lOMoARcPSD|11373609

CDCS Specimen Paper A - QP

Certificate for Documentary Credit Specialists (The London Institute of Banking and
Finance )

Scan to open on Studocu

Studocu is not sponsored or endorsed by any college or university

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)
 lOMoARcPSD|11373609

LIBF Level 4 Certificate for Documentary Credit

Specialists (CDCS®)
Specimen paper: A
Length of examination: 3 hours and 15 minutes
___________________________________________________________________________

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 simulation booklet, 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 and 3
simulation document-checking exercises, five discrepancies need to be identified from a
choice of 10, each simulation is worth a maximum of ten marks.

2. Accompanying this question paper is 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 organisation in the world.

This qualification is regulated by the regulatory authorities for England and is incorporated into the Regulated
Qualifications Framework (RQF) at Level 4.

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

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 collection.

B Documentary credit.

C Open account trading.

D Payment in advance.

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(n):

A confirmed documentary credit available by acceptance with drafts drawn on confirming bank
calling for a third-party quality certificate.

B confirmed documentary credit payable at sight calling for beneficiary's quality certificate.

C confirmed standby credit payable on demand calling for beneficiary's quality certificate.

D unconfirmed documentary credit payable at sight calling for a third-party quality certificate.

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

A Confirmed irrevocable, payable at maturity.

B Irrevocable, payable at sight.

C Red clause.

D Transferable.

Page 2 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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

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

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

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

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 GBP10,000 may be drawn each month during its one-year validity, then the
credit is:

A clean.

B evergreen.

C reinstatable.

D revolving.

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

A Credit amount.

B Percentage of insurance cover.

C Period for presentation.

D Required documents.

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?

It:

A ceases to be available for that instalment only.

B ceases to be available for that and future instalments.

C continues to be available for that and future instalments.

D continues to be available for future instalments only.

Page 3 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

8. A cumulative, revolving documentary credit for USD22,500 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 USD22,500.

B USD112,500.

C USD157,500.

D USD180,000.

9. Which of the following percentages represent the minimum CIF or CIP 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 appear to have been issued by the named beneficiary.

B be made out in the name of the applicant.

C be manually signed by the 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 avoid disputes and misunderstandings.

B comply with international law.

C ensure consistency of approach across banks.

D obtain a common interpretation of documentary credits.

Page 4 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

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, advising the issuing bank it will act as nominated and
transferring bank.

C should obtain the issuing bank's authorisation to act as the transferring bank.

D should request the issuing bank to authorise a partial transfer.

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

If the credit:

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

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

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

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

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 the nature of any underlying business relationship to the transaction.

C what the goods will be used for.

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

Page 5 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

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 cast a doubt on the bank's undertaking.

C cause uncertainty for the beneficiary.

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

B authorises the nominated bank to accept drafts.

C authorises the nominated bank to purchase or prepay documents.

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

Page 6 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

18. Which of the following banks must honour a complying presentation under a documentary credit?

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 confirming bank has accepted a usance draft, it is responsible for effecting payment at
maturity when:

A it has received funds from the issuing bank.

B it has received funds from the reimbursing bank.

C the draft is presented by the holder.

D the draft is verified by the applicant.

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

Payment is made:

A at a future date in accordance with the documentary credit terms.

B only by the issuing bank.

C on the maturity date of the draft.

D upon presentation of complying documents.

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

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

B deferred payment - to incur a deferred payment undertaking.

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

D sight payment - to pay at sight.

Page 7 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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 acceptance.

B deferred payment.

C negotiation.

D payment.

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 30 days after bill of lading date.

B 45 days after invoice date.

C 45 days after sight.

D 60 days after invoice date.

Page 8 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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 Acceptance by the nominated bank in country X.

B Acceptance with the issuing bank in country Y.

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 advising bank by negotiation.

B confirming bank by deferred payment.

C issuing bank by acceptance.

D nominated bank by negotiation.

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

A 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.

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 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'.

Page 9 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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

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

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

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

1. Air transport document.

2. Bill of lading.
3. Charterparty 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.

30. A marine bill of lading issued by the carrier acts as:

1. an acknowledgement of receipt of the goods.

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

A 1 and 4 only.

B 2 and 3 only.

C 1, 2 and 3 only.

D 2, 3 and 4 only.

Page 10 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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.

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 USD150,000 less discount of
USD25,000; a bill of lading evidencing shipment on 10 February; and an insurance policy, issued on
11 February, for USD137,500 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 date of issue of the insurance document is acceptable.

D the risks covered by the insurance document are acceptable.

33. Which of the following documents must be signed?

A Certificate of origin.

B Commercial invoice.

C Packing list.

D Weight specification.

Page 11 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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:

June M T W T F S S

1 2 3

4 5 6 7 8 9 10

11 12 13 14 15 16 17

18 19 20 21 22 23 24

25 26 27 28 29 30

July M T W T F S S

2 3 4 5 6 7 8

9 10 11 12 13 14 15

16 17 18 19 20 21 22

23 24 25 26 27 28 29

30 31

A 11 July XXXX.

B 13 July XXXX.

C 15 July XXXX.

D 16 July XXXX.

Page 12 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

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 original.

B All must be signed.

C At least one of the three must be original.

D At least one of the three must be signed.

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.

Page 13 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

37. A documentary credit is issued for approximately GBP40,000 with drafts at 30 days from date of
shipment. Documents are presented on 22 September with bills of lading dated 01 September.

Using the calendars below, which of the following drafts would comply?

1. 30 days from 01 September for approximately GBP40,000.

2. 30 days from date of shipment for GBP38,000.
3. Due 01 October for GBP42,000.
4. 30 days from bill of lading date 01 September for GBP44,000.

September M T W T F S S

1 2 3 4 5 6

7 8 9 10 11 12 13

14 15 16 17 18 19 20

21 22 23 24 25 26 27

28 29 30

October M T W T F S S

1 2 3 4

5 6 7 8 9 10 11

12 13 14 15 16 17 18

19 20 21 22 23 24 25

26 27 28 29 30 31

A 1 and 2 only.

B 1 and 3 only.

C 2 and 4 only.

D 3 and 4 only.

Page 14 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

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 applicant, confirming bank and issuing bank only.

B beneficiary and applicant only.

C beneficiary, confirming bank and issuing bank only.

D 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 : USD200,000

Insurance coverage : 110%
Partial transfer value : USD190,000

A 110%.

B 116%.

C 123%.

D 134%.

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 deem such condition as not stated and disregard it.

B look for this statement on one of the documents.

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

D require the beneficiary to issue a statement of compliance.

Page 15 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

42. In accordance with UCP 600, which of the following documents is not acceptable in a documentary
credit issued on 1 March with documents presented on 01 June and expiring on 10 June?

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

B Certificate of origin dated 28 February.

C Third-party certificate of quality dated 2 June.

D Weight certificate issued by the beneficiary dated 15 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 dishonour the claim as per the issuing bank's instruction.

B honour the claim and debit the issuing bank's account.

C instruct the claiming bank to contact the issuing bank.

D request the claiming bank to cancel the claim.

44. According to URR 725, which of the following statements is correct?

A A documentary credit that states a third-party reimbursement bank means URR 725
automatically applies to it.

B A reimbursing bank is required to process a claim within five banking days of receipt.

C Issuing banks should not require a sight draft to be drawn on the reimbursing bank.

D The claiming bank must submit a certificate of compliance.

45. Under eUCP Version 2.0, if a bank requests that an electronic record be re-presented because the
initial presentation appears to be corrupted, the:

A beneficiary has 21 calendar days to re-present the electronic record.

B date of the re-presentation becomes the new presentation date.

C re-presentation may be with paper documents even if the documentary credit calls for
electronic records.

D time for examination is suspended and resumes when the re-presented records are received.

Page 16 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

46. A documentary credit pre-advice is issued on 01 March for USD510,000 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.

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 time frames allowed by UCP
600, the bank should:

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

B return the documents to the presenter.

C send notice of refusal to the presenter, listing all discrepancies and action it is taking with
regard to 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 credit 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.

Page 17 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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

The:

A applicant.

B first beneficiary.

C issuing bank.

D transferring bank.

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.

Page 18 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

52. The term ‘evergreen’ is most commonly associated with a credit that:

A cannot be amended or cancelled prior to expiry.

B has an expiry date that extends beyond 12 months from the date of issue.

C has an expiry date that extends beyond five years from the date of issue.

D is annually renewable.

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 advising bank.

C the confirming bank.

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

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

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

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

Page 19 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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 delivery order.

B payment guarantee.

C release note.

D shipping company guarantee.

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

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

B the handling of discrepant documents.

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

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

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 assignee will receive payment of the proceeds directly from the applicant.

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

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

Page 20 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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

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

D undertakes to accept the underlying documents irrespective of discrepancies.

60. An issuing bank issued a USD10,000,000 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 a syndication.

B an assignment of proceeds.

C participation.

D transfer.

Page 21 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

Section B

61. A documentary credit for USD150,000 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 USD170,000.

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 Documentary credit has expired and late presentation.

B Documentary credit has expired and late shipment.

C Late presentation only.

D Late shipment only.

Page 22 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

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 : USD25,000
February : USD25,000
March : USD25,000

The documentary credit has been drawn and paid as follows:

January : USD20,000
February : USD20,000
March : USD15,000

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

A USD10,000.

B USD25,000.

C USD75,000.

D USD95,000.

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 from German port 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 Bill of lading evidencing goods received for shipment in France with an on-board notification
for a German port.

B 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.

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

D Commercial invoice dated 11 June.

Page 23 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

65. A documentary credit is issued for USD300,000 covering 300 TV sets CIF New York, partial
shipments allowed available by negotiation with Bank N. The credit is amended to USD280,000
covering 350 TV sets FOB Hong Kong.

Documents are subsequently presented direct to the issuing bank by the beneficiary for
USD280,000 covering shipment of 280 TV sets CIF New York, all other terms comply. No other
correspondence has been received from the beneficiary or from Bank N.

What action must the issuing bank take?

A Contact the applicant requesting their instructions.

B Pay USD280,000.

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

D Send a notice of rejection indicating discrepancies.

Page 24 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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. Using the calendars below, on which date will payment be made?
September M T W T F S S

1 1 2 3 4 5

6 7 8 9 10 11 12

13 14 15 16 17 18 19

20 21 22 23 24 25 26

27 28 29 30

October M T W T F S S

1 2 3

4 5 6 7 8 9 10

11 12 13 14 15 16 17

18 19 20 21 22 23 24

25 26 27 28 29 30 31

November M T W T F S S

1 2 3 4 5 6 7

8 9 10 11 12 13 14

15 16 17 18 19 20 21

22 23 24 25 26 27 28

29 30

A Friday 22 October.

B Monday 25 October.

C Friday 05 November.

D Monday 08 November

Page 25 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

67. At the request of an importer, an issuing bank issued a documentary credit in favour of ABC Co.
After being informed that ABC 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?

Issue:

A an amendment cancelling the credit in favour of ABC stating if agreement is not refused within
ten days the credit is cancelled and issue the credit in favour of XYZ once the ten days have
lapsed.

B an amendment to the credit making XYZ the beneficiary.

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

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

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.

Page 26 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

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.

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 a calendar
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 at the beginning of January, 100 cars at the beginning of February, 100 cars at the
beginning of 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 January, 100 cars in February, 100 cars in March.

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

Page 27 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

71. Please refer to document entitled, 'CDCS Specimen paper A - Simulation Documents' looking at
Simulation 1.

BACKGROUND
You are the document checker at the nominated confirming bank.

ASSUMPTIONS
 Today’s date is Monday 21 June XXXX.
 All signatures, where shown, are original.
 The documents are presented in the required number of originals and copies.
 The amount demanded is EUR200,000.

SUPPORTING DOCUMENTATION
 Documentary credit (MT700).
 Commercial invoice.
 CMR.

INSTRUCTIONS TO CANDIDATES
Identify the five discrepancies from the documents.

A Shipment not within period allowed.

B All invoiced goods have not been shipped.

C Documentary credit overdrawn.

D Documents do not evidence goods of Dutch origin.

E No bill of exchange presented.

F Incoterm® incorrectly stated on the commercial invoice.

G Transport document not correctly issued to the order of the applicant.

H Transport document not signed in accordance with UCP 600.

I Transport document not stamped and signed by the shipper.

J The invoice covers merchandise not called for in the documentary credit.

Page 28 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

72. Please refer to the document entitled 'CDCS Specimen paper A - Simulation Documents' looking at
Simulation 2.

BACKGROUND
You are working in the credits department of Worldwide International Bank in London and have
received a request to effect a transfer of a credit from the beneficiary.

ASSUMPTIONS
 Your bank has advised the credit to the beneficiary.
 Your bank has added its confirmation to the credit.
 No amendments have been issued to the credit.
 The transfer application attached has been signed by authorised signatories of the beneficiary.
 Transfer commission will be paid by the first beneficiary.

SUPPORTING DOCUMENTATION
 Documentary credit MT700.
 Transfer application form.

INSTRUCTIONS TO CANDIDATES
Identify the five discrepancies in the transfer application form on the discrepancy checklist that you
should take up with the first beneficiary. These will be issues that you would need to first resolve
with the customer before you could proceed to transfer the credit.

A Amount of insurance cover is not sufficient.

B Disclosure of original applicant’s name in invoice requirements.

C Disclosure of original applicant’s name in transport document.

D Credit does not state which bank is authorised to effect a transfer of credit.

E Expiry date of the credit and the presentation period are curtailed under the transfer.

F Incoterms® stated in credit are not valid.

G Instruction to effect transfer of credit on an unconfirmed basis.

H Instruction to expire the transferred portion of the credit in Germany.

I Partial transfer.

J Requirement to include first beneficiary order number on invoice.

Page 29 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)

 lOMoARcPSD|11373609

Principles and Practices of Documentary Credit Transactions Specimen Paper A

73. Please refer to the document entitled 'CDCS Specimen paper A - Simulation Documents' looking at
Simulation 3.

BACKGROUND
You are the documentary credit issuer at ABC Bank plc and have received the application form
along with a copy of a previous credit from your customer.

Application for Documentary Letter of Credit:

Applicant: Savage Steel plc
Issuing bank: ABC Bank plc
Amount: USD120,000

Savage Steel Facilities with ABC Bank plc: USD1,600,000

Current Exposure: USD1,470,000

SUPPORTING DOCUMENTATION
Documentary credit application form.

INSTRUCTIONS TO CANDIDATES
Identify on the discrepancy checklist the five items in the application that must be queried before
the documentary credit could be issued.

A Applicant’s facilities with issuing bank would be exceeded if documentary credit issued.

B Description of goods is insufficient.

C Exclusion clause on insurance document is inappropriate.

D Latest shipment date / expiry date are in conflict with presentation period.

E Pricing and goods quantity do not match value of the credit.

F Order party/consignee details not indicated.

G Requirements for inspection certificate are unclear.

H Additional instructions incompatible with the documents required.

I Confirmation instructions conflict with the credit terms.

J Incoterms® are inconsistent with the documents required.

Page 30 of 30 SpecimenA/PDT

Downloaded by Prabhleen Kaur (pkprabhleennagpal@gmail.com)