Certified Supply Chain Professional (CSCP) Practice Exam

What is the role of the seller's bank in the line of credit process?

1. Notifies the buyer

2. Issues a letter of credit

3. Asks for payment from the buyer's bank

4. Delivers the cargo

The correct answer is: Asks for payment from the buyer's bank

The role of the seller's bank in the line of credit process is to ensure that the transaction is secure for the seller. When a letter of credit is established, it is typically issued by the buyer's bank, which assures the seller that they will receive payment provided they adhere to the terms specified in the letter of credit, such as delivering certain documents or meeting specific conditions. The seller's bank then serves as a facilitator in this process. When the seller fulfills their obligations—such as delivering the goods and providing the necessary documentation—the seller's bank processes the claim for payment. This involves asking for payment from the buyer's bank based on the terms outlined in the letter of credit. This step ensures that the seller receives their funds without risk, as the buyer's bank has already guaranteed payment under the agreed terms. Understanding this role is crucial, as it highlights the importance of banks in facilitating international trade and ensuring trust between parties who may not know each other well.