CDCS Examination Model Question Paper I

Covering Chapters 1, 2 and 3 from CDCS Book 2014

Marks: 30 Time: 1 hour

NAME OF THE CANDIDATE:

DEPARTMENT:
UID:
MARKS SCORED:
DATE:

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 1.) Which of the following is NOT a risk to a beneficiary with regard to an unconfirmed credit?

A.) Failure to comply with credit conditions

B.) Insolvency of issuing bank

C.) Loss of goods in transit

D.) None of the above

2.) In a LC calling for a bill of lading on CFR basis, which of the following is acceptable?

A.) Shipped on board with freight pre-payable

B.) Shipped on Board with freight to be paid

C.) Shipped on board with freight prepaid and destination charges collect

D.) Received for shipment with freight prepaid and destination charges to pay

3.) A documentary credit for USD 120,000.00 calls for shipment of fertilizer in February, March,
April and May. Each shipment is to be for about 500 tonnes. Shipment was effected as follows:

1. 450 tonnes sent 24 February for value USD 27,000.00.

2. 550 tonnes sent 12 April for value USD 33,000.00.
3. 460 tonnes sent 30 April for value USD 28,000.00.
4. 550 tonnes sent 04 June for value USD 33,000.00.

Which of the above shipments will be honored on presentation?

A.) 1 only.

B.) 1 and 3 only.

C.) 2 and 4 only.

D.) 1, 2 and 3 only.

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4.) Which of the following is TRUE about Incoterms CIF?

A.) Transfer of Risk occurs at the port of loading

B.) The buyer enters into the contract of carriage with the main carrier

C.) The seller pays unloading cost if separate from the main carriage cost

D.) The term can be used for all modes of transport

5.) Which of the following statements is correct when an assignment of proceeds has been effected
under a documentary credit issued in accordance with UCP600?

A.) The assignee must present complying documents to receive payment

B.) The assignee will receive payment of the proceeds directly from the applicant

C.) The value of the documentary credit is reduced by the amount of the assignment

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

6.) A cumulative revolving documentary credit is opened with 9 months validity and allowing for
USD70,000.00 to be drawn for each month. If only the first months shipment is effected in full,
what is the available amount in the seventh month?

A.) USD 0.00

B.) USD70,000.00

C.) USD420,000.00

D.) USD560,000.00

7.) A Pre advice credit is an irrevocable undertaking:

A.) To be irrevocable, operative credit must be issued

B.) Operative credit to be issued with amendments from pre-advice credit

C.) False

D.) Pre advice is not acceptable in UCP 600.

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8.) Which of the following is NOT an example of data conflict?

A.) LC calls for mens shirt; invoice show only shirt

B.) LC calls for shipping mark ABC; BL shows shipping marks as container no. 123

C.) LC calls for to the order of ABC Bank as consignee; Cert. of Origin shows applicant

D.) None

9.) A documentary credit is an irrevocable undertaking _ _ _ _ _ _ _ _ _

A.) Enforceable against a reimbursing bank even if issuing bank is unable to pay

B.) Enforceable against the applicant even if issuing bank is unwilling to pay

C.) Enforceable against the nominated bank even if issuing bank is unwilling to pay

D.) Enforceable against the issuing bank even if the confirming bank is unwilling to pay

10.) An effective sales agreement must specify:

I.) Commercial Documents required

II.) It is subject to contract for international sale of goods

III.) Point at which risks in respect of the goods pass from seller to buyer

IV.) Requirements to obtain export/import clearance

Answer:

A.) I and II
B.) II and III
C.) III and IV
D.) I and III

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11.) Which of the following is NOT a reason for adapting open account terms?

A.) Two companies have a long established trading relationship

B.) Buyer wishes to engage the seller in long term relationship

C.) Lesser banking fees

D.) Seller is confident with the buyers country risk

12.) When a bank confirms an irrevocable transferable documentary credit, it assumes the credit

risk of which party?

A.) The applicant

B.) The issuing bank

C.) The first beneficiary

D.) The second beneficiary

13.) Which of the following statement regarding Forfaiting is true?

I.) It is an arrangement by means of which the seller receives payment for export receivables

from the lender without recourse.

II.) It is a device used for long term financing

III.) Rights to payment under letters of credit are accepted as security

IV.) It is a guarantee given by the lender to pay the seller in case the buyer defaults

ANSWER:

A.) I and II

B.) I and III

C.) I, II and III

D.) II, III and IV

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14.) A credit which states that payments under the credit will be made only after the goods have

been cleared through customs is a

A.) Credit with non-documentary condition

B.) Inoperative Credit

C.) Commercial Credit

D.) Clean Credit

15.) If an applicant requests that the documentary credit expires at the counters of beneficiarys

bank and available with them by drafts drawn on issuing bank at 60 days after shipment date,

how should the documentary credit be made available?

A.) By Mixed Payment

B.) By Deferred Payment

C.) By Negotiation

D.) By Acceptance

16.) Which of the following Incoterms is correctly described?

Options Incoterms Insurance Document Transport Document

A DDP Required Marked Freight Paid

B CFR Required Marked Freight Collect

C FOB Not Required Marked Freight Paid

D FAS Not Required Marked Freight Collect

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17.) A transferring bank confirms the master LC. Will the confirmation hold good for the transferred

credit? What will be your answer in case of Back-to back Credit?

A.) Confirmation holds good for both transferred credit and Back-to back LC

B.) Confirmation holds good for transferred credit but not for Back-to back LC

C.) Confirmation is not applicable for transferred credit but for Back-to back LC

D.) Confirmation not applicable for both transferred credit and Back-to back LC

18.) A transferable credit can do which of the following?

A.) Protect the applicant from the risk of loss and error

B.) Allow the second beneficiary to obtain payment for complying documents

C.) Restrict the right of second beneficiary to claim payment directly from the nominated bank

D.) Permit the supplier to provide the intermediary trader with security of a documentary credit

19.) Which of the following is NOT true about holder in due course?

A.) Their rights are affected by disputes in rights and wrongs of the commercial contract

B.) They acquire their right to claim payment through endorsement and delivery

C.) They must have taken the instrument in good faith

D.) They must have taken the instrument without the knowledge of any defects in title

20.) An exporter based in New York has agreed to sell goods to a company in London. The importer

is responsible for arranging freight and insurance. Which of the following shipping terms is

correct?

A.) CIF London

B.) FAS London

C.) CIF New York

D.) FAS New York

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21.) Which of the following Incoterms can be used for Road/rail Shipment?

I.) CIF

II.) FCA

III.) DAT

IV.) DAP

Options:

A.) I and II only

B.) III only

C.) II, III and IV only

D.) IV only

22.) Which of the following incoterms is appropriate when the seller is to bear all the risks and costs

including taxes and other duties at the quay at a named port of destination?

A.) CIF

B.) DDP

C.) DAT

D.) DAP

23.) An automatic non-cumulative revolving LC is issued for USD10,000.00 with the value of the LC

being reinstated upon every shipment. The LC is valid for a period of one year. What is the

maximum liability of the issuing bank?

A.) USD10,000.00

B.) USD120,000.00

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 C.) Cannot be determined

D.) USD360,000.00

24.) Risk of non-payment/default by the confirming bank is termed as ___________ risk.

A.) Credit Risk

B.) Issuing Bank Risk

C.) Country Risk

D.) Political Risk

25.) A credit which is available for a longer period and can be cancelled or amended only after giving

a notice by the issuer to the beneficiary well in advance of expiry is known as:

A.) Cumulative revolving Credit

B.) Evergreen Credit

C.) Inoperative Credit

D.) Back to back Credit

26.) For an instalment shipment, LC states, there must be 20 days difference between two shipments.

Which of the following will comply?

A.) 1st Shipment on 01-01-2014 and 2nd on 21-01-2014

B.) 1st Shipment on 01-01-2014 and 2nd on 19-01-2014

C.) 1st Shipment on 01-01-2014 and 2nd on 20-01-2014

D.) 1st Shipment on 01-01-2014 and 2nd before 20-01-2014

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27.) ABC Bank has received documents from its customer under a transferred LC. The customer

confirms that they have an arrangement with beneficiary regarding forwarding documents

directly to Issuing bank and provides them with a confirmation from 1st beneficiary regarding

the same and instructs ABC Bank to send documents directly to the issuing bank by-passing the

transferring bank. Can ABC Bank accede to their customers request and send documents

directly to the issuing bank?

A.) Yes, provided it is not a partial transfer

B.) Yes, since beneficiary themselves has agreed for the same

C.) No, unless it is expressly agreed to by the transferring bank

28.) In accordance with UCP600, which of the following alterations can a first beneficiary request a

transferring bank to make under a transferable credit?

A.) Extend the expiry date

B.) Decrease the unit price

C.) Decrease the insurance cover

D.) Extend the period of shipment

29.) Documents presented by the second beneficiary are credit compliant. The invoice substituted by

First beneficiary is discrepant. Transferring bank approaches the beneficiary to rectify and

beneficiary insists on sending the documents as it is on approval basis and further states that

the applicant will definitely accept the document. Can a transferring bank act on 1st beneficiarys

instructions as per UCP600?

A.) Yes, since 1st beneficiary has got more control over the credit than the 2nd beneficiary, they

can accede to the request

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 B.) No, the transferring bank needs to present 2nd beneficiarys document ignoring 1st

beneficiarys request

C.) Transferring bank should check with Issuing bank regarding the same.

30.) Which of the following statements are true for a evergreen letter of credits?

I.) They should be issued only for applicants of undoubted financial and dependable

undertaking

II.) Issued only for Beneficiaries of undoubted financial and dependable undertaking

III.) Liability remains outstanding for a long period

IV.) They are always standby letter of credits

Answer:

A.) I and II

B.) I and III

C.) II and IV

D.) I, II and III

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