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 30^th Sep 2008 while the document was received by the issuing bank on 5^th Oct 2008. The issuing bank raised discrepancy on 10^th of Oct 2008. The document was later accepted by the applicant on 15^th Oct 2008. The issuing bank communicated its acceptance on 16^th Oct 2008.

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

a) 29^th Nov 2008

b) 4^th Dec 2008

c) 14^th Dec 2008

d) 15^th 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 1^st 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 1^st 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 5^th Nov 2008. What is correct maturity under this presentation?

a) 31^st Oct 2008

b) 1^st Dec 2008

c) 5^th 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