CDCS Specimen Paper A - Answers

LIBF Level 4 Certificate for Documentary Credit
Specialists (CDCS®)
Specimen paper A – Answer document
___________________________________________________________________________
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.
CDCS Specimen Paper A
Answers and Justifications
Q1 C
A
B
C Correct. Section 4.4 of the Study Text refers.
D
Q2 A
A Correct. Confirmation and a third party quality certificate maximise security.
B A quality certificate from a third party is preferable to the same from a beneficiary.
C A quality certificate from a third party is preferable to the same from a beneficiary.
D Not as strong as 'D' because the credit is unconfirmed.
Q3 C
A
B
C Correct. Section 20.4 of the Study Text refers.
D
Q4 D
A UCP 600 article 38.
B UCP 600 article 10c.
C UCP 600 article 38.
D Correct. UCP 600 article 38.
Q5 D
A
B
C
D Correct. Section 20.5 of the Study Text refers.
Q6 D
A May be altered, as per Article 38g of UCP 600.
B May be altered, as per Article 38g of UCP 600.
C May be altered, as per Article 38g of UCP 600.
D Correct.
Q7 B
A
B Correct. Article 32 of UCP 600 refers.
C
D
Q8 C
A
B
C Correct. The cumulative nature of the credit means that unused balances are carried forward.
The available amount is therefore USD22,500 for each of the third, sixth, eight, ninth, tenth,
eleventh and twelfth months, making USD157,500 in total.
D
Page 2 of 13 SpecimenA/PDT
Q9 C
A
B
C Correct. Article 28f of UCP 600 refers.
D
Q10 C
A
B
C Correct. Article 18 of UCP 600 refers.
D
Q11 B
A
B Correct. Section 2.1 of the Study Text refers.
C
D
Q12 C
A As per UCP 600 Article 38, in a credit available with any bank, a bank must be specifically
authorized by the issuing bank to transfer.
B As per UCP 600 Article 38, in a credit available with any bank, a bank must be specifically
authorized by the issuing bank to transfer, no matter in part or in whole.
C Correct. As per UCP 600 Article 38, in a credit available with any bank, a bank must be
specifically authorised by the issuing bank to transfer.
D As per UCP 600 Article 38, a credit may be transferred in part.
Q13 D
A
B
C
D Correct. Article 20a(vi) of UCP 600 states that the bill of lading must contain no indication that it is
subject to a charter party.
Q14 C
A
B
C Correct. 25.1.2
D
Q15 A
A Correct. Text location 25.1.2.
B
C
D
Q16 A
A Correct. Text location 25.2.
B
C
D
Q17 C
A Not explicitly authorised by the issuing bank.
B There is no usance agreement.
C Correct. Article 12b of UCP 600 refers.
D No obligation imposed.
Q18 A
A Correct. UCP 600 articles 2, 7, 8 and 12.
B
C
D
Q19 C
A
B
C Correct. Article 2 of UCP 600 defines honour as acceptance of a draft and payment at maturity.
Article 8 defines the confirming bank's obligation to honour. Their payment is not dependent on
any other party.
D
Q20 A
A Correct. Section 7.4.4 of the Study Text refers.
B
C
D
Q21 C
A Confirming banks must honour a time draft if not honoured by nominated bank.
B Confirming banks must create a deferred payment undertaking on credit conforming
presentations.
C Correct. Confirming banks must negotiate without recourse on credit conforming presentations.
D Confirming banks must pay at sight on credit conforming presentations.
Q22 C
A The confirming bank MUST honour complying document so 1 and 4 are not possible.
B The confirming bank MUST honour complying document so 1 and 4 are not possible.
C Correct. Payment may be at or prior to maturity so both 2 and 3 are possible.
D The confirming bank MUST honour complying document so 1 and 4 are not possible.
Q23 A
B
C
D
Q24 C
A Incorrect. Provides insufficient time for both the transit period and the desired 30 days after
arrival.
B Incorrect. The invoice could bear any date prior to presentation.
C Correct. Documents cannot be presented until shipment has taken place and payment will
therefore be at least 45 days after shipment.
D Incorrect. The invoice could bear any date prior to presentation.
Q25 D
A
B
C
D Correct. This is the only option that gives immediate payment to the seller upon presentation of
compliant documents to a bank in their own country.
Q26 C
A
B
C Correct. Drafts are not required for credit available by negotiation or deferred payment but are
needed for acceptance credits.
D
Q27 D
A UCP 600 article 4.
B UCP 600 article 4.
C UCP 600 article 4.
D Correct. UCP 600 article 4.
Q28 A
A Correct. Sub-article 10f UCP 600 states that a provision in an amendment (a cancellation notice
is an amendment) that it shall enter into force after a certain time can be disregarded. Then, as
the documents comply, sub-article 15a UCP 600 requires them to honour.
B
C
D
Q29 C
A
B
C Correct. Bills of lading evidence title to the goods whereas air transport documents and non-
negotiable sea waybills do not. See section 12.3 of the Study Text for explanations of title and
negotiability.
D
Q30 C
A
B
C Correct. See section 12.3 of the Study Text for explanations of the characteristics of bills of
lading.
D
Q31 B
A
B Correct. UCP 600 Sub-article 31c refers and would make both courier receipts acceptable.
Shipments on two separate trucks, regardless of whether they are under one or two separate
transport documents, constitute individual movement of the goods and thereby partial shipment.
ISBP J13 also applies.
C
D
Q32 B
A
B Correct. ISBP paragraph K15 states that the insured amount must be based on the gross CIF
value, prior to application of the discount.
C
D
Q33 A
A Correct. Article 3 of UCP 600 indicates the requirement for a signature. ISBP paragraph A3 also
refers.
B UCP 600 Article 18 states that an invoice need not be signed.
C This is not a certificate, therefore no signature is required.
D This is not a certificate, therefore no signature is required.
Q34 B
A
B Correct. ISBP745 sub-paragraph B2e(i) refers.
C
D
Q35 C
A Not in line with Article 17(e).
B Not in line with Article 17(e).
C Correct. It will be satisfied by the presentation of at least one original and the remaining number
as copies. ISBP Paragraphs A29d and UCP Article 17.
D Not in line with Article 17(e).
Q36 A
A Correct. ISBP paragraph C7.
B As per ISBP paragraph C12 states- Invoice must not show over-shipment or goods which are not
called for in the credit even if they are free of charge.
C Option no.2 incorrect as per ISBP C12.
D ISBP paragraph C12.
Q37 D
A The bank must be able to determine the payment amount and the maturity date in the time draft.
B The bank must be able to determine the payment amount and the maturity date in the time draft.
C The bank must be able to determine the payment amount and the maturity date in the time draft.
D Correct.
Q38 C
A Agreement is required from all parties to the credit. The applicant is not a party to the credit but
the others are.
B Agreement is required from all parties to the credit. The applicant is not a party to the credit but
the others are.
C Correct.
D Agreement is required from all parties to the credit. The applicant is not a party to the credit but
the others are.
Q39 A
A Correct. ISBP paragraph E23.
B
C
D
Q40 B
A The percentage increase required to adequately cover the partial transfer value to the original
documentary credit requirements is 190,000 x 116% = 220,000 (220,000 = 200,000 x 110%).
B Correct.
C The percentage increase required to adequately cover the partial transfer value to the original
D The percentage increase required to adequately cover the partial transfer value to the original
Q41 A
A Correct. Article 14h of UCP 600 applies.
B
C
D
Q42 C
A
B
C Correct. Article 14i of UCP 600 states that a document may be dated prior to date of issuance of
the credit but not later than the date of presentation.
D
Q43 B
A URR725 Articles 2 & 9. A reimbursement undertaking is irrevocable so valid claims MUST be
paid.
B Correct.
C URR725 Articles 2 & 9. A reimbursement undertaking is irrevocable so valid claims MUST be
paid.
D URR725 Articles 2 & 9. A reimbursement undertaking is irrevocable so valid claims MUST be
paid.
Q44 C The process and challenges in documentary credit transactions.

A Incorrect. Article 1.
B Incorrect. 3 days according to article 11a.
C Correct. Article 6e.
D Incorrect. Article 6c.
Q45 D
A
B
C
D Correct. eUCP E12 (b)(i).
Q46 B
A UCP 600 Article 11 states that the issuing bank must issue the credit in terms not inconsistent
with the pre-advice.
B Correct.
C UCP 600 Article 11 states that the issuing bank must issue the credit in terms not inconsistent
D UCP 600 Article 11 states that the issuing bank must issue the credit in terms not inconsistent
Q47 C
A Not in line with Article 16(d).
B Although the issuing bank has a right to disposition documents it is practice to consult applicant
and send notice of refusal in line with Article 16.
C Correct. This notice and its details are in line with Article 16(c).
D Not in line with Article 16(c).
Q48 D
A The advising bank incurs no 'credit' risk.
B The advising bank incurs no 'credit' risk.
C The nominated bank incurs counterparty risk with regard to issuing bank.
D Correct. The confirming bank's main risk is non-reimbursement from the issuing bank due to
extenuating circumstances such as insolvency, the reimbursing bank will only pay if funds are
made available to it by the issuing bank.
Q49 C
A
B
C Correct. Confirmation relates to issuing bank risk, irrespective of whether the credit is
transferable.
D
Q50 B
A
B Correct. Section 20.14 refers.
C
D
Q51 A The risks involved in documentary credit transactions..

A Correct. Confirmation mitigates the risk of both the issuing bank and the country in which they are
domiciled. Text location 6.1.5.
B
C
D
Q52 D
A This alludes to the irrevocable nature of credits.
B There is no specific term for long validity credits.
C There is no specific term for long validity credits.
D Correct. This is the definition of evergreen. Study Text - Section 21.5.
Q53 A
A Correct. The other options offer a singularity of banks to approach which could be closed for
reasons of force majeure. A freely available credit does not impose such restrictions.
B
C
D
Q54 A
B
C
D
Q55 B
A An assignment does not transfer the rights of performance under a credit but relates purely to the
proceeds of any presentation.
B Correct. Text location 19.4.
C Whilst the letter from the bank addressed to the assignee may well state that they consider the
instructions they have received from the assignor to be irrevocable, they will not state that their
`undertaking' is irrevocable as they could be stopped from making payment by a number of
reasons.
D No documents are required to be submitted by the assignee to trigger any payments.
Q56 D
A This deals with delivery of goods dispatched by modes other than sea and air.
B This supports an obligation to account for payment.
C Incorrect.
D Correct. This is required by carrier (shipping company) for delivery of goods without production of
a bill of lading. Text location 20.13.2.
Q57 A
B
C
D
Q58 C
A Payment is subject to presentation of complying documents by the beneficiary, NOT the
assignee.
B The assignee receives a payment directly from the bank, NOT the applicant.
C Correct. An assignment simply relates to a portion of the proceeds and will be for a specific
amount in favour of a specific assignee. Text location 19.4.
D The value of the credit is unaffected by an assignment; a portion of the proceeds is simply paid to
the assignee instead of the beneficiary.
Q59 B
A The status and value of the documents is not necessarily known when the delivery order is
issued so an indemnity is required to cover any value, discrepancies etc.
B Correct. The authority to debit the account cannot be conditional on the inspection of the goods.
Text location 20.14.
C The status and value of the documents is not necessarily known when the delivery order is
D The status and value of the documents is not necessarily known when the delivery order is
Q60 C
A
B
C Correct. Rule 10 of ISP98.
D
Q61 B
A 1 is acceptable as it fulfils the UCP 600 requirement for a minimum of 110%. 4 is compliant with
UCP Article 28j. 2 is not acceptable as the certificate is dated later than the shipment date. 3 is
not acceptable as UCP 600 requires a signature from the insurance company or their agent.
B Correct. 1 is acceptable as it fulfils the UCP 600 requirement for a minimum of 110%. 4 is
compliant with UCP Article 28j.
C 2 is not acceptable as the certificate is dated later than the shipment date. 3 is not acceptable as
UCP 600 requires a signature from the insurance company or their agent.
D 1 is acceptable as it fulfils the UCP 600 requirement for a minimum of 110%. 4 is compliant with
UCP Article 28j. 2 is not acceptable as the certificate is dated later than the shipment date. 3 is
not acceptable as UCP 600 requires a signature from the insurance company or their agent.
Q62 D
A
B
C
D Correct. According to Article 23 of UCP 600 and Paragraph H8 of ISBP, the date of issue of the
air transport document is deemed to be the date of shipment. As the expiry date and latest
presentation date fall on a weekend, presentation on the next working day is acceptable.
Q63 D
A
B
C
D Correct. In a cumulative revolving L/C undrawn amounts are carried forward to be available for
future drawings.
Q64 C
A
B
C Correct. Article 3 of UCP 600 defines 'middle' as the 11th to 20th of the month.
D
Q65 B
A The beneficiary did not accept the amendment, and presentation was complying with the terms of
original credit, therefore the issuing bank must honour.
B Correct. Documentary Credit is irrevocable unless explicitly specified that it is revocable (UCP
600 Article 2). Credit cannot be amended without the agreement of the beneficiary (UCP 600
Article 10).
C As per UCP 600 Article 6d, beneficiary is allowed to present documents directly to the issuing
bank.
D The beneficiary did not accept the amendment, and presentation was complying with the terms of
original credit.
Q66 B
A
B Correct.
C
D
Q67 C
A
B
C Correct. Issuance of a new credit before cancellation of the original will mean that there are two
separate commitments in existence, each of which could be claimed against by the respective
beneficiaries.
D
Q68 D
A
B
C
D Correct. Neither the amendment nor the cancellation is effective because they have not been
accepted by the beneficiary. There is still time for the beneficiary to correct their presentation for
the first shipment.
Q69 B
A
B Correct. Article 20a (iii) of UCP 600 applies.
C
D
Q70 A
A Correct. Given that the beginning of the month is defined in UCP 600 article 3 as being 1st to
10th of a month, no shipments would arrive in the same month given the stated journey times.
B Incorrect. The example above would allow 2 cargos to arrive in the same month.
C Incorrect. By way of example, the January shipment could be made on 31 January and the
February shipment on 1 February and the 200 cars would arrive in February.
D Incorrect. Given that February is a shorter month and the middle of the month is defined in UCP
600 article 3 as being 11th to 20th of a month, the February shipment could arrive in the same
month as the March shipment.
Q71 ABCHJ
A Correct. UCP600 Article 3 defines 'middle' as between the 11th and 20th of the month.
B Correct. Invoice refers to goods being packed on 5 pallets. The CMR Note only mentions 4
pallets.
C Correct. The amount is EUR180,000 but EUR200,000 is being claimed.
D The requirement for Dutch origin is a non-documentary condition.
E This is a deferred payment credit so no bill of exchange is required.
F Incoterm is correctly shown.
G A CMR note is not a negotiable document of title so the word 'order' is irrelevant. ISBP paragraph
J8 also refers.
H Correct. The document is signed by an agent without specifying that this is on behalf of the
carrier.
I Not a requirement of the credit. ISBP paragraph A37 also refers.
J Correct. Free of charge advertising material is not allowed, per ISBP paragraph C12
Q72 ACGIJ
A Correct. If the insurance is only stated to be for 10 percent above the value of the transferred
credit amount, then a full drawing will only result in an insurance document for USD 132,000
which will be totally inadequate and result in a discrepancy under the original credit upon
substitution of invoices.
B UCP 600 sub-article 38g allows for the name of the original credit applicant to be substituted by
the name of the first beneficiary. The fact that the applicant name appears in the text of the
invoice requirements is irrelevant and does not prevent substitution of the name of the party.
C Correct. UCP600 sub-article 38g again applies. As the name appears in the transport document
requirements disclosure is an issue, especially given that the transfer instructions states that the
name of the first beneficiary is to be substituted for that of the original credit applicant.
D As the original credit is restricted to a nominated bank, there is no need to state which bank can
effect a transfer - UCP600 sub-article 38b refers.
E UCP600 sub-article 38g allows for this.
F Whilst the stated incoterms are subject to an older version than the current incoterms 2020,
incoterms 2010 is still in force and is valid.
G Correct. If the original credit is confirmed, then the confirmation will also attach to the transfer.
UCP600 sub-article 38g applies.
H Provided the transferring bank agree to this request, this is allowed under UCP600 sub-article
38k.
I Correct. The original credit prohibits partial shipment thus the credit cannot be transferred to
more than one second beneficiary. Any transfer must be within the quantity of goods tolerance, in
this case it is stated in items so no tolerance. UCP600 sub-article 38j also applies.
J Correct. This is prohibited by UCP600 sub-article 38g.
Q73 AEHIJ
A Correct. The documentary credit allows a tolerance of 10% on the amount. This means that a
drawing could be made for USD132,000 but there is only USD130,000 available on the facility.
B In the background information, we are told that the customer has submitted a copy of the
previous credit with their latest application. The bank therefore has sufficient information to be
able to issue the new credit with an adequate goods description.
C An insurance document may contain reference to exclusions, even if it is purportedly covering 'all
risks'. Article 28 of UCP 600 refers, specifically paragraphs 'h' and 'i'.
D According to the application form, the default presentation period of 21 days after shipment will
apply. The latest shipment date is 15th May with expiry 21 days later, on 5th June; there is no
conflict.
E Correct. The documentary credit amount includes a tolerance, but the goods quantity does not.
F The transport document is to be issued 'to order' and blank endorsed. No specific consignee
details are required. Goods are initially consigned to the order of the shipper with rights then
transferred by endorsement and delivery of the document.
G The application form requires the certificate to be issued by an independent party. As this term is
defined by Article 3 of UCP 600, no additional clarity is required.
H Correct. The application is calling for a full set of transport documents but also for 1 original to be
sent directly to the applicant.
I Correct. Confirmation will be added by the advising bank but the credit is available by payment at
sight with the issuing bank.
J Correct. The Incoterms are 'CFR' but an insurance document is being called for.

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LIBF Level 4 Certificate for Documentary Credit

Specimen paper A – Answer document

Answers and Justifications

Q44 C The process and challenges in documentary credit transactions.

Q51 A The risks involved in documentary credit transactions..

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