CDCS Specimen Paper C - QP

LIBF Level 4 Certificate for Documentary Credit
Specialists (CDCS®)
Specimen paper: C
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.
CDCS® Electronic Specimen Paper C
Section A
1. In accordance with ISP98, an issuer of a standby credit is responsible for:
A an action or omission of others if that other party is chosen by the issuer.
B the genuineness of any document presented under the standby credit.
C the observance of law or practice chosen in the standby credit.
D the performance or breach of any underlying transaction.
2. Which of the following statements are correct?
A documentary credit can be made available by:
1. negotiation with any bank with drafts drawn at sight on the issuing bank.
2. negotiation with the issuing bank with drafts drawn at sight on the issuing bank.
3. acceptance with any bank with drafts drawn at 30 days' sight on the issuing bank.
4. acceptance with the issuing bank with drafts drawn at 30 days' sight on the issuing bank.
A 1 and 2 only.
B 1 and 4 only.
C 2 and 3 only.
D 3 and 4 only.
3. A reinstatement documentary credit must contain all of the following except:
A a condition that reinstatement will occur automatically after each presentation.
B an evergreen clause.
C the maximum amount that may be drawn under the credit.
D the maximum value that may be drawn for any one shipment.
4. When a standby credit states that it is payable from issuer’s own funds, this emphasises that it is:
A clean.
B irrevocable.
C not dependent on the availability of the applicant’s funds.
D unconditional.
Page 2 of 30 SpecimenC/PDT
5. In the case of unconfirmed documentary credits available by negotiation, which of the following is
correct?
A Drafts are always required if payment is at a future date.
B The beneficiary can only be paid after receipt of documents by the issuing bank.
C The nominated bank may negotiate with recourse.
D The nominated bank undertakes to negotiate documents.
6. An exporter has agreed to supply machinery to a company on open account terms. Which type of
credit could an exporter use to protect against the risk of non-payment?
A Advance payment.
B Clean credit.
C Standby.
D Transferable.
7. A red clause credit may require all of the following except:
A permitted alternative uses for the advance in the event that the letter of credit is not fully
utilised.
B a receipt for the advance signed by the beneficiary.
C an undertaking from the beneficiary to utilise the funds to purchase and pack the goods.
D the undertaking of the beneficiary to present the full set of documents stipulated to the
nominated bank within expiry.
8. A commercial standby letter of credit is best defined as:
A having the intention of being the primary means of payment for a transaction.
B supporting an obligation to pay for goods or services in the event of non-payment by other
methods.
C supporting an obligation to pay for losses arising from a failure to complete the underlying
transaction.
D supporting an obligation to repay borrowed money.
9. Which of the following are required in a documentary credit transaction?
Invoices that:
1. indicate a description of goods that is a mirror image of that stated in the documentary credit.
2. are both dated and signed.
3. show the name and address of the applicant as stated in the documentary credit.
4. include the trade term as stated in the goods description in the documentary credit.
A 4 only.
B 1 and 2 only.
C 2 and 3 only.
D 3 and 4 only.
10. Under ISP98, which of the following is always correct?
A standby:
A cannot be amended or cancelled by the issuer.
B does not require the presentation of documents.
C is a binding undertaking from date of issue.
D is revocable.
11. A confirmed irrevocable documentary credit issued for USD155,000 is amended, increasing its
value to USD185,000 and extending the expiry date by one month.
Which of the following statements is correct?
The:
A beneficiary is obliged to confirm its acceptance of the amendment to the confirming bank.
B confirming bank is not obliged to extend its confirmation to the amendment.
C issuing bank's liability and the confirming bank's liability is USD185,000 from the date of the
amendment.
D issuing bank's liability is USD155,000 until the beneficiary advises acceptance of the
amendment.
12. In accordance with UCP 600, a complying presentation means all of the following except a
presentation in accordance with the:
A applicable provisions of UCP 600.
B international standard banking practice.
C local law for negotiable instruments.
D terms and conditions of the documentary credit.
13. A bank’s duty to combat money laundering and terrorist financing may be in conflict with all of the
following provisions of UCP 600 except:
A a credit by its nature is a separate transaction from the sale or other contract on which it may
be based.
B banks deal with documents and not with the goods to which the documents may relate.
C if a credit contains a condition without stipulating the document to indicate compliance with
the condition, banks will deem such condition as not stated and will disregard it.
D subsequent mail confirmation of an authenticated teletransmitted credit shall be disregarded.
14. An internal review by a bank of all its customers who have trade-related business has highlighted
one customer who has recently requested that the bank open two documentary credits, that appear
to be unrelated to their customer’s principal business activity.
Unless otherwise dictated by local regulation, the bank has a duty to investigate the nature of their
customer’s request in order to comply with:
A anti-money laundering regulations.
B customs and exchange control regulations.
C government import and export regulations.
D uniform documentary credits rules.
15. Failure by a confirming bank to act in accordance with the provisions of UCP 600 article 16 will
preclude which of the following parties from claiming that the documents do not constitute a
complying presentation?
The:
A confirming bank alone.
B confirming bank and the issuing bank.
C confirming bank, the issuing bank and the applicant.
D issuing bank alone.
16. By nominating a bank to incur a deferred payment undertaking without adding its confirmation, the
issuing bank:
A authorises the nominated bank to accept and discount drafts.
B authorises the nominated bank to negotiate its deferred payment undertaking.
C authorises the nominated bank to prepay its deferred payment undertaking.
D imposes an obligation on the nominated bank to honour documents.
17. A confirming bank must honour a complying presentation made to which of the following?
The:
1. confirming bank.
2. issuing bank.
3. nominated bank.
4. reimbursing bank, provided that bank has issued a reimbursement undertaking.
A 1 and 3 only.
B 2 and 4 only.
C 3 and 4 only.
D 1, 2 and 3 only.
18. A bank that has issued a preliminary advice of the issuance of a documentary credit is then
irrevocably committed to issue the operative credit:
A by authenticated teletransmission.
B by authenticated teletransmission without delay in terms not inconsistent with the preliminary
advice.
C by teletransmission without delay.
D without delay in terms not inconsistent with the preliminary advice.
19. A sight documentary credit available with any bank by negotiation is confirmed by the advising
bank. All of the following statements are correct except that the confirming bank:
A is obligated to advance funds or agree to advance funds to the beneficiary.
B is required to approach the issuing bank for authority to negotiate.
C must forward documents to the issuing bank.
D will negotiate on a without-recourse basis.
20. In accordance with UCP 600, which of the following best describes the meaning of negotiation?
The:
A examination of documents by the nominated bank and the claiming of reimbursement prior to
payment to the beneficiary.
B giving of value for drafts and/or documents by the nominated bank.
C purchase of drafts and/or documents by the nominated bank.
D sending of documents by the nominated bank to the issuing bank.
21. A documentary credit calls for a draft at 60 days after sight. It is available with the issuing bank by:
A acceptance.
B deferred payment.
C negotiation.
D payment.
22. ABC Inc is the beneficiary of a non-transferable documentary credit. ABC Inc has advised the
nominated bank that an assignment of proceeds is to be made to its own supplier.
The nominated bank:
A cannot act on ABC Inc’s instructions as the credit is non-transferable.
B cannot act on ABC Inc’s instructions without the agreement of all parties to the credit.
C will advise the supplier that instructions have been received to pay part of the proceeds of the
credit to them on receipt of a complying presentation.
D will issue a guarantee obligation to ABC Inc’s supplier, confirming a future payment to them.
23. An irrevocable credit is confirmed by a nominated bank with payment due 30 days after the bill of
lading date. The beneficiary wishes to obtain finance and has requested that the nominated bank
prepay its undertaking.
The type of credit being referred to is best described as:
A acceptance.
B deferred payment.
C negotiation.
D revolving.
24. Which of the following statements is incorrect regarding the independent nature of documentary
credits?
A An issuing bank is required to make payment if all the terms of the documentary credit are
met.
B Payment is conditional upon receipt of goods by the applicant.
C Payment is made against presentation of complying documents.
D There is no responsibility on the issuing bank to determine if the terms of the underlying
contract have been met.
25. Documents are sent by an advising bank to an issuing bank and are found to be compliant with the
documentary credit conditions. On the same day as the presentation is made, the applicant informs
the issuing bank that they have entered into litigation with the beneficiary due to a dispute relating to
the underlying contract. The applicant asks the issuing bank not to make payment under the credit.
What action should the issuing bank take?
A Payment should be made to the beneficiary.
B The case should be referred to the bank’s lawyers.
C The issuing bank should advise the beneficiary that it is unable to make payment due to the
commencement of litigation.
D The issuing bank should make payment to the advising bank ‘under reserve’ until the dispute
is settled.
26. Which of the following is not a document of title to the goods that it covers?
A Bill of lading.
B Multimodal transport document.
C Railroad transport document.
D Short form bill of lading.
27. Which of the following documents is not considered to be a transport document?
A Courier receipt.
B Delivery order.
C Inland waterway bill.
D Non-negotiable sea waybill.
28. A ‘received for shipment’ bill of lading indicates a place of receipt that is different to the port of
loading without any indication of a means of pre-carriage.
Which of the following will meet the minimum requirements laid down in ISBP 745?
A:
A dated on-board notation.
B dated on-board notation indicating both the port of loading and the name of the vessel.
C dated on-board notation indicating the port of loading.
D signed and dated on-board notation indicating both the port of loading and the name of the
vessel.
29. Which of the following commercial documents are usually required for official purposes?
1. Certificate of weight.
2. Consular invoice.
3. Independent health certificate.
4. Chamber of commerce certificate of origin.
A 1 and 2 only.
B 2 and 4 only.
C 1, 3 and 4 only.
D 2, 3 and 4 only.
30. 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.
31. A documentary credit issued in favour of Baker Products Ltd requires presentation of drafts drawn
at 60 days after shipment date, invoice, packing list, certificate of origin and bills of lading, and
further states that third-party documents are not allowed. All documents presented indicate the
name of the beneficiary as Baker Holdings Ltd.
Assuming all other conditions of the credit have been met, which of the following will be required to
make the documents acceptable according to ISBP?
A A notation on all documents that states that the named party was formerly known as Baker
Products Ltd.
B A notation on both the draft and the invoice that states that the named party was formerly
known as Baker Products Ltd.
C A notation on the invoice alone that states that the named party was formerly known as Baker
Products Ltd.
D Presentation of a certified copy of a certificate of reincorporation.
32. In accordance with ISBP, and unless specifically required by the documentary credit, which of the
following are correct regarding an invoice?
It:
1. may not include any deductions covering advance payment, discount, etc.
2. need not be signed.
3. may include samples, advertising materials, etc.
4. need not be dated.
A 1 only.
B 4 only.
C 2 and 4 only.
D 3 and 4 only.
33. A documentary credit that prohibits transhipment calls for an air transport document consigned to
the applicant, ABC Co. Which of the following presentations would be discrepant?
An air transport document:
A indicating that the goods have only been accepted for carriage.
B indicating that transhipment will take place.
C showing the notify party as XYZ Co.
D signed by an agent acting on their own behalf.
34. A bank which has issued a reimbursement undertaking received a claim that complied with the
terms and conditions of the reimbursement undertaking. At the same time, the issuing bank gave
instructions to dishonour that claim. In accordance with URR 725, what actions should the
reimbursing bank take?
A Dishonour the claim as per the issuing bank's instruction.
B Honour the claim and debit the issuing bank's account.
C Request more details from the issuing bank.
D Request the claiming bank’s agreement to cancel claim.
35. In accordance with UCP 600, which of the following statements is correct regarding an
amendment?
The:
A beneficiary must give notice of acceptance of amendment within five days of receipt.
B beneficiary’s partial acceptance of amendment is deemed to be notice of rejection.
C confirming bank may not advise the amendment extending its confirmation to the amendment.
D credit can be amended without the confirming bank’s consent.
36. A ‘lien’ clause in a non-negotiable sea waybill will result in the:
A carrier being unable to deliver goods to the named consignee without first obtaining the
permission of the consignee.
B carrier being unable to deliver goods to the named consignee without first obtaining the
permission of the lien holder.
C consignee being unable to take delivery of the goods without presentation of all original non-
negotiable sea waybills.
D consignor being unable to change the name of the consignee without submission of all
original non-negotiable sea waybills.
37. A shipment under a documentary credit has arrived at its destination port. Local customs authorities
have requested the clearing agent to provide a document that will enable them to carry out a spot
check on the contents of the shipment.
Which of the following is the clearing agent most likely to require?
A Certificate of analysis.
B Certificate of origin.
C Inspection certificate.
D Packing list.
38. The issuing bank receives documents from the confirming bank on Friday 13 November and on
Thursday 19 November determines they are discrepant. All of the following actions can be taken by
the issuing bank except:
A accepting documents without a waiver from the applicant.
B giving notice of dishonour to the presenter on Friday 20 November, having previously sought
a waiver from the applicant.
C giving notice of dishonour to the presenter on Monday 23 November, following refusal by the
applicant on 20 November.
D returning the documents to the presenter on Friday 20 November, having previously stated in
a notice of dishonour that documents were being held pending further instructions.
39. A documentary credit is available against drafts at 90 days' sight. The beneficiary presents
documents to the issuing bank on 10 July. On 13 July the issuing bank notifies the beneficiary of the
refusal of discrepant documents. On 20 July the applicant accepted the discrepancies, which were
then waived by the issuing bank.
Using the calendar below, what will be the latest maturity date of the draft?
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
August 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
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 8 October.
B 10 October.
C 11 October.
D 18 October.
40. Which of the following SWIFT message types is not directly related to bank-to-bank
reimbursements under a documentary credit?
A MT 734.
B MT 740.
C MT 742.
D MT 747.
41. A documentary credit supported by a reimbursement agreement, issued by a funding organisation

such as the World Bank or the European Bank for Reconstruction and Development (EBRD), will
usually provide for reimbursement within a maximum of how many days after the claim is
submitted?
A 10 days.
B 15 days.
C 30 days.
D 45 days.
42. A standby letter of credit subject to ISP98 states that it is payable upon presentation of the
beneficiary’s statement of default. The beneficiary presents the following documents:
1. A statement of default that does not incorporate a demand for payment.

2. A draft drawn on the issuing bank.
The presentation is:
A compliant.
B not compliant, because a copy of the unpaid invoice is not enclosed.
C not compliant, because there is no demand for payment.
D not compliant, because the standby does not call for a draft.
43. A documentary credit that prohibits partial shipment and transhipment requires presentation of a
multimodal transport document with shipment from London to Singapore no later than 15 March.
Which of the following would render the multimodal transport document discrepant?
It:
A evidences place of receipt ‘London’ and intended port of loading ‘Felixstowe’.
B is claused ‘transhipment will take place’.
C is dated 17 March but bears a notation stating that goods were taken in charge on 15 March.
D is signed only as ‘J Smith, Agent’.
44. Which of these is not a risk faced by the beneficiary in a documentary credit?
A An inability to comply with the terms of the documentary credit.
B Failure of the applicant to pay.
C Failure of the confirming bank.
D The documentary credit being fraudulently issued.
45. An applicant requests an airway release note because goods have arrived and are consigned to the
bank. What stipulation will be the least likely to appear in the counter-indemnity signed by the
applicant?
A An irrevocable authority to debit the applicant’s account or an undertaking from the applicant
to reimburse the bank on first demand.
B That the applicant undertakes to accept the documents when presented, irrespective of any
discrepancies.
C That the counter indemnity will only cover goods covered in the documents that the air waybill
relates to and the applicant will only pay that invoice value.
D That the issuing bank will be indemnified against all damages, actions, proceedings or costs
in relation to the issue of the release to order.
46. The risk of non-receipt of documents by the credit applicant, despite payment having been made to
the beneficiary, can be best mitigated by making the credit available with:
A a nominated bank.
B a nominated bank that adds its confirmation to the credit.
C any bank.
D the issuing bank.
47. Which of the following issues associated with amendments to documentary credits are not directly
addressed by UCP 600?
A A provision within an amendment that it shall enter into force after a stated period of time.
B An ability to accept or reject multiple amendment advices, regardless of the order in which
they have been issued.
C Partial acceptance of an amendment.
D Presentation of documents that comply with the terms of any not-yet-accepted amendment.
48. Which of the following measures will best mitigate the credit risk of an issuing bank in a
documentary credit transaction?
A requirement that the:
A air waybill be consigned to the applicant for the account of the issuing bank.
B beneficiary address their invoice to the issuing bank for account of the applicant.
C bills of lading be consigned to the order of the issuing bank.
D insurance document evidences claims payable to the issuing bank.
49. A reimbursement authorisation must include all of the following except the:
A additional amounts payable and tolerance, if any.
B claiming bank's details or, in the case of a freely negotiable credit, that claims can be made by
any bank.
C currency and amount.
D expiry date of the documentary credit.
50. Which of the following are likely to issue an indemnity to a carrier for missing bills of lading?
1. Issuing bank.
2. Confirming bank.
3. Beneficiary.
4. Applicant.
A 1 only.
B 3 only.
C 1 and 3 only.
D 2 and 4 only.
51. Which of the following are the most common instances where ‘participation’ and ‘syndication’
would apply?
1. Issuance of a documentary credit.

2. Advising a documentary credit.
3. Confirmation of a documentary credit.
4. Negotiation of documents under a documentary credit.
A 1 only.
B 4 only.
C 1 and 3 only.
D 2 and 4 only.
52. Bank A issues a documentary credit to Bank B requesting that Bank B add its confirmation to the
credit. Bank B advises the credit to the beneficiary and exercises its right under UCP 600 not to add
its confirmation. Bank B agrees to act as the nominated bank. The beneficiary supplies a complying
presentation and Bank B negotiates the draft presented.
The negotiation by Bank B is best described as:
A without recourse to the beneficiary.
B with recourse for a period of 10 banking days.
C with recourse for a period of 21 banking days.
D with recourse to the beneficiary.
53. A counter-indemnity given to the issuing bank by the applicant of a documentary credit in order to
obtain release of goods prior to receipt of shipping documents should do all of the following except:
A confirm that the underlying goods will not be sold prior to receipt of documents.
B indemnify the issuing bank against all actions, proceedings, damages or costs.
C provide irrevocable reimbursement authority to the issuing bank.
D undertake to accept the underlying documents, irrespective of discrepancies.
54. A letter of indemnity used in a credit for oil normally incorporates all of the following except it:
A indemnifies the holder against absence of bills of lading.
B indemnifies the holder against all consequences resulting from sale in the absence of bills of
lading.
C undertakes to release goods.
D undertakes to surrender bills of lading once received.
55. Which of the following is not a risk when an issuing bank provides a shipping guarantee to cover
the absence of bills of lading?
A Documents must be honoured, irrespective of any discrepancies.
B The bank takes on the credit risk of the country of the port of discharge.
C The liability may be unlimited in time.
D The liability may be unlimited in value.
56. Which of the following features must be indicated on a charterparty bill of lading?
1. The name of the charterer.

2. The details of the charterparty contract or reference to another source containing the charter
party contract details.
3. The number of originals issued.
4. Words indicating that the goods have been shipped 'clean' on board the vessel.
A 3 only.
B 1 and 2 only.
C 1 and 4 only.
D 3 and 4 only.
57. Which of the following statements is incorrect?
A A confirming bank is irrevocably bound to honour or negotiate as of the time it adds its
confirmation to the credit.
B A confirming bank’s undertaking to reimburse another nominated bank is independent of the

confirming bank’s undertaking to the beneficiary.
C A confirming bank undertakes to reimburse another nominated bank that has honoured or
negotiated a complying presentation and forwarded the documents to either the confirming
bank or the issuing bank.
D Reimbursement for the amount of a complying presentation under a credit available by

acceptance or deferred payment is due at maturity, whether or not another nominated bank
prepaid or purchased prior to maturity.
58. Company A have entered into a contract to supply Company B with computer hardware.
The terms of the contract define that delivery will take place when Company A has placed the goods
at the disposal of Company B on the arriving means of transport ready for unloading at the named
place of destination.
The contract requires the seller to ship the goods to Busan port and to then arrange road
transportation to Gwangju.
Neither party is obliged by the contract terms to insure the goods while in transit.
Given the above information, which Incoterm® 2020 rule reflects the above arrangements?
A CIP Gwangju.
B CIF Busan port.
C DAP Busan port.
D DAP Gwangju.
59. According to ISBP745, which of the following documents need not include a goods description or
any other reference to the credit or another stipulated document?
A Beneficiary certificates.
B Certificates of origin.
C Invoices.
D Packing lists.
60. A release note for goods shipped by air consigned to the issuing bank would normally be issued:
A by the carrier and countersigned by the applicant.
B by the carrier and countersigned by the issuing bank.
C to the carrier by the applicant and countersigned by the issuing bank.
D to the carrier by the issuing bank.
Section B
61. A documentary credit is issued for USD200,000, which includes the following terms and conditions:
1. Original insurance certificate covering all risks.

2. Clean on-board bills of lading evidencing shipment from ‘Southampton, UK’ to a US port.
In accordance with UCP 600, which of the following documents would not be acceptable?
A An insurance certificate for USD250,000 covering all risks, subject to franchise of USD2,500.
B Full set of clean on-board bills of lading evidencing port of loading as ‘Southampton’.
C Original insurance policy covering all risks for USD200,000.
D Sole original on-board bill of lading claused ‘packaging may be insufficient for the journey’.
62. A documentary credit with a latest shipment date of 30 June requires presentation of ‘Full set house
air waybill indicating shipment from any UK airport to Hong Kong’.
Which of the following presentations comply with these terms?
A ‘Original for consignor’ air waybill issued and signed by the freight forwarder without naming
the carrier, dated 1 July, indicating shipment from London Heathrow (LHR) to Hong Kong
(HKG) but otherwise indicating flight date as 30/06 in box labelled ‘for carrier use only’.
B ‘Original for consignee’ air waybill issued and signed by the freight forwarder, without naming
the carrier, dated 30 June, indicating shipment from LHR airport to HKG airport.
C ‘Original for consignor’ air waybill issued by the freight forwarder and signed as agents of a
named carrier, dated 1 July, indicating shipment from LHR to HKG but otherwise indicating
flight date as 30/06 in box labelled ‘required flight date’.
D ‘Original for shipper’ air waybill issued and signed by the freight forwarder without naming the
carrier, dated 1 July, indicating shipment from LHR to HKG and bearing a specific notation
indicating the date of shipment as 30 June.
63. Documents have been presented by the beneficiary to the nominated bank in full compliance with
the terms of a confirmed documentary credit. The nominated bank has retained the documents but
refused to negotiate the documents due to a liquidity crisis in the country where the issuing bank is
located.
Which of the following best describes the actions the beneficiary should take?
A Ask the nominated bank to forward the documents to the confirming bank for payment.
B Ask the nominated bank to seek the authority of the issuing bank to claim the documents'
value from a third-party reimbursing bank and retain the documents until payment has been
received.
C Ask the nominated bank to send the documents on a collection basis to the issuing bank.
D Request the applicant to make a direct payment to the nominated bank, conditional upon
release of the documents to the applicant.
64. The applicant of a documentary credit has requested their bank to issue a credit for USD100,000,
which is payable as follows:
1. USD10,000 against presentation of a simple receipt.

2. USD10,000 against issuance of a factory inspection certificate.
3. USD60,000 against presentation of shipping documents.
4. USD20,000 against presentation of an installation certificate.
With regard to items one, two and four above, no other details relating to these documents are
stated in the credit. Documents are presented for the amounts indicated above in the following
order:
1. An untitled document marked ‘we acknowledge with thanks receipt of USD10,000 in the form of
an advance payment’.
2. A factory inspection certificate stating that the factory meets the required standards.
3. Shipping documents that evidence late shipment of goods.
4. An installation certificate stating that the machinery has been installed to the buyer’s satisfaction.
Which of the following statements are correct?
1. The untitled document can be accepted as a simple receipt.

2. The factory inspection certificate cannot be issued by the beneficiary.
3. The final staged payment due upon installation will be considered ‘unavailable for drawing’ until a
waiver has been issued for presentation of discrepant shipping documents.
4. The installation certificate cannot be issued by the beneficiary.
A 1 only.
B 3 only.
C 1 and 3 only.
D 2 and 4 only.
65. A seller in Turkey is agreeing a contract for the sale of fine cotton shirts to a buyer in the United
Kingdom. During the contract negotiations, it is agreed that the seller will pay for transport if
undertaken by sea. However, the buyer will have the option to request transportation by air, in which
case they will pay for the transport. In all cases, the buyer will be responsible for insurance of the
goods to destination.
Which two Incoterms® 2020 best suit the above transaction?
A CFR UK port (for sea) and FCA Turkish airport (for air).
B CIF UK port (for sea) and FOB Turkish airport (for air).
C CIP UK port (for sea) and FCA Turkish airport (for air).
D FOB Turkish port (for sea) and CPT UK airport (for air).
66. A documentary credit issued for USD150,000 covering a shipment of vegetables contains the
following shipment schedule for the first three months:
1. January shipment – 100 boxes of carrots at USD50 per box.

2. February shipment – 150 tonnes of potatoes at USD80 per tonne.
3. March shipment – 100,000 turnips at USD0.08 per item.
Assuming that the shipments are made on time and the maximum quantity of goods allowed by
UCP 600 is shipped each month, what is the balance of the credit after the March shipment has
been honoured?
A USD122,900.
B USD124,400.
C USD124,500.
D USD125,000.
67. A documentary credit calls for presentation of a full set of bills of lading evidencing shipment from
the USA to Singapore no later than 15 November, a commercial invoice and an insurance policy
covering all risks. Partial shipment and transhipment are prohibited and the expiry date is 30
November. The following documents are presented to the confirming bank on 22 November:
1. One full set of bills of lading dated 13 November evidencing shipment from New York to
Singapore on vessel A for voyage number 123.
2. A second full set of bills of lading dated 15 November evidencing shipment from Boston to
Singapore on vessel A for voyage number 123.
3. Insurance policy dated 15 November covering all risks excluding rust oxidation and discoloration
for 120% of CIF value.
4. Unsigned commercial invoice dated 23 November.
A Partial shipment has been effected.
B The date of the invoice is unacceptable.
C The exclusion clause on the insurance policy is unacceptable.
D The insurance policy must be dated no later than 13 November.
68. A documentary credit with an invoice goods description of ‘shoes as per order ABC 123’ requires
presentation of the following documents:
1. Commercial invoice
2. Certificate of origin
3. Full set less one bills of lading.
It states the following additional conditions:
1. Goods of Swedish origin

2. Packing in wooden cases
3. One original bill of lading to be sent directly to the applicant
4. Third-party documents are not acceptable.
Which of the additional conditions can be disregarded?
A 1 and 3 only.
B 2 and 4 only.
C 1, 2 and 4 only.
D 2, 3 and 4 only.
69. A documentary credit is issued for an amount of about USD50,000 and calls for documents to
include an insurance certificate with cover to be irrespective of percentage. Partial shipments are
prohibited and documents are presented for the maximum permitted amount. Which of the following
would be acceptable?
Insurance certificate with all risks cover for:
A USD55,000 not subject to a franchise or excess.
B USD63,000 subject to a franchise of USD2,500.
C USD65,000 not subject to a franchise or excess.
D USD70,000 with an excess deductible of USD5,000.
70. What is the minimum percentage of insurance required for a transfer credit to meet the original
documentary credit value, based on the following details?
Original documentary credit value: USD372,000

Partial transfer value: USD320,000
A 110%.
B 128%.
C 140%.
D 157%.
71. Please refer to the document entitled 'CDCS Specimen paper C - Simulation Documents' looking at
Simulation 1.
You are the documentary credit checker at ABC Bank New York.
ASSUMPTIONS
 The bill of lading was also presented and complies with the documentary credit.
 The amount drawn under the credit is consistent with the invoice value.
SUPPORTING DOCUMENTATION
 Documentary credit (SPC SIM1 DOC1 – DC).
 Final tax invoice (SPC SIM1 DOC2 – invoice).
INSTRUCTIONS TO CANDIDATES
Identify the five discrepancies in the documents.
A Final tax invoice presented.
B Documentary credit amount overdrawn.
C Invoice is not signed.
D Invoice shows incorrect description of goods.
E Shipment of additional goods free of charge.
F Import licence number not indicated on invoice.
G Documentary credit number not stated on invoice.
H Invoice shows incorrect Incoterms.
I Invoice not made out in the name of applicant.
J Invoice not dated.
Simulation 2.
You are the documentary credit specialist at the Indian Bank Calcutta. Documents have been
presented today, Tuesday 10 March XXXX, given that the expiry date fell on a weekend and on
Monday 9 March XXXX your offices were closed due to circumstances beyond your bank’s control.
You are requested to examine the presented documents – commercial invoice and bill of lading –
against the documentary credit. The required number of documents has been presented.
ASSUMPTIONS
 All signatures are original. All other documents presented are complying.
 It is not a leap year; February only has 28 days.
SUPPORTING DOCUMENTATION
 documentary credit.
 commercial invoice.
 bill of lading.
INSTRUCTIONS TO CANDIDATES
Identify the five discrepancies in the documents.
A Goods description on bill of lading not as per credit.
B Transport document evidences shipping marks in conflict with credit terms.
C Documents presented after credit expiry.
D Beneficiary’s address on the commercial invoice is insufficient.
E Data conflict between shipping marks shown on invoices and transport document.
F Goods undershipped.
G Late shipment.
H Goods description on commercial invoice not as per the credit.
I Incoterms® shown on invoice not as per credit.
J Bills of lading issued in 2/2 originals instead of 3/3 originals.
Simulation 3.
BACKGROUND
You are the standby credit issuer and have received the application form from your client.
INSTRUCTIONS TO STUDENTS
Identify the five discrepancies in the application.
A Standby indicates incorrect place for presentation of documents.
B The reduction schedule is not workable.
C The application form automatic extension clause should include a final expiration date beyond
July 01 2XX4.
D It is unclear what documents are required to trigger payment.
E Documentary requirement B fails to indicate applicable credit number.
F The intention of additional instruction 1 is unclear.
G Additional instruction number 2 is inconsistent with other terms and conditions in the
application.
H The statement that the credit will become effective after the lease agreement is signed will be
ineffective if the credit is issued in its current form.
I Credit application fails to indicate on whom drafts are to be drawn.
J The beneficiary should be Gaucho Bank.

CDCS Specimen Paper C - QP

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

CDCS Specimen Paper C - QP

Uploaded by

Copyright:

Available Formats

LIBF Level 4 Certificate for Documentary Credit

2. Answer all questions.

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

Information for candidates

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

2. Accompanying this question paper is a booklet of three simulation exercises.

5. Applicable current ICC rules apply throughout.

1. In accordance with ISP98, an issuer of a standby credit is responsible for:

A an action or omission of others if that other party is chosen by the issuer.

B the genuineness of any document presented under the standby credit.

C the observance of law or practice chosen in the standby credit.

D the performance or breach of any underlying transaction.

2. Which of the following statements are correct?

A documentary credit can be made available by:

3. A reinstatement documentary credit must contain all of the following except:

A a condition that reinstatement will occur automatically after each presentation.

C the maximum amount that may be drawn under the credit.

C not dependent on the availability of the applicant’s funds.

A Drafts are always required if payment is at a future date.

C The nominated bank may negotiate with recourse.

D The nominated bank undertakes to negotiate documents.

7. A red clause credit may require all of the following except:

B a receipt for the advance signed by the beneficiary.

8. A commercial standby letter of credit is best defined as:

D supporting an obligation to repay borrowed money.

9. Which of the following are required in a documentary credit transaction?

10. Under ISP98, which of the following is always correct?

A cannot be amended or cancelled by the issuer.

B does not require the presentation of documents.

C is a binding undertaking from date of issue.

Which of the following statements is correct?

B confirming bank is not obliged to extend its confirmation to the amendment.

A applicable provisions of UCP 600.

B international standard banking practice.

C local law for negotiable instruments.

D terms and conditions of the documentary credit.

D subsequent mail confirmation of an authenticated teletransmitted credit shall be disregarded.

A anti-money laundering regulations.

B customs and exchange control regulations.

C government import and export regulations.

D uniform documentary credits rules.

A confirming bank alone.

B confirming bank and the issuing bank.

C confirming bank, the issuing bank and the applicant.

D issuing bank alone.

A authorises the nominated bank to accept and discount drafts.

B authorises the nominated bank to negotiate its deferred payment undertaking.

C authorises the nominated bank to prepay its deferred payment undertaking.

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

C by teletransmission without delay.

D without delay in terms not inconsistent with the preliminary advice.

A is obligated to advance funds or agree to advance funds to the beneficiary.

B is required to approach the issuing bank for authority to negotiate.

C must forward documents to the issuing bank.

D will negotiate on a without-recourse basis.

B giving of value for drafts and/or documents by the nominated bank.

C purchase of drafts and/or documents by the nominated bank.

D sending of documents by the nominated bank to the issuing bank.

The nominated bank:

A cannot act on ABC Inc’s instructions as the credit is non-transferable.

The type of credit being referred to is best described as:

B Payment is conditional upon receipt of goods by the applicant.

C Payment is made against presentation of complying documents.

What action should the issuing bank take?