Case Study

IBM 230-004

Ashok Kumar-0758832

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International Trade Finance

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St. Clair College of Applied Arts and Technology
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Professor Tim Law

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June 12, 2020

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 Question-1. How could TLP have more effectively prepared itself for this undertaking?

Answer: TLP have more effectively can be prepared itself by clarifying all the points and terms
in undertaking. They can get the documents properly reviewed and if any point is missing than
get them included in documents, so that they can save themselves from this type of situation.

Question-2. Apart from the financing arrangements with its bankers, what steps should TLP have
taken regarding the trade finance arrangements?

Answer: The TLP should have a secured bond with the KSM company about the payments in
the form of a guaranteed letter because once the KSM company comes up with the performance
bond from the TLP company , they should also be prepared for every upcoming future risks
regarding payments and if the KSM company refuses to sanction such a guaranteed letter , the

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TLP company should ask for a letter of credit which will cover all the required guarantees. The

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letter of credit should be issued by a local bank.

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Question-3. Was the negotiating bank justified in refusing to honour its client’s drawing,
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especially given the financial challenges faced by TLP? Explain your answer.

Answer: - The local bank BT refused to negotiate with the TLP company and was not pleased
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with the news that the company would require to utilize a large portion of its existing line of
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credit to secure the performance bond , and also warned the TLP company about the impact on
the size of the pre- export loan.
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The reason why the local bank refused was that the issuing bank was not known to the BT and
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did not have any pre- established credit limits in place for this bank which would have allowed it
to confirm the letter of credit.
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Question-4. Given the scenario that has developed in this transaction and the position TLP is
facing, which of the following options would you choose, and why?
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A. Refuse the price reduction demand and make arrangements to store the goods to be sold or
returned for their own future use.

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 B. Accept the offer from KSM and reduce the price or negotiate a price reduction less than that
demanded by KSM; cap losses and future costs.

C. Refuse the offer, continue to negotiate with the issuing bank and the buyers to accept the
documents and the goods in the interest of preserving future relations, and agree to make
concessions on the services portion of the contract.

Answer:- - As per my thought of point, I would like to refusing the offer and negotiating with
issuing banks and buyers to accept the documents and goods so as to preserve the future
relations of the company and it would be the best decision of selling goods by giving
concession on the services portion of the contract .

I have selected this option, because the company has that letter of credit against KSM company

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in which the remaining amount will be paid by the bank itself and its not making any sense to

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sell our product on low prices to other buyers as the company has already gone through huge

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expenditure and it will cause big loss if company go with that option. Also, the company should
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take the product back to them as there is continue demurrage charges will be applied by the line
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of shipping.
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