Export Credit & Letters of Credit Flashcards
7 cards from real CCP practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.
Read the first 7 Export Credit & Letters of Credit flashcards as text
A revolving letter of credit is most suitable for transactions involving:
Answer: Repetitive shipments of goods to the same buyer
A revolving LC automatically reinstates its value after each drawing, making it efficient for ongoing supply relationships with regular shipments.
Under UCP 600, an LC that does not state whether it is revocable or irrevocable is treated as:
Answer: Irrevocable
UCP 600 Article 3 eliminated revocable LCs; all LCs subject to UCP 600 are deemed irrevocable unless explicitly stated otherwise.
The 'tenor' of a letter of credit refers to:
Answer: The credit period or maturity of a time draft or deferred payment
Tenor specifies when payment under a time LC is due, such as '90 days after bill of lading date,' defining the deferred payment period.
Which of the following best describes a standby letter of credit?
Answer: A secondary payment mechanism triggered only if the applicant defaults
A standby LC functions like a performance bond or guarantee; it is drawn upon only if the primary obligor fails to fulfill their obligation.
When an exporter 'discounts' a time draft accepted under a letter of credit, the exporter is:
Answer: Selling the accepted draft to a bank in exchange for immediate cash at a discount
Discounting a banker's acceptance allows the exporter to monetize a deferred payment instrument immediately by selling it at a discount reflecting the time value of money.
Which organization publishes the Uniform Rules for Collections (URC 522) governing documentary collections?
Answer: International Chamber of Commerce (ICC)
The ICC publishes URC 522, which governs the handling of documents by banks for collection purposes in international trade.
In a 'Documents Against Acceptance' (D/A) collection, the buyer receives the shipping documents when they:
Answer: Accept a time draft committing to pay at a future date
Under D/A terms, the collecting bank releases documents to the buyer upon the buyer's acceptance of the time draft, creating a binding payment obligation.