Explain how use of letter of credit can secure the position

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Question: Explain how the use of letter of credit can secure the position of an exporter in the following situation: A Japanese manufacturer (the seller) of optical zoom attachments has signed a contract with a Mexican company (the buyer) to supply 10,000 attachments for a contract price of USD 1.2 million. Following multiple discussions, the Japanese company has sought a 10 percent advance payment to help the company secure funds for purchasing raw material and to ensure the seriousness of the buyer. Given this is the first ever contract between these two companies, the Mexican company has asked for a 5 percent performance guarantee to ensure appropriate delivery on their agreement. Explain how a buyer can use the advance payment and performance guarantee to their benefit

Reference no: EM133357653

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