Question

What are advantages and disadvantage ( if any ) of an exporter under transferable l/c?

Answer 1

Transferable L/C offers expanded market access and reduced risk of non-payment for exporters, but it may come with increased costs and limited control over terms.

Step-by-step explanation:

An exporter under a transferable letter of credit (L/C) can provide several advantages and disadvantages.

Advantages:

1. Expanded Market Access: Transferable L/C allows exporters to sell their products to buyers who may not have access to foreign currency or credit facilities.
2. Reduced Risk of Non-Payment: With a transferable L/C, the exporter can rely on the issuing bank's guarantee of payment, reducing the risk of non-payment.
3. Efficient Payment Process: A transferable L/C simplifies the payment process by providing a secure and convenient method of payment.

Disadvantages:

1. Increased Cost: The exporter may incur additional costs associated with the transferable L/C, such as transfer fees and higher insurance premiums.
2. Limited Control: The exporter may have limited control over the terms and conditions of the transferable L/C, as it is usually negotiated between the buyer and the importer's bank.