Question

Why is a Letter of Credit important in the pre-import stage?

Options

• It helps in customs clearance.

• It acts as a bank's guarantee of payment to the exporter.

• It ensures goods have passed quality checks.

• It is proof of payment of port trust dues.

Answer 1

It acts as a bank's guarantee of payment to the exporter.

Explanation:

A Letter of Credit assures the exporter that the payment will be made, thus building trust and ensuring secure transactions between the importer and exporter.