The following quiz is intended as a fun exercise to test your knowledge on international trade. However, real life situations are more complex and should be discussed with a TD International Trade Services specialist.

Your Profile: You are CanExport Inc., a Canadian manufacturer of widgets used in various manufacturing processes. You have little experience in exporting, with the exception of a few small sales to the USA. At your most recent senior management meeting, the decision was made to move more aggressively into the international arena.

Scenario I:

A company called ManImport Co. awards CanExport a contract that requires not only making a large quantity of widgets, but also installing and integrating them into an existing manufacturing process at ManImport's plant. So, CanExport asks for 25% down payment to finance the pre-shipment production. ManImport agrees provided that an Advance Payment Guarantee is issued on its behalf.

To what risk has CanExport exposed itself as a result of issuing the Advance Payment Guarantee?

Scenario II:

Through the grapevine, CanExport has discovered that PepCo -- a large, financially sound company located in a G-7 country -- is interested in purchasing a small shipment of widgets. CanExport already has the widgets in stock and can ship immediately. Eager to make the sale, CanExport contacts PepCo.

What method of international payment would you, CanExport, suggest to your customer?

Scenario III:

CanExport is in the process of negotiating a large sale with a new customer, Widgets Import Inc. This customer is located in a politically unstable developing country. Widgets Import is asking for 180 day payment terms, and CanExport agrees as this promises to be a very lucrative deal.

(I)What payment structure suits the situation best?

(II) Let's assume that CanExport and Widgets Import agree to carry out the transaction under a confirmed term Letter of Credit with a maturity date of 180 days from the time of shipment. But after shipping the goods, CanExport realizes that it does not have the cash flow to wait 180 days to receive payment.

Which of the following options would allow CanExport to collect payment under the Letter of Credit before the maturity date?