Question

Which of the following correctly states the role of banks in import/export transactions involving a letter of credit (L/C):

a. the importer's bank is the advising and/or confirming bank; the exporter's bank is the issuing bank.
b. the exporter's bank is the advising and/or confirming bank; the importer's bank is the issuing bank.
c. the exporter's bank is the advising, confirming, and issuing bank.
d. the importer's bank is the advising, confirming, and issuing bank.
e. none of the above

Answer 1

The correct role of banks in import/export transactions involving a letter of credit (L/C) is as follows: the importer's bank acts as the advising and/or confirming bank, while the exporter's bank acts as the issuing bank.

Step-by-step explanation:

In import/export transactions involving a letter of credit (L/C), the correct role of banks is as follows:

a. The importer's bank is the advising and/or confirming bank;

b. The exporter's bank is the issuing bank.

The advising bank is responsible for notifying the exporter of the L/C terms, while the confirming bank adds its confirmation to the L/C, making the payment more secure. The issuing bank, on the other hand, is the bank that opens the L/C on behalf of the importer.