Page 237 - International Marketing

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BRILLIANT'S Export Management 239

3. No risk in import: The risks involved in importing goods directly
is reduced. Under the letter of credit, the importer is assured that the
bill will be paid or accepted only when documents are received by the
negotiating banker.
4. Facility of advance payment: Sometimes an exporter insists for
advance payment to buy raw material and meet other costs. In such a case,
the importer can make advance payment by opening 'Red Clause Packing
Credit' letter of credit. The negotiating banker will make advance payment,
which will be adjusted while making final payment. Thus, the importer is
saved of the risks involved, in making advance payment for imports.
Advantages to buyers
Although, the burden of financing is placed upon the buyer under
a credit transaction, this method of payment also provides certain ad-
vantages:
1. The greatest practical benefit derived by the buyer is the protec-
tion of setting a definite date by which the seller is required to
ship the order. The buyer, accordingly, may figure on prompt
delivery, as the credit will expire on the date set unless an exten-
sion is granted.
2. The buyer can receive low prices when a letter of credit is sub-
mitted. Since, contingencies are fully guarded against that, ex-
porter finds it unnecessary to cover them in the price.
3. Advance order or orders running throughout a period of time are
also well protected by reason of the expiration date of the letter
of credit as well as by the limitation of the sum of money for
which it is drawn.
4. Finally, an attractive cash discount may be offered to importers
for providing letter of credit payment. 
CREDIT RISK INSURANCE AND ECGC
Q.37. Write an essay on: Export Credit Guarantee Corporation: Its
functioning and critical evaluation. [MBA 2011]
OR
Write a short note on: Export Credit Guarantee Corporation
(ECGC) and its critical evaluation. [MBA (FT) 2004, 2007]
OR
Name the risks being faced by the international marketers in
financing their operations and granting credit to customers.
In the light of these risks, write a note on the working of Ex-
port credit guarantee corporation (ECGC). [MBA (FT) 2005]