CDCS specimen paper

® Certificate for Documentary Credit Specialists (CDCS ) SPECIMEN PAPER Length of examination: hours A qualification jointly examined by the ifs School of Finance and BAFT-IFSA CDCS Specimen paper Section A A documentary credit for USD 120,000 calls for shipment of fertiliser in February, March, April and May Each shipment is to be for about 500 tonnes Shipments were effected as follows: 450 tonnes on 24 February for value USD 27,000 550 tonnes on 12 April for value USD 33,000 460 tonnes on 30 April for value USD 28,000 550 tonnes on 04 June for value USD 33,000 Which of the above shipments will be honoured on presentation? A only B and only C and only D 1, and only In accordance with ISP 98, which of the following statements is correct? The issuer of a standby letter of credit MUST: A validate the breach of any underlying transaction B ensure the accuracy of any documents presented C ensure that any documents presented are genuine D honour presentations that appear on their face to comply If an exporter is willing to release the shipping documents directly to the buyer, but requires a guarantee of payment should the buyer default, which of the following BEST suits the exporter’s needs? A Standby B Revolving C Evergreen D Transferable Page CDCS Specimen paper A reimbursing bank has received a valid claim under its reimbursement undertaking and is simultaneously instructed by the issuing bank NOT to honour the claim In accordance with the URR 725, the reimbursing bank should: A request the claiming bank to cancel the claim B instruct the claiming bank to contact the beneficiary C honour the claim and debit the issuing bank's account D dishonour the claim as per the issuing bank's instruction An importer requires goods of a stipulated quality while the exporter requires certainty of payment Which of the following would BEST meet all requirements? A A confirmed standby credit payable on demand calling for beneficiary's quality certificate B A confirmed documentary credit payable at sight calling for beneficiary's quality certificate C An unconfirmed documentary credit payable at sight with drafts on issuing bank calling for a third-party quality certificate D A confirmed documentary credit available by acceptance with drafts drawn on confirming bank calling for a third-party quality certificate When an advising bank has accepted a usance draft, it is responsible for effecting payment at maturity when: A the draft is verified by the applicant B the draft is presented by the beneficiary C it has received funds from the issuing bank D it has received funds from the reimbursing bank A sight documentary credit authorises a nominated bank to pay the beneficiary Upon receipt of complying documents, direct from the beneficiary, the issuing bank should: A pay the beneficiary B pay the nominated bank C remit the documents to the nominated bank for examination D return the documents to the beneficiary for presentation to the nominated bank Page CDCS Specimen paper If a credit, available with the issuing bank, calls for a draft at 60 days after sight, it is available by: A payment B negotiation C acceptance D deferred payment A documentary credit that will only become available for presentation of shipping documents to the issuing bank after it has received and approved a performance guarantee is usually described as: 10 A standby B revocable C inoperative D advance payment In accordance with UCP 600, which of the following banks MAY have an undertaking to negotiate complying documents? Issuing bank Confirming bank Nominated bank Reimbursing bank 11 A and only B and only C and only D and only If a seller in country X wishes to receive payment from a buyer in country Y as soon as possible, which type of payment SHOULD the documentary credit be made available? A Negotiation with a nominated bank in country X B Acceptance by the nominated bank in country X C Sight payment with the issuing bank in country Y D Sight payment with the nominated bank in country X Page CDCS Specimen paper 12 Which of the following payment terms are possible under a credit available with, and requiring a draft drawn on, an issuing bank? 13 14 Payment Deferred payment Acceptance Negotiation A and only B and only C and only D and only The buyer has the LEAST risk by agreeing which of the following payment methods? A Documentary credit B Payment in advance C Open account trading D Documentary collection The issuing bank of a standby credit, subject to ISP 98, acknowledges an instruction from the beneficiary to assign proceeds Which of the following statements is INCORRECT? The rights of an assignee are subject to: A the rights of any other acknowledged assignees B the rights of any other assignees, pending acknowledgement C any other rights or interests that may have priority under the applicable law D the existence of any net proceeds payable to the beneficiary by the person making the acknowledgement Page CDCS Specimen paper 15 16 17 In a letter of credit available by acceptance, a confirming bank gives an undertaking to: accept drafts not accepted by the stipulated drawee bank accept drafts not accepted by the issuing bank accept drafts drawn on itself pay drafts accepted by the drawee bank and unpaid by the drawee bank at maturity A and only B and only C and only D and only Under a standby letter of credit subject to a participation agreement, the issuer: A may sell participations in their rights against the applicant and any presenter B may not disclose relevant applicant information in confidence to potential participants C will affect its obligation under the standby letter of credit by any participations sold D will create new rights and obligations between the beneficiary and the participants In accordance with UCP 600, which of the following terms may NOT be altered on a transferred documentary credit? A Credit amount B Required documents C Period for presentation D Amount of insurance cover Page CDCS Specimen paper 18 Which of the following examples under UCP 600 is discouraged? A The goods description field states "goods per the copy of the proforma invoice appended to the credit which forms an integral part of the credit" B A copy of the sales contract is submitted with the credit application to the issuing bank and there is no reference to such attachment within the credit application C The additional conditions field states that this credit is relative to sales contract XYZ and that all documents must state "details per purchase order 123 and contract XYZ" D A copy of the purchase order is provided to the issuing bank for information purposes only and the goods description field of the credit application includes details of the purchase order 19 A standby letter of credit which supports the obligations of an applicant to pay for goods or services in the event of non-payment by other method is usually described as: 20 A a financial standby B a direct-pay standby C a commercial standby D an advance-payment standby A cumulative revolving documentary credit is opened with six months' validity and allowing for USD 25,000 to be drawn each month A single drawing is made for USD 25,000 in the first month What is the available amount in the fourth month? A USD B USD 25,000 C USD 75,000 D USD 100,000 Page CDCS Specimen paper 21 A documentary credit which allows partial shipments has the following shipment schedule: 1,000 units shipped between 01 June and 30 June 2,000 units shipped between 01 July and 31 July 2,000 units shipped between 01 August and 31 August 3,000 units shipped between 01 September and 30 September The beneficiary shipped the goods and presented documents as follows: 1,000 units shipped on 15 June, documents presented on 30 June 3,000 units shipped on 15 July, documents presented on 28 July 2,000 units shipped on 31 July, documents presented on 15 August 3,000 units shipped on 15 September, documents presented on 30 September Which of the above sets of documents are complying? 22 A only B only C and only D 1, and only A cumulative, revolving documentary credit for USD 22,500 allows full monthly drawings and is valid for one year Full monthly drawings were made during the first, second, fourth, fifth and seventh months and there have been no other drawings In the last month of the documentary credit’s validity, what is the maximum value that can be drawn? A USD 22,500 B USD 112,500 C USD 157,500 D USD 180,000 Page CDCS Specimen paper 23 An advising bank receives the beneficiary's request to partially transfer an irrevocable transferable documentary credit, which is freely available and does not nominate a transferring bank In accordance with UCP 600, the advising bank: 24 A may transfer the documentary credit as requested B may transfer the documentary credit only in its entirety C should request the issuing bank to authorise a partial transfer D should obtain the issuing bank's authorisation as the nominated transferring bank A documentary credit calls for a draft at 95 days bill of lading date drawn on the confirming bank The documentary credit is available by: 25 A refinance B acceptance C sight payment D deferred payment A documentary credit pre-advice is issued on 01 March for USD 510,000 with the following terms and conditions: Partial shipment allowed Latest shipment date 30 April Expiry date 15 May On 02 March the applicant requests an amendment prohibiting partial shipment and extending the expiry date to 30 May In accordance with UCP 600, what action MUST the issuing bank take? A Clarify with the applicant the period for presentation B Issue the documentary credit incorporating all the amendments C Issue the documentary credit incorporating only the extended expiry date D Issue the documentary credit as originally instructed, without amendments Page CDCS Specimen paper 26 On 03 January, an irrevocable documentary credit for USD 500,000 is confirmed On 17 January the confirming bank receives an amendment cancelling the documentary credit What is the liability of each bank? 27 A Issuing and confirming bank - USD B Issuing and confirming bank - USD 500,000 C Issuing bank - USD 0; confirming bank - USD 500,000 D Issuing bank - USD 500,000; confirming bank - USD The confirming bank receives documents on Friday 02 April and finds them complying on 05 April Tenor is 30 days after the bill of lading date The bill of lading is dated 01 April, and the confirming bank agrees to pay the beneficiary immediately On what date would the confirming bank expect to receive funds from the issuing bank? (There are NO bank holidays and Saturdays and Sundays are NOT banking days.) 28 A 05 April B 30 April C 01 May D 03 May What action should an advising bank take if it receives a documentary credit which includes the term ‘transmissible’? 29 A Disregard the term B Seek clarification from the issuing bank C Refuse to advise the documentary credit D Advise the documentary credit as transferable A documentary credit is issued with drafts at 45 days sight drawn on the confirming bank Under special conditions it states 'drafts can be discounted and paid on a sight basis' The applicant’s account will be debited at: A maturity by the issuing bank B maturity by the confirming bank C the time of acceptance by the issuing bank D the time of acceptance by the confirming bank Page 10 CDCS Specimen paper 79 A documentary credit calls for a commercial invoice, but documents presented include only a customs invoice What action should the confirming bank take? 80 81 82 A Pay the documents as fully complying B Reject the documents as non-complying C Refer to the issuing bank for authority to pay D Return the documents for amendment by the beneficiary An issuing bank becomes bound by the terms of an amendment when the: A advising bank advises the amendment to the beneficiary B issuing bank issues the amendment to the advising bank C reimbursing bank agrees to the applicant's request for an amendment D beneficiary accepts the amendment whether expressly or by implication A standby credit subject to ISP 98 states that it is not operative Therefore it is: A irrevocable from date of issue B deemed not to have been issued C available for drawing immediately D revocable prior to becoming operative If a bank requests that an electronic record be re-presented because the initial presentation appears to be corrupted, the: A date of the re-presentation becomes the new presentation date B beneficiary has 21 calendar days to re-present the electronic record C time for examination is suspended and resumes when the re-presented records are received D re-presentation may be with paper documents even if the documentary credit calls for electronic records Page 25 CDCS Specimen paper 83 In accordance with UCP 600, which of the following terms may NOT be reduced or curtailed in a transferred credit? A The latest shipment date B The unit price of the goods C The period for presentation D The percentage of insurance coverage Page 26 CDCS Specimen paper Section B 84 A documentary credit is issued for USD 300,000 covering 300 TV sets CIF New York, partial shipments allowed available by negotiation with Bank N The credit is amended to USD 280,000 covering 350 TV sets FOB Hong Kong Documents are subsequently presented direct to the issuing bank by the beneficiary for USD 280,000 covering shipment of 280 TV sets CIF New York No other correspondence has been received from the beneficiary or from Bank N What action should the issuing bank take? A Pay USD 280,000 B Contact the applicant requesting their instructions C Return the documents to the beneficiary requesting presentation through Bank N D Send a notice of rejection indicating discrepancy: 1.Goods under-shipped; Documents indicate CIF New York instead of FOB New York 85 An issuing bank amends a documentary credit from USD 100,000 to USD 80,000 stating the amendment will come into effect within 10 calendar days after its issuance Which of the following statements are correct? The credit value remains at USD 100,000 until the amendment has been accepted by the beneficiary The credit value reduces to USD 80,000 on presentation of complying documents for that value The credit value reduces to USD 80,000 10 calendar days after issue of the amendment The credit value reduces to USD 80,000 unless the beneficiary rejects the amendment within the stipulated 10 calendar days A and only B and only C and only D and only Page 27 CDCS Specimen paper 86 A documentary credit for USD 150,000 calls for a full set of bills of lading and an insurance certificate to cover all risks The bill of lading presented indicates an on board date of 15 December Which of the following insurance documents are acceptable? 87 Policy for USD 185,000 Certificate dated 17 December Declaration signed by a broker Certificate subject to a franchise A and only B and only C and only D and only Delivery of goods has been made to the buyer on 08 October Complying documents are presented including a CMR dated 15 days prior to delivery The credit terms state payment is to be effected 30 days after shipment On which date will payment be made? (There are NO bank holidays and Saturdays and Sundays are NOT banking days.) 88 A Friday 22 October B Monday 25 October C Friday 05 November D Monday 08 November A documentary credit calls for presentation of an insurance certificate Which of the following insurance documents would be acceptable for CIF shipment where the invoice value is USD 75,000? Insurance certificate for USD 82,500 Insurance policy for USD 85,000 Insurance declaration under open cover for USD 75,000 Insurance certificate for USD 75,000 A and only B and only C and only D and only Page 28 CDCS Specimen paper 89 Under a documentary credit calling for a bill of lading and requiring shipment from a Korean port to a UK port, which of the following would be acceptable? Place of Receipt Port of Loading Port of Discharge Final Destination Busan Osaka Hamburg Southampton Osaka Busan Southampton Hamburg Busan Osaka Southampton Hamburg Osaka Busan Hamburg Southampton 90 A only B only C and only D and only A documentary credit is issued for approximately GBP 40,000 with drafts at 30 days from date of shipment Documents are presented on 22 September with bills of lading dated 01 September Which of the following drafts would comply? 30 days from 01 September for approximately GBP 40,000 30 days from date of shipment for GBP 38,000 Due 01 October for GBP 42,000 30 days from bill of lading date 01 September for GBP 44,000 A and only B and only C and only D and only Page 29 CDCS Specimen paper The following questions, 91 – 95, relate to the supporting documentation for In-Basket Page 30 CDCS Specimen paper 91 92 Which of the following statements is correct? A An original certificate of origin must be presented B Availability is consistent with the role of a confirming bank C The confirmation commission is for the beneficiary's account D The documentary credit amount is subject to a 10% tolerance Which of the following statements are correct? Description of goods quantity is consistent with the documentary credit amount The issuing bank needs to send a mail confirmation of the documentary credit Drawee requirement is inconsistent with the role of a confirming bank The period for presentation of documents requires clarification 93 A and only B and only C and only D and only Which of the following statements relating to the insurance requirements, as specified, are correct? An insurance certificate would be acceptable in lieu of an insurance policy An insurance document stating that certain risks had been excluded may be acceptable The insurance document will need to show claims, if any, payable in Brazilian currency Insurance cover to a minimum of 110% of the invoice value would be acceptable A and only B and only C and only D and only Page 31 CDCS Specimen paper 94 Which of the 'additional conditions' are deemed to be non-documentary? Beneficiary must provide the applicant with details of the shipment Shipment must be made on a vessel named Butterfly Goods must be inspected by the applicant prior to shipment Goods must be of Indian or Chinese origin 95 A and only B and only C and only D and only Which of the following statements are correct? The confirming bank is able to determine the maturity date Required documents not conflict with the delivery terms Conditions of beneficiary's certificate require clarification Bill of lading is not the appropriate transport document A and only B and only C and only D and only Page 32 CDCS Specimen paper The following questions, 96 – 100, relate to the supporting documentation for In-Basket Page 33 CDCS Specimen paper 96 97 What is the appropriate insurance coverage on the transferred documentary credit? A 100% B 110% C 134% D 147% Which of the following should present documents to the issuing bank? ABC Co 123 Company The Best Bank Bank of Vancouver BC 98 A only B only C and only D and only On Monday 25 October XXXX The Best Bank receives compliant documents from the second beneficiary indicating a shipment date of 10 October XXXX By which date must the first beneficiary present their substitute invoice and draft? 99 A 25 October XXXX B 26 October XXXX C 31 October XXXX D 01 November XXXX Which of the following is responsible for paying the transfer fee? A ABC Co B XYZ Co C 123 Company D Bank of Vancouver BC Page 34 CDCS Specimen paper 100 Compliant documents are received from the second beneficiary The first beneficiary's invoice indicates that all goods are made in Vietnam What initial action should The Best Bank take? A Ask the first beneficiary to present revised invoices B Hold the documents and contact the issuing bank for approval C Forward documents, including the first beneficiary's invoices and draft to the issuing bank for acceptance D Return the first beneficiary's invoices and present the second beneficiary's invoice, draft and other documents to the issuing bank Page 35 CDCS Specimen paper The following questions, 101 – 105, relate to the supporting documentation from In-Basket Page 36 CDCS Specimen paper 101 Which of the following statements is correct? A Transhipment is allowed B The certificate of analysis must be signed C Three copies of certificate of origin can be presented D An insurance certificate would be acceptable in lieu of an insurance policy 102 Which of the following statements are correct? Documents can be presented 21 days after the latest shipment date An insurance document stating that certain risks have been excluded may be acceptable The beneficiary must present a draft An insurance document may contain a reference to deductions by indicating franchise or excess A and only B and only C and only D and only 103 Which of the following statements relating to the transport documents are NOT correct? The transport document must be endorsed by the shipper The transport document may indicate that it is subject to a charter party The transport document may be titled other than 'ocean bill of lading' The transport document entitles the applicant to control of the goods A and only B and only C and only D and only Page 37 CDCS Specimen paper 104 Which of the following statements is correct? A The transferring bank may be any bank in Australia B A full set of transport documents must be presented C The certificate of origin may be issued by the shipper D An insurance document must be endorsed by the applicant 105 Which of the following statements are NOT correct? Stipulated documents comply with the price and delivery terms The commercial invoice must include one original The amount is subject to a 5% tolerance The certificate of origin may be issued by the beneficiary A and only B and only C and only D and only Page 38 CDCS Specimen paper Please refer to separate documentation for Simulations – Page 39