Page 166 - DMGT547_INTERNATIONAL_MARKETING

Unit 9: Terms of Payment and Delivery

Confirmed Letter of Credit (L/C) Notes

Confirmed Letter of Credit (L/C) under a Confirmed Letter of Credit, a bank, called the
Confirming Bank, adds its commitment to that of the issuing bank. By adding its commitment,
the Confirming Bank takes the responsibility of claim under the letter of credit, assuming all
terms and conditions of the letter of credit are met.

Self Assessment

Fill in the blanks:

4. In ....................... method, all shipping documents, including title documents are handled
directly between the trading partners and the role of banks is limited to clearing amounts
as required.

5. There are two methods under Collections of bill method, ....................... and ....................... .
6. The ....................... is published by the International Chamber of Commerce under the
provision of Uniform Custom and Practices (UCP) brochure number 500.

9.3 Dumping

The first and clearer principle is that prohibiting dumping. A second practice prohibited under
the GATT is the payment of unfair subsidies, bounties, or grants. The principle opposes attempts
by governments to distort the world market by specifically subsidizing exports. As more
governments assist industry to promote economic growth, the issue of what an unfair subsidy
is has become considerably more complex. More governments use subsidies in a variety of
forms, such as grants, tax forgiveness or deferral, or low-interest loans, in order to encourage
businesses to train workers, locate in depressed areas of a country, develop needed products, or
restructure industries. When those subsidies are aimed at export generating businesses, there is
the risk that the lowered cost of producing products for export will distort world markets.
Dumping is a form of price discrimination. It is the practice of charging different prices for the
same product in similar markets. As a result, imported goods are sold at prices so slow as to be
detrimental to local producers of the same kind of merchandise.

9.3.1 Types of Dumping

The major types of Dumping prevalent today are:

Over-capacity dumping
Government-support dumping
Tactical dumping (discriminatory pricing)

Predatory dumping
Over-capacity dumping occurs when a company produces and sells products at a price that is
lower than the average cost of production, trying to cover at least its fixed costs.
Government-supported dumping takes place when the government supports a particular industry
by providing subsidies, because of which such firms can sell their products at a price below the
production costs.

Example: Agricultural products are often dumped in this manner.

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