question archive In which of the following trade finance situations would a performance guarantee be procured? A When an exporter wishes to respond to an international public tender that requires all bidders provide cash deposits or an irrevocable guarantee to secure their bids
In which of the following trade finance situations would a performance guarantee be procured? A When an exporter wishes to respond to an international public tender that requires all bidders provide cash deposits or an irrevocable guarantee to secure their bids
Subject:EconomicsPrice:2.87 Bought7
In which of the following trade finance situations would a performance guarantee be procured?
A When an exporter wishes to respond to an international public tender that requires all bidders provide cash deposits or an irrevocable guarantee to secure their bids.
B When two parties engage in a bilateral negotiation outside of the tendering process to reassure the foreign importer and strengthen the position of the seller.
C When negotiating parties are engaged in a long-term international contract and an instrument is needed to undertake payment of the seller to uphold the terms of the commercial contract to the satisfaction of the importer.
D When one of the negotiating parties wants guarantee of financial compensation if a bidder that has submitted a proposal refuses to accept a contract that is being awarded (e.g. due to competing obligations).
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Answer: Option C
Explanation: The trade finance situations in which a performance guarantee would be procured is when negotiating parties are engaged in a long-term international contract and an instrument is needed to undertake payment of the seller to uphold the terms of the commercial contract to the satisfaction of the importer. This is because this trade finance condition will guarantee the performance in a well secured way. Therefore, option C is the correct answer. Option A, B, and D are incorrect because these trade finance situations would not be procured by a performance guarantee as these will create hindrances in the performance guarantee.
