Question: K & S Pty. Ltd. is based in Australia, has just signed a C.I.F. contract to export its fish oil products to a local retailer

K & S Pty. Ltd. is based in Australia, has just signed a C.I.F. contract to export its fish oil products to a local retailer based in K.L. Malaysia and to receive payments in USD. The shipping company advised the cargo would arrive in K.L. 3 months later. The owner of K & S Pty. Ltd. is worrying about the exchange rate risk.

Explain what C.I.F. is in international trade.

What would be the potential exchange rate risk for K & S Pty. Ltd.?

What could K & S Pty. Ltd. do to mitigate the risks you would discuss in (b) above?

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