CDCS UCP 600 Practice Exercises 4

CDCS* UCP 600 Practice Exercises 4

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

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.
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 results (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 shiX! I 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 still 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, ISP98 and the other ICC Rules. They do not wish to give you a hard time like we do, to push you to the limit, so that you may get a distinction!

Our Advices

In the CDCS examination, due to fear, anxiety and heavy pressure, you could only perform up to 66% (2/3) of your normal capacity. That means you would not be able to think so coolly and intelligently for the best answers. And exercises like this would prepare you well in advance for the most difficult part (case studies) of the CDCS examination that would ultimately lead you to a pass, if not an enviable distinction.

Here you go. And good luck!

Is an “UPS air waybill” a courier receipt or an air waybill under UCP 600?
In a credit subject to UCP 600, an “UPS air waybill” is presented, showing air carriage of Apache remote control toy helicopters of CIP value USD200,000 packed in 42 strong cartons of size 4 x 5 x 6 ft.
The issuing bank dishonours because in the “UPS air waybill”, the carrier is not identified as required under UCP 600 article 23.
The negotiating bank disagrees and says that the “UPS air waybill” is a courier receipt and should be examined under UCP 600 article 25 where there is no need to identify the carrier, which is also not required under the credit.

Q1 Is an “UPS air waybill” a transport document under UCP 600?

Q2 Under which article, article 23 or 25 in UCP 600 should this document be examined?

Is a SME Courier Forwarder Inc. “certificate of courier receipt”, a courier receipt, an air waybill or a forwarder's certificate of receipt under UCP 600?
In a credit subject to UCP 600, a “certificate of courier receipt” issued by SME Courier Forwarder Inc. is presented showing air delivery of oil drilling head assembly of CIP value USD880,000 stowed in 4 pallets. The issuing bank dishonours because the document is a courier receipt that has only shown a date of receipt of the goods without “evidencing receipt of goods for transport” as required in article 25 (a) of UCP 600.
The confirming bank dishonours because the document is an air waybill and the carrier is not identified as required by article 23 (a) (i) of UCP 600.
The negotiating bank disagrees and says that this “certificate of courier receipt” is a forwarder's certificate of receipt (FCR) issued by SME Courier Forwarder Inc. as a forwarder. Hence article 14 (f) should be used to examine this document. As a result there is no discrepancy since there is no requirement in the credit for “evidencing receipt of goods for transport” in the credit or under UCP 600 article 14 (f).

Q1 Is this “certificate of courier receipt” a transport document under UCP 600?

Q2 Under which article, article 23, 25 or 14 (f) in UCP 600, should this document be examined?

If examination of documents by a nominated bank constitutes "acting on its nomination" under UCP 600 article 14 (b)?
The beneficiary presented documents to a nominated bank N under a credit subject to UCP 600 available for deferred payment 60 days after date of bill of lading. Negotiation is restricted to nominated bank N.
As bank N is the beneficiary's banker, the beneficiary requested bank N to examine the documents for compliance. Bank N found the documents compliant and forwarded them to the issuing bank in USA. Ten banking days after receipt of presentation by the issuing bank, there was no notice of refusal received. Two week before the payment maturity date, the issuing bank applied for Chapter 11 protection due to lack of liquidity.
On payment maturity date, the beneficiary demanded payment by Bank N based on following reasons:

Bank N is the nominated bank, having examined the documents and found them compliant.
Bank N never showed any intention to refuse the nomination before the payment maturity date.

Is bank N obligated to pay the beneficiary?

A credit subject to UCP 600 providing sight payment states in field 42D
“Drawee: ABC Bank, with full address”
There is no requirement to present any drafts or bills of exchange in field 42C. Hence no draft is presented.
The issuing bank refuses to pay because the information in field 42D is not reflected in the documents.
Is the issuing bank correct in its refusal?

Beneficiary's Certification in Commercial Invoice
A credit subject to UCP 600, amongst other documents, asks for one original commercial invoice certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder's cargo receipt issued by forwarder F.
The commercial invoice presented has no such certification but the forwarder's cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.
Should missing the certification in commercial invoice be a valid discrepancy under the circumstance?

Beneficiary's Certificate
A credit subject to UCP 600, amongst other documents, asks for one original beneficiary's certificate certifying that one set of documents has been sent to the forwarder F nominated by the applicant and one original forwarder's cargo receipt issued by forwarder F.
The beneficiary's certificate is not presented but the forwarder's cargo receipt has acknowledged receipt of one set of documents from the beneficiary on the same date of delivery which is within the shipment period stated in the credit.
Should missing the beneficiary's certificate be waived under the circumstance?

A credit subject to UCP 600 asks for full set of 3 original sea waybills consigned to the order of the issuing bank, evidencing shipment from Hong Kong to New York, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancies:

One original sea waybill instead of full set of 3 originals is presented.
The sea waybill is consigned to issuing bank but not to order of issuing bank.

Are the two discrepancies valid?

A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The issuing bank dishonours due to following discrepancy:

Three sets of original bills of lading are presented whereas the credit only asks for one set.

Can the beneficiary present three sets of original bills of lading when the credit only asks for one set?

A credit subject to UCP 600 asks for full set of 3 original bills of lading evidencing shipment of building materials, comprising of cement, steel round bars, I-beams, etc. consigned to the order of issuing bank, evidencing shipment from any Chinese port to Dubai, with freight prepaid, notifying the applicant. The credit prohibits partial shipments. Three sets of original bills of lading loaded on the same vessel under the same voyage number, discharging at Dubai are presented.

The issuing bank dishonours due to following discrepancy:

Partial shipments are made as evidenced by presentation of three sets of original bills of lading and the credit prohibits partial shipments.

Is this discrepancy valid?

A credit subject to UCP 600 asks for full set of 3 original charter party bills of lading evidencing shipment of freshly cut logs, consigned to the order of the shipper, evidencing shipment from any Asian port to any European port, with freight prepaid, notifying the applicant.

The issuing bank dishonours due to following discrepancies:

Three sets of original charter party bills of lading are presented whereas the credit only asks for one set.
The 3 sets of original charter party bills of lading show a range of ports of loading (one set showing Kota Kinabalu, one set showing Sandakan, and one set showing Tawau). This is not allowed in UCP 600 article 22 (a) (iii) which only allows a range of ports of discharge.

Q1 Can the beneficiary present three sets of original charter party bills of lading when the credit only asks for full (one) set?

Q2 Are the 3 sets of original charter party bills of lading discrepant?

A bill of lading presented under a credit subject to UCP 600 has the following pre-printed clause:
“The shipper acknowledges that the carrier is authorized to carry the Goods identified in the Bill of Lading on the deck of any vessel and in taking remittance of this Bill of lading, the Merchant (including the Shipper, the Consignee and the Holder of the Bill of Lading, as the case may be) confirms his express acceptance of all the terms and conditions of this...”.

The bill of lading is however silent on “on deck shipment”.

The issuing bank dishonours because the bill of lading bearing such pre-printed clause about on deck shipment is not acceptable according to UCP 600 article 26 (a).

Is the issuing bank right in its decision?

A credit subject to UCP 600 calls for one set of 3 original charter party bills of lading (CPBL). The issuing bank dishonours due to following discrepancy:
“The set of 3 original CPBL presented is signed by an agent A for the carrier C. It does not comply with UCP 600 Article 22 (a) (i)”.
Is the issuing bank correct in its refusal decision?

A credit subject to UCP 600 asks for an original inspection certificate issued by competent surveyors within 3 days before loading on board.
The issuing bank refuses the presentation based on following discrepancy:
“Inspection certificate issued by only one surveyor (single number) whereas the credit asks for checking by competent surveyors (plural number).
Is this discrepancy valid?

A credit subject to UCP 600 states in field 41D that it is available with ABC Bank in Dubai by negotiation but in field 31D, it does not state the place of expiry.
Which is the place of expiry under the circumstance?

A credit subject to UCP 600 requires goods of Japanese origin. It does not ask for any certificate of origin. The invoice shows that the goods are made in South Korea.
The issuing bank dishonours due to following discrepancy:
“Invoice shows that the goods are of South Korean origin whereas the credit asks for goods of Japanese origin”.
The beneficiary disagrees, saying that Japanese origin is a NDC (non-documentary condition) since the credit does not ask for any document to reflect this. According to UCP 600 article 14 (h), country of Japanese origin can be ignored. As a result of this, the bank need not check for the origin of the goods. Hence there should be no discrepancy.
Who is correct?

The issuing bank in India refused to pay for a compliant presentation under UCP 600 based on a court injunction in India applied by the applicant. The beneficiary re-presented the rejected documents to the confirming bank in Korea within expiry and within 21 days after shipment. The confirming bank refused payment, stating:
“Because the law is overriding the UCP, we cannot pay you due to the injunction even though the documents are compliant.”
Can the confirming bank refuse payment based on the injunction?

The issuing bank, head office of Bank ABC in India refused to pay for a compliant presentation under UCP 600 based on a court injunction in India applied by the applicant. The beneficiary re-presented the rejected documents to the confirming bank, a branch of Bank ABC in South Korea within expiry and within 21 days after shipment. The confirming bank refused payment, stating:
“Our head office Bank ABC is bound by the injunction in India. As a South Korean branch of Bank ABC, we are also bound by the injunction and hence cannot pay you even though the documents are compliant.”
Can the confirming bank refuse payment under the circumstance?

A bill of lading presented under a credit subject to UCP 600 is signed as follows:
“By authority of Master, Captain ABC:
(Manual signature)
XYZ Shipping Company Ltd. as agent”
The issuing bank rejects this bill of lading because the agent has not stated whether it is signing for the master or for the carrier.
Is this discrepancy valid?

A credit subject to UCP 600 asks for a FCR (Forwarder's Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid.
A FCR is signed by a chop as follows:
“For and on behalf of:
(Manual signature)
XYZ Freight Forwarding Company Ltd.”
The issuing bank rejects this FCR as XYZ Freight Forwarding Company Ltd. does not indicate whether it signs as a carrier or as an agent of the carrier or as an agent of the master.
Is this discrepancy valid?

A credit subject to UCP 600 asks for a FCR (Forwarder's Certificate of Receipt) consigned to Applicant, evidencing shipment from Yantian, China to San Francisco, USA under Purchase Order No. 123456, marked freight prepaid.
A FCR is signed by a chop as follows:
“For and on behalf of:
(Manual signature)
XYZ Godown Company Ltd.”
The issuing bank rejects this FCR as XYZ Godown Company Ltd. is only a godown or warehouse and cannot sign as an issuer of the FCR that should be signed by a forwarder only.
Is this discrepancy valid?

A credit subject to UCP 600 issued for steel round bars trade asks for one original and two copies of certificate of origin, evidencing goods are of China origin.
The issuing bank refuses the certificate of origin that is issued “To Whom It May Concern” instead of issuing to the buyer, consignee or applicant named in the credit.
Is the issuing bank correct in refusing the certificate of origin?

A credit subject to UCP 600 asks for one set of original bills of lading, evidencing shipment from Shanghai, China to Abu Dhabi, UAE, notifying forwarder AUH, with freight collect.
The issuing bank refuses the bill of lading bearing the clause “Part load with bill of lading No. JMSBOND007 no separate delivery.”
Is the issuing bank correct in refusing the bill of lading?

A credit subject to UCP 600 asked for presentation of “One original and 2 copies of certificate of origin evidencing China origin” for sales of 10,000 MT steel goods from Hong Kong to Dubai. A certificate of origin issued by a Chamber of Commerce in China covering 30,000 MT of steel goods was presented, showing shipment from Hong Kong to Dubai.
The issuing bank regarded the certificate of origin discrepant because:

Q1 It covers 30,000 MT instead of 10,000 MT of steel goods.
Q2 The issuing date of the certificate of origin is two months before the credit issuing date.

A credit subject to UCP 600 from the purchasing department of a department stores chain in USA, purchasing goods based on FOB Yantian China terms, asked for “One original forwarder's cargo receipt (FCR) consigned to USA port determined by the forwarder marked freight collect”. A FCR was presented, inter alia, marked “consigned to USA port determined by the forwarder, freight collect”.
The issuing bank rejected the FCR because no port of discharge was specified based on ICC Banking Commission opinion R368, which states that a bill of lading must specify the port of discharge even if the credit asks for “any Country K port(s)” as the port of discharge.
Is ICC opinion R368 applicable to the present case?

A credit subject to UCP 600 purchasing commodities goods from any Asian port(s) to any European port(s), asked for one set of charter party bills of lading (CPBL). One set of CPBL was presented, inter alia, marked “Consignee: Any European port(s)”
The issuing bank rejected the CPBL because no port or ports of discharge was/were specified in the CPBL.
Is the issuing bank correct in its refusal?

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Q1	Is an “UPS air waybill” a transport document under UCP 600?
Q2	Under which article, article 23 or 25 in UCP 600 should this document be examined?

Q1	Is this “certificate of courier receipt” a transport document under UCP 600?
Q2	Under which article, article 23, 25 or 14 (f) in UCP 600, should this document be examined?

Q1	Can the beneficiary present three sets of original charter party bills of lading when the credit only asks for full (one) set?
Q2	Are the 3 sets of original charter party bills of lading discrepant?

Q1	It covers 30,000 MT instead of 10,000 MT of steel goods.
Q2	The issuing date of the certificate of origin is two months before the credit issuing date.