Download Sample quiz questions for CDCS and more Quizzes Foreign Trade in PDF only on Docsity!
The London Institute of Banking & Finance is a registered charity, incorporated by Royal Charter. The International Chamber of Commerce (ICC) is the largest, most representative business organisation in the world. This qualification is regulated by the regulatory authorities for England and is incorporated into the Regulated Qualifications Framework (RQF) at Level 4.
LIBF Level 4 Certificate for Documentary Credit
Specialists (CDCS
®
Specimen paper B – Answer document
___________________________________________________________________________
Answers and Justifications Q1 C A This is within the definition of a complying presentation as per Article 2 of UCP 600. Study Text - Section 3.4.2. B This is within the definition of a complying presentation as per Article 2 of UCP 600. Study Text - Section 3.4.2. C Correct. Article 4 of UCP 600 states that the credit is separate from the underlying contract and the bank's undertaking is not subject to that contract. Study Text - Section 3.4.4. D This is within the definition of a complying presentation as per Article 2 of UCP 600. Study Text - Section 3.4.2. Q2 A A Correct. Articles 4 and 5 of UCP 600 emphasise the separateness of the credit from goods, services, contracts and performance. This theme is replicated in ISP98 Rule 1.08a. B This defines only the standby credit. Study Text - Section 21.1. Note that there is an exception in the form of a direct-pay standby. Study Text - Section 21.2. C Only a documentary credit is a principal method of settlement. Study Text - Topic 4. D Advance payments typically relate to red clause credits. Study Text - Section 20.4. As a default instrument you would not have a similar provision for standby credits. Q3 D A URR covers bank-to-bank reimbursements and is therefore not relevant to this scenario. B URR covers bank-to-bank reimbursements and is therefore not relevant to this scenario. C UCP 600 does not make any provision for presentation of electronic records. D Correct. Rule 1.09c of ISP98 covers the presentation of electronic records. While many standby credits are subject to ISP98, they may also be governed by UCP. In the event that presentation of electronic records is required, this would mean using eUCP. Q4 A A Correct. This meets the definition of a clean credit. Study Text - Section 20.3. B See Section 20.3 of the Study Text for the definition of a clean credit. C See Section 20.3 of the Study Text for the definition of a clean credit. D See Section 20.3 of the Study Text for the definition of a clean credit. Q5 C A See Section 19.1.3 of the Study Text. B See Section 19.1.3 of the Study Text. C Correct. Article 38b of UCP 600 refers. Study Text - Section 19.1.4. D See Section 19.1.3 of the Study Text. Q6 A A Correct. It usually supports an obligation to pay for goods or services. Study Text - Section 21.2. B This describes a financial standby. Study Text - Section 21.2. C This describes a financial standby. Study Text - Section 21.2. D This could be better described as a performance standby. Study Text - Section 21.2. Q7 B A See Section 20.4.1 of the Study Text for details of the likely documents. B Correct. The payment is made pre-shipment so a bill of lading would not yet exist. See Section 20.4.1 of the Study Text. C See Section 20.4.1 of the Study Text for details of the likely documents. D See Section 20.4.1 of the Study Text for details of the likely documents.
Q15 B
A A multimodal document is acceptable. UCP 600 Article 20a states 'however named'. B Correct. 1 and 3 do not fulfil the requirements. See UCP 600 Article 20 and Study Text - Sections 14.2 and 14.3. C A multimodal or combined transport document is acceptable. UCP 600 Article 20a states 'however named'. D A combined transport document is acceptable. UCP 600 Article 20a states 'however named'. Q16 A A Correct. Article 10a of UCP 600 states the parties need to agree. B An advising bank does not need to agree to cancellation. C The reimbursing bank does not need to agree to cancellation of the credit, irrespective of their undertaking. D An advising bank does not need to agree to cancellation. Q17 C A Article 37c of UCP 600 states that the issuing bank remains liable for payment of charges. Study Text - Section 20.12. B Article 37c of UCP 600 states that the issuing bank remains liable for payment of charges. Study Text - Section 20.12. C Correct. Article 37c of UCP 600 states that the issuing bank remains liable for payment of charges. Study Text - Section 20.12. D Article 37c of UCP 600 states that the issuing bank remains liable for payment of charges. Study Text - Section 20.12. Q18 C A ISBP paragraph F5c(ii) details the requirements. B ISBP paragraph F5c(ii) details the requirements. C Correct. ISBP paragraph F5c(ii) details the requirements. D ISBP paragraph F5c(ii) details the requirements. Q19 C A Article 2 of UCP 600 defines negotiation. B Article 2 of UCP 600 defines negotiation. C Correct. Article 2 of UCP 600 defines negotiation. D Article 2 of UCP 600 defines negotiation. Q20 C A Article 39 of UCP 600 states that a credit does not need to be transferable in order for a beneficiary to assign proceeds. B The assignment instruction is separate from the credit and does not require the agreement of any other parties. C Correct. An acknowledgement may be issued to the assignee, but payment of funds is dependent on presentation of complying documents under the credit by the beneficiary. Study Text - Section 19.4. D The assignment will take effect only when the credit is paid. The bank does not give any guarantee of payment to the assignee. Study Text - Section 19.4.
Q21 C
A This is an obligation of the confirming bank per Article 8a(i) of UCP 600. Study Text - Section 10.1.2. B This is an obligation of the confirming bank per Article 8a(i) of UCP 600. Study Text - Section 10.1.2. C Correct. Article 8a(ii) of UCP 600 requires the negotiation to be without recourse. Study Text - Section 17.2. D This is an obligation of the confirming bank per Article 8a(i) of UCP 600. Study Text - Section 10.1.2. Q22 D A An invoice for USD 200,000 is required in order to claim that amount from the issuing bank and divide it between the first beneficiary, second beneficiary and assignee. B An invoice for USD 200,000 is required in order to claim that amount from the issuing bank and divide it between the first beneficiary, second beneficiary and assignee. C An invoice for USD 200,000 is required in order to claim that amount from the issuing bank and divide it between the first beneficiary, second beneficiary and assignee. D Correct. A full drawing has been made so the invoices should be for the maximum value of USD 200,000. The assignment will be paid out of the USD 50,000 due to the first beneficiary. Study Text - Section 19.1.5. Q23 A A Correct. See the definition of 'Honour' in Article 2 of UCP 600. Study Text - Section 7.4.3, 7.4.4, 7.4.5 and 7.5. B See the definition of 'Honour' in Article 2 of UCP 600. Study Text - Section 7.4.3, 7.4.4, 7.4.5 and 7.5. C See the definition of 'Honour' in Article 2 of UCP 600. Study Text - Section 7.4.3, 7.4.4, 7.4.5 and 7.5. D See the definition of 'Honour' in Article 2 of UCP 600. Study Text - Section 7.4.3, 7.4.4, 7.4.5 and 7.5. Q24 D A While option 3 is acceptable, it is not the only correct statement. B While option 4 is acceptable, it is not the only correct statement. C Options 1 and 2 do not categorically state that freight has been paid, consistent with Incoterm CFR. D Correct. Options 3 and 4 are clear regarding prepayment of freight. Article 26 of UCP 600 permits reference to charges additional to the freight. Q25 B A A courier receipt is a transport document covered by Article 25 of UCP 600. B Correct. Paragraph A18 of ISBP lists those documents that are not considered transport documents. Section 20.13.3 explains more about the nature of delivery orders. C An inland waterway document is a transport document covered by Article 24 of UCP 600. D A non-negotiable sea waybill is a transport document covered by Article 21 of UCP 600.
Q32 B
A Article 28d of UCP 600 allows presentation of a policy in lieu of a certificate or declaration, but not the reverse. Study Text - Section 15.1.2. B Correct. Article 28i of UCP 600 allows reference to exclusion clauses. Study Text - Section 15.1.2. C There is no provision in UCP 600 or ISBP for a maximum amount of cover. D Article 28f ii of UCP 600 defines the minimum cover as 110% of the CIF or CIP value. Study Text
- Section 15.1.1. Q33 D A There is no provision in UCP 600 or ISBP for open topped containers being deemed discrepant. The phrase 'shipper's load and count' is permissible under Article 26b of UCP 600. B There is no provision in UCP 600 or ISBP for open topped containers being deemed discrepant. C The phrase 'shipper's load and count' is permissible under Article 26b of UCP 600. D Correct. Reference to the goods having been shipped on deck is prohibited by Article 26a of UCP
- Paragraph E20 of ISBP indicates such a statement as declaring defective condition and therefore failing to meet the definition of 'clean' under Article 27 of UCP 600. Study Text - Section 14.9. Q34 C A Article 10f states that the amendment cannot become automatically effective unless rejected. The credit therefore remains valid for USD 100,000 and the documents must be paid for this amount. Study Text - Section 11.9. B Article 10f states that the amendment cannot become automatically effective unless rejected. The credit therefore remains valid for USD 100,000 and the documents must be paid for this amount. Study Text - Section 11.9. C Correct. Article 10f states that the amendment cannot become automatically effective unless rejected. The credit therefore remains valid for USD 100,000 and the documents must be paid for this amount. Study Text - Section 11.9. D Article 10f states that the amendment cannot become automatically effective unless rejected. The credit therefore remains valid for USD 100,000 and the documents must be paid for this amount. Study Text - Section 11.9. Q35 C A Departments of Trade are permitted by paragraph L3c(ii) of ISBP. B Associations of Industry are permitted by paragraph L3c(ii) of ISBP. C Correct. Paragraph L3c(ii) of ISBP states the types of issuer that are acceptable and these do not include inspection agencies. D Customs Authorities are permitted by paragraph L3c(ii) of ISBP. Q36 A A Correct. See ISBP paragraph L2. B See ISBP paragraph L2. C See ISBP paragraph L2. D See ISBP paragraph L2.
Q37 C
A Article 23a(iii) of UCP confirms that the specific notation is deemed to be the shipment date, hence the goods have been shipped within the latest shipment date. Third party consignors are allowed. Study Text - Section 12.4.1. B Article 14(i) of UCP 600 allows documents to be dated prior to the date of the credit. C Correct. Article 14(i) of UCP 600 prohibits documents dated later than the date of presentation. D ISBP paragraph N3 allows the certificate to be issued by any entity in the absence of a specific stipulation. Q38 A A Correct. Article 7 of URR 725 states that the reimbursing bank is not responsible for the expiry date of the credit and will disregard it. B Article 7 of URR 725 states that the reimbursing bank is not responsible for the expiry date of the credit and will disregard it. C Article 7 of URR 725 states that the reimbursing bank is not responsible for the expiry date of the credit and will disregard it. D Article 7 of URR 725 states that the reimbursing bank is not responsible for the expiry date of the credit and will disregard it. Q39 D A This is simply seven calendar days following the message. B This is only seven calendar days following the message, plus an extra day to allow for the US national holiday. C This date allows for weekends being non-banking days, but does not include the US national holiday. D Correct. The message is sent on Thursday 18 May. Weekends are non-banking days and in this instance, so is Monday 22 May as a US national holiday. The seventh banking day following the SWIFT is therefore Tuesday 30 May. Q40 D A The packing list is not necessarily a concern as the third party is not directly involved in the transaction and no sensitive information is likely to be shown. B The packing list is not necessarily a concern as the third party is not directly involved in the transaction no sensitive information is likely to be shown. C There is no disclosure here as both the applicant and the second beneficiary already know the first beneficiary. D Correct. The invoice amount would indicate to the applicant the price at which goods were being sourced by the first beneficiary. The notify party discloses the name of the applicant to the second beneficiary, thus allowing them to deal directly for future transactions. No documents other than the invoice and draft can be substituted. See Article 38h of UCP 600 and Section 19. of the Study Text. Q41 D A The credit remains in force for the original amount of USD100,000 until the amendment is accepted by the beneficiary. See Article 10c of UCP 600 and Section 11.9 of the Study Text. B The credit remains in force for the original amount of USD 100,000 until the amendment is accepted by the beneficiary. See Article 10c of UCP 600 and Section 11.9 of the Study Text. C The credit remains in force for the original amount of USD 100,000 until the amendment is accepted by the beneficiary. See Article 10c of UCP 600 and Section 11.9 of the Study Text. D Correct. The credit remains in force for the original amount of USD 100,000 until the amendment is accepted by the beneficiary. See Article 10c of UCP 600 and Section 11.9 of the Study Text.
Q46 A
A Correct. Foreign exchange risk is the applicant's responsibility in the event that the credit is denominated in a foreign currency. The issuing bank is not exposed on its own account. B This is a true statement. Study Text - Section 6.1 and 6.2. C This is a true statement. Study Text - Section 6.1 and 6.2. D This is a true statement. Study Text - Section 6.1 and 6.2. Q47 D A This alludes to the irrevocable nature of credits. B There is no specific term for long validity credits. C There is no specific term for long validity credits. D Correct. This is the definition of evergreen. Study Text - Section 21.5. Q48 B A Sending one bill of lading directly ensures that the applicant is able to clear goods, irrespective of when documents are presented to the issuing bank. B Correct. Demurrage does not fall into the classification of 'costs additional to freight' and would therefore be unaffected by any such clause. See ISBP paragraph E27c. C Curtailment of the presentation period will enforce faster presentation of bills of lading, thus reducing the risk of demurrage. D Non-negotiable sea waybills reduce the risk as they do not need to be surrendered in order to release goods. Study Text - Section 12.3.3. Q49 B A This is a correct statement. Study Text - Section 19.4. B Correct. The assignee cannot present documents. Study Text - Section 19.4. C This is a correct statement. Study Text - Section 19.4. D This is a correct statement. Study Text - Section 19.4. Q50 D A The tenor is only a requirement if the reimbursing bank is being asked to accept and pay a term draft. The credit expiry date is not a requirement. See Article 9b of URR 725. B The tenor is only a requirement if the reimbursing bank is being asked to accept and pay a term draft. See Article 9b of URR 725. C The credit expiry date is not a requirement. See Article 9b of URR 725. D Correct. Article 9b of URR 725 lists the mandatory requirements for the issuing bank's request and these two points are included. Q51 B A Article 39 of UCP 600 allows assignment of proceeds. Study Text - Section 19.4. B Correct. Article 39 allows the beneficiary to assign proceeds. Study Text - Section 19.4. C Article 39 of UCP 600 allows assignment of proceeds. Study Text - Section 19.4. D Article 38b of UCP There is no requirement to make a credit transferable to enable funds to be paid to a third party. Q52 D A Study Text - Section 20.13.3. B Study Text - Section 20.13.3. C Study Text - Section 20.13.3. D Correct. Study Text - Section 20.13.3.
Q53 C
A Study Text - Section 20.14 gives more detail on the risks and counter-indemnity. B Study Text - Section 20.14 gives more detail on the risks and counter-indemnity. C Correct. The applicant cannot indemnify the issuing bank against their own insolvency as in such an event, the indemnity would be worthless. Study Text - Section 20.14. D Study Text - Section 20.14 gives more detail on the risks and counter-indemnity. Q54 D A Paragraph A18 of ISBP confirms that a delivery order is not considered a transport document. B Paragraph A18a of ISBP confirms that a forwarder's certificate of shipment is not considered a transport document. C Paragraph A18a of ISBP confirms that a forwarder's certificate of transport is not considered a transport document. D Correct. A post receipt is a transport document covered by Article 25 of UCP 600. Q55 B A Text location 25.1.2. B Correct. Text location 25.1.2. C Text location 25.1.2. D Text location 25.1.2. Q56 A A Correct. See UCP 600 sub-article 8d. B C D Q57 B A UCP 600 sub-article 7a(iv). B Correct. Not included within the confines of UCP 600 article 7. C UCP 600 sub-article 7a(iv). D UCP 600 sub-articles 6a and 6d(ii). Q58 C A ISP98 sub- rule 1.06c(i) incorrectly referring to beneficiary instead of applicant. B ISP98 sub- rule 1.06c(ii). C Correct. ISP98 sub- rule 1.06c(iii). D ISP98 sub- rule 1.06c(iv) incorrectly referring to applicant instead of issuer. Q59 C A B C Correct. Refer UCP 600 sub-article 14f. D Q60 B A B Correct. Text location 20.13.1. C D
Q66 A
A Correct. Article 3 of UCP 600 defines the middle of the month as being between the 11th and 20th. Shipment on 21 August is therefore late. B The certificate of origin is not called for under the credit and can therefore be ignored, according to Article 14g of UCP 600. It is therefore not discrepant. C As the bank was closed on 10 September due to a national holiday, the expiry date is extended to 11 June in accordance with Article 29a of UCP 600. The invoice is therefore date within the expiry of the credit. Study Text - Section 7.6, 12.6.1 and 13.8. D Paragraph M1 of ISBP allows presentation of a document bearing a similar title and fulfilling the intended function. Q67 D A Neither 1 nor 3 is applicable because amendment 1 is deemed to have been rejected per Article 10e of UCP 600. B 1 is not applicable because amendment 1 is deemed to have been rejected per Article 10e of UCP 600. C 3 is not applicable because amendment 1 is deemed to have been rejected per Article 10e of UCP 600. D Correct. Article 10e of UCP 600 states that partial acceptance of an amendment is not allowed and will be deemed a rejection. Amendment 1 is therefore not in force, meaning that neither the reduced value nor the extended dates are relevant. This leaves 2 and 4 as the only correct statements. Study Text - Section 11.9. Q68 D A These percentages, when applied to the transfer values, will not be sufficient for compliance with the original credit. B These percentages, when applied to the transfer values, will not be sufficient for compliance with the original credit. C These are the correct figures, but applied incorrectly to each of the transfer values. D Correct. Insurance is required for 110% of the full value, not the transfer value. The values sought are therefore USD44,000 and USD66,000. These equate to 147% of the Transfer 1 value and 138% of the Transfer 2 value. Study Text - Section 19.1.4. Q69 C A No shipment has been made in March and therefore, according to Article 32 of UCP 600, the credit ceases to be available and the documents should not be honoured. Study Text - Section 20.7. B No shipment has been made in March and therefore, according to Article 32 of UCP 600, the credit ceases to be available for both the March shipment and subsequent instalments i.e. April. Study Text - Section 20.7. C Correct. No shipment has been made in March and therefore, according to Article 32 of UCP 600, the credit ceases to be available and the documents should be refused. Study Text - Section 20.7. D Although the bank could choose to contact the assignee out of courtesy, it would be incorrect to state that documents are held at their disposal and the documents belong to the beneficiary, not the assignee. Study Text - Section 19.4.
Q70 B
A Article 11a(i) of URR 725 allows a maximum of three banking days following receipt for the claim to be processed. B Correct. Article 11a(i) of URR 725 allows a maximum of three banking days following receipt for the claim to be processed. Study Text - Section 22.3. C Article 11a(i) of URR 725 allows a maximum of three banking days following receipt for the claim to be processed. D Article 11a(i) of URR 725 allows a maximum of three banking days following receipt for the claim to be processed. Q71 AFGIJ A Correct. The phrase 'concerned authority' is similar to the terms noted in Article 3 of UCP 600 and therefore requires the document to be issued by a party other than the beneficiary. B The credit is not specific with regard to the origin of the goods so Article 14f of UCP 600 applies and the data content of the document is acceptable as presented. C There is no reference to a specific number of packing units and the goods quantity is expressed solely as 25mt. Article 30b therefore applies, allowing a tolerance of 5% more or less. D The credit does not specify the content of the packing list so Article 14f of UCP 600 applies and the data content of the document is acceptable as presented. E The credit does not specify a presentation period so Article 14c of UCP 600 applies and 21 days are allowed. A period of 14 days would only apply if goods were despatched on the latest shipment date, in order to meet the expiry date of the credit. F Correct. Article 27 of UCP 600 states that the word 'clean' does not need to appear on the transport document, even if the credit includes a requirement for the document to show 'clean on board'. G Correct. Although the credit calls for a full set less one original, it does not give any disposal instructions for the third bill of lading. ISBP paragraph A29c therefore applies and allows presentation of the full set. H The credit does not specify the content of the health certificate so Article 14f of UCP 600 applies and the data content of the document is acceptable as presented. I Correct. Article 20c of UCP 600 sets out the conditions under which transhipment will be acceptable. It is possible for the bill of lading presented under this credit to meet those conditions. J Correct. The credit requires legalisation in the exporting country. ISBP paragraph A19e gives possible definitions for 'exporting country' and these include domicile of the beneficiary, in this case the UK.
Q73 DEFGI
A The transport document indicates that 'any additional freight costs from Tema to Accra payable by consignee'. The credit is only covering shipment up to Tema port so reference to freight costs beyond Tema being for the consignee cannot be considered a discrepancy. B The credit expires on Saturday 20 July. As this is a non-business day, the expiry date is automatically extended to Monday 22 July in accordance with the provisions of UCP 600 Article
- An invoice issued 22 July is not therefore dated after expiry. C Any transhipment is permitted by UCP 600 Article 20c on the basis that the entire carriage is covered by a single bill of lading indicating that the goods have been shipped in a container. D Correct answer. While the name of Confreight Marine Line appears at the top of the document, it is not clearly identified as the carrier in accordance with the provisions of UCP 600 Article 20a(i). E Correct answer. The bill of lading shows the vessel as 'intended'. On this basis, the on-board notation must include a date and vessel name in accordance with UCP 600 Article 20a(ii). F Correct answer. A partial drawing has been made against the credit, but it is not clear which specific items have been shipped as this data is not quoted. This contravenes ISBP paragraph C4. G Correct answer. Field 45A of the credit incorporates the words 'Incoterms 2010' and ISBP paragraph C8 requires this specific detail to be incorporated on the invoice. The document presented does not comply. H There is no specific requirement in the credit for the bill of lading to show a declared value of the goods. ISBP paragraph A17 does not require the data to be completed, even if the document features a space for its inclusion. I Correct answer. The invoice shows a gross weight of 8,406kg whereas the bill of lading evidences 6,406kg. Article 14d of UCP 600 states that data must not conflict and these documents are therefore discrepant. J Article 14e of UCP 600 allows documents other than the commercial invoice to describe the goods in general terms not conflicting with the description in the credit. The bill of lading presented satisfies this requirement.
