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Questions and Answers
What is the primary purpose of the URC522 document?
What is the primary purpose of the URC522 document?
- To serve as a payment mandate
- To outline letter of credit rules
- To facilitate documentary collection (correct)
- To provide financial guarantees
Which document governs the rules of letter of credit transactions?
Which document governs the rules of letter of credit transactions?
- URC522
- UCP600 (correct)
- ICC Rules
- ISBP
How is a letter of credit defined?
How is a letter of credit defined?
- A guarantee of funds by the seller
- A payment commitment from the buyer
- A temporary financial agreement
- An irrevocable payment undertaking by the advising bank (correct)
What does ISBP stand for in the context of letter of credit transactions?
What does ISBP stand for in the context of letter of credit transactions?
Which of the following statements about the documentary collection is true?
Which of the following statements about the documentary collection is true?
What is the minimum insurance requirement for shipped goods?
What is the minimum insurance requirement for shipped goods?
Which of the following is NOT one of the four terms related to waterway transport?
Which of the following is NOT one of the four terms related to waterway transport?
How many Inco terms are established as of 2020?
How many Inco terms are established as of 2020?
Which of the following terms is related to delivery at the manufacturer's door?
Which of the following terms is related to delivery at the manufacturer's door?
What aspect is crucial when determining the total insurance value for shipped goods?
What aspect is crucial when determining the total insurance value for shipped goods?
What does SWIFT stand for?
What does SWIFT stand for?
What does the term DP refer to in trade finance?
What does the term DP refer to in trade finance?
Which of the following best describes DA in the context of trade finance?
Which of the following best describes DA in the context of trade finance?
What is the primary function of URC522 in international trade?
What is the primary function of URC522 in international trade?
Which statement accurately differentiates between DP and DA?
Which statement accurately differentiates between DP and DA?
What does CFR indicate regarding shipping responsibilities?
What does CFR indicate regarding shipping responsibilities?
What is the primary difference between CFR and CPT in shipping terms?
What is the primary difference between CFR and CPT in shipping terms?
Under CIP shipping terms, who is responsible for unloading at the destination?
Under CIP shipping terms, who is responsible for unloading at the destination?
Which statement accurately describes the seller's obligations under CIF terms?
Which statement accurately describes the seller's obligations under CIF terms?
What does the term 'delivery at the agreed place' refer to in CPT?
What does the term 'delivery at the agreed place' refer to in CPT?
What does DAP stand for in delivery terms?
What does DAP stand for in delivery terms?
Under DAP terms, who bears the risk until delivery?
Under DAP terms, who bears the risk until delivery?
What additional responsibilities does the seller have under DPP terms?
What additional responsibilities does the seller have under DPP terms?
Which organization is associated with defining international commerce terms?
Which organization is associated with defining international commerce terms?
What does the 'max risk on seller' phrase indicate?
What does the 'max risk on seller' phrase indicate?
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Study Notes
Documentary Collections
- URC522 is a set of rules for documentary collections issued by the International Chamber of Commerce (ICC).
- Documentary collections involve transferring documents against payment (DP) or acceptance (DA).
Letter of Credit (LoC)
- Governed by UCP600 (Uniform Customs and Practice for Documentary Credits) and ISBP (International Standard Banking Practice).
- A letter of credit represents an irrevocable payment commitment from the advising bank to the beneficiary.
Insurance Requirements
- Minimum insurance coverage required is 110% of the total value of shipped goods.
Incoterms 2020
- There are 11 Incoterms outlined in the 2020 update which guide international trade.
- Key terms for waterway transport include FAS (Free Alongside Ship), FOB (Free On Board), CFR (Cost and Freight), and CIF (Cost, Insurance, and Freight).
Specific Incoterms
- CFR: Seller pays for shipping and insurance, the buyer assumes risks.
- CIF: Seller covers shipping and insurance costs for goods transported by sea.
- CPT (Carriage Paid To): Seller pays for freight to a specified destination, but not responsible for insurance.
- CIP (Carriage and Insurance Paid To): Seller pays for both freight and insurance to a specified destination.
- DPU (Delivered at Place Unloaded): Seller responsible for delivery and unloading goods at the agreed place.
- DAP (Delivered at Place): Seller delivers goods ready for unloading at the buyer's location; maximum risk (including taxes) borne by the seller.
- DPP (Delivered Duty Paid): Seller assumes full responsibility for shipping, duties, taxes, and unloading at buyer’s location.
Key Organizations
- ICC: International Chamber of Commerce.
- SWIFT: Society for Worldwide Interbank Financial Telecommunications.
- Documentary against payment (DP): Cash against documents process.
- Documentary against acceptance (DA): Deferred payment method.
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