LIBF Level 4 Certificate for Documentary Credit

®
Specialists (CDCS )
Specimen paper: A
Length of examination: 3 hours
______________________________________________________________________________

Instructions to candidates

1. Open this question paper and the supporting documentation when instructed to do so.

2. Answer all questions.

3. Use the examination answer sheets provided for your answers. Please do not note your answers in
this booklet or on the supporting documentation, as they will not be marked.

4. Read the instructions on both sides of the answer sheet carefully.

5. Hand in all the examination materials before you leave the examination, including the answer sheet,
the question paper and the in-basket / simulation booklets, and have them checked by the invigilator.
Failure to do so will invalidate your entry.

Information for candidates

1. This paper consists of two sections:

• Section A consists of 60 multiple-choice questions worth one mark each.

• Section B consists of 10 stand-alone analysis questions worth one mark each; 3 in-basket
exercises, with 5 questions per in-basket, each question worth one mark; and 3 simulation
document-checking exercises, five discrepancies need to be identified from a choice of 10,
each simulation is worth a maximum of five marks.

2. Accompanying this question paper is a booklet of supporting in-basket documentation, referenced to

each corresponding set of in-basket questions, and a booklet of three simulation exercises.

3. In the questions in both Section A and Section B you should assume that, unless otherwise stated,
there are no bank holidays, Saturdays and Sundays are not banking days, and all transactions take
place in the same year.

4. Unless otherwise stated, all credits referred to in this paper are irrevocable.

5. Applicable current ICC rules apply throughout.

6. Silent non-programmable (including scientific) calculators are allowed. Programmable calculators are
not allowed.

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 organization in the world.

This qualification is accredited by the regulatory authorities for England and Northern Ireland and is incorporated into the Regulated
Qualifications Framework (RQF) at Level 4.
 Principles and Practices of Documentary Credit Transactions Specimen Paper A

Section A

1. The buyer incurs 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.

2. 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.

3. Which documentary credit enables a beneficiary to obtain pre-shipment financing without impacting
his facility?

A Red clause.

B Transferable.

C Irrevocable, payable at sight.

D Confirmed irrevocable, payable at maturity.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

4. Which of the following statements is correct regarding transferable documentary credits?

A The first beneficiary may request that confirmation be withheld from the transferred credit.

B The first beneficiary may cancel the transferred credit without the second beneficiary's
consent.

C A transferred credit can be transferred at the request of the second beneficiary to any
subsequent beneficiary.

D The transferred credit may expire in the second beneficiary's country of domicile on the expiry
date of the first beneficiary's credit.

5. If a credit states that GBP 10,000 may be drawn each month during its one-year validity, then the
credit is:

A clean.

B revolving.

C evergreen.

D reinstatable.

6. In accordance with UCP 600, which of the following terms may NOT be altered when transferring a
documentary credit?

A Credit amount.

B Required documents.

C Period for presentation.

D Amount of insurance cover.

7. Where a documentary credit includes a shipping schedule and an instalment is NOT shipped within
the stipulated period, which of the following statements concerning the documentary credit is
correct?

A It continues to be available for that instalment only.

B It continues to be available for that and future instalments.

C It ceases to be available for that instalment only.

D It ceases to be available for that and future instalments.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

8. 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.

9. Which of the following percentages represent the minimum insured value on the insurance
document, unless otherwise stated in the documentary credit?

A 100%.

B 105%.

C 110%.

D 115%.

10. In accordance with UCP 600, all the following statements relating to commercial invoices are correct
EXCEPT that they must:

A be manually signed by the beneficiary.

B be made out in the name of the applicant.

C appear to have been issued by the named beneficiary.

D indicate the description of goods corresponding with the documentary credit.

11. Uniform rules to govern documentary credit transactions were introduced for all of the following
reasons EXCEPT to:

A comply with international law.

B avoid disputes and misunderstandings.

C ensure consistency of approach across banks.

D obtain a common interpretation of documentary credits.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

12. 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:

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 to act as the nominated transferring bank.

13. Which of the following statements is INCORRECT for a credit that is subject to UCP 600? If the
credit:

A prohibits transhipment, an air transport document may indicate that transhipment will or may
take place.

B requires a bill of lading indicating freight prepaid, a notation of freight prepaid as per charter
party is acceptable.

C calls for one original rail transport document, presentation of a rail transport document marked
‘duplicate’ is acceptable.

D calls for a multimodal transport document made out 'to order', an endorsement made by, for or
on behalf of the shipper is required.

14. Financial Action Task Force (FATF) recommendations require banks to exercise due diligence in
their relationships with customers. Banks are required to have procedures to confirm all of the
following, EXCEPT:

A the identity of their customer.

B what the goods will be used for.

C who the beneficial owners of the parties to a transaction are.

D the nature of any underlying business relationship to the transaction.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

15. To avoid the possibility of committing a money laundering offence, documentary credit practitioners
should:

1. report any suspicion.

2. follow their bank's procedures.
3. stop any routine contact if they have a suspicion about a transaction.
4. not consider any transaction from a branch of their bank in a high-risk country as suspicious.

A 1 and 2 only.

B 1 and 3 only.

C 2 and 4 only.

D 3 and 4 only.

16. The ICC discourages sanction clauses in documentary credit transactions for all but one of the
following reasons. Which is the exception?

Because they might:

A be illegal.

B cause uncertainty for the beneficiary.

C cast a doubt on the bank's undertaking.

D give the bank discretion whether to pay or not.

17. By nominating a bank to incur a deferred payment undertaking without adding its confirmation, the
issuing bank:

A authorises the nominated bank to purchase or prepay documents.

B allows the nominated bank to advance funds to the beneficiary upon demand.

C authorises the nominated bank to accept drafts under the usance agreement.

D imposes an obligation on the nominated bank to honour or negotiate documents.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

18. Which of the following banks MUST honour a complying presentation?

1. An issuing bank with which the documentary credit is available by acceptance.

2. A nominated bank under a freely negotiable credit payable at sight.
3. A confirming bank where the credit is available by sight payment and the nominated bank does
not pay.
4. A reimbursing bank that has issued a reimbursement undertaking.

A 1 and 3 only.

B 2 and 3 only.

C 1, 2 and 3 only.

D 1, 2 and 4 only.

19. When a 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.

20. Which of the following statements is correct regarding a deferred payment obligation?

Payment is made:

A only by the issuing bank.

B on the maturity date of the draft.

C upon presentation of complying documents.

D at a future date in accordance with the documentary credit.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

21. Which of the following is NOT an undertaking of the confirming bank for a credit available by:

A sight payment - to pay at sight.

B deferred payment - to incur a deferred payment undertaking.

C negotiation - to negotiate with recourse a time draft drawn by the beneficiary.

D acceptance - to honour a time draft drawn on a nominated bank if the nominated bank does
not accept the time draft.

22. A beneficiary requests the confirming bank to purchase complying documents presented under a
deferred payment credit. In accordance with UCP 600, which of the following actions could the
confirming bank take?

1. Obtain the issuing bank's agreement prior to paying the beneficiary.

2. Refuse the beneficiary's request while undertaking to pay at maturity.
3. Prepay the deferred payment undertaking.
4. Obtain a recourse agreement from the beneficiary.

A 1 only.

B 4 only.

C 2 and 3 only.

D 3 and 4 only.

23. 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.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

24. Two parties have agreed to trade and the seller requires the security of a documentary credit. The
buyer does not wish to pay for the goods until at least 30 days after their arrival at the discharge
port. Given that the journey will take a maximum of two weeks, which of the following will BEST suit
the buyer's requirements?

A documentary credit available with a nominated bank at:

A 45 days after sight.

B 45 days after invoice date.

C 60 days after invoice date.

D 45 days after bill of lading date.

25. If a seller in country X wishes to receive payment from a buyer in country Y as soon as possible,
how should the documentary credit BEST 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.

26. The beneficiary requires the return of its accepted time drafts in order to discount them in the
market. Which of the following BEST meets the beneficiary’s needs? A documentary credit available
with the:

A issuing bank by acceptance.

B advising bank by negotiation.

C nominated bank by negotiation.

D confirming bank by deferred payment.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

27. Which of the following is discouraged under UCP 600?

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.

28. An issuing bank notifies the beneficiary that the applicant has ceased trading and that the
documentary credit is cancelled and that cancellation shall be effective ten days after the date of the
issue of its cancellation notice. The beneficiary presents documents to the issuing bank that
otherwise fully comply with the credit terms fifteen days after the date of the cancellation notice.

The issuing bank:

A is obliged to honour the documents.

B may simply return the documents unchecked as the credit has now ceased to exist.

C should hold the documents unchecked and seek further instructions from the beneficiary.

D may refuse the documents as more than ten days have elapsed since the issue of its
cancellation notice.

29. Which of the following documents must be presented to obtain release of the underlying goods?

1. Air transport document.

2. Bill of lading.
3. Charter-party bill of lading.
4. Non-negotiable sea waybill.

A 1 and 2 only.

B 1 and 4 only.

C 2 and 3 only.

D 3 and 4 only.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

30. A marine bill of lading acts as:

1. an acknowledgement of receipt of the goods by the carrier.

2. evidence of a contract of carriage.
3. a document of title for the goods.
4. evidence of the contract between the seller and the forwarding agent.

A 1 and 4 only.

B 2 and 3 only.

C 1, 2 and 3 only.

D 2, 3 and 4 only.

31. Which of the following do NOT constitute partial shipment for goods shipped from the same place to the same
destination?

Presentation of:

1. a courier receipt evidencing receipt of two separate packages.

2. a road transport document indicating two different trucks.
3. two separate courier receipts dated at different times of the same day by the same courier service.
two separate road transport documents indicating the same date of shipment but each indicating a different
4.
truck.

A 1 and 2 only.

B 1 and 3 only.

C 3 and 4 only.

D 1, 2 and 3 only.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

32. A documentary credit calls for invoices for the full CIF value and an insurance certificate covering all
risks. Documents presented include invoices for the CIF value of USD 150,000 less discount of
USD 25,000; a bill of lading evidencing shipment on 10 February; and an insurance policy, issued
on 11 February, for USD 137,500 and effective from 09 February covering Institute Cargo Clauses
A.

According to UCP 600, all of the following statements are correct EXCEPT:

A an insurance policy is acceptable.

B the amount of the insurance cover is sufficient.

C the risks covered by the insurance document are acceptable.

D the date of issue of the insurance document is acceptable.

33. Which of the following documents MUST be signed?

A Packing list.

B Certificate of origin.

C Commercial invoice.

D Weight specification.

34. A credit is payable against drafts drawn at 30 days after bill of lading date and requires shipment to
be effected from any European port.

The bill of lading indicates receipt of the goods by the carrier on 11 June XXXX, an on-board
notation for vessel ‘A’ dated 13 June XXXX at Felixstowe and transhipment at Hamburg with an on
board notation for vessel ‘B’ dated 16 June XXXX, which has been subsequently amended by the
carrier to read as 15 June XXXX. The maturity date for the draft is:

A 11 July XXXX.

B 13 July XXXX.

C 15 July XXXX.

D 16 July XXXX.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

35. A documentary credit calls for the beneficiary's invoice in 3 copies. Which of the following
requirements is mandatory for a complying presentation?

A All must be signed.

B All must be original.

C At least one of the three must be signed.

D At least one of the three must be original.

36. In accordance with ISBP, an invoice may show:

1. deduction for a discount not stated in the credit.

2. over-shipment of goods provided they are stated to be free of charge.
3. shipment of goods not called for in the credit.
4. shipment of goods not called for in the credit provided they are stated to be free of charge.

A 1 only.

B 2 only.

C 1 and 3 only.

D 2 and 4 only.

37. 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?

1. 30 days from 01 September for approximately GBP 40,000.

2. 30 days from date of shipment for GBP 38,000.
3. Due 01 October for GBP 42,000.
4. 30 days from bill of lading date 01 September for GBP 44,000.

A 1 and 2 only.

B 1 and 3 only.

C 2 and 4 only.

D 3 and 4 only.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

38. An irrevocable confirmed documentary credit CANNOT be amended or cancelled without the
agreement of the:

A beneficiary and applicant only.

B confirming bank and issuing bank only.

C applicant, confirming bank and issuing bank only.

D beneficiary, confirming bank and issuing bank only.

39. A documentary credit requires the bill of lading to state the name and address of the carrier’s agent
at the port of discharge. To comply with the credit terms, the agent:

A can be at any location in the world.

B must be located at the port of discharge.

C must be located in the same country as the port of discharge.

D must be located in the same geographical area as the port of discharge.

40. What is the minimum percentage of insurance required for a transferable credit to meet the original
documentary credit value, based on the following details?

Original documentary credit value : USD 200,000

Insurance coverage : 110%
Partial transfer value : USD 190,000

A 110%.

B 116%.

C 123%.

D 134%.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

41. A confirming bank receives a documentary credit containing the following additional condition:
'carrying vessel must not be older than 15 years'. Upon receipt of the documents from the
beneficiary, the confirming bank MUST:

A look for this statement on one of the documents.

B deem such condition as not stated and disregard it.

C require the beneficiary to issue a statement of compliance.

D refuse payment to the beneficiary until receipt of the issuing bank's clarification.

42. In accordance with UCP 600, which of the following documents is NOT acceptable in a
documentary credit issued on 01 March with documents presented on 01 June and expiring on 10
June?

A Certificate of origin dated 28 February.

B Third-party certificate of quality dated 02 June.

C Weight certificate issued by the beneficiary dated 15 May.

D Bills of lading evidencing third party as consignor dated 28 May.

43. 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 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.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

44. At the request of the issuing bank, a reimbursing bank has issued its reimbursement undertaking in
favour of a nominated bank. The documentary credit is advised to the beneficiary by the nominated
bank. The beneficiary subsequently presents documents directly to the issuing bank for settlement.

Which of the following BEST describes the action that the issuing bank should now take?

A Check the documents and, if compliant, make payment directly to the beneficiary.

B Check the documents and, if compliant, make payment to the beneficiary through the
reimbursing bank.

C Return the documents to the beneficiary and request that documents be presented through
the nominated bank.

D Return the documents to the beneficiary and request that documents be presented to the
reimbursing bank to enable the reimbursement undertaking to be utilised.

45. 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.

46. 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 as originally instructed.

C Issue the documentary credit incorporating all the amendments.

D Issue the documentary credit incorporating only the extended expiry date.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

47. Documents presented to the issuing bank have been found to be discrepant. The bank has left a
message for the applicant to discuss the discrepancies. Within the timeframes allowed by UCP 600,
the bank should:

A return the documents to the presenter.

B continue to hold the documents until discussion with the applicant. No further action is
required.

C send notice of refusal to the presenter, listing all discrepancies and current disposition of the
documents.

D send notice of refusal to the presenter without listing discrepancies as the applicant has not
been consulted.

48. Which of the following statements are correct in relation to documentary credit risks?

1. The advising bank incurs payment risk by advising an unconfirmed credit.

2. A negotiating bank is concerned with applicant risk when making payment to the beneficiary.
3. The confirming bank’s main risk is that of non-reimbursement by the issuing bank after effecting
the payment to the beneficiary.
4. A reimbursing bank that has not issued a reimbursement undertaking does not have any risk
related to the credit.

A 1 and 2 only.

B 1 and 4 only.

C 2 and 3 only.

D 3 and 4 only.

49. When a bank confirms an irrevocable transferable documentary credit it assumes the credit risk of
which party?

A The applicant.

B The issuing bank.

C The first beneficiary.

D The second beneficiary.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

50.
The issuing bank of a sight documentary credit issues an indemnity to a shipping company
authorising the release of goods to the importer prior to presentation of documents. Documents
subsequently received are discrepant. What action MUST the issuing bank take?

1. Seek agreement from the shipping company to cancel the indemnity.

2. Send a rejection notice to the presenting bank.
3. Approach the applicant for a waiver of the discrepancies.
4. Pay the presenting bank.

A 2 only.

B 4 only.

C 1 and 4 only.

D 2 and 3 only.

51. When an advising bank adds its confirmation to a documentary credit, which of the following risks
has the beneficiary mitigated?

1. Issuing bank.
2. Foreign exchange.
3. Political.
4. Fraud.

A 1 and 3 only.

B 1 and 4 only.

C 2 and 3 only.

D 2 and 4 only.

52. Which of the following statements does NOT relate to documentary credit risks?

A The issuing bank may not be able to honour its obligation to pay on the maturity date due to
governmental action.

B In the event of failure of the issuing bank, the beneficiary may need to rely on payment
directly from the applicant.

C The issuing bank may try to mitigate the risk of non-reimbursement from the applicant by
retaining title to the goods.

D A forward foreign exchange contract may provide a hedge against a difference in exchange
rates to the issuing bank.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

53. The beneficiary can mitigate the risk of ‘force majeure’ by requesting that the documentary credit be
made available with:

A any bank.

B the issuing bank.

C the advising bank.

D the confirming bank.

54. Goods shipped by road have been consigned to the issuing bank. To obtain release of the goods,
the applicant will need to request the issuance of a:

A delivery order.

B letter of indemnity.

C performance guarantee.

D shipping company guarantee.

55. A third-party supplier requires a notice of assignment of proceeds from the nominated bank prior to
shipping the goods. This notice of assignment:

A is an irrevocable undertaking to pay the third-party supplier.

B authorises the third-party supplier to perform the role of the beneficiary.

C guarantees payment upon presentation of documents by the third-party supplier.

D is a conditional undertaking from the nominated bank to pay the third-party supplier from
proceeds, if any, payable under the credit.

56. To clear the goods in the absence of an original bill of lading, which document should the applicant
request from the issuing bank?

A A release note.

B A delivery order.

C A payment guarantee.

D A shipping company guarantee.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

57. Under a confirmed credit established in favour of a corporate beneficiary on a syndicated basis, all
of the following aspects will be commonly covered by the syndicate agreement EXCEPT:

A the handling of discrepant documents.

B the handling of commercial disputes between the corporate beneficiary and the applicant.

C whether the other syndicate banks will wish to approve the text of the credit and amendments.

D whether the lead bank's checking of documents will be acceptable to the other syndicate
banks.

58. Which of the following statements is correct when an assignment of proceeds has been effected
under a documentary credit issued in accordance with UCP 600?

The:

A assignee must present complying documents to receive payment.

B value of the documentary credit is reduced by the amount of the assignment.

C assignee will receive payment of the proceeds directly from the issuing bank.

D beneficiary has assigned its rights to the stated amount of proceeds to the assignee.

59. Which of the following statements would NOT be included in an applicant's counter indemnity when
requesting a delivery order?

The applicant:

A indemnifies the bank against all actions, damages and costs.

B undertakes to accept the underlying documents irrespective of discrepancies.

C gives the issuing bank authority to debit its account for the full value pending inspection of the
goods.

D undertakes that should the goods form part of a large consignment it will accept that
consignment and pay the full value.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

60. An issuing bank issued a USD 10,000,000 standby letter of credit requiring documents to be
presented to them. In order to reduce its risk, the issuing bank contacted two other banks who each
agreed to purchase a 20% portion of the liability. The applicant was NOT aware of this
arrangement. According to ISP98, this standby involves:

A transfer.

B participation.

C a syndication.

D an assignment of proceeds.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

Section B

The following 10 questions,

61–70,
are stand-alone analysis
questions with no supporting
documentation.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

61. 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?

1. Policy for USD 170,000.

2. Certificate dated 17 December.
3. Declaration signed by a broker on their own behalf.
4. Certificate subject to a franchise.

A 1 and 2 only.

B 1 and 4 only.

C 2 and 3 only.

D 3 and 4 only.

62. On Monday 17 May documents were presented to the confirming bank. The documentary credit
expires 15 May at their counters. The latest shipment date is 30 April and it allows 15 days for
presentation of documents. The documentary credit calls for an air transport document, but does
NOT require a specific date of dispatch.

The air transport document is issued on 01 May and states in one of the information boxes:
'flight/date UA900/29 April'. Assuming all other documents comply, which of the following
discrepancies would the confirming bank advise to the beneficiary?

A Late shipment only.

B Late presentation only.

C Documentary credit has expired and late shipment.

D Documentary credit has expired and late presentation.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

63. A cumulative revolving documentary credit was issued in December for an original amount of USD
25,000, valid for six months.

The documentary credit has revolved three times as follows:

January : USD 25,000

February : USD 25,000
March : USD 25,000

The documentary credit has been drawn and paid as follows:

January : USD 20,000

February : USD 20,000
March : USD 15,000

What is the liability of the issuing bank after the March drawing?

A USD 10,000.

B USD 25,000.

C USD 75,000.

D USD 95,000.

64. A documentary credit expiring on 10 June requires the following documents:

1. Signed commercial invoice indicating goods of German origin.

2. Bill of lading evidencing shipment in the middle of May.
3. Detailed packing list.

The beneficiary presents documents on 11 June because the bank was closed on 10 June due to a
national holiday.

Which of the following would be considered discrepancies?

A Commercial invoice dated 11 June.

B Bill of lading evidencing shipment from France.

C Bill of lading indicating an on board notation of 21 May.

D Bill of lading evidencing that the goods are packed in six cartons on two pallets in one
container but packing list only states that the goods are packed in six cartons.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

65. 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 MUST the issuing bank take?

A Pay USD 280,000.

B Contact the applicant requesting their instructions.

C Send a notice of rejection indicating discrepancies.

D Return the documents to the beneficiary requesting presentation through Bank N.

66. 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 dispatch. On which date will payment be made?

A Friday 22 October.

B Monday 25 October.

C Friday 05 November.

D Monday 08 November.

67. At the request of an importer, an issuing bank issued a documentary credit in favour of ABC Co.
After being informed that ABC Co. is not a reputable company, the importer requests the issuing
bank to cancel the credit and issue another credit to XYZ Co. Which of the following BEST
describes the actions the issuing bank should take?

A Issue the documentary credit to XYZ Co. immediately.

B Issue an amendment to the credit making XYZ Co. the beneficiary.

C Issue the documentary credit to XYZ Co. after receipt of cancellation acceptance from ABC
Co.

D Issue the documentary credit to XYZ Co. and simultaneously issue an amendment to ABC
Co. to cancel the credit.

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68. A documentary credit for USD350,000 covering shipment of 350 rolls of textile products priced at
USD1,000 per roll does not state a presentation period but contains the following shipment
schedule:
100 rolls in May
100 rolls in June
50 rolls in July
100 rolls in August.

On 01 April the issuing bank issued an amendment reducing both the documentary credit's value to
USD300,000 and the August shipment to 50 rolls.

On 20 May the issuing bank issued an amendment cancelling the credit.

On 10 June documents were presented direct to the issuing bank for USD100,000 covering a
shipment effected on 31 May, together with the beneficiary's letter rejecting the 01 April
amendment. This presentation was found discrepant due to non-presentation of the required quality
certificate.

What is the issuing bank's contingent liability under this documentary credit as of close of business
on 10 June?

A None.

B USD250,000.

C USD300,000.

D USD350,000.

69. 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

1. Busan Osaka Hamburg Southampton
2. Osaka Busan Southampton Hamburg
3. Busan Osaka Southampton Hamburg
4. Osaka Busan Hamburg Southampton

A 1 only.

B 2 only.

C 1 and 4 only.

D 2 and 3 only.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

70. A buyer wishes to import 300 sports cars from its supplier over a three-month period. Import
regulations will only allow a maximum of 100 sports cars to be shipped into the country each month
by the buyer without the imposition of import duties. Port-to-port shipment takes a maximum of ten
days.

Which of the following shipment schedules will BEST protect the buyer from the imposition of import
duties?

A 100 cars in January, 100 cars in February, 100 cars in March.

B 100 cars by the end of January, 100 cars by the end of February, 100 cars by the end of
March.

C 100 cars in the middle of January, 100 cars in the middle of February, 100 cars in the middle
of March.

D 100 cars at the beginning of January, 100 cars at the beginning of February, 100 cars at the
beginning of March.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

The following 5 questions,

71–75,
relate to the supporting
documentation for
In-Basket 1.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

In-Basket 1

71. 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.

72. Which of the following statements are correct?

1. Description of goods is consistent with the documentary credit amount.

2. The issuing bank needs to send a mail confirmation of the documentary credit.
3. Drawee requirement is inconsistent with the role of a confirming bank.
4. The period for presentation of documents is workable.

A 1 and 2 only.

B 1 and 4 only.

C 2 and 3 only.

D 3 and 4 only.

73. Which of the following statements relating to the insurance requirements, as specified, are correct?

1. An insurance certificate would be acceptable in lieu of an insurance policy.

2. An insurance document stating that certain risks have been excluded is acceptable.
3. The insurance document will need to show claims, if any, payable in Brazilian currency.
4. Insurance cover to a minimum of 120% of the invoice value would be acceptable.

A 1 and 3 only.

B 1 and 4 only.

C 2 and 3 only.

D 2 and 4 only.

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74. 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.

75. Which of the following statements are correct?

1. The confirming bank is able to determine the maturity date.

2. The required documents do not conflict with the delivery terms.
3. The conditions of beneficiary's certificate require clarification.
4. The bill of lading is not the appropriate transport document.

A 1 and 3 only.

B 1 and 4 only.

C 2 and 3 only.

D 2 and 4 only.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

The following 5 questions,

76–80,
relate to the supporting
documentation for
In-Basket 2.

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In-Basket 2

76. The document is what type of standby letter of credit?

A Counter standby.

B Commercial standby.

C Performance standby.

D Advance payment standby.

77. Which of the following statements is INCORRECT?

The standby letter of credit can:

1. be partially transferred.
2. only be transferred by the issuing bank.
3. be transferred in its entirety more than once.
4. only be transferred with the further agreement of the applicant.

A 1 and 3 only.

B 1 and 4 only.

C 2 and 3 only.

D 2 and 4 only.

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 Principles and Practices of Documentary Credit Transactions Specimen Paper A

78. On 3 December XXXX, the issuing bank receives a partial drawing for GBP130,000.00 under the
standby letter of credit. The documentation is in order with the exception of the draft, which has an
incorrect tenor having been drawn at 30 days sight. Which of the following BEST describes the
actions the issuing bank should take?

1. Advise the applicant of the situation and ask if they wish to grant a waiver in respect of the
discrepancy noted.
2. Advise the presenter that the statement complies with the terms of the standby letter of credit and
that payment will be deferred until the draft falls due for payment.
3. Make immediate payment under the standby letter of credit given that complying documents have
otherwise been presented and the financial instrument bears a clear typographical error.
4. Refuse to honour the presentation and issue a notice to the presenter advising that the
presentation does not comply with the terms of the credit.

A 2 only.

B 3 only.

C 1 and 4 only.

D 4 only.

79. A further presentation of documents for GBP74,000.00 is received by the issuing bank on 24
September XXXY. The statement and the draft comply with the terms of the standby letter of credit,
excepting that the drawer has not endorsed the draft. What BEST describes the action the issuing
bank should take in respect of this drawing?

A Make a payment to the beneficiary.

B Refuse payment as the standby letter of credit has expired.

C Refuse payment as the beneficiary has not endorsed the draft.

D Refuse payment as the beneficiary has not endorsed the draft and the standby letter of credit
has expired.

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80. With regard to the term 'this standby letter of credit is divisible', which of the following statements is
CORRECT?

The term:

A is not defined and can be disregarded.

B makes the terms of the standby letter of credit unclear.

C adds emphasis to the statement that the standby letter of credit in transferable.

D has context given the further statements made that both multiple and partial drawings are
allowed.

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The following 5 questions,

81–85,
relate to the supporting
documentation for
In-Basket 3.

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In-Basket 3

81. Which of the following statements is INCORRECT about documents presented under a
documentary credit issued in accordance with this application?

A The insurance document may show a franchise.

B The inspection certificate can be issued by the Korean government.

C The transport document gives the issuing bank control of the goods.

D A packing list showing shipment of fiber optic telephone cable is acceptable.

82. Which of the following statements is INCORRECT for documents to be presented under a
documentary credit issued in accordance with this application?

A The inspection certificate must be signed.

B Presentation of four original invoices would be acceptable.

C A certificate of origin showing the origin of the goods as China would be acceptable.

D The invoice showing the beneficiary address as 250 High Street, Seoul, Korea would be a
discrepancy.

83. Which of the following statements is INCORRECT for documents to be presented under a
documentary credit issued in accordance with this application?

A The transport document may be titled bill of lading.

B The transport document may show it is subject to a charter party.

C The transport document may state that transhipment will take place.

D An insurance policy would be acceptable in lieu of the insurance certificate.

84. Which of the following statements is correct in respect of this application?

A Partial shipments are not allowed.

B The beneficiary is required to present a draft.

C Documents can be presented 21 days after the latest shipment date.

D The certificate of origin must be issued by a party other than the beneficiary.

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85. Which of the following Incoterms SHOULD be used?

A FOB Busan.

B CIF Las Vegas.

C CIP Las Vegas.

D CPT New York.

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Please refer to separate

documentation for
Simulation 1–3.

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