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

a) 15^th Aug

b) 20^th Aug

c) 19^th Aug

d) 18^th 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 1^st Dec 2008 and requires presentation of pre-shipment inspection certificate. Shipment effected on 15^th Dec 2008

a) Pre-shipment inspection certificate must be dated on or before 1^st of Dec 2008

b) Inspection certificate dated on or before 15^th 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 2^nd of Jan 2009  (Saturday and Sunday non banking days for issuing bank). The issuing bank must honour or reject presentation:

a) on 9^th Jan 2009

b) Between 2^nd to 8^th Jan 2009

c) on 8^th Jan 2009

d) Between 2^nd to 9^th 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