Question

How can you protect yourself from expropriation and/ or non payment for good delivered to a foreign port?

Answer 1

The risk that we face on exporting goods to the foreign port is the financial risk. Risk of non payment by the customer will result in the financial loss for the seller. In order to cover the risk, we may ask the customer to issue Letter of Credit on behalf of the customer assigned to us.

A Letter of Credit is a letter issued by a bank to another bank (especially one in a different country) to serve as a guarantee for payments made to a specified person under specified conditions.

Hence, if the customer defaults the issuing bank is liable to make the payment to our bank and our risk is protected.