Finance Of International Trade 1st Edition Eric Bishop - Solutions

Q33 Under countertrade deals what is the original supplier committed to do?
Q32 Are switch currencies convertible?
Q31 What is the difference between an offset deal and a counterpurchase deal?
Q30 Name two negotiable instruments.
Q29 You receive from the issuing bank, a red clause credit which you advise to the beneficiary. The credit allows a cash advance of 20%:(a) Are you obliged to make the advance?(b) Would it make any difference if you have confirmed the credit?
Q28 Under what circumstances would a remitting bank examine documents which it was handling as a collection?
Q27 Documents are presented under a credit covering shipment of six cases of machine tools. What particular detail, which will appear on all documents, must be identical on each?
Q26 You are the issuing bank and you receive documents under one of your credits from a negotiating bank. Upon examination you discover discrepancies. Who do you contact first:(a) the applicant, or(b) the negotiating bank?How much time do you have according to UCP500?
Q25 If a credit calls for a ‘shipped’ bill of lading, what would you look for to ensure that the bill of lading presented was correct?
Q24 The beneficiary of a transferable credit requests the nominated bank to transfer it. What alterations is he permitted to make under UCP500?
Q23 What must the drawee do to become liable on a bill of exchange?
Q22 (a) What is the difference between a bill of exchange drawn at 90 days fixed and one drawn at 90 days sight?(b) As a negotiating bank, which would you prefer if the drawee was in a foreign country?
Q21 What is the difference between a shipping company’s bill of lading and a charterparty bill of lading?
Q20 Who can sign a bill of lading?
Q19 An irrevocable credit is opened covering 6000 tons of steel; part shipments are not permitted. What is the minimum quantity the exporter may ship in accordance with UCP500?
Q18 Documents for a value of US$150 000 are presented against a CIF credit. They include an insurance certificate for £100 000. The current exchange rage is US$1.50 = £1. Is the insurance certificate acceptable?
Q17 Uniform Rules for Collection require the collecting bank to advise the remitting bank immediately upon non-payment or non-acceptance by the drawee – why?Sometimes the remitting bank asks to be advised immediately upon payment – why?
Q16 You are an exporter selling goods on a collection basis. If you sold FOB or CFR, would you be taking a greater risk than selling CIF?
Q15 Why do we call a standby credit a negative credit? How did this type of credit originate?
Q14 What is a multimodal bill of lading? If it is to be acceptable under a documentary credit, what essential feature must it have?
Q13 What does ‘pour aval’ mean when applied to a bill of exchange?
Q12 A buyer in Turkey buys three combine harvesters from an exporter in Paris on ex works terms for shipment to Izmir – list the costs to be borne by the buyer.
Q11 There are three parties appearing on the front of a bill of exchange, who are they? Could there be more than three parties to the bill? If so, how?
Q10 Does a mate’s receipt give title to the goods detailed on it?
Q9 What is the purpose of a tender bond?
Q8 As an exporter you are offered by the importer:(a) a usance credit(b) a deferred payment credit.Which would you prefer and why?
Q7 You are the advising bank for a $250 000 credit valid for 9 months.The issuing bank asks you to confirm the credit. Are you obliged to:(a) confirm it?(b) confirm it for 9 months?(c) confirm it for $250 000?
Q6 Who makes the first presentation under a transferable credit?
Q5 Name three types of credits which provide pre-shipment finance.
Q4 How would you describe a clean bill of lading?
Q3 When documents are sent for collection on a D/A basis, when are they released to the importer?
Q2 What basic documents must be supplied for a CIF Shipment?
Q1 What does FOB mean?Who pays the freight?
4 Bolero electronic bills of lading will be used to replace the present paper version. Bills of lading will be registered by Bolero on a central registry which will maintain a record of who are the holders of such bills. Thus no amendments or alterations can be made to this critical document
3 Recipients of transmissions will confirm that the content appears to be complete and correct (an essential reservation for banks receiving documents in which they have a financial interest and contractual liabilities towards beneficiaries and applicants of irrevocable documentary credits.)
2 All documents transmitted will be protected by the use of a ‘private key’agreed between parties for authentication purposes.
1 Subscribers to the scheme will be able to raise their documents electronically, whether for collection or for presentation against a documentary credit, and to submit them electronically (EDI).
5 Communication between the various parties to a transaction was limited to the exchange of mail and fax messages where opinions were sought as to the authenticity or correctness of a given document or documents.
4 Importers and exporters were unable to cover foreign exchange commitments until the documents were found by both negotiating and issuing banks to be in order.
3 Documents which were found to be out of order, could not, in many cases be corrected manually and re-presented to banks within the validity of their respective irrevocable credits (time is money!).
2 Manually produced documents offer opportunities for fraud through forgery, alteration and unauthorized amendment.
1 Documents are often delayed by using airmail and can be lost, if not permanently, certainly for long enough to cause the banks and consignees great inconvenience and expense.
7 a liability policy to protect carriers and exporters against, inter alia, loss of interest, charter costs, demurrage and customs costs.
6 digital signing of messages limiting access only to authorized users
5 high level security using cryptographic technology
4 title registry
3 access through the use of internet
2 a core messaging platform
1 an electronic commerce service
The cotton buyer is paying in Sterling for his cotton and faces an exchange risk, spread possibly over 2 years. Currency options would, at least, fix his liabilities.
If the cotton buyer is only a short sea journey from the African supplier, the documents of title may have to go direct to the buyer or to the issuing bank instead of via the countertrader. In that situation, the obvious solution would be to use a standby credit instead of a documentary credit due
The UK exporter will charge interest on the cost of the cotton gin from the time of despatch. Interest will be payable on £5 million until the first payment under the cotton buyer’s credit and thereafter reducing balances as further shipments of cotton are made.
7 In the second year, stages (4), (5) and (6) are repeated until the UK exporter has been paid £5 million.
6 The UK exporter is paid from the proceeds of the discounted bills.
5 The countertrader presents the documents against the documentary credit, which we must assume is a usance one as the diagram states that the bills are discounted.
4 In the first year, the African state industry ships cotton to the cotton buyer and sends the documents to the countertrader.
3 On the strength of that credit, the countertrader can now authorize the UK exporter to despatch the cotton gin to the African state industry.
2 When that insurance is in place, the cotton buyer is asked to establish an irrevocable documentary credit or credits in favour of the countertrader, valid for 2 years.
1 The UK exporter arranges insurance against possible non-delivery of cotton by the African state industry and assigns the insurance cover to the countertrader.
4 A bank performance bond from the US supplier for US$1 565 000. There are two ways in which this document can be obtained before the French bank becomes liable on its irrevocable credit. Firstly, it can demand receipt of the bond before it actually issues its credit. Secondly, and more
3 French bank irrevocable credit for US$15 650 000 in favour of the US supplier and available by payment at sight. This is the back-to-back credit and must be a reproduction of the foreign credit with alterations to amount, price, latest shipment date and validity, etc.
2 Foreign government irrevocable credit issued by their bank for US$16 000 000 valid for 6 months and available by acceptance of 180 day drafts.
1 A bid bond for $800 000 issued by the French Bank: if the bid is successful, this will become a performance bond for an amount of US$1 600 000.
5 Can you obtain a performance bond from your supplier to support our bond?
4 Are your terms of sale identical to the terms under which you are buying the tallow? If not, what are they?
3 How will you pay for the tallow?
2 We are asked to guarantee that you will execute your contract with the foreign government, but where will you get the tallow from?
1 If your bid is successful, how will you be paid?
4 The first beneficiary may request that payment or negotiation be effected to the second beneficiary at the place to which the credit has been transferred, up to and including the expiry date of the original credit unless that credit expressly states that it may not be made available for payment
3 If a credit is transferred to more than one second beneficiary, refusal of an amendment by one or more second beneficiaries does not invalidate the acceptance by the other second beneficiaries.Note: this is a difficult situation for advising or confirming banks, who may find themselves operating
2 At the time of transfer the first beneficiary must irrevocably instruct the transferring bank as to whether he wishes to retain the right to refuse to allow the transferring bank to advise amendments direct to the second beneficiary (transferee) or allow them to do so.
1 A credit may only be transferred by the bank authorized to pay, incur a deferred payment undertaking, accept or negotiate; if the credit is freely negotiable it can only be transferred by the bank specifically authorized to do so.Note: an exporter requesting his buyer to provide him with a
3 When the bank which has effected the transfer of a credit eventually receives documents raised by the transferee and presented by its appointed advising bank, it immediately approaches the first beneficiary for his invoice. That invoice is then substituted for that of the transferee and together
2 The issuing bank is unaware of the opening of a back-to-back credit; to that extent it is totally independent of the master credit.
1 When a transferable credit is transferred, it is done with the knowledge and consent of the issuing bank.
Alterations may be made to the amount, the price of the goods, latest shipment date, validity and insurance cover and number of days from date of transport document within which documents must be presented.
The beneficiary of the prime credit may be shown as the applicant for the transferred credit.
Where part shipments are permitted, partial transfers can also only be made once.
Unless a transferable credit permits part shipments, the amount can only be transferred once.
3 sell back the option.
2 abandon the option and lose his premium
1 exercise his option and sell the currency in March
regularly obtain updated status reports on the buyers.
ensure that all amendments to the policy are notified direct to the bank
regularly check on any variation in the nature of the exporter’s trade
have the premiums paid by standing order/direct debit, etc.
have the policy assigned to the bank
3 The individual limit on the buyer may have been exceeded.
2 He may have breached his contract with the buyer (faulty goods, late delivery etc.).
1 The exporter may have defaulted on the payment of the insurance premiums.
9 Voyage diversion.
8 War, strikes, riots, civil commotions.
7 Shortfall resulting from the settlement in local currency and subsequent conversion to foreign currency (delay risk).
6 Cancellation of export licence/import licence.
5 External debt moratorium declared by the buyer’s government.
4 Any embargo by the government in the buyer’s country that prevents the import of goods which the exporter has contracted to sell.
3 Buyer’s failure to take up the goods.
2 Failure by buyer to pay within 6 months of due date for goods which he has accepted.
1 Insolvency of buyer.
3 The exporter must place all his exports with the insurer except where he is the beneficiary of an irrevocable credit.

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Finance Of International Trade 1st Edition Eric Bishop - Solutions

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