Rwanda Import Inc. signed a contract with Zimbabwe Expo! Inc. for the purchase of drilling equipment used in infrastructure development. The Rwandan company is interested in obtaining the product prior to payment but the Zimbabwean company wants to receive the payment up-front to minimize their risk of non-collecting. What is the recommended trade instrument for both companies to use?

A Transferable letter of credit

B Open payment terms

C Letter of credit and letter of guarantee

D Corporate letter of credit

Answer: Option C

Explanation: Letter of credit and letter of guarantee is the recommended trade instrument for both companies to use. In letter of credit, there is guarantee of transactions between seller and buyer. In letter of guarantee, bank provides guarantee of the transactions between seller and buyer. Therefore, there is negligible chances of losses to occur. This will satisfy the needs of the both Rwanda Import Inc. and Zimbabwean company. Therefore, option C is the correct answer. Option A is incorrect because transferable letter of credit includes a third party beneficiary which is not desired in this case at all. Open payment terms is used when products are received prior to payment, but Zimbabwean company wants to receive the payment up-front. So, this will not effective for the given contract. Therefore, option B is incorrect. Option D is incorrect because corporate letter of credit cannot fulfill the requirements of both Rwanda Import Inc, and Zimbabwean company.