Question
At the end of the annual harvest season each year, Shocker Co. ships wheat to a major buyer in Asia. Shocker Co. has not used
At the end of the annual harvest season each year, Shocker Co. ships wheat to a major buyer in Asia. Shocker Co. has not used any trade financing because the importing firm always pays its bill in a timely manner upon receipt of the wheat. The wheat shipments take about two weeks to travel from Kansas to Asia, and Shocker Co. expects to make this years shipment next week.
News from the importers country indicates that the new government may impose foreign exchange controls that would delay or perhaps prevent the buyer from making payment. What trade financing arrangement can Shocker Co. make that will make it almost certain Shocker Co. will be paid for its exports upon delivery? Be sure to explain why the financing arrangement you described protect Shocker Co. and give the company confidence that it can make the delivery.
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