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
Forfaiting in export finance involves:
Answer: The non-recourse purchase of medium-term export receivables by a financial institution
Forfaiting allows exporters to sell receivables (usually bills of exchange or promissory notes) to a forfaiter at a discount, eliminating credit and country risk.
Under a confirmed LC, if the issuing bank becomes insolvent, the confirming bank is:
Answer: Still obligated to pay the beneficiary upon presentation of complying documents
The confirming bank's undertaking is independent of the issuing bank's obligation; insolvency of the issuing bank does not extinguish the confirming bank's commitment.
A 'clean' collection differs from a 'documentary' collection in that a clean collection involves:
Answer: Transfer of financial documents only, without shipping documents
Clean collections involve only financial instruments (drafts, promissory notes) without accompanying commercial or shipping documents, typically used for non-trade payments.
The 'Berne Union' is an international association primarily associated with:
Answer: Export credit agencies and investment insurers sharing information and standards
The Berne Union is the global association of export credit agencies (ECAs) and investment insurers that promotes international acceptance of sound principles in export credit and investment insurance.
An 'evergreen' standby letter of credit refers to one that:
Answer: Automatically renews for successive periods unless the issuing bank gives notice of non-renewal
An evergreen standby LC contains an automatic renewal clause, extending the validity period unless the issuer notifies the beneficiary of cancellation within a specified notice window.
Under export credit insurance, 'political risk' coverage typically protects against which of the following?
Answer: Currency inconvertibility and transfer restrictions imposed by a foreign government
Political risk insurance covers events beyond the buyer's control, such as host government actions blocking currency transfer, war, or expropriation that prevent payment.
The primary advantage of using open account terms for the importer compared to an LC is:
Answer: Lower transaction costs and greater cash flow flexibility for the buyer
Open account terms eliminate bank fees associated with LCs and allow the buyer to pay after receiving and verifying goods, improving the buyer's working capital.