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Discuss how the l-c facilitates international trade

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Reference no: EM132971051

Question - Penang Motors is a newly incorporated company in Malaysian. They are about to purchase 10 tonnes of copper at $9000/tonne from a Turkish exporter. The CEO of Penang Motors, Tim Lee, does not have any experience in international trade. Therefore, Tim was shocked when he received a request for a payment of $90,000 for 10 tonnes of copper from the exporter. Tim is furious and does not want to pay before receiving the goods. The exporter also does not want to send copper before receiving the payment. You are the external advisor to Penang Motors. You have suggested Tim to use letter of credit (L/C) to purchase from any unknown seller.

Required - Answer the following questions:

Explain what is letter of credit (L/C), its principle parties and principle advantages to Tim Lee? 

Discuss how the L/C facilitates international trade.

Reference no: EM132971051

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