Saturday 28 March 2015

CDCS SAMPLE TEST 8/25 With Answers

1. The applicant showed to the beneficiary a written undertaking from the issuing bank for its agreement to issue a letter of credit subject to UCP 600. However, due to change in financial position of the applicant, the issuing bank later decided not to do so. The beneficiary wrote to the issuing bank to force its commitment in writing.

Is the beneficiary successful?

2. Under which condition that a confirmed letter of credit subject to UCP 600 may become unconfirmed without the consent of the beneficiary?


3. An issuing bank sent its refusal notice to a presentation under UCP 600 to a presenting bank overseas by courier.

Is this acceptable?

4. A documentary credit is issued for an amount of approximately GBP 40,000.00 payable with drafts drawn at 30 days from date of shipment. Documents are presented on 22 September XXXX with bills of lading dated 01 September xxxx and for value GBP 38,000.00.

Which of the following drafts would be accepted?

1. 30 days from 01 September XXXX for approximately GBP 40,000.00.
2. 30 days from date of shipment – value GBP 38,000.00.
3. Due 01 October XXXX – value GBP 38,000.00.
4. 30 days from bill of lading date 01 September XXXX – value GBP 38,000.00.

a) 1 and 2 only.
b) 1 and 3 only.
c) 2 and 4 only.
d) 3 and 4 only.

5. Which of the 'additional conditions' are deemed to be non-documentary?

1. Beneficiary must provide the applicant with details of the shipment.
2. Shipment must be made on a vessel named Butterfly.
3. Goods must be inspected by the applicant prior to shipment.
4. Goods must be of Indian or Chinese origin.

a) 1 and 2 only.
b) 1 and 3 only.
c) 2 and 4 only.
d) 3 and 4 only.


6. A L/c was issued by 60 days deferred payment from the date of bill of lading. The presented document shows the BL date as 30th Sep 2008 while the document was received by the issuing bank on 5th Oct 2008. The issuing bank raised discrepancy on 10th of Oct 2008. The document was later accepted by the applicant on 15th Oct 2008. The issuing bank communicated its acceptance on 16th Oct 2008.

Which one of the following is the correct maturity date of the bill?


a) 29th Nov 2008
b) 4th Dec 2008
c) 14th Dec 2008
d) 15th Dec 2008

7. Is this refusal notice acceptable for a DC subject to UCP 600?

"We refuse to pay you due to the following three discrepancies:
1. The commercial invoice does not meet the terms and conditions of the DC.
2. Third party B/L presented.
3. Unclean B/L presented.

Meanwhile we are holding the documents at your disposal and risk."

8. A presenting bank had the following messages in its covering letter/schedule dated 24 July 2007 presented against a DC subject to UCP 600.

"We have found the following discrepancies in the documents:

1. The port of discharge in the B/L is not the same as that stated in the DC.
2. Presentation after expiry.
3. Corrections in the certificate of origin are not authenticated by the issuer.

The documents are now presented for collection. Please approach the applicant for a waiver and give us your authority to negotiate by SWIFT message."

The issuing bank sent its refusal notice as follows:

"After consulting the applicant, we determine to refuse the documents due to the three discrepancies with the underlying reasons as stipulated in your covering letter/schedule dated 24 July 2007.
Meanwhile, we are holding the documents at your disposal and risk."

Who is wrong in this case- issuing bank or nominated bank ?

9. An issuing bank sent its refusal notice on the 5th banking day after receipt of the documents presented under UCP 600. In fact a simple set of documents was presented for sales of kitchenware, consisting of a total of 12 pages of documents.

Is this refusal notice sent within reasonable time?

10. Under UCP 600, can a beneficiary, through a presenting bank, have the right to present documents against a confirmed letter of credit directly to the issuing bank?


11. A beneficiary made a compliant presentation under a documentary credit subject to UCP 600. The applicant showed to the issuing bank that the same beneficiary had made fraudulent presentation under another documentary credit issued by another bank and instructed the issuing bank not to pay the beneficiary. The issuing bank did not follow the instruction and paid the beneficiary. The applicant refused to reimburse the issuing bank.

Is the applicant right in doing so?

12. Your customer has received the following amendment under L/c which prohibits partial shipments

1. Decrease in amount of L/c from USD 100000 to USD 90000
2. Inspection certificate from SGS instead of Ministry of Agriculture

What options does your customer have in terms of documents presentation?

a) Reject the amendment in writing, if not it will be assumed that he has
    accepted the amendments
b) Present documents for USD 100000 and inspection certificate from SGS
c) Present documents for USD 90000 and inspection certificate from Ministry of
   Agriculture
d) Present documents for USD 100000 and inspection certificate from Ministry of
    agriculture

13. An advising bank acts as per UCP

a) If it refuses to add confirmation to a documentary credit upon request from the
    issuing bank but still advises the credit to the beneficiary
b) If it passes an incomplete documentary credit to the beneficiary without
    mentioning the fact that the credit appeared incomplete
c) If it takes no action upon receipt of an incomplete documentary credit,
   assuming that the issuing bank will provide all necessary information later
d) If it treats mail confirmation as the LC while it has received by LC through both
    through tele transmission and mail


14. A DC subject to UCP 600 specified a reimbursement instruction that reads:

"Upon receipt of full set of documents in conformity with the letter of credit terms and conditions, we will effect payment as per your instructions".

Compliant presentation was made to the nominated negotiating bank that had given value to the beneficiary and claimed for reimbursements.

The documents were however lost in transit by the courier company.

The issuing bank refused reimbursement because reimbursement would only be effective "upon receipt of documents" as specified in the reimbursement instruction quoted above.

Is the issuing bank correct in its refusal decision?

15. In a DC subject to UCP 600, the issuing bank gave a refusal notice that read:

"We refuse payment due to following discrepancies:

The commercial invoice and the bill of lading are not consistent with each other.

Meanwhile we hold documents at your risk and disposal".

Is this refusal notice valid?

16. You receive an L/c with the following condition

Beneficiary – ABC Co, Taiwan
Manufacturer-XYZ Co, China
Certificate of origin issued by local chamber of commerce
Export License issued by a official authority in the exporting country

Beneficiary presents the following documents

1. Certificate of origin issued by a chamber of commerce in Hong Kong
2. Export license issued by XYZ Co in China

a) Both documents are not acceptable
b) Both documents are acceptable
c) 1 is acceptable but 2 is not
d) 2 is acceptable but 1 is not

17. When advice of refusal states 5 discrepancies and nominated bank observe 3 of them are not valid, is the advice of refusal valid ?

18. In a confirmed credit, if the drafts are drawn on the confirming bank, can the confirming bank negotiate ?

19. A credit stipulated under additional conditions, “shipment to be effected on FCL/FCL basis”. Is it necessary for the bill of lading to indicate shipment effected on FCL/FCL basis?

20. An issuing bank has issued a sight documentary credit to a beneficiary authorising a nominated bank to pay the beneficiary for all documents presented in accordance with the documentary credit terms and conditions. Upon receipt of complying documents drawn under the documentary credit direct from the beneficiary, the issuing bank should:

a) Examine the documents and pay the beneficiary
b) Verify the documents and pay the nominated bank
c) Return the documents to the beneficiary for presentation to the nominated bank
d) Remit the documents to the nominated bank for examination

21. A confirming bank examines documents under a documentary credit, which requires presentation of an invoice, certificate of origin and an ocean bill of lading.

The documentary credit also includes the following clause: “special condition- all packages must be clearly marked with the country of origin”.

Where the documents do NOT show that the packages have been marked in this way and are otherwise in order, the confirming bank should:

a) Reject the documents and suggest to the beneficiary that he present a
   certificate evidencing that this condition has been complied with
b) Reject the documents and suggest to the beneficiary that the certificate of
    origin be amended to include the special condition
c) Contact the issuing bank and withhold payment until clarification is received
d) Ignore the special condition and honour the beneficiary’s presentation of
   documents


22. An LC subject to UCP 600 was issued on 1 August 2007 stating the total value of the goods as "USD 200,000 CIF Hong Kong" and a commercial invoice stating "USD 200,000 CIF Hong Kong Incoterms 2000" was presented.
The Issuing Bank considered this as a discrepancy.

The reasons are:
"CIF" does not exist only in Incoterms. It is also found in other trade terms, such as the USA Trade Definitions, the Warsaw Trade Terms and the like. The Applicant may not mean Incoterms.
Even if the parties do mean Incoterms, it may be Incoterms 1990 other than Incoterms 2000.

Is the Issuing Bank correct in its determination of this discrepancy?

23. Documents under a documentary credit are tendered at the counters of the confirming bank and are mistakenly found to comply with its terms and conditions. The confirming bank pay the beneficiary and forwards the documents to the issuing bank. Upon receipt by the issuing bank, the documents are checked and found to be discrepant. The issuing bank notifies the confirming bank of all discrepancies ten banking days after receipt and refuses to reimburse. In considering whether the confirming bank can recover funds paid, which of the following statements are correct? It:

1) Can recover from the beneficiary
2) Cannot recover from the beneficiary
3) Can recover from the issuing bank
4) Cannot recover from the issuing bank

a) 1 and 3 only
b) 1 and 4 only
c) 2 and 3 only
d) 2 and 4 only

24. A credit was issued by ABC Bank Ltd on 1st of Oct 2008 and was confirmed by XYZ Bank Limited. The credit was “30 days after sight” available with confirming bank by acceptance. On presentation of documents by the beneficiary on 1st Nov 2008 to the confirming bank, the confirming bank communicated its acceptance to the beneficiary on the same day and forwarded the documents to the issuing bank. The issuing bank communicated its acceptance on 5th Nov 2008. What is correct maturity under this presentation?

a) 31st Oct 2008
b) 1st Dec 2008
c) 5th Dec 2008
d) None of the above

25. L/c is available by sight payment with issuing bank and requires presentation of documents within 21 calendar days from the date of shipment

a) Beneficiary must present documents to their banker within 21 calendar days
    from the date of shipment without fail but within the validity of the credit
b) Beneficiary or their banker must dispatch documents within 21 calendar days
    from the date of shipment but not later than expiry of the credit
c) Beneficiary must present documents to their banker before expiry of the credit
d) None of above






ANSWERS


  1. NO
  2. IF CONFIRMING BANK ADVISES THE AMENDMENT WITHOUT ADDING CONFIRMATION
  3. YES
  4. D
  5. B
  6. A
  7. NOT VALID
  8. ISSUING BANK
  9. YES
  10. YES
  11. NO
  12. D
  13. A
  14. NO
  15. NO
  16. B
  17. YES
  18. NO
  19. NO
  20. A
  21. D
  22. NO
  23. C
  24. B
  25. D


Monday 23 March 2015

CDCS SAMPLE TEST 7/25 With Answers

1. A DC, subject to UCP 600, available for 30-day deferred payment of USD200,000, covering furniture items of Reconnaissance design shipped from Hong Kong to Jeddah, Saudi Arabia was confirmed by the Advising & Nominated Bank.

An amendment added USD100,000 for framed oil paintings with pornographic themes.

The Confirming Bank advised the amendment without adding confirmation to USD100,000 because pornographic works would be confiscated by the Saudi Arabian import authorities due to religious reasons.

The Beneficiary argued that
(a) DC deals with documents not with goods
(b) A bank should not speculate the intention of the parties in international trade 
(c) since both the Issuing Bank and the Applicant agreed to the amendment, they
     were the parties to take this risk, not the Confirming Bank that could claim
     reimbursement from the Issuing Bank regardless as whether the goods were
     confiscated or not, according to UCP 600 articles 7 (c) and 12 (b).

Does the Confirming Bank have a right to do so under UCP 600?
  1. Yes
  2. No

2. Bank A has confirmed an L/C issued by Bank B in favour of its customers Nice Exports. On 01st April Bank A receives an amendment to the letter of credit. If Bank A does not wish to extend its confirmation to the amendment it should

a) Inform the issuing bank without delay
b) Inform the beneficiary without delay
c) Inform beneficiary and issuing bank without delay
d) Bank A is bound to extend its confirmation to the credit


3. You have received credit compliant documents from a beneficiary under an unconfirmed sight documentary credit and as a nominated bank you wish to negotiate them. Which of the following statements describe best your actions?

a) Make immediate payment to the beneficiary
b) Make payment to the beneficiary upon receipt of funds from the issuing bank
c) Send documents to the issuing bank
d) Seek permission from issuing bank to negotiate the documents

a) D only
b) B & C
c) C only
d) A & C


4. LC was to be expired on 15th Aug. The beneficiary presented documents on 14th Aug to a nominated bank. What was latest day of completion of examination by the nominated bank? (if there are no holidays)

a) 15th Aug
b) 20th Aug
c) 19th Aug
d) 18th Aug


5. If a bank is requested to advise L/c but elects not to advise the same to beneficiary

a) It must inform to the issuing bank within reasonable time but not exceeding 5
    banking days
b) It must inform to the issuing bank without delay
c) It need not inform to the issuing bank
d) It must inform to the issuing bank within a day or two

6. Issuing bank amended L/c for 4 conditions stated in confirmed credit. What is appropriate statement.

a) Beneficiary must accept amendment covering all four amendments in total
    or reject
b) Confirming must add confirmation and forward the same to beneficiary
c) Beneficiary may accept 3 conditions and may reject one condition
d) All above

7. Bank that negotiates without recourse of a complying presentation

a) Issuing bank
b) Confirming bank
c) Advising bank
d) A & C


8. If a credit is available with a nominated bank by acceptance “30days after sight” does this mean 30days after the nominated bank’s sight of the documents or the issuing bank’s sight ?


9. A DC subject to UCP 600 specified a reimbursement instruction that reads:

"Upon receipt of full set of documents in conformity with the letter of credit terms and conditions, we will effect payment as per your instructions".

Compliant presentation was made to the nominated negotiating bank that had given value to the beneficiary and claimed for reimbursements. The documents were however lost in transit by the courier company.

The issuing bank refused reimbursement because reimbursement would only be effective

"upon receipt of documents" as specified in the reimbursement instruction quoted above.

Is the issuing bank correct in its refusal decision?

10. Which of the following can be combined under a credit available with and requiring a draft drawn on an issuing bank?

1. Payment.
2. Deferred payment.
3. Acceptance.
4. Negotiation.

a) 1 and 2 only.
b) 1 and 3 only.
c) 2 and 3 only.
d) 3 and 4 only.

11. Reimbursement authorisation must contain

a) Expiry date and latest date of shipment
b) Expiry date and statement by claiming bank that they of honoured or
    negotiated complying presentation
c) Not require any statement and must not show expiry date
d) All above

12. L/c does not stipulate rules applicable for bank to bank reimbursements

a) ICC latest rules for Bank to Bank reimbursements will apply
b) Advising bank must seek clarification from the issuing bank
c) Beneficiary must seek amendment from the applicant
d) None of the above

13. As per additional conditions of L/c, “goods must be of Indian origin” and requires presentation of following documents:

a) Transport Document
b) Quality Certificate
c) Commercial Invoice
d) None of the above

Identify the document that needs to show “goods are of Indian origin”

14. Under additional conditions of a letter of credit packing details are shown as “goods must be packed in 50kg pp bags” and requires presentation of following documents

a) Packing list
b) Commercial Invoice
c) Bill of lading
d) All above

Identify the document that needs to show “goods are packed in 50kg pp bags
  
15. LC issued on 1st Dec 2008 and requires presentation of pre-shipment inspection certificate. Shipment effected on 15th Dec 2008

a) Pre-shipment inspection certificate must be dated on or before 1st of Dec 2008
b) Inspection certificate dated on or before 15th Dec 2008 is acceptable
c) Inspection certificate dated prior to the date of presentation and showing title
   as “Pre-shipment inspection certificate” is acceptable
d) Only A is incorrect

16. L/c available by sight payment and documents under a letter of credit reached the issuing bank on Friday the 2nd of Jan 2009  (Saturday and Sunday non banking days for issuing bank). The issuing bank must honour or reject presentation:

a) on 9th Jan 2009
b) Between 2nd to 8th Jan 2009
c) on 8th Jan 2009
d) Between 2nd to 9th Jan 2009

17. Issuing bank sent notice of refusal within 5 banking days to the presenter and to the applicant. Within how many days applicant must confirm acceptance or rejection of discrepancies to the issuing bank

a) Within 5 banking days upon receipt of such notice of refusal
b) Without delay
c) As soon as possible
d) No time limit for applicant’s acceptance

18. Last date for presentation of documents in beneficiary’s country falls on Sunday which is a local holiday. Since L/c is issued by bank in Dubai and Sunday is working day for issuing bank, nominated bank refused presentation of documents on Monday.

a) Nominated bank is right in refusing presentation under UCP rules.
b) Nominated bank should have taken clarification from the issuing bank
c) Nominated bank can not refuse documents under UCP rules
d) None of the above is correct

19. In a DC subject to UCP 600, the issuing bank gave a refusal notice that read:

"We refuse payment due to following discrepancies:

The commercial invoice and the bill of lading are not consistent with each other.

Meanwhile we hold documents at your risk and disposal".

Is this refusal notice valid?

20. A beneficiary made a compliant presentation under a documentary credit subject to UCP 600. The applicant showed to the issuing bank that the same beneficiary had made fraudulent presentation under another documentary credit issued by another bank and instructed the issuing bank not to pay the beneficiary. The issuing bank did not follow the instruction and paid the beneficiary. The applicant refused to reimburse the issuing bank.

Is the applicant right in doing so?

21. A DC subject to UCP 600 required presentation of a freight receipt without specifying its issuer and data content. A freight receipt issued by the beneficiary was presented, certifying that the freight was received by the carrier.

Is it acceptable?

22. A DC subject to UCP 600 has the following stipulation:
"Purchase Contract No. 123456 dated 24 July 2007 attached herewith forms an integral part of this documentary credit."

Is this stipulation acceptable?

23. Is the following refusal notice acceptable for a DC subject to UCP 600?

"We refuse the documents and have found the following three discrepancies in the presented documents:

1. The port of discharge in the B/L is not the same as that stated in the DC.
2. Presentation after expiry.
3. Corrections in the certificate of origin are not authenticated by the issuer."

24. Suppose a nominated bank purchases discrepant documents after receipt of the issuing bank

An applicant informed the issuing bank that the goods were rubbish and asked the issuing bank to freeze payment under a DC subject to UCP 600 due to trade frauds although the documents presented were all compliant.

Should the issuing bank follow the instructions from the applicant?

25. A nominated paying bank sent three refusal notices on the same day under a DC subject to UCP 600. The first notice was sent by fax listing all the discrepancies with reasons; the second notice made by telephone advising payment dishonour and the third notice sent by telex advising that documents were returned to the presenter by local courier.

Is this acceptable?



ANSWERS


  1. YES
  2. C
  3. D
  4. C
  5. B
  6. A
  7. B
  8. NOMINATED BANK’S
  9. NO
  10. B
  11. C
  12. D
  13. D
  14. A
  15. D
  16. D
  17. D
  18. C
  19. NO
  20. NO
  21. YES
  22. YES
  23. NO
  24. NO
  25. YES