42820°7 (CDC UCP 600 Practice Exercises 2 CDCS* UCP 600 Pract WARNING! Disclaimer + CDCS means “Certified Documentary Credit Specialist”, a certification from ICC Paris, administered by IFSA for the USA, Canada, and Mexico, whilst for the rest of the world by IFS School of Finance. + CDCS is a registered trade mark of ifs School of Finance registered with the EU Community Trade Mark office under number 000858704, The Bad News A, We declare our copyright for the following CDCS Exam Exercises and Model Answers (the Exercises), Please Understand that you may face serious legal consequences for unauthorised use of our exercises, B, Some of our Exercises are tricky ones and you have to read them carefully and think twice before you finish ‘your answers, For best learning resus (if you don’t know the answer at all) or for testing purposes (if you believe that you should know what the correct answer is), please do not click the Model Answer button placed below each question so soon. After you have provided your answer, which you think should be Correct, do think twice before you click for the Model Answer. Otherwise you will exclaim: "Oh shi! | should have given a different answer if I had read the question correctly and had given the issues a little more thoughts", ‘The Good News If you fail in providing good answers for the Exercises, don't worry! You would stil be able to pass the CDCS exam, because our Exercises may be more difficult than those in the CDCS. The examiners of CDCS only wish to check your knowledge on UCP 600, TSP9B and the other TCC Rules, They do not wish to give you # hard time like we do, you to the limit, so that you may get a distinction! push Our Advices In the CDCS examination, due to fear, anxiety and heavy pressure, you could only perform up to 65% (2/3) of your normal capacity. That means you would not be able to think so coolly and inteligentiy for the best answers. And exercises like this would prepare you well in advance for the mast aifficult part (case studies) of the CDCS examination that would ultimately lead you 0 2 pass, if not an enviable distinction. Here you go. And goad luck! Note: yas This exercise were updated on 2 August 2007 to reflect UCP 600 provisions. yet! The Answer for Question 33 was revised on 26 July 2009. 26, Case Study A documentary credit subject to UCP 600 called for "Full set of 3/3 clean on board original marinefocean bills of lading evidencing shipment from Houston to Shanghai made out to order and blank endorsed, marked freight prepaid, notifying applicant". The presented bill of lading, bearing a title of "Mermaid Shipping Company S.A., Geneva", was manually signed hipihwurw:olee comihimlledes2 him 142820°7 21. cDeSUCP E00 Practoe Exercises 2 with a signature chop reading "Carrier - Mermaid Shipping Company S.A., Geneva’. The "Place and Date of Issue" box contained a statement: "New Orleans - Mermaid Shipping Company (USA) Inc., 17 July 2007 12:12:22 pm". 1s this bill of lading acceptable? Please state your reasons. Model Answer Case Study Upon request by the applicant, the issuing bank finally waived the previously advised valid discrepancy for the first instalment shipment made after the latest shipment date in a DC subject to UCP 600 that clearly stated the shipping period of three instalment shipments. However, the issuing bank did not clarify whether or not the DC was still valid for subsequent instalment shipments. After a period of time, the beneficiary presented compliant documents for the second instalment shipment made according to the shipping schedule stated in the DC. The issuing bank denied payment according to UCP 600 article 32. The beneficiary sued the issuing bank for payment dishonour and negligence. the expert's report from the beneficiary states that the confusion is created by the issuing bank that should have clarified in its waiver notice whether or not the DC is still valid for the second and the third instalment shipments. So the issuing bank should bear the serious consequenees for its negligence and should effect payment of the second instalment shipment, since the documents are all compliant. IL. The expert's report from the issuing bank states that: a. There is no stipulation in the UCP 600 that requires the issuing bank to state its intention/decision on the validity of the balanced instalment shipments after waiving the discrepancy in the first instalment shipment. b. Discrepancy and waiver are two separate issues. The wavier cannot change the nature of a discrepancy. A discrepancy always remains a discrepancy, whether being waived or not. ©. The discrepancy will trigger the following two consequences To dishonour payment according to UCP 600 articles 7, 14 & 16, and ii, To make the DC no more available for all future instalment shipments according to UCP 600 article 32. 4.So the wavier only waives the first consequence regarding payment but the second consequence affecting balanced instalment shipments remains unwaived. ¢. As a result, the issuing bank has no payment obligation for the second and the third instalment shipments. If you were the Judge, what would you adjudicate? Please state the reasons of your judicial decisions. Model Answer hipihwurw:olee comihimlledes2 him 2942820°7 (CDC UCP 600 Practice Exercises 2 28. An Insurance Policy Not Indicating Number of Originals Issued A DC subject to UCP 600 calls for full set of insurance policy but is silent on the number of originals issued. The issuing bank refuses to pay due to the insurance policy presented does not indicate number of originals issued. Is the issuing bank correct in naming this as a discrepancy? Model Answer 29, Port of Loading Different from DC The DC subject to UCP 600 requires port of discharge to be "Alexandria (Free Zone)" whereas in the "port of discha " box in the bill of lading, it states only "Alexandria", However, the same bill of lading also has information "CFR Alexandria Port Free Zone" appearing in other area, Is the bill of lading discrepant? Model Answer 30. Signature in a Bill of Lading Not In the Signature Box In a bill of lading presented under a DC subject to UCP 600, the signature box is empty. However, in other area of the same bill of lading, there is a signature of the master with the name and capacity of the master given. Is this bill of lading compliant? Model Answer 31, An insurance policy is issued on 10 August 2007 and the DC specifies the latest shipment date as 15 August 2007. The loaded on bard date in the bill of lading is 9 August 2007. Is the insurance policy discrepant under UCP 600? Model Answer 32. Partial Shipments The DC subject to UCP 600 called for supply of freshly cut logs and prohibited partial shipments. It specified port of loading "Any Malaysian port". Goods were shipped on the same vessel loading at different ports in Malaysia at different time periods under the same voyage number for the same destination. Different sets of bills of lading and related documents (certificates of inspection etc) were presented under the same DC. The issuing bank refused to pay due to following reasons: a. Bills of lading show more than one port of loading whereas the DC calls for only one port of loading, namely "Any Malaysia Port” and not "Any Malaysian ports". b. Three sets of bills of lading and inspection certificates are presented instead of one set intended in the DC. hipihwurw:olee comihimlledes2 him a942820°7 33, 35, 36. (CDC UCP 600 Practice Exercises 2 c. Partial shipments made and this is not allowed in the DC. Is the issuing bank correct in its refusal? Model Answer Consignee Different from DC Requirement The DC subject to UCP 600 required the Consignee of a negotiable bill of lading made to the order of Party A but the negotiable bill of lading presented was consigned to the order of Party B, However, there was an endorsement from Party B to the order of Party A on the face of the bill of lading. The issuing bank dishonoured due to name of Consignee in the bill of lading was not meeting the DC requirement. Is this a discrepancy? Model Answer Reasons for changing the name of consignee as specified in the DC Please state your reasons why the bill of lading is not made out straight to the order of Party ‘Aas specified in the DC under the above case "Consignee Different from DC Requirement"? Model Answer Reimbursement instructions ADC subject to UCP 600 specified a reimbursement instruction that reads: “Upon receipt of full set of documents in conformity with the letter of credit terms and conditions, we will effect payment as per your instructions” Compliant presentation was made to the nominated negotiating bank that had given value to the beneficiary and claimed for reimbursements. The documents were however lost in tran: by the courier company. The issuing bank refused reimbursement because reimbursement would only be effective “upon receipt of documents" as specified in the reimbursement instruction quoted above. Is the issuing bank correct in its refusal decision? Model Answer DC Number missing A DC subject to UCP 600 specified that the DC number must be quoted in all documents presented, The commercial invoice did not quote the DC No. and the issuing bank refused payment, Is the issuing bank correct in its refusal? hipihwurw:olee comihimlledes2 him 4942820°7 (CDC UCP 600 Practice Exercises 2 Model Answer 37. Documents not consistent Ina DC subject to UCP 600, the issuing bank gave a refusal notice that read: "We refuse payment due to following discrepancies: The commercial invoice and the bill of lading are not consistent with each other. Meanwhile we hold documents at your risk and disposal” Is this refusal notice valid? Model Answer 38, Documents not consistent Ina DC subject to UCP 500, the issuing bank gave a refusal notice that read: "We refuse payment due to following discrepancies: The commercial invoice and the bill of lading are not consistent with each other, Meanwhile we hold documents at your risk and disposal” Is this refusal notice valid? Model Answer 39, Interpretation of CIF An LC subject to UCP 600 was issued on 1 August 2007 stating the total value of the goods as "USD 200,000 CIF Hong Kong" and a commercial invoice stating "USD 200,000 CIF Hong Kong Incoterms 2000” was presented. The Issuing Bank considered this as a discrepancy. The reasons are "CIE" does not exist only in Incoterms. It is also found in other trade terms, such as the USA Trade Definitions, the Warsaw Trade Terms and the like. The Applicant may not mean Incoterms. ii, Even if the parties do mean Incoterms, it may be Incoterms 1990 other than Incoterms 2000. Is the Issuing Bank correct in its determination of this discrepancy? Please state your reasons. Model Answer hipihwurw:olee comihimlledes2 him 5942820°7 (CDC UCP 600 Practice Exercises 2 40. Port of Loading & Port of Discharge A DC issued in Hong Kong and confirmed by a bank in Taiwan subject to UCP 600 requires a port-to-port bill of lading showing: Port of Loading: Come by Chance, Canada Port of Discharge: Any port in China A port-to-port bill of lading is presented showing: Port of Loading: Come by Chance, Canada Port of Discharge: Kaohsiung The Confirming Bank in Taiwan rejected the bill of lading stating: i. "Come by chance in Canada" means "Any port at which the goods happen to be discharged in Canada". Come by Chance is not the name of a port. The Port of Loading should show the name of a port in Canada, such as Toronto, as required by UCP 600 sub-article 20 (a) (ii). ii, Republic of China (Taiwan) is an independent country and not part of "China" according to President Chen Shui-bien ((#/K fii) and the Democratic Progressive Party (De AME Mi). Accordingly "China" should mean "People's Republic of China", iii, Hence "Any port in China” should mean any port in People's Republic of China, such as Shanghai and not any port in Republic of China (Taiwan), such as Kaohsiung, Is the Confirming Bank right in its rejection? And why? Model Answer 41, Transport documents issued by freight forwarder not acceptable The L/C subject to UCP 600 states "Transport documents issued by freight forwarder not acceptable" and a port-to-port bill of lading signed by freight forwarder as a carrier is presented. Is the bill of lading acceptable? Model Answer ht Forwarder's Bill of Lading Acceptable The DC subject to UCP 500/600 states "Freight Forwarder's Bill of Lading not acceptable” and the bill of lading presented is issued by a freight forwarder in the capacity of a carrier. Is the bill of lading acceptable? Model Answer hipihwurw:olee comihimlledes2 him as42820°7 OCS UCP E00 Practos Exercises 2 43, Negotiation by A Confirming Bank ‘An acceptance LIC subject to UCP 600 was confirmed by a confirming bank with drafts drawn on the confirming bank at 180 days after shipment date. The issuing bank, upon request by the applicant, who accepted the request from the beneficiary, later amended the LIC to be available for negotiation by the confirming bank. The confirming bank then requested the issuing bank to amend the L/C for drafts to be drawn on the issuing bank. QI _ Is this a violation of international standard banking practice where the drafts should be drawn on the confirming bank afier confirmation was added? Q2_ What is the intent of the confirming bank for making such a request? Q3_— What is the risk for the issuing bank after accepting such a request? Model Answer 44. Bill of Lading Consigned to Order of Issuing Bank A DC subject to UCP 600 required presentation of copy of a set of original bills of lading consigned to order of Issuing Bank in country A with full set of originals sent directly to the Applicant, quoting DC No. on bills of lading, The Issuing Bank refused payment due to valid discrepancies by giving valid notice of refusal, Meanwhile a third party sent for D/A collection under URC 522 full sets of same original bills of lading to another Branch of Issuing Bank in country B (now acting as Remitting Bank) to endorse to another Collecting Bank to facilitate delivery after acceptance of drafts. The Beneficiary claimed payment from the Issuing Bank due to its endorsement on the original bills of lading, resulting the goods being delivered by the Applicant. Should the Issuing Bank be liable for this claim? Model Answer 45. Extension of Confirmation After An Amendment ADC, subject to UCP 600, available for 30-day deferred payment of USD200,000, covering furniture items of Reconnaissance design shipped from Hong Kong to Jeddah, Saudi Arabia was confirmed by the Advising & Nominated Bank. An amendment added USD100,000 for framed oil paintings with pomographic themes. The Confirming Bank advised the amendment without adding confirmation to USD 100,000 because pomographic works would be confiscated by the Saudi Arabian import authorities due to religious reasons. The Beneficiary argued that (a) DC deals with documents not with goods (b) A bank should not speculate the intention of the parties in intemational trade and (¢) since both the Issuing Bank and the Applicant agreed to the amendment, they were the parties to take this risk, not the Confirming Bank that could claim reimbursement from the Issuing Bank regardless as whether the goods were confiscated or not, according to UCP 600 articles 7 (c) and 12 (b). Questions: hipihwurw:olee comihimlledes2 him 142820°7 (CDC UCP 600 Practice Exercises 2 i, Does the Confirming Bank have a right to do so under UCP 6007 ii, Would your answer be the same if it were DC transfer other than confirmation? Model Answer 46, Restricted Endorsement on Bills of Lading The DC subject to UCP 600 required presentation of one set of original bills of lading endorsed to the order of the applicant whilst the set of original bills of lading presented was endorsed in blank, Is this acceptable? Model Answer 47, Open Endorsement on Bills of Lading The DC subject to UCP 600 required presentation of one set of original bills of lading made out to order and endorsed in blank. A set of original bills of lading was presented made out to order of the beneficiary endorsed to the order of the applicant. Is this acceptable? Model Answer 48, Freight Receipt A DC subject to UCP 600 required presentation of a freight receipt without specifying its issuer and data content. A freight receipt issued by the beneficiary was presented, certifying that the freight was received by the carrier. Is it acceptable? Model Answer 49, Is an issuing bank obligated to transfer if the nominated transferring bank refuses to transfer? A credit subject to UCP 600 provides transfer restricted to a nominated paying bank T that does not agree to transfer. The beneficiary asks for transfer by the issuing bank I, regarding that since bank I chooses to provide transfer by a nominated bank T and that bank does not wish to transfer, then bank I should have the obligation to transfer. Otherwise why bank provides transfer in the first place if it does not wish to do the transfer? Also a principle should carry out the task refused by its nominated agent. Is the first beneficiary right in its statements? Model Answer 50, Can an issuing bank refuse presentation of complying documents from a second beneficiary through a transferring bank? hipihwurw:olee comihimlledes2 him a9azereot7 (DCS UCP 600 Practice Exercises 2 A credit subject to UCP 600 is totally transferred to a second beneficiary S. The first beneficiary F fails to substitute the invoice and drafts upon demand. The transferring bank T presents the complying documents from the second beneficiary S to the issuing bank I for honour. The issuing bank I refuses to honour based on the following reasons: a, The presentation is not from the first beneficiary F. b. The unit price in the invoice is smaller than that stated in the credit. ¢. The total value (in both the drafts and invoice) is less than that stated in the credit, creating under drawing Model Answer << Back to Previous Sample Go to Next Sample >> &D (905) 237-6465 © Please send email instead IOMEgE COLUMN SBE OUNDERSEMAI See AEE Emall: experts@tolee.com © 1992-2017 T.O. LEE CONSULTANTS LTD. ALL RIGHTS RESERVED. hipihwurw:olee comihimlledes2 him a9