I am new to the forum and rather new to the world of trade finance. I am currently preparing for an exam and have some sample questions, which I am rather unsure about how to answer. I really hope you can take some time out to give my answers a look-over and check for my understanding?
I would really appreciate it! Thanks in advance! 
1. Company A has been supplying medical products to a Chinese buyer for 6 years and the method of payment has been L/C. However, the buyer has complained about the increasing commission and time involved with this payment method. However, Company A would not accept open account terms.
(a) What are other methods of payment that Company A may use?
- Cash in advance
- Documentary collections
(b) Compare the methods you suggested above in terms of time needed and protection to Company A.
- Cash in advance offers more protection to Company A as the goods are shipped only after payment is made. For documentary collections, there is lesser protection as the goods are shipped first, but title remains with Company A until payment is made or draft accepted by the Chinese buyer.
- time needed??
(c) If the Chinese buyer insists on trading under open account terms, what other method related to documentary credit can Company A suggest to protect his position?
- Performance stand-by L/C. This will protect Company A against non-performance of the Chinese buyer.
2. Company B is a diamond trader, importing from China and reselling to Europe. Your customer received a large order from a new European buyer. Due to the large amount, Company B insists on some payment undertaking by a bank. Company B’s Chinese supplier also made a similar request.
(a) Name and describe a suitable method of providing security of payment to Company B.
- Letter of credit
(b) How will the method you suggest above provide assistance to secure payment to the Chinese supplier? Name and describe these methods.
- Back-to-back L/C and transferable L/C??
