Problem1. Kenyoko Ltd is engaged in import and distribution of pulses in Mauritius. Goods are imported from the Madagascar and Australia. Import of goods is done on the monthly basis through ‘open account’ and letters of credit. Most letters of credit are at sight, whilst for bigger imports, letters of the credit are 90 days usance. Goods are majorly distributed to supermarkets and hyper stores, who get 90 days credit and they hand-over avalised bills of the exchange to Kenyoko Ltd on delivery of goods.
Required:
Question1. Make a distinction between ‘open account’ and letters of credit as a mode of doing business.
Question2. Describe the meaning of incoterms and assess how ‘incoterms’ affect the documents that exporters should produce.
Question3. Describe the advantages of receiving an avalised bill of exchange rather than dealing on open account with supermarkets for Kenyoko Ltd.
Question4. According to Article 19 of UCP 600 (Transport Documents covering at least two different modes of transport), must indicate at least six important information on the letter of credit. Describe three of this information.