40 Questions
What type of credit is restored to its original amount after it has been utilized?
Revolving Credit
What is the primary purpose of a confirming bank in a confirmed documentary credit?
To provide an additional undertaking
What type of credit can be transferred by the original beneficiary to one or more subsequent beneficiaries?
Transferable Credit
What is the purpose of a back-to-back credit?
To secure an export credit
What is the term for a credit that has been made available by the transferring bank to a second beneficiary?
Transferred Credit
In a revolving credit, what can revolve?
Both the value and time
What is the characteristic of a confirmed documentary credit?
It has double undertakings
What type of credit is used when parties wish to arrange for a regular and repeated transaction?
Revolving Credit
What is the primary arrangement in open account terms between the buyer and seller?
The goods are manufactured and delivered before payment is required
In which situation do sellers typically have more bargaining power?
Cash in advance
What is the primary purpose of a standby LC?
To serve as a demand guarantee or international bank guarantee
What is the role of banks in open account and cash in advance transactions?
Banks are involved, but only to a limited extent
What is the primary benefit of using a documentary credit (LC) in international trade?
It substantially reduces risks for both exporter and importer
What is the primary difference between a standby LC and an international bank guarantee?
The structure of the guarantee
What is the primary role of banks in documentary credit (LC) transactions?
To offer payment, financing, and risk management services to clients
What is the primary purpose of international guarantees?
To serve several purposes, from an indefinite range of payment, performance, or non-performance
What is the main purpose of a consular invoice?
To authenticate the particulars of the goods
What is a legalized invoice?
An invoice authenticated by the embassy or consulate
What is the purpose of a certified invoice?
To confirm that the goods are as specified in the contract
What is a tax invoice used for?
To show the amount of tax payable
What is the primary function of transport documents?
To give proof of shipment/carriage of goods
What information should a full-fledged transport document carry?
Certain information noted in box 1.1
What is the role of a transport document in a shipment?
To serve as evidence of contract for the carriage of the goods
What is the relationship between the shipper and the carrier according to a transport document?
They have a contractual agreement for the carriage of the goods
What is the main benefit of the URBPO?
It enables banks to offer flexible risk mitigation and enhanced financing services
What is the purpose of the ICC DOCDEX Rules?
To provide parties with a specific dispute resolution procedure
What is the ICC Court?
A leading international arbitration institution
What is the result of the joint effort between ICC and the International Forfaiting Association (IFA)?
The Uniform Rules for Forfaiting (URF 800)
What is the purpose of the General Rules for International Factoring (GRIF)?
To govern transactions amongst FCI members
When did the new version of DOCDEX rules come into effect?
May 1, 2015
What is the Uniform Rules for Forfaiting (URF 800)?
Details how forfaiting facilitates the provision of finance to the international trade community
What is the main difference between receivables finance and lending?
Receivables finance involves the sale of an invoice, whereas lending is a borrowing arrangement
What is the subject of much discussion over the years?
International carriage of goods
What is the main characteristic of forfaiting?
It involves the purchase of future payment obligations on a 'without recourse' basis
What is the main purpose of loan or advance against receivables?
To bridge the liquidity gap until the receipt of funds from receivables
What is the main difference between loan or advance against receivables and loan or advance against inventory?
The first is for financing the sale of goods, while the second is for financing the holding of goods
What is the main purpose of distributor finance?
To provide financing for a distributor of a large manufacturer to cover the holding of goods for re-sale
What is the main characteristic of pre-shipment finance?
It is a credit extended to exporters prior to the shipment of goods
What is the main difference between recourse and non-recourse factoring?
The first involves the seller taking on the risk of non-payment, while the second involves the factor taking on the risk of non-payment
What is the main benefit of receivables finance?
It unlocks the cash that is owed to a business by selling its invoice
Learn about the different types of commercial letter of credit, including revolving credit, and how they are used in international trade.
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