation. -Transferable L/C.
-Amount. -Traveler’s L/C.
-Partial shipment. -Unconfirmed L/C
-Transshipment.
-Availability.
-Insurance covered by the buyer.
-Transport information.
-Description of the Goods.