International Trade Documentation Quiz

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Questions and Answers

Which of the following is NOT a common risk associated with international trade when merchandise does not reach its destination?

Difficulties in finding a second buyer
Possibility of auction at customs
Increased production costs (correct)
Loss, theft, or damage to the merchandise

What is the primary function of a documentary credit in international trade?

To facilitate currency exchange
To provide insurance against all risks
To act as a payment guarantee for the seller (correct)
To establish a payment delay for the buyer

A documentary credit helps reduce which of the risks inherent in international trade?

Risk of non-payment, fraud, or delivery disputes (correct)
Risk of changes in import regulations
Risk of currency fluctuations
Risk of overproduction

What does the term 'irrevocable' mean in the context of a documentary credit?

That the credit cannot be canceled or altered once issued without consent of all parties involved (C) Signup and view all the answers

What is the 'expiry date for presentation' in relation to documentary credit?

The final date by which the required documents must be presented to the bank (C) Signup and view all the answers

If the shipment date is October 1st, what is the deadline for presenting original transport documents, according to the provided text?

October 22nd (A) Signup and view all the answers

What is the primary role of documentation within international trade?

To facilitate trade by ensuring security, trust, and compliance (C) Signup and view all the answers

According to the information provided, which of the following is crucial to have in relation to the expiry date of the documentary credit?

Presentations cannot occur after the expiry date of the documentary credit (A) Signup and view all the answers

A seller may want to obtain short-term financing for the transaction via the documentary credit in order to do what?

To facilitate the commercial transaction (A) Signup and view all the answers

In a documentary collection, what serves as the verification that the terms agreed upon by buyer and seller have been fulfilled?

The exchange of documents such as invoices, bills of lading, and quality certificates (C) Signup and view all the answers

What does the term 'acceptance' mean in the context of documentary collection?

The agreement from the importer to pay at a future time, with the presentation of a bill of exchange or promissory note (A) Signup and view all the answers

Which function is NOT a responsibility of the bank in documentary collection?

Guaranteeing a successful outcome for the collection process (B) Signup and view all the answers

In documentary collection, what is the significance of documents acting as 'proof of ownership and transfer'?

They act as the only proof for ownership of the goods and the conditions under which the transfer was made. (C) Signup and view all the answers

What is the main difference between a simple documentary collection and an acceptance documentary collection?

Simple documentary collections involve immediate payment, while acceptance (D/A) collections involve payment at a later date. (A) Signup and view all the answers

Within a documentary collection system, what happens explicitly when there is no payment or acceptance of the documents?

There is no indication of what might happen in this case, according to the content given. (C) Signup and view all the answers

What distinguishes an 'acceptance with bank guarantee' from a simple acceptance (D/A) in documentary collection?

An 'acceptance with bank guarantee' includes a bank guarantee ensuring future payment, while simple acceptance does not. (A) Signup and view all the answers

Flashcards

Documentary Credit

The issuing bank's commitment to pay the seller for compliant documents, regardless of any buyer issues.

Non-Payment Risk

The risk that a buyer might not pay for the goods, or may try to deceive the seller about the transaction.