CDCS Study Guide

Contents page

Certified Documentary Credit Specialist (CDCS) Study Guide

Institute of Financial Services

IFS House, 4-9 Burgate Lane Canterbury, Kent CT1 2XJ United Kingdom Telephone: (+44) (0) 1227 762600 Fax: (+44) (0) 1227 763788 International Financial Services Association

9 Sylvan Way, Suite 130 Parsippany, New Jersey 07054 USA Telephone (973) 656-1900 Fax: (973) 656-1915 http:/www.ifsaonline.org The ifs is the official brand of The Chartered Institute of Bankers, a registered charity.

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CDCS study guide

Apart from any fair dealing for for the purpose of of research or private private study, study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may be reproduced, stored or transmitted, in any form or by any means, only with the prior permission in writing of the publisher, publisher, or in the case of reprographic reproduction in accordance with the terms and licences issued by the Copyright Licensing Agency. Agency. Enquiries concerning reproduction outside those terms should be addressed to the publisher’s agents at the address below: Institute of Financial Services IFS House 4-9 Burgate Lane Canterbury Kent CT1 2XJ T 01227 818649 F 01227 479641 E [email protected] The Chartered Institute of Bankers believes that the sources of information upon which the book is based are reliable and has made every effort to ensure the complete accuracy of the text. However, neither CIB, the authors nor any contributor can accept any legal responsibility whatsoever for consequences that may arise from errors or omissions or any opinion or advice given. Typeset by Kevin O’Connor Printed in China through Printworks Int Ltd

© The Chartered Institute of Bankers 2004, with the exception of North and South America wherein copyright lies with the International Financial Services Association 2004

School of Finance

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CDCS study guide

Apart from any fair dealing for for the purpose of of research or private private study, study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may be reproduced, stored or transmitted, in any form or by any means, only with the prior permission in writing of the publisher, publisher, or in the case of reprographic reproduction in accordance with the terms and licences issued by the Copyright Licensing Agency. Agency. Enquiries concerning reproduction outside those terms should be addressed to the publisher’s agents at the address below: Institute of Financial Services IFS House 4-9 Burgate Lane Canterbury Kent CT1 2XJ T 01227 818649 F 01227 479641 E [email protected] The Chartered Institute of Bankers believes that the sources of information upon which the book is based are reliable and has made every effort to ensure the complete accuracy of the text. However, neither CIB, the authors nor any contributor can accept any legal responsibility whatsoever for consequences that may arise from errors or omissions or any opinion or advice given. Typeset by Kevin O’Connor Printed in China through Printworks Int Ltd

© The Chartered Institute of Bankers 2004, with the exception of North and South America wherein copyright lies with the International Financial Services Association 2004

School of Finance

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September 2004 Dear CDCS Candidate Welcome. You Welcome. You made a significant commitment to your career when you registered for the CDCS examination. This Self-Study Guide has been prepared with your success in mind. It will help you make the transition from the CDCS Content Outline and the Study Text; in addition, it will outline a variety of study techniques for your consideration. The text for the CDCS examination has been updated and revised and published as The Guide to Documentary Credits: second edition. There are changes to the Content Outline, including the rules, as as well as updating to the the general text. It is important that you study the second second edition as you prepare prepare for the examination. examination. The text and Content Outline contain two new regulations that are covered in the Signpost article reproduced at the end of Section 2 in this guide. If it has been a few years since you last studied for an examination, a review of this publication will help you identify the areas you will find helpful as you develop your individual study plan. Experiment to find out what suits you best. The CDCS examination is based on a Job Analysis Study that identified the knowledge and skills required for competent practice in the field of Documentary Credits. The Content Outline details the results of the survey and the Study Text is based on the Content Outline. You You can build on the information and experience you have, as you are involved with Documentary Credit practice. As you can see from the Table of Contents there are many different areas that will be of assistance to you as you prepare to study for the CDCS examination; not all may apply to you. Your first step will be to identify those sections that you want to include in your study plan. Sections 2 and 3 contain the CDCS Content Outline and Examination Specifications. These two documents are the basis for f or the CDCS examination and should be reviewed in depth. The CDCS examination is an opportunity for you to demonstrate what you know and your skills as a Documentary Credit Specialist. We wish you success in your preparation for the examination. There are several products that will assist you as you prepare for the CDCS examination: X the Study Text is the basic reference for the examination; all multiple-choice questions are documented to this text;

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CDCS study guide X CDCS calculator: in the US a CDCS calculator will be mailed with your admission

ticket. It will be provided on the examination day at CIB centers. Become familiar with the CDCS calculator, as it is the only calculator allowed at the examination centers; X CDCS

website (www.cdcs.org): information will be posted on the website as it becomes available. This will be a source of continuing help to you as you prepare for the examination.

Gavin Shreeve

Dan Taylor

Chief Executive Institute of Financial Services

President International Financial Services Association

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Contents page of The Guide to Documentary Credits

Table of Contents

◆

Introduction

◆

Section l: CDCS Study Text

◆

Section 2: CDCS Content Outline CDCS Signpost Article

◆

Section 3: CDCS Examination Specifications

◆

Section 4: Self-assessment Tool

◆

Section 5: Key Terms

◆

Section 6: Planning Your Study Study Plan

◆

Section 7: Keys to Studying for Success

◆

Section 8: CDCS Study Groups

◆

Section 9: Multiple-choice Question Formats

◆

Section 10: Simulation Exercises

◆

Section 11: Tips for Answering Multiple-choice Questions

◆

Section 12: Pre-examination Check List

◆

Section 13: Sample Answer Sheet

◆

Section 14: Sample Test

◆

Section 15: Scoring the Examination

◆

Section 16: Answers to Sample Test

◆

Section 17: CDCS Website 5

CDCS study guide

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Contents page

Introduction

Volunteers Associated with the CDCS Project The Certified Documentary Credit Specialist (CDCS) credential is a peer-review project that includes volunteers in each segment of its development. It is a joint project of the Chartered Institute of Bankers (CIB) in the UK, and the International Financial Services Association (IFSA) in the US and is endorsed by the International Chamber of Commerce (ICC). There are several volunteer-intensive phases of the project and they include: X Job

Ana lysis Study: vol unteers ide ntified the maj or res ponsibiliti es of a Documentary Credit Specialist. They also detailed the knowledge and experienc e required to meet these responsibilities competently. The Job Analysis Study serves as the basis of the CDCS Content Outline and the Examination Specifications; X Study Text: The Guide to Documentary Credits: second edition is the reference text for the CDCS examination. It is based on the Content Outline and was reviewed by volunteers who served as topic experts; X Test Development: volunteers who write, review and revise the questions develop the CDCS examination. This is a very intensive responsibility and the committee meets annually to prepare for each examination administration.

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CDCS study guide

CDCS Program Volunteers Maria Adamczyk, CDCS — Chase Manhattan Bank Lowell Campbell, CDCS — Chase Bank Steve Cooke, CDCS — Standard Chartered Bank Barbara Lotrionte, CDCS — Fleet Bank of Massachusetts David Morrish, CDCS – Lloyds TSB Bank plc Rita Nielsen, CDCS -Wells Fargo HSBC Trade Bank Tineke Overvliet, CDCS – DHB Bank Victor Pena, CDCS – Citicorp Steve Thompson, CDCS - Standard Chartered Bank Gareth Watts, CDCS – JP Morgan Chase Bank Charnell Patrick Williams, CDCS — Citicorp Paul Williamson, CDCS – JP Morgan Chase Bank

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Contents page

Section 1

CDCS Study Text

The Study Text for the CDCS examination is The Guide to Documentary Credits: second edition by Steve Berrisford, CDCS. The text was reviewed by ifs and IFSA volunteers and produced by the CIB and IFSA. The Study Text is intended to assist CDCS candidates prepare for the examination. The text is based on the CDCS Content Outline (see Section 2); the Content Outline details the knowledge and skills identified in a Job Analysis Study as necessary to fulfill the major responsibilities of a Documentary Credit practitioner. A thorough understanding of the topics covered in the CDCS Content Outline should result in success on the CDCS examination. Examination questions in the first section of the examination are referenced to the Study Text. Questions in the Simulation portion of the examination are based on the analysis and application of the information in the Study Text to actual situations.

Contents page Next section 9

CDCS study guide

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Contents page Previous section

Section 2

CDCS Content Outline – Summary

A.

Documentary Credit Groups 1 Types and Uses of Documentary Credits 2 Parties to the Credit: Roles, Responsibilities and Risks 3 Types of Payment

B.

Characteristics of Documentary Credits 1 Primary Characteristics 2 Specialty Characteristics

C.

Operations 1 Processes 2 Related Products/Terms

D.

Financial and Commercial Documents

E.

Rules

CDCS Content Outline A.

Documentary Credit Groups 1 Types and Uses of Documentary Credits a Commercial b Standby 2 Parties to the Credit: Roles, Responsibilities and Risks a Required Parties (1) Issuing Bank (2) Beneficiary b Applicant 11

CDCS study guide

c Banks’ Roles and Obligations (1) Issuing Bank (2) Confirming Bank (3) Advising Bank (4) Negotiating Bank (5) Paying Bank (6) Accepting Bank (7) Reimbursing Bank d Types of Risk (1) Operational/UCP500 (2) Credit (3) Foreign Exchange (4) Fraud (5) Legal (6) Political 3 Types of Payment a Sight b Deferred c Negotiation d Acceptance B.

Characteristics of Documentary Credits 1 Primary Characteristics a Revocable b Irrevocable 2 Specialty Characteristics a Revolving Credits (1) Cumulative vs Non-cumulative (2) Automatic vs Controlled b Instalment c. Advance Payments d Transferable e Evergreen f. Clean g. Direct pay

C.

Operations 1 Processes a Issue b Pre-advise c Advise d Confirm e Amend f Transfer g Present

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CDCS content outline

h Examine i Pay/Reject j Claim k Reimburse Funds l Cancel 2 Related Products/Terms a Letter of Indemnity b Air Way Release c Steamship Guarantee d Assignment of Proceeds e Participation and Syndication f Trade-related Incoterms D.

Financial and Commercial Documents 1 Draft/Bill of Exchange 2 Commercial Invoice 3 Ocean/Marine Port-to-port Bill of Lading 4 Non-negotiable Seaway Bill 5 Charter Party Bill of Lading 6 Multimodal Transport Document 7 Air Transport Document 8 Road, Rail or Inland Waterway Transport Document 9 Forwarder’s Cargo Receipt, Mate’s Receipt and Consolidator’s Receipt 10 Post Receipt or Certificate of Posting 11 Courier or Expedited Delivery Service Document 12 Insurance Document 13 Weight Certificate 14 Certificate of Origin 15 Packing Lists 16 Inspection Certificate 17 Other Documents

E.

Rules 1 UCP 500 – Uniform Customs and Practice for Documentary Credits 2 ISP98 – International Standby Practices 3 URR 525 – Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits

4 UCP500 subarticle 20(b) – Decision on Original Documents 5 ICC Position Papers 1 – 4 6 ISBP - International Standard Banking Practice for the Examination of Documents under Documentary Credits 7 eUCP – Supplement to UCP500 for Electronic Presentations


CDCS study guide

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CDCS Signpost Article

The following article has been prepared by Steve Berrisford CDCS, the author of The Guide to Documentary Credits: second edition, and explains the significance of the changes made to the CDCS Content Outline in 2005. April 2004 saw the culmination of another successful year’s study with the numbers in the ranks of Certified Documentary Credit Specialists rising to almost 2,500, geographically spread across more than 60 countries. Since its inauguration in May 1999 as the first internationally recognized standard for Documentary Credits the CDCS examination has gone some way towards achieving its two main aims of: providing an internationally recognized benchmark qualification for X competence in handling documentary credits; promoting uniformity in the interpretation and usage of Documentary Credits. X To ensure that these aims remain current the CDCS Board regularly reviews the Documentary Credits job description by way of a job analysis survey. This survey is used to gather information from a representative sample of active Documentary Credit practitioners working in a number of different locations, and from its results the examination content outline (syllabus) is reviewed and revised as necessary. As a result of the latest survey candidates preparing for the 2004 examination should note that the following topics will be included in the revised Content Outline from which questions may be drawn. 1.International Standard Banking Practice for the Examination of Documents under Documentary Credits (ISBP). 2.The Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentations (eUCP). 15

CDCS study guide

The purpose of this article is to raise the awareness of the need for students to include these topics in their study and revision schedules, and to set out some of the key points relating to this new subject matter.

ISBP Candidates studying for the examination will be familiar with the following extract from UCP 500 article 13a: Compliance of the stipulated documents on their face with the terms and conditions of the Credit shall be determined by international standard banking practice as reflected in these Articles.

In order to provide amplification and improve consistency in application of international standard banking practice in 2004 the ICC Banking Commission published the ‘International Standard Banking Practice for the Examination of Documents under Documentary Credits (ISBP)’. This document explains how practices articulated in UCP500 are to be applied by Documentary Credit practitioners, and is consistent with the Opinions and Decisions of the Banking Commission. CDCS candidates will need to study the content of the 200 numbered paragraphs that make up ISBP. These are structured as follows: X preliminary considerations that relate to the application and issuance of credits (paragraphs 1 to 5); X general principles that are not specific to any one article of UCP 500 or any one document (paragraphs 6 to 44); X practices that are clearly linked to a named type of document – – drafts (paragraphs 45 to 58); – invoices (paragraphs 59 to 72); – transport documents (paragraphs 73 to 182); – insurance documents (paragraphs 183 to 195); – certificates of origin (paragraphs 196 to 200).

eUCP As we reached the end of the 20th century it was recognized by the ICC Banking Commission that the global trading community using Documentary Credits were being presented with an increasing range of potential electronic solutions for the preparation and transmission of documentation. As a consequence of this it followed that there was a need to expand the reach of UCP 500 to provide it with the flexibility not only to cater for traditional paper documentation transactions but also for dematerialized documentation transactions transmitted electronically. At midnight 16

CDCS Signpost Article

on the 31st March 2002 the Supplement to the Uniform Customs and Practice for Documentary Credits for Electronic Presentations, thankfully shortened to eUCP, was born as the first step in responding to this need. At the date of this article it is likely that the majority of students will have limited, if any, ‘hands on’ experience of processing Documentary Credits subject to eUCP. Regardless of current levels of involvement, the advent of electronic presentations will undoubtedly change the roles of practitioners and banks involved in the traditional Documentary Credit transactional flow. Will beneficiaries need to receive credits in their favour via an Advising Bank or present documents to a Nominated Bank? Will a Confirming Bank need to receive Documentary presentations?

These are questions that are already being answered as trade chains are established to pioneer the evolution from a paper to an electronic medium. For this reason Documentary Credit Specialists will need to familiarize themselves with the content and structure of the 12 articles of eUCP together with the relationship between eUCP and UCP500. In this respect the following points may be helpful to prospective CDCS candidates. X eUCP is a supplement to, and must be used in conjunction with, UCP 500. X It is flexible and may be used to facilitate mixed presentations made up of part paper-based and part electronic presentations, or fully electronic presentations. X It is intended to be dynamic. The current version 1.0 represents a starting point for future revisions that will be needed to keep pace with changes to technology and practice. X It is structured to align with UCP 500 and its rules follow a logical sequence of activities undertaken in an electronic presentation. X It provides definitions of terminology used within its text. X The provisions of its articles in relation to UCP 500 may be categorized into four groupings. These are: – provisions of UCP500 that have no parallel in the eUCP and are applicable to an eUCP Credit (UCP 500 articles 2 to 10 for example); – provisions of the eUCP that add to but do not contradict UCP 500 rules with respect to an electronic record and which do not impact the UCP 500 provisions with respect to paper documents (eUCP article e3(a) for example); – provisions of the eUCP that differ from the treatment of paper documents under UCP 500 but only relate to an electronic record so that there is no change to the provisions of UCP 500 as to paper documents under an eUCP Credit (eUCP articles 11 and 12 for example); – provisions of the eUCP that change the UCP 500 rule where the Credit is subject to eUCP and that are applicable whether or not they apply to an electronic record or a paper document presented under an eUCP Credit (eUCP articles e2(a), e5(c) and (e), e7(a) and (b), and e8 for example). 17

CDCS study guide X Credits

issued subject to eUCP are automatically subject to UCP 500 without specific reference. X Under a Credit issued subject to eUCP its provisions prevail over those of UCP 500 in the event of their application providing different results. To further assist in the study of eUCP rules the ‘Guide to understanding the electronic supplement to the UCP 500’, ICC publication no. 639 is recommended reading.



Section 3

CDCS Examination Specifications

Multiple-choice Questions The CDCS examination has a total of 120 questions and is in two parts: X Part A contains 85 multiple-choice knowledge (KN) and application (AP) questions based on the Study Text – approximately 1.5 hours of the examination. X Part B contains 35 questions: 5 are multiple-choice analysis (AN) questions and 30 are included in the simulation exercises — approximately 1.5 hours of the examination. Content Outline

Total

KN

AP

AN

4

4

10 4

5 2

5 2

18

11

7

0

3 13

3 8

4

1

16

11

4

1

Part A

A. Documentary Credit Groups 1. Types and Uses of Documentary Credits 2. Parties to the Credit: Roles, Responsibilities and Risks 3. Types of Payment Subtotal

B. Characteristics 1. Primary Characteristics 2. Specialty Characteristics Subtotal

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CDCS study guide

Content Outline

C. Operations 1. Processes 2. Related Products/Terms Subtotal

D. Financial and Commercial Documents E. Rules

Total

KN

AP

AN

21 4

8 3

10 1

3

25

11

11

3

21 10

11 7

9 3

1

Part B

Simulation Questions

30

TOTALS

120

51

34

35

Candidates must pass the entire examination while achieving a minimum passing score on Part B of the examination X X

X

X

X

X

Candidates will have THREE hours to complete the examination. Candidates are responsible for timing themselves to ensure there is sufficient time to complete both sections of the examination in three hours. The multiple-choice questions test your knowledge and how to apply that knowledge to specific situations outlined in the simulation exercises. Each question qualifies for one point/mark; incorrect answers/points are not deducted from the number of correct answers. The matrix on this page identifies the number of questions by cognitive level. See Section 9 for additional explanations on the three cognitive levels for multiple-choice questions. Types of questions – there are three basic levels of multiple-choice questions: – knowledge questions are recall questions; – application questions apply knowledge; – analysis questions require both knowledge and application skills.



Section 4

Self-assessment Tool

1.

This simple self-assessment tool will assist you in identifying the areas of the Content Outline that will require more study.

2.

Plan to set aside adequate time to review each item on the Content Outline and determine if the topic will require Review or Study. X Review indicates familiarity with the topic. You feel you understand and can explain the concepts and ideas in the section. X Study indicates you will require a more thorough study of the topic in order to understand and explain the concepts and ideas in the section. Review

Section A

Study

Documentary Credit Groups

1. Types and Uses of Documentary Credits a. Commercial b. Standby 2. Parties to the Credit: Roles, Responsibilities and Risks a. Required Parties (1) Issuing Bank (2) Beneficiary b. Applicant c. Banks’ Roles and Obligations (1) Issuing Bank 21

CDCS study guide

Review

(2) Confirming Bank (3) Advising Bank (4) Negotiating Bank (5) Paying Bank (6) Accepting Bank (7) Reimbursing Bank a. Types of Risk (1) Operational/UCP 500 (2) Credit (3) Foreign Exchange (4) Fraud (5) Legal (6) Political 2. Types of Payment a. Sight b. Deferred c. Negotiation d. Acceptance Section B Characteristics of Documentary Credits

1. Primary Characteristics a. Revocable b. Irrevocable 2. Specialty Characteristics a. Revolving (1) Cumulative vs Non-cumulative (2) Automatic vs Controlled b. Instalment c. Advance Payments d. Transferable 22

Study

Self-assessment tool

Review

Study

e. Evergreen f. Clean g. Direct Pay Section C Operations

1. Processes (1) Issue (2) Pre-advise (3) Advise (4) Confirm (5) Amend (6) Transfer (7) Present (8) Examine (9) Pay/Reject (10) Claim (11) Reimburse Funds (12) Cancel 2. Related Products/Terms (1) Letter of Indemnity (2) Air Way Release (3) Steamship Guarantee (4) Assignment of Proceeds (5) Participation and Syndication (6) Trade-related Incoterms Section D Financial and Commercial Documents

1. Draft/Bill of Exchange 2. Commercial Invoice 3. Ocean/Marine/Port-to-port Bill of Lading 4. Non-negotiable Sea Waybill 23

CDCS study guide

Review

5. Charter Party Bill of Lading 6. Multi-modal Transport Document 7. Air Transport Document 8. Road, Rail or Inland Waterway Transport Document 7. Forwarder’s Cargo Receipt, Mate’s Receipt and Consolidator’s Receipt 8. Post Receipt or Certificate of Posting 9. Courier or Expedited Delivery Service Document 10. Insurance Document 11. Weight Certificate 12. Certificate of Origin 13. Packing Lists 14. Inspection Certificate 15. Other Documents Section E Rules

1. UCP 500 – Uniform Customs and Practices for Documentary Credits

2. ISP98 – International Standby Practices 3. URR 525 – Uniform Rules for Bank-to-bank Reimbursements under Documentary Credits

4. UCP500 sub article 20(b) – Decision on Original Documents

5. ICC Position Papers 1 – 4 6. ISBP – International Standard Banking Practice for the Examination of Documents under Documentary Credits 7. eUCP – Supplement to UCP500 for Electronic Presentations


Study


Section 5

Key Terms

Key terms have been identified to assist you as you review the text. They are a starting point and you may find it helpful to develop your own glossary of terms.

Chapter 1 X Acceptance X Advising

Bank X Applicant X Beneficiary X Complied with X Confirming Bank X Counters X Drafts X Irrevocable undertaking X Issuing Bank X Negotiation X Nominated Bank X Payment X Stipulated documents

Chapter 2 X Arbitrator X Deferred payment X Delivery obligation X Good

faith X Legally enforceable 25

CDCS study guide X Method

of payment

X Performance X Trade

terms

Chapter 3 X Amendment X Authenticate X Discrepancies X Freely

negotiable X Middleman X Partial drawings X Partial shipment X Reimburse X Reinstated X Revocable X Substitution X Transferable X Transferring Bank

Chapter 4 X Compliance X Correspondent Bank X Disclaimer X Expiry

date

X Facility X Presentation

of documents

X Respond X Without

recourse

Chapter 5 X Down loaded X Operational guidelines X Workability

Chapter 6 X Agent X Carrier X Charter

party X Clean transport document X Consignee X Consignor 26

Key terms X Date

of shipment of title X Endorsed X Freight forwarder X Freight payable X Freight prepaid X Full set X Indemnity X Intended vessel X Loading on Board X Marked as Original X Master X Multimodal X Negotiability X Non-documentary conditions X Non-negotiable X Notation X On Deck X On its Face X Place of delivery X Port of discharge X Port of loading X Received for shipment X Roll on Roll off X Shipper load and count X Taking in charge X Transhipment X Documents

Chapter 7 X All

risks X Assigned by transfer or endorsement X Certificates X Date of issuance of insurance document X Description of goods X Fixed and determinable future time X License X Minimum cover X Unconditional order in writing

Chapter 8 X Assignment

of proceeds X Common sense 27

CDCS study guide X Confirmation instructions X Credit

risk X Discrepant documents X Force majeure X Freely negotiable X Good judgment X Honoring obligations X Inconsistent with one another X Notice of refusal X Period for presentation X Reasonable care X Reasonable time X Reimbursing Bank X Role of the checker

Chapter 9 X Bank

to Bank Reimbursements

X Reimbursement amendments X Reimbursement authorization X Reimbursement

claim X Reimbursement instructions X Reimbursement undertakings

Chapter 10 X Conversion X Counter

indemnities X Delivery orders X Guarantee X Letter of Indemnity X Syndication

Chapter 11 X Fraud risk X Legal risks X Risks

for the applicant to the beneficiary X Risks to the Advising Bank X Risks to the Issuing Bank X Risks to the Nominated Bank X Sovereign and regulatory risks X Risks

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Contents page Next section


Section 6

Planning Your Study

Tips from successful certification examination candidates X Your

objective should be to arrive at the examination secure in the knowledge that, through a well planned course of study and your practical experience, you are in as strong a position as possible to be successful. X Draft a study schedule/timeframe based on your objectives and a realistic view of your time available for study and preparation. X Review the CDCS Content Outline and Examination Specifications (Sections 2 and 3) and identify the areas with which you are familiar and require review and the areas that are new and will require in-depth study. X Discuss your objectives and study plan with a colleague or mentor who is willing to discuss the examination materials with you and assist you during your study phase.

Study Techniques Using your experience, think about study techniques that have helped you in the past and any others you may have come across. How do you learn something new on the job? Some ideas you may want to consider include: X summarize the main ideas in the text; X write study questions for self-testing based on materials in the text; X use the key terms to identify not only definitions but use them for review; X identify/flag key words, terms and concepts you do not understand or that are new to you; 29

CDCS study guide X prepare

‘flash cards’ to capture key terms, definitions, exhibits and other material that you have identified for additional study; X work with a partner or study group to teach and test each other; X test yourself frequently. What do I know? Do not spend time studying what you know. Use what you know for review at the end of the study process; X what is troublesome? Identify someone to help you understand sections you do not know and find difficult; X use the resources available through CIB and IFSA: check the website (www.cdcs.org) for the CDCS Forum, a listing of review/revision courses and other examination-related information; X note questions to ask others with more experience or members of your study group.

Develop a Study Plan Once you have considered the different study options available to you, it is still important to draft a study schedule/timeframe based on your objectives and a realistic view of your time for study and preparation. Your study plan should reflect your individual preferences and methods of working. It is important to remember that a study plan is a flexible document and is both an indicator of where you are and where you want to be. The first step you should take is to determine your personal study objectives based on the Content Outline and Study Text. X You may find it helpful to write out your objectives and post them in a visible location. X Advance planning will provide multiple benefits as you prepare for the CDCS examination. It will not require much time to develop a study plan, but doing so will establish your priorities. The most important part of a study plan is to identify how, when and where you want to study. X By reviewing the CDCS Content Outline and Examination Specifications (Sections 2 and 3), you will be able to identify the areas with which you are familiar; those you wish to review in detail, and those that are new to you and need in-depth study. X You will now be in a position to develop an overall study plan with specific timelines. In drawing up your plan, you may find the following useful: – prepare a study schedule – be realistic. Space your studying and allow ample time for review; – keep a copy of the CDCS Content Outline in a prominent place as you will refer to it often; – make the best of your environment. Some individuals prefer to study in a quiet place, while others prefer working with the radio or television on in the background. Whatever your preference, you can usually create the environment you want for your study session; 30

Planning your study

– be prepared to study in free moments, whenever you can. This means identifying times that are available to you for study, such as travel time, standing in lines and queues, waiting for a meeting to start, etc.

Summary Relax while studying. The CDCS examination is an opportunity for you to learn and to demonstrate your knowledge and ability. Maintain a positive attitude that you will be successful on the examination and will allocate the resources required to ensure success. Do not worry about how much time is left before the examination. You have planned adequately to allow for the maximum use of your time. Take breaks, exercise. Keep your body and mind relaxed. A sample Study Plan is shown on the next page – you may wish to reproduce it to assist you in your preparation for the examination.

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CDCS study guide

Study plan Content Outline

Topic

Page Reference


Completed


Section 7

Keys to Studying for Success

As adults we know that we learn in a variety of ways that differ significantly from the ways we learned as children. As you read the Study Text you will be able to compare the information with your own experience and knowledge. You can use the information you are studying in several ways: X if this is information you already know, the materials will reinforce your knowledge; X if the information is new to you, you can relate it to your own experience and consider how the information can be used in your job; X each chapter has objectives and study questions that will assist you as you focus on the key elements within a chapter; X use your memory effectively: – frequent recall and use: build regular reviews into your study sessions. Be selective about what you need to recall — use key terms and facts; – indicate significance: make the information you need to recall stand out by emphasizing it; link the information to your experience; use mnemonics; – link to other items: link information to your own experience; look for patterns and relationships among the items; compare and contrast information; – regular review: plan regular review of key points; end a session by summarizing what you have studied; X getting started can be difficult: starting a session with a brief review of the previous session may be helpful; X if you are not feeling motivated, consider why you started this study in the first place and think about what the CDCS credential will enable you to do; X build in rewards — at the end of study sessions; at the completion of a predetermined number of study sessions; and when you have completed your study; 33

CDCS study guide X it

is important to think positively during your preparation period. If you do not feel comfortable about your memory, monitor your progress. You will be pleased at how much you can recall; X there are no trick questions. As you take and study the sample test, you will see how straightforward the questions are; X the answers to all multiple-choice questions have been documented to the Study Text.

Successful students offer the following advice on planning your study and preparation for the CDCS examination To develop my study plan, I reviewed the syllabus and study materials. Then I divided the Study Text and the study topics into the number of weeks before the exam, allowing time for review. ◆ Design your plan with short study sessions (about 45 minutes) on a regular basis. This builds a study habit and makes it easier to stick to your plan. ◆

◆

◆

When planning your schedule or timetable of study, always build in extra time for contingencies, time off and relaxation and fun. There is nothing worse than feeling like a prisoner of the examination preparation process. If you build in extra study sessions, you can afford to be flexible and remain in control of your time. Plan to revise your study schedule as you go along.

Tell your family, friends and colleagues what you are doing. They will then know what to expect of your schedule and be more supportive. ◆ Take charge of your own studies. Spend time getting to know the st ructure and layout of the materials. Monitor your study progress against your plan and make adjustments as needed. Expect success — if you put the effort in, you will pass. ◆

At the Examination Site 1. Plan to arrive at least 30 minutes early, as identification will be checked prior to your being allowed into the examination room. 2.The examination will start promptly. 3.You will be allowed a full three hours to take the examination. 4.Read all instructions carefully. 5.Pace yourself: the examination has been written to allow approximately 1 ½ hours for each part of the CDCS examination.



Section 8

CDCS Study Groups

There is a great deal of benefit to studying with others. Conference calls, email and the internet provide access to your colleagues preparing for the CDCS examination. Usually two types of information are shared in study groups: X topic information from the Study Text; X informal study tips, support and general assistance. There are several ways to form study groups; most candidates preparing for other certification examinations prefer the following two: X Local Study Group: if there are others in your bank or city preparing for the examination that is your first and probably best option; X Electronic Study Group: identify others preparing for the examination who are willing to share ideas, information and provide support by phone, fax and/or email. All questions on the examination are referenced to the Study Text; it is very important to use the Study Text as the sole reference. It should be supplemented by the Rules outlined in Section E of the Content Outline.

Study Groups Tips 1.

Select the format that meets the schedules within your group: Weekly usually meets for 1 – 1 ½ hours per session Semi-monthly usually meets twice a month for 3-hour sessions Monthly usually meets for 3 or 4 hours per session Two days often 4 – 6 hours per day Three days often 4 – 6 hours per day 35

CDCS study guide

2. 3. 4.

5. 6. 7. 8.

Determine the number and length of sessions. Determine the topic schedule: number of sessions on topic material and number of sessions focused on study tips etc. Determine how presentations will be made to the group: X will leadership rotate and each individual assume responsibility for certain sections of the Study Text, which they will prepare for the rest of the group? X will you have experienced managers, supervisors or CDCSs from the banks discuss the chapters in the Study Text? Supplement the sessions with review of the Self-Study Guide. After individual or group review of a chapter, answer the questions at the end of each chapter. They are not in the examination format but highlight the important information in each chapter. Prepare test questions for other members of the group. Prepare glossary cards based on the terms in the Study Guide and other key terms identified from the Study Text.



Section 9

Multiple-choice Question Formats

Levels of multiple-choice questions Section A of the CDCS examination is entirely multiple-choice questions. There are three levels of questions based on the cognitive or thinking levels required to correctly answer a question. X Knowledge (KN) questions are recall questions. X Application (AP) questions apply knowledge. X Analysis (AN), also called higher level thinking, questions require both knowledge and application skills. There are several standard formats for multiple-choice questions. Becoming familiar with the various types will assist candidates as they prepare for the examination.

Sample Generic Questions Correct answers are noted by an * Recall/Knowledge: recall or knowledge questions recognize specific information

and facts that do not vary by situation. Such questions are predominantly an effort of memory and include the recall of specific facts, generalizations, concepts, theories, formulae and procedures. There will be 51 knowledge or recall questions on the examination.

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CDCS study guide X

Which of the following is a primary color? A. purple B. green * C . red D. orange

Application : application questions require comprehension, interpretation, or

manipulation of concepts or data. They primarily test simple interpretations or applications of limited data. Questions may require recognition of more than one element or concept and the ability to apply knowledge to a specific situation. There will be a total of 34 application questions on the examination. If the time in London, using Greenwich Mean Time, is 7.30 pm, what time X will it be in New York, using Eastern Standard Time (EST)? A. 12:30 am B. 1:30 am C. 1:30 pm * D. 2:30 pm Analysis: analysis questions require the integration or synthesis of a variety of concepts

and/or elements to solve a specific problem situation. Questions test the ability to gather information, evaluate data and make decisions. Analysis questions often require value judgments concerning the effectiveness, appropriateness or best course of action in a given situation. There will be five analysis questions on the examination. If a flight taking off from London at 12:35 pm takes 6.5 hours to reach New X York, what time will it land, using Eastern Standard Time (EST)? A. 1:05 pm * B. 2:05 pm C. 12:35 am D. 1:05 am Direct or Closed Question: a complete question followed by four options; there is

only one correct answer to direct or closed questions. X Who was the King of England in 1484? A. George I * B. Richard III C. Edward IV D. Henry V Open Question or Incomplete Sentence : an incomplete sentence with four

options; there is only one correct answer to incomplete sentence questions.

38

Multiple-choice question formats X

Confederate Commander General Robert E. Lee’s horse was named A. Trigger B. Silver * C. Traveler D. Champion

Complete Question that includes the phrase ‘which of the following’ : used

when there is more than one correct answer to a question, but ONLY one of the correct answers is offered in the options. Which of the following is a prime number? X * A. 7 B. 10 C. 12 D. 15 Complex Multiple-choice : there may be more than one correct answer. The

response will include options. Which of the following cities are capitals of their respective countries? X 1. Paris 2. Washington DC 3. Chicago 4. Sydney A. 4 only *

B. l and 2 only C. l, 3 and 4 only D. 2, 3 and 4 only

Negatively Worded or EXCEPT questions : three of the four options are correct

and only one option is incorrect. There is only one answer for EXCEPT questions. X All of the following are primary colors EXCEPT * A. orange B. red C. blue D. green Key Words — LEAST, BEST, MOST : the question requires evaluation and the

selection of the appropriate option. X Most color blind males inherit the gene from their A. father * B. mother C. maternal grandmother D. paternal grandfather 39

CDCS study guide

Situational Set: there is one answer to each question in situational sets. There may

be more than one question for each information set. X Michael has $100 to purchase clothes. Costs are: shirts, $20 each; sweaters $30 each; slacks $40 per pair; and socks $5 per pair. 1.

If Michael purchased 1 pair of slacks and 1 sweater, how many shirts can he buy with his remaining money? * A. 1 B. 2 C. 3 D. 4

2.

If Michael spent 40% of his money on socks, how many pairs did he purchase? A. 4 B. 5 * C. 8 D. l0



Section 10

Simulation Exercises

Section B of the examination consists of FIVE analysis questions and SIX simulation exercises. The simulations test the information gathering and decision-making skills of the candidate by requiring them to analyze the information provided and identify the irregularities/discrepancies in the documents for each simulation. X Each simulation exercise has five responses that equate to FIVE questions per simulation. X Each simulation will include samples of documents to review. X The content of each simulation is designed to reflect real work situations and to be relevant to the responsibilities of Documentary Credit Specialists. X There will be a series of documents that the candidate must review prior to answering the questions for each simulation. Candidates are required to identify the FIVE correct discrepancies or irregularities from a checklist of a possible 15.


CDCS study guide

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Section 11

Tips for Answering Multiple-choice Questions

X In

multiple-choice questions the answer follows the question. There are four options and only one is correct. Your task is to identify the correct answer from the plausible, but incorrect, distracter answers. The correct answer is called the key and the other options are called distracters. X Remember that all multiple-choice questions have the same format — four options but only one correct answer. X The correct answer is the best answer for each question. X Only correct answers are scored, so it is to your advantage to answer every question. X Analyze what the question is asking. X Try to answer the question before looking at the options. Then decide which option is closest to your answer and is the best option. X It is best to answer questions as you proceed through the test booklet. X Place question marks in the margin of your test booklet to indicate questions that require more time or you cannot answer. You can return to these questions when you have completed the other questions. X As you cannot bring extra paper into the examination room, it is helpful to write directly in your test booklet. X Be careful of making pencil marks on the answer sheet. An Optical Mark Reader machine scores the answer sheet. It is very important to completely erase pencil markings if you change your mind. Do not make notes on the answer sheet. X You can waste valuable time and increase the opportunity for error if you mark your answers on the answer sheet individually. A preferred method is to circle your answer in the test booklet and transfer your answers in blocks to the answer sheet. Test experts recommend transferring answers after completing each page of questions. 43

CDCS study guide X The

more questions you answer, the better your chances of achieving a passing score. For best results pace yourself, periodically checking your progress. X If you are near the end of the examination period, make your best guess at the unanswered questions by eliminating the incorrect/wrong options. You could get the answer correct. X Read all instructions carefully.



Section 12

Pre-examination Checklist

❒ ❒ ❒

The admission ticket or attendance notice will be received two weeks prior to examination.

❒

Plan on three full hours to complete the examination after instructions by the test center supervisor.

❒

Bring your admission ticket and two forms of identification; one must be a picture ID.

❒ ❒ ❒

Bring several HB/ #2 sharpened pencils; most test centers will not have pencil sharpeners.

❒ ❒

Do not bring electronic devices into the examination room. You will be disqualified if a pager or phone rings.

Select the best route to the test center and identify parking options. Plan to arrive at the test center 30 minutes prior to the examination start.

Bring an eraser and watch as the test center may not have a clock. Do not bring food, beverages, extra paper, books, supplies, etc into the examination room.

Become familiar with the answer sheet on pages 48-49.


CDCS study guide

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Recertification guidelines

Section 13

Sample Answer Sheet

X The

sample answer sheet on the next pages is for illustrative purposes only: the spatial layout for the CDCS examination will be slightly different, eg to allow for the incorporation of the ifs /International Financial Services Association logos. X The instructions to candidates will be as follows: – use only HB/#2 pencil to complete this form; – make sure that you mark your choice with a straight line; – to amend an answer, THOROUGHLY erase and mark the appropriate box; – mark ONE box only for each question; – answer all 120 questions; X Registration No . – your candidate number as advised to you on your attendance letter/notice. X Session No. – as advised on your attendance letter/notice.

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48

Sample answer sheet

Contents page Next section

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Section 14

Sample Test

Answers to the Sample Test are in Section 16 page 65 Part A – Multiple-choice Questions 1.

Which of the following clauses or notations appearing on the face of the Transport Document would preclude it from being accepted? A. B. C. D.

2.

Oil drums are leaking. Highly flammable material. Potentially explosive material. Refrigerated seafood, may spoil during voyage.

An Issuing Bank becomes bound by the terms of an amendment to a Documentary Credit at the time at which the: A. B. C. D.

Beneficiary accepts the amendment whether expressly or by implication. Reimbursing Bank agrees to the Applicant’s request for an amendment. Advising Bank advises the amendment to the Beneficiary. Issuing Bank issues the amendment to the Advising Bank.

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CDCS study guide

3.

When an Advising Bank adds its confirmation to a Documentary Credit, which of the following risks has the Beneficiary mitigated? 1. 2. 3. 4.

Issuing Bank. Foreign Exchange. Political. Fraud. A. B. C. D.

4.

A Beneficiary receives an Irrevocable Documentary Credit for which USD 22,500 may be drawn during each month of the Documentary Credit’s one year validity. The Documentary Credit also indicates that reinstatement is on a cumulative basis. Full monthly drawings were made during the first, second, fourth, fifth and seventh months and there have been no other drawings. In the last month of the Documentary Credit’s validity, the Beneficiary expects to make a final shipment. What is the maximum value available for this final drawing? A. B. C. D.

5.

Incoterm

Insurance Doc.

Transport Doc.

DDP CFR FOB FCA

Required Required Not required Not required

marked Freight Paid. marked Freight Collect. marked Freight Paid. marked Freight Collect.

Prior to advising a Documentary Credit to the Beneficiary, the Advising Bank is responsible for: A. B. C. D.

52

USD 112,500 USD 135,000 USD 157,500 USD 180,000

Which of the following Incoterms is correctly described?

A. B. C. D. 6.

1 and 3 only. 1 and 4 only. 2 and 3 only. 2 and 4 only.

effecting payment against conforming documents. checking the apparent authenticity of the Documentary Credit. notifying the Issuing Bank that the Documentary Credit is being advised. checking that the reimbursement method is effective?

Sample test

7.

A Documentary Credit states that shipment must be made on or about 27 June. Which of the following shipment dates would be acceptable? 1. 2. 3. 4.

20 June 27 June 02 July 03 July A. B. C. D.

8.

If an Exporter is willing to release the shipping documents directly to the Buyer, but wishes to retain some guarantee of payment should the Buyer fail to pay on the due date, which of the following Documentary Credits BEST suits the Exporter’s needs? A. B. C. D.

9.


Transferable. Revolving. Standby. Evergreen.

Where a Documentary Credit includes a shipping schedule and an instalment is NOT shipped within the stipulated period, which of the following statements concerning the Documentary Credit is correct? A. B. C. D.

It continues to be available for that instalment only. It continues to be available for that and other instalments. It ceases to be available for that instalment only. It ceases to be available for that and other instalments.

10. A Marine Bill of Lading acts as: 1. 2. 3. 4.

an acknowledgement of receipt of the goods by the carrier. evidence of a contract of carriage. a document of title for the goods. evidence of the contract between the seller and the forwarding agent? A. B. C. D.

1 and 3 only. 2 and 4 only. 1, 2 and 3 only. 2, 3 and 4 only.

11. Which Documentary Credit enables a Beneficiary to obtain pre-shipment financing without impacting his facility? A. B. C. D.

Transferable. Red Clause. Irrevocable, payable at sight. Confirmed Irrevocable, payable at maturity. 53

CDCS study guide

12. Which of the follow following ing percent percentages ages repre represents sents the minimu minimum m insured insured value value of goods on the insurance document unless otherwise stated in the Documentary Credit Credit where the CIF/CIP CIF/CIP value can be determined? determined? A. B. C. D.

100%. 105%. 110%. 115% 11 5%..

13. Documents Documents are are presente presented d in accorda accordance nce with with the terms terms of of an Unconfir Unconfirmed med Documentary Credit payable at sight and the Nominated Nominated Bank chooses to negotiate them. Which of the following following statements best describes the Nominated Bank’s actions? 1. 2. 3. 4.

Make immedi immediate ate payment payment to the Benefi Beneficiary ciary.. Effectt payment Effec payment on receip receiptt of covering covering funds funds.. Present Prese nt docume documents nts to the Issuing Issuing Bank Bank.. Confirm Confi rm sight sight to the Reimbu Reimbursing rsing Bank Bank.. A. B. C. D.

1 and 3 only. 1 and and 4 onl onlyy. 2 and and 3 only only.. 2 and and 4 only only..

14. A Documenta Documentary ry Credit Credit is received received withou withoutt a stipulat stipulation ion of whether whether parti partial al shipments are allowed. Which of the following statements statements is applicable? A. B. C. D.

They are allowed. Refer Ref er to the the Issui Issuing ng Bank. Bank. Referr to the Benefici Refe Beneficiary ary.. They are prohib prohibited ited..

15. When a bank bank confirms confirms an Irrevoc Irrevocable able Transf ransferabl erablee Documenta Documentary ry Credit Credit it assumes the credit risk of which party? A. B. C. D.

The Applicant. The Iss Issuin uingg Bank Bank.. The First First Benefici Beneficiary ary.. The Second Second Bene Beneficia ficiary ry

16. When an an Advising Advising Bank Bank has has accepted accepted a Time/ Time/Usanc Usancee Draft Draft under under an Advise Advised d Documentary Credit, they are responsible for effecting payment at maturity when: A. B. C. D. 54

they have received funds from the Issuing Bank. they have have received received funds funds from the Reimbur Reimbursing sing Bank. Bank. the draft draft is verified verified by the the Applicant Applicant.. the draft is presented by the Beneficiary Beneficiary..

Sample test

17. Delivery Delivery of good goodss has been been made made to to the buyer buyer on on 08 Octobe Octoberr. The relevan relevantt documents were presented in order, including a CMR dated 15 days prior to delivery. The Documentary Credit terms state that payment is to be effected 30 days after shipment. shipment. On which date date will payment payment be be made? (There are NO bank holidays and Saturdays and Sundays are NOT banking days.) A. B. C. D.

Friday Friday Monday Friday Monday

22 October. October. 25 October. 05 November. 08 No November.

18. The Confirmi Confirming ng Bank Bank receives receives documen documents ts on Friday Friday 02 Apri Aprill and finds finds them them to be in order on 05 April. Tenor is 30 days days after the Bill of Lading Lading date. The Bill of Lading is dated 01 April, and the Confirming Bank agrees to pay the Beneficiary immediately immediately.. On what date would the Confirming Bank expect to receive funds from the Issuing Bank? (There are NO bank holidays and Saturdays and Sundays are NOT banking days.) A. B. C. D. 19.

05 April. 12 Ap Apri ril. l. 30 Ap Apri ril. l. 03 Ma Mayy.

If an Applic Applicant ant requests requests that the Document Documentary ary Credit Credit expires for presentat presentation ion at the Issuing Bank with drafts drawn drawn on the Issuing Bank 90 days after sight, how should the Documentary Credit be made available? A. B. C. D.

By sight payment. By defer deferred red paym payment ent.. By acce accept ptanc ance. e. By negot negotiatio iation. n.

20. A Documenta Documentary ry Credit Credit that will will become become available available for for presentat presentation ion of shippin shippingg documents to the Issuing Bank only after it has received and approved a performance guarantee is usually described as: A. B. C. D.

Standby. Standby. Revo Re voca cabl ble. e. Inoper Ino perati ative. ve. Advance Adva nce Paym Payment. ent.

21. In accordance accordance with with UCP, what is the the maximum maximum number number of banking banking days days (inclusive of presentation date) that a Confirming Bank is allowed to refuse the documents? A. B. C. D.

One. Three. Seve Se ven. n. Eigh Ei ght. t. 55

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22. What should should an Advising Advising Bank Bank do do if it receive receivess a Document Documentary ary Credit Credit from from the Issuing Bank which includes the term ‘Transmissible’? ‘Transmissible’? A. B. C. D.

Disregard the term. Seekk clari See clarific ficati ation. on. Advise the the Documentary Documentary Credit Credit as transferable. Refuse to advise the Documentary Credit.

23. A Documenta Documentary ry Credit Credit calls calls for present presentation ation of of an Insurance Insurance Certi Certificat ficate. e. Which of the following insurance documents would be acceptable for CIF shipment where the invoice value is USD 75,000? 1. 2. 3. 4.

Insurance Certif Insurance Certificate icate for USD USD 82,500 82,500.. Insurance Insur ance Poli Policy cy for for USD 85,0 85,000. 00. Insurance Insur ance Declara Declaration tion under under Open Cover Cover for USD 75,00 75,000. 0. Insurance Insur ance Certif Certificate icate for USD USD 75,000 75,000.. A. B. C. D.

1 and 2 only. 1 and and 4 onl onlyy. 2 and and 3 only only.. 3 and and 4 only only..

24. In accordance with UCP all the following statements statements relating to to commercial invoices under a non-transf non-transferable erable Documentary Credit are correct EXCEPT the commercial invoices must: A. B. C. D.

be manually signed by the Beneficiary. Beneficiary. be made made out in in the name name of the the Applican Applicant. t. appear to have have been issued by the named Beneficiary Beneficiary.. indicate the description description of goods corresponding corresponding with the Documentary Credit.

25. An Issuing Issuing Bank has issued issued a sight sight Documenta Documentary ry Credit Credit to a Benefici Beneficiary ary authorizing a Nominated Bank to pay the Beneficiary for all documents presented in accordance with the Documentary Credit terms and conditions . Upon receipt of complying documents drawn under the Documentary Credit direct from the Beneficiary, the Issuing Bank should: A. examine the documents and pay the Beneficiary. B. verif verifyy the docum documents ents and pay pay the Nominat Nominated ed Bank. Bank. C. return the documents documents to the Beneficiary Beneficiary for presentation presentation to the Nominated Bank. D. remit the documents documents to the the Nominated Bank for examination. examination.

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Sample test

26.

Which party has the MOST responsibility to examine the terms and conditions of a Documentary Credit against the sales agreement? A. B. C. D.

Applicant. Beneficiary. Issuing Bank. Confirming Bank.

27. Which of the following classification types BEST describes a Standby Credit that is intended to be the primary means of payment? A. B. C. D.

Bid bond. Direct pay. Performance. Advance payment.

28. In the case of a Non-cumulative Revolving Documentary Credit available for USD 10,000 per month and valid for six months, which of the following statements is correct? 1. The face value of the credit is USD 10,000. 2. The face value of the credit is USD 60,000. 3. The amount(s) not utilized in one month may be carried over to the next. 4. The total undertaking of the Issuing Bank is USD 60,000. A. B. C. D. 29.


A Confirming Bank examines documents under a Documentary Credit, which requires presentation of an Invoice, Certificate of Origin and an Ocean Bill of Lading. The Documentary Credit also includes the following clause: ‘Special condition – all packages must be clearly marked with the country of origin.’ Where the documents do NOT show that the packages have been marked in this way and are otherwise in order, the Confirming Bank should: A. reject the documents and suggest to the Beneficiary that he present a certificate evidencing that this condition has been complied with. B. reject the documents and suggest to the Beneficiary that the Certificate of Origin be amended to include the special condition. C. contact the Issuing Bank and withhold payment until clarification is received. D. ignore the special condition and honour the Beneficiary’s presentation of documents. 57

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30. Documents under a Documentary Credit are tendered at the counters of the Confirming Bank and are mistakenly found to comply with its terms and conditions. The Confirming Bank pays the Beneficiary and forwards the documents to the Issuing Bank. Upon receipt by the Issuing Bank, the documents are checked and found to be discrepant. The Issuing Bank notifies the Confirming Bank of all discrepancies ten banking days after receipt and refuses to reimburse. In considering whether the Confirming Bank can recover funds paid, which of the following statements are correct? It: 1. 2. 3. 4.

can recover from the Beneficiary. cannot recover from the Beneficiary. can recover from the Issuing Bank. cannot recover from the Issuing Bank. A. B. C. D.


31. 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. B. C. D.

CIF London. FAS London. CIF New York. FAS New York.

32. What is the applicable Incoterm for an Airway Bill marked ‘Freight Prepaid’? A. B. C. D.

58

FCA. CFR. CPT. DAF.

Sample test

Part B – Simulation INSTRUCTIONS You are the Letter of Credit issuer at ABC Bank plc and are requested to identify five irregularities in the application form attached.

INFORMATION Application for Documentary Letter of Credit Applicant: Issuing Bank: Amount:

Savage Steel plc ABC Bank Plc USD 120,00.00

Savage Steel Facilities with ABC Bank plc USD 1,600,000 Current Exposure USD 1,104,000

SUPPORTING DOCUMENTATION 1) 2)

Irregularity checklist. Irrevocable Documentary Credit Application Form.

INSTRUCTIONS TO STUDENTS Identify the five irregularities on the attached irregularity checklist (document 1) then transfer your answer to the main answer sheet.

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Irrevocable Documentary Credit Application Form Applicant: Savage Steel plc Tilton Road Birmingham England

Date of Application: 1 March XX  Issue by (air) Mail  with brief advice by teletransmission (see UCP 500 Article 11) ; Issue by teletransmission (see UCP 500 Article 11)  Transferable Credit – As per UCP 500 Article 48

Confirmation of the Credit: ; not requested  requested  authorized if requested by Beneficiary

Partial shipments  allowed ; not allowed Transhipments  allowed ; not allowed Please refer to UCP 500 transport Articles for exceptions to this condition ; Insurance will be covered by us

Shipment as defined in UCP 500 Article 46 From: Newark, New Jersey

Issuing Bank: ABC Bank plc London England

Expiry Date and Place for Presentation of documents Expiry Date: 31.5.XX Place for Presentation: Pittsburgh Beneficiary: Kirovski Steel Supplies Pittsburgh Pennsylvania USA

Amount in figures and words (Please use ISO Currency Codes): USD 120,000 Dollars one hundred and twenty thousand

Credit available with Nominated Bank: Second Pennsylvannia Pittsburgh

;   

Bank,

by payment at sight by deferred payment at: by acceptance of drafts at: by negotiation

Against the documents detailed herein: ; and Beneficiary’s drafts(s) drawn on: ABC Bank, London

For transportation to: Southampton,

England Not later than: 15 May XX Goods (Brief description without excessive details – See UCP 500 Article 5): Flat rolled steel as per previous Letter of Credit ref DC 731264 Dated 10 January XX

60

¦ Terms: ¦  FAS ; CIF ¦  FOB  Other terms: ¦  CFR  as per INCOTERMS

Sample test

Irrevocable Documentary Credit Application Form (continued) Commercial Invoice

signed, original and

1

4

copies

Transport Document: ; Multimodal Tran sport Documen ts, covering at least two different modes of transport (full set)  Marine/Ocean Bill of Lading covering a port-to-port shipment  Non-negotiable Sea Waybill covering a port-to-port shipment  Air Waybill, original for the consignor  Other transport document ; to the order of: Kirovski Steel Supplies, Pittsburgh, Pennsylvania, USA ; endorsed in blank ; marked freight ; prepaid  payable at destination ; notify: Savage Steel plc, Tilton Road, Birmingham, England

Insurance Document:  Policy  Certificate

; Declaration under an open cover. Covering the following risks: All Risks excluding surface rust

Certificates: ; Origin USA ; Inspection Issued and signed by qualified official  Health  Other Other Documents: ; Packing List Goods description must exactly match Letters of Credit terms

; Weight List Two copies

Documents presented within

2 1

days after the date of shipment

Additional Instructions: One original transport document to be sent direct to: Savage Steel plc Tilton Road Birmingham England

but within the validity of the Credit.

We request you to issue on our behalf and for our account your Irrevocable Credit in accordance with the above instructions (marked (x) where appropriate). This Credit will be subject to the Uniform Customs and Practice for Documentary Credits (1993) Revision Publication No. 500 of the International Chamber of Commerce, Paris, France), Insofar as they are applicable.

R SAVAGE

Name and signature of the Applicant

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Irregularity Checklist 1.

Applicant’s facilities with Issuing Bank would be exceeded if Documentary Credit issued.

2.

Description of goods unacceptable.

3.

Inappropriate insurance specification.

4.

Latest shipment date/expiry date incompatible with presentation period.

5.

Pricing of goods does not match value of the credit.

6.

Request for validation of document(s) unacceptable.

7.

Incorrect type of transport document requested

8.

Additional instructions incompatible.

9.

Shipping terms incompatible with transport document.

10. Issuer of some document(s) is ambiguous. 11. Draft drawee unacceptable. 12. Non-documentary condition(s) stipulated. 13. Inconsistent insurance requirement. 14. Country of origin not specified. 15. Confirmation instructions ambiguous


❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒ ❒

Contents page Previous section Sample test

Section 15

Scoring the Examination

The decision to use the objective testing methodology of a multiple-choice examination as the assessment instrument for the Certified Documentary Credit Specialis t (CDCS) credential allows a range of established statistical methods to be employed to support the testing and grading processes. An objective test such as the CDCS examination can be defined as a ‘test constructed in such a way that every question has a single unique correct answer’. Multiplechoice tests are one form of an objective test and the opportunity to easily collect performance data for multiple-choice examinations has led to the development of numerous techniques for test evaluation and monitoring. A variety of tried and tested techniques will be applied to the CDCS examination. X All questions are reviewed extensively through a peer review process. X All questions are analyzed prior to use by an established panel of international experts. X Post examination analysis of individual question performance throu gh the analysis of parameters, such as facility indices (which measure the difficulty of each question) and discrimination indices (which measure the ability of the question to distinguish between strong and weak candidates). This feedback provides information for use in the development of future examination questions and will also be useful in identifying possible areas for increased learning support. X In addition, each test as a whole will also be reviewed in terms of reliability measures, etc, to ensure that the examination is consistent and valid over time.

Contents page Answers 63

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Recertification guidelines

Section 16

Answers to Sample Test

Multiple-choice Question Number Correct Answer

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22

A D A C D B C C D C B C A A B D B D C C D A 65

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Question Number

Correct Answer

23 24 25 26 27 28 29 30 31 32 26 27 28 29 30 31 32 33 34

A A A B B B D C D C B B B C D C D C D

Simulation Irregularities 2

4

8


10

13


Section 17

CDCS Website

X The

CDCS website is available for your use and is a helpful tool as you prepare for the CDCS examination – www.cdcs.org. X For additional information or if you do not receive your materials, visit either the ifs or IFSA website or contact ifs or IFSA directly: Institute of Financial Services IFS House, 4-9 Burgate Lane Canterbury, Kent, CT1 2XJ, United Kingdom http://www.ifslearning.com The International Financial Services Association 9 Sylvan Way, First Floor Parsippany NJ 07054 USA http://www.intbanking.org

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