In a Documentary Collection Transaction,the Exporter Has an Increased Risk

question 23

Multiple Choice

In a documentary collection transaction,the exporter has an increased risk that is not so prominent in a letter of credit transaction? What is that risk?

• A)If the importer does not pay for the goods,the exporter will have to take action in the country where the importer is to force the return of the goods.
• B)In a documentary collection transaction,the exporter has had to pay a fee to a bank for the documentary collection that is not required in a letter of credit transaction.
• C)If the importer rejects the goods in a letter of credit transaction,the exporter still receives payment,but if the importer rejects the goods in a documentary collection transaction,the exporter does not get paid.
• D)In a documentary collection,the exporter is depending on the importer to make payment and take title to and possession of the goods.If the importer does not do that,the exporter has an inventory of unsold goods in a foreign country.

---

Definitions:

Step-Up Transformer

A transformer that produces a higher voltage at its secondary than is applied to its primary.

Secondary Voltage

The voltage output by the secondary winding of a transformer or another type of electrical converter, which has been transformed from the primary voltage.

Primary Voltage

The voltage supplied to the primary winding of a transformer, which induces a secondary voltage in accordance with the transformer's winding ratio.

Flux Leakage

The number of magnetic flux lines that radiate into space and do not cut through the conductors of an inductor or secondary winding of a transformer.