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Export Credit & Letters of Credit Flashcards

7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Export Credit & Letters of Credit flashcards as text

  1. A usance or deferred payment letter of credit benefits the importer by:

    Answer: Granting the buyer a period of credit before payment is due

    Usance LCs specify a future payment date (e.g., 60 or 90 days after shipment), giving the buyer time to sell goods and generate cash before paying.

  2. Which Incoterm places the maximum responsibility on the seller for delivering goods to the buyer's named destination?

    Answer: DDP (Delivered Duty Paid)

    DDP requires the seller to bear all costs and risks, including import duties and taxes, until goods are delivered to the buyer's named place.

  3. A back-to-back letter of credit involves:

    Answer: A new LC issued using an existing LC as collateral to pay a supplier

    In a back-to-back arrangement, the intermediary uses the master LC from their buyer as collateral to open a second LC in favor of their own supplier.

  4. Under the Foreign Credit Insurance Association (FCIA) or EXIM Bank export credit insurance, a short-term policy typically covers credit periods of:

    Answer: Up to 360 days

    Short-term export credit insurance generally covers receivables with repayment terms up to 360 days (one year), applicable to consumer goods and raw materials.

  5. Which party in an LC transaction is also known as the 'opener' or 'accountholder'?

    Answer: Applicant

    The applicant is the buyer/importer who instructs their bank to issue the LC and is responsible for reimbursing the issuing bank.

  6. What is the purpose of a 'red clause' in a letter of credit?

    Answer: To allow the beneficiary to receive an advance payment before shipment

    A red clause LC authorizes the advising or nominated bank to make pre-shipment advances to the beneficiary, historically typed in red ink.

  7. Country risk in export credit analysis primarily refers to:

    Answer: Political, economic, and transfer risks that could prevent the importer from paying

    Country risk encompasses sovereign risk, political instability, currency inconvertibility, and other macro-level factors that could impair cross-border payment.