CDCS Study Guide 2006

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Contents page

Certified DocumentaryCredit Specialist(CDCS)Study Guide

Institute of Financial Services

IFS House, 4-9 Burgate LaneCanterbury, Kent CT1 2XJUnited Kingdom

Telephone: (+44) (0) 1227 762600Fax: (+44) (0) 1227 763788

International Financial Services Association

9 Sylvan Way, Suite 130Parsippany, New Jersey 07054USA

Telephone (973) 656-1900Fax: (973) 656-1915http:/www.ifsaonline.org

The ifs is the official brand of The Chartered Institute of Bankers, a registered charity.


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Apart from any fair dealing for the purpose of research or private study, or criticismor review, as permitted under the Copyright, Designs and Patents Act 1988, thispublication may be reproduced, stored or transmitted, in any form or by any means,only with the prior permission in writing of the publisher, or in the case of reprographicreproduction in accordance with the terms and licences issued by the CopyrightLicensing Agency. Enquiries concerning reproduction outside those terms should beaddressed to the publishers agents at the address below:

Institute of Financial ServicesIFS House4-9 Burgate LaneCanterburyKentCT1 2XJ

T 01227 818649F 01227 479641E [email protected]

The Chartered Institute of Bankers believes that the sources of information uponwhich the book is based are reliable and has made every effort to ensure thecomplete accuracy of the text. However, neither CIB, the authors nor anycontributor can accept any legal responsibility whatsoever for consequences thatmay arise from errors or omissions or any opinion or advice given.

Typeset by Kevin OConnorPrinted in China through Printworks Int Ltd

The Chartered Institute of Bankers 2004, with the exception of North andSouth America wherein copyright lies with the International Financial Services

Association 2004

School of Finance


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September 2004

Dear CDCS Candidate

Welcome. You made a significant commitment to your career when you registeredfor the CDCS examination. This Self-Study Guide has been prepared with your successin mind. It will help you make the transition from the CDCS Content Outline andthe Study Text; in addition, it will outline a variety of study techniques for yourconsideration.

The text for the CDCS examination has been updated and revised and published asThe Guide to Documentary Credits: second edition. There are changes to the ContentOutline, including the rules, as well as updating to the general text. It is importantthat you study the second edition as you prepare for the examination. The text andContent Outline contain two new regulations that are covered in the Signpost articlereproduced at the end of Section 2 in this guide.

If it has been a few years since you last studied for an examination, a review of thispublication will help you identify the areas you will find helpful as you develop yourindividual study plan. Experiment to find out what suits you best.

The CDCS examination is based on a Job Analysis Study that identified the knowledgeand skills required for competent practice in the field of Documentary Credits.TheContent Outline details the results of the survey and the Study Text is based ontheContent Outline. You can build on the information and experience you have, as yo

uare involved with Documentary Credit practice.

As you can see from the Table of Contents there are many different areas that willbe of assistance to you as you prepare to study for the CDCS examination; not allmay apply to you. Your first step will be to identify those sections that you want toinclude in your study plan.

Sections 2 and 3 contain the CDCS Content Outline and Examination Specifications.

These two documents are the basis for the CDCS examination and should be reviewedin depth.

The CDCS examination is an opportunity for you to demonstrate what you knowand your skills as a Documentary Credit Specialist. We wish you success in yourpreparation for the examination.

There are several products that will assist you as you prepare for the CDCSexamination:


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Xthe Study Text is the basic reference for the examination; all multiple-choicequestions are documented to this text;


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XCDCS calculator: in the US a CDCS calculator will be mailed with your admissionticket. It will be provided on the examination day at CIB centers. Becomefamiliar with the CDCS calculator, as it is the only calculator allowed at theexamination centers;

XCDCS website (www.cdcs.org): information will be posted on the website as itbecomes available. This will be a source of continuing help to you as you preparefor the examination.

Gavin Shreeve Dan Taylor

Chief Executive President

Institute of Financial Services International Financial Services Association


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Contents page of The Guide to Documentary Credits

Table of Contents

.

.....Introduction

.

.....Section l:CDCS Study Text......Section 2: CDCS Content OutlineCDCS Signpost Article......Section 3: CDCS Examination Specifications......Section 4: Self-assessment Tool......Section 5: Key Terms......Section 6: Planning Your StudyStudy Plan.

.....Section 7: Keys to Studying for Success.

.....Section 8: CDCS Study Groups

.

.....Section 9: Multiple-choice Question Formats

.

.....Section 10: Simulation Exercises

.

.....Section 11: Tips for Answering Multiple-choice Questions

.

.....Section 12: Pre-examination Check List

.

.....Section 13: Sample Answer Sheet

......Section 14: Sample Test

.

.....Section 15: Scoring the Examination

.

.....Section 16: Answers to Sample Test

.

.....Section 17: CDCS Website


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Contents page

Introduction

Volunteers Associated with the CDCS Project

The Certified Documentary Credit Specialist (CDCS) credential is a peer-reviewproject that includes volunteers in each segment of its development. It is a jointproject of the Chartered Institute of Bankers (CIB) in the UK, and the InternationalFinancial Services Association (IFSA) in the US and is endorsed by the InternationalChamber of Commerce (ICC). There are several volunteer-intensive phases of theproject and they include:

XJob Analysis Study: volunteers identified the major responsibilities of aDocumentary Credit Specialist. They also detailed the knowledge and experiencerequired to meet these responsibilities competently. The Job Analysis Studyserves as the basis of the CDCS Content Outline and the ExaminationSpecifications;

XStudy Text: The Guide to Documentary Credits: second edition is the referencetext for the CDCS examination. It is based on the Content Outline and wasreviewed by volunteers who served as topic experts;

XTest Development: volunteers who write, review and revise the questionsdevelop the CDCS examination. This is a very intensive responsibility and thecommittee meets annually to prepare for each examination administration.


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CDCS Program Volunteers

Maria Adamczyk, CDCS Chase Manhattan BankLowell Campbell, CDCS Chase BankSteve Cooke, CDCS Standard Chartered BankBarbara Lotrionte, CDCS Fleet Bank of MassachusettsDavid Morrish, CDCS Lloyds TSB Bank plcRita Nielsen, CDCS -Wells Fargo HSBC Trade BankTineke Overvliet, CDCS DHB BankVictor Pena, CDCS CiticorpSteve Thompson, CDCS - Standard Chartered BankGareth Watts, CDCS JP Morgan Chase BankCharnell Patrick Williams, CDCS CiticorpPaul Williamson, CDCS JP Morgan Chase Bank

8


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Contents page

Section 1

CDCS Study Text

The Study Text for the CDCS examination is The Guide to Documentary Credits:second edition by Steve Berrisford, CDCS.

The text was reviewed by ifs and IFSA volunteers and produced by the CIB and IFSA.The Study Text is intended to assist CDCS candidates prepare for the examination.The text is based on the CDCS Content Outline (see Section 2); the Content Outlinedetails the knowledge and skills identified in a Job Analysis Study as necessaryto fulfillthe major responsibilities of a Documentary Credit practitioner. A thoroughunderstanding of the topics covered in the CDCS Content Outline should result insuccess on the CDCS examination.

Examination questions in the first section of the examination are referenced to

theStudy Text. Questions in the Simulation portion of the examination are based ontheanalysis and application of the information in the Study Text to actual situations.

Contents pageNext section


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Contents pagePrevious section

Section 2

CDCS Content Outline Summary

A.Documentary Credit Groups1 Types and Uses of Documentary Credits2 Parties to the Credit: Roles, Responsibilities and Risks3 Types of PaymentB.Characteristics of Documentary Credits1 Primary Characteristics2 Specialty CharacteristicsC.Operations1 Processes2 Related Products/TermsD.Financial and Commercial Documents

E.RulesCDCS Content Outline

A.Documentary Credit Groups1Types and Uses of Documentary Creditsa Commercialb Standby

2

Parties to the Credit: Roles, Responsibilities and Risksa Required Parties

(1) Issuing Bank(2) Beneficiaryb Applicant


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The purpose of this article is to raise the awareness of the need for students toinclude these topics in their study and revision schedules, and to set out someof thekey points relating to this new subject matter.

ISBP

Candidates studying for the examination will be familiar with the following extractfrom UCP 500 article 13a:

Compliance of the stipulated documents on their face with the terms

and conditions of the Credit shall be determined by international

standard banking practice as reflected in these Articles.

In order to provide amplification and improve consistency in application of internationalstandard banking practice in 2004 the ICC Banking Commission published the

International Standard Banking Practice for the Examination of Documents underDocumentary Credits (ISBP). This document explains how practices articulated inUCP500 are to be applied by Documentary Credit practitioners, and is consistentwith the Opinions and Decisions of the Banking Commission.

CDCS candidates will need to study the content of the 200 numbered paragraphsthat make up ISBP. These are structured as follows:Xpreliminary considerations that relate to the application and issuance of credits(paragraphs 1 to 5);Xgeneral principles that are not specific to any one article of UCP 500 or any on

edocument (paragraphs 6 to 44);Xpractices that are clearly linked to a named type of document

drafts (paragraphs 45 to 58); invoices (paragraphs 59 to 72); transport documents (paragraphs 73 to 182); insurance documents (paragraphs 183 to 195); certificates of origin (paragraphs 196 to 200).eUCP

As we reached the end of the 20th century it was recognized by the ICC Banking

Commission that the global trading community using Documentary Credits werebeing presented with an increasing range of potential electronic solutions for thepreparation and transmission of documentation. As a consequence of this it followedthat there was a need to expand the reach of UCP 500 to provide it with theflexibility not only to cater for traditional paper documentation transactions but alsofor dematerialized documentation transactions transmitted electronically. At midnight


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provisions with respect to paper documents (eUCP article e3(a) for example); provisions of the eUCP that differ from the treatment of paper documentsunder UCP 500 but only relate to an electronic record so that there is nochange to the provisions of UCP 500 as to paper documents under an eUCPCredit (eUCP articles 11 and 12 for example); provisions of the eUCP that change the UCP 500 rule where the Credit issubject to eUCP and that are applicable whether or not they apply to anelectronic record or a paper document presented under an eUCP Credit(eUCP articles e2(a), e5(c) and (e), e7(a) and (b), and e8 for example).


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XCredits issued subject to eUCP are automatically subject to UCP 500 withoutspecific reference.XUnder a Credit issued subject to eUCP its provisions prevail over those of UCP500 in the event of their application providing different results.

To further assist in the study of eUCP rules the Guide to understanding the electronicsupplement to the UCP 500, ICC publication no. 639 is recommended reading.



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Contents pagePrevious sectionContents pagePrevious sectionSection 4

Self-assessment Tool

1.This simple self-assessment tool will assist you in identifying the areas of theContent Outline that will require more study.2.Plan to set aside adequate time to review each item on the Content Outlineand determine if the topic will require Review or Study.XReview indicates familiarity with the topic. You feel you understand andcan explain the concepts and ideas in the section.XStudy indicates you will require a more thorough study of the topic inorder to understand and explain the concepts and ideas in the section.

Review Study

Section A Documentary Credit Groups1. Types and Uses of Documentary Creditsa. Commercialb. Standby2. Parties to the Credit: Roles, Responsibilities and Risksa. Required Parties(1) Issuing Bank(2) Beneficiaryb. Applicantc. Banks Roles and Obligations(1) Issuing Bank


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Review Study(2) Confirming Bank(3) Advising Bank(4) Negotiating Bank(5) Paying Bank(6) Accepting Bank(7) Reimbursing Banka. Types of Risk(1) Operational/UCP 500(2) Credit(3) Foreign Exchange(4) Fraud(5) Legal(6) Political2. Types of Paymenta. Sightb. Deferredc. Negotiationd. AcceptanceSection B Characteristics of Documentary Credits1. Primary Characteristics

a. Revocableb. Irrevocable2. Specialty Characteristicsa. Revolving(1) Cumulative vs Non-cumulative(2) Automatic vs Controlledb. Instalmentc. Advance Paymentsd. Transferable


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Self-assessment tool

Review Studye. Evergreenf. Cleang. Direct PaySection C Operations1. Processes(1) Issue(2) Pre-advise(3) Advise(4) Confirm(5) Amend(6) Transfer(7) Present(8) Examine(9) Pay/Reject(10) Claim(11) Reimburse Funds(12) Cancel2. Related Products/Terms(1) Letter of Indemnity(2) Air Way Release

(3) Steamship Guarantee(4) Assignment of Proceeds(5) Participation and Syndication(6) Trade-related IncotermsSection D Financial and Commercial Documents1. Draft/Bill of Exchange2. Commercial Invoice3. Ocean/Marine/Port-to-port Bill of Lading4. Non-negotiable Sea Waybill


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Review Study5. Charter Party Bill of Lading6. Multi-modal Transport Document7. Air Transport Document8. Road, Rail or Inland Waterway Transport Document7. Forwarders Cargo Receipt, Mates Receipt andConsolidators Receipt8. Post Receipt or Certificate of Posting9. Courier or Expedited Delivery Service Document10. Insurance Document11. Weight Certificate12. Certificate of Origin13. Packing Lists14. Inspection Certificate15. Other DocumentsSection E Rules1. UCP 500 Uniform Customs and Practices forDocumentary Credits2. ISP98 International Standby Practices3. URR 525 Uniform Rules for Bank-to-bankReimbursements under Documentary Credits

4. UCP500 sub article 20(b) Decision on OriginalDocuments5. ICC Position Papers 1 46. ISBP International Standard Banking Practicefor the Examination of Documents underDocumentary Credits7. eUCP Supplement to UCP500 for ElectronicPresentations



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Section 5

Key Terms

Key terms have been identified to assist you as you review the text. They are astarting point and you may find it helpful to develop your own glossary of terms.

Chapter 1

XAcceptance

XAdvising Bank

XApplicant

XBeneficiary

XComplied with

XConfirming Bank

XCounters

X

Drafts

XIrrevocable undertaking

XIssuing Bank

XNegotiation

XNominated Bank

XPayment

XStipulated documents

Chapter 2

X


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Arbitrator

XDeferred payment

XDelivery obligation

XGood faith

XLegally enforceable


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XMethod of paymentXPerformanceXTrade terms

Chapter 3

XAmendmentXAuthenticateXDiscrepanciesXFreely negotiableXMiddlemanXPartial drawingsX

Partial shipmentXReimburseXReinstatedXRevocableXSubstitutionXTransferableXTransferring Bank

Chapter 4

XComplianceXCorrespondent BankXDisclaimerXExpiry dateX

FacilityXPresentation of documentsXRespondXWithout recourse

Chapter 5


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XDown loadedXOperational guidelinesXWorkability

Chapter 6

XAgentXCarrierXCharter partyXClean transport documentXConsigneeXConsignor

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Key terms

XDate of shipmentXDocuments of titleXEndorsedXFreight forwarderXFreight payableXFreight prepaidXFull setXIndemnityXIntended vesselXLoading on BoardX

Marked as OriginalXMasterXMultimodalXNegotiabilityXNon-documentary conditionsXNon-negotiableXNotation

XOn DeckXOn its FaceXPlace of deliveryXPort of dischargeXPort of loadingXReceived for shipmentX

Roll on Roll offXShipper load and countXTaking in chargeXTranshipment

Chapter 7


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XAll risksXAssigned by transfer or endorsementXCertificatesXDate of issuance of insurance documentXDescription of goodsXFixed and determinable future timeXLicenseXMinimum coverXUnconditional order in writing

Chapter 8

XAssignment of proceeds

XCommon sense


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XConfirmation instructionsXCredit riskXDiscrepant documentsXForce majeureXFreely negotiableXGood judgmentXHonoring obligationsXInconsistent with one anotherXNotice of refusalXPeriod for presentationX

Reasonable careXReasonable timeXReimbursing BankXRole of the checker

Chapter 9

XBank to Bank Reimbursements

XReimbursement amendmentsXReimbursement authorizationXReimbursement claimXReimbursement instructionsXReimbursement undertakings

Chapter 10

XConversionXCounter indemnitiesXDelivery ordersXGuaranteeX


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Letter of IndemnityXSyndication

Chapter 11

XFraud riskXLegal risksXRisks for the applicantXRisks to the beneficiaryXRisks to the Advising BankXRisks to the Issuing BankXRisks to the Nominated BankXSovereign and regulatory risks


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Section 6

Planning Your Study

Tips from successful certification examination candidates

XYour objective should be to arrive at the examination secure in the knowledgethat, through a well planned course of study and your practical experience, youare in as strong a position as possible to be successful.

XDraft a study schedule/timeframe based on your objectives and a realistic viewof your time available for study and preparation.

XReview the CDCS Content Outline and Examination Specifications (Sections 2and 3) and identify the areas with which you are familiar and require review and

the areas that are new and will require in-depth study.

XDiscuss your objectives and study plan with a colleague or mentor who is willingto discuss the examination materials with you and assist you during your studyphase.

Study Techniques

Using your experience, think about study techniques that have helped you in thepast and any others you may have come across. How do you learn something new onthe job?

Some ideas you may want to consider include:Xsummarize the main ideas in the text;Xwrite study questions for self-testing based on materials in the text;Xuse the key terms to identify not only definitions but use them for review;Xidentify/flag key words, terms and concepts you do not understand or that arenew to you;


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Xprepare flash cards to capture key terms, definitions, exhibits and other material

that you have identified for additional study;Xwork with a partner or study group to teach and test each other;Xtest yourself frequently. What do I know? Do not spend time studying what you

know. Use what you know for review at the end of the study process;Xwhat is troublesome? Identify someone to help you understand sections you donot know and find difficult;

Xuse the resources available through CIB and IFSA: check the website(www.cdcs.org) for the CDCS Forum, a listing of review/revision courses andother examination-related information;

X

note questions to ask others with more experience or members of your studygroup.

Develop a Study Plan

Once you have considered the different study options available to you, it is stillimportant to draft a study schedule/timeframe based on your objectives and a realisticview of your time for study and preparation. Your study plan should reflect yourindividual preferences and methods of working. It is important to remember thata

study plan is a flexible document and is both an indicator of where you are andwhereyou want to be.

The first step you should take is to determine your personal study objectives basedon the Content Outline and Study Text.XYou may find it helpful to write out your objectives and post them in a visiblelocation.

XAdvance planning will provide multiple benefits as you prepare for the CDCS

examination. It will not require much time to develop a study plan, but doing sowill establish your priorities. The most important part of a study plan is to identifyhow, when and where you want to study.

XBy reviewing the CDCS Content Outline and Examination Specifications (Sections2 and 3), you will be able to identify the areas with which you are familiar; those


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you wish to review in detail, and those that are new to you and need in-depthstudy.

XYou will now be in a position to develop an overall study plan with specifictimelines. In drawing up your plan, you may find the following useful:

prepare a study schedule be realistic. Space your studying and allow ampletime for review; keep a copy of the CDCS Content Outline in a prominent place as you willrefer to it often; make the best of your environment. Some individuals prefer to study in aquiet place, while others prefer working with the radio or television on in thebackground. Whatever your preference, you can usually create theenvironment you want for your study session;


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Planning your study

be prepared to study in free moments, whenever you can. This meansidentifying times that are available to you for study, such as travel time, standingin lines and queues, waiting for a meeting to start, etc.Summary

Relax while studying. The CDCS examination is an opportunity for you to learn andto demonstrate your knowledge and ability. Maintain a positive attitude that youwillbe successful on the examination and will allocate the resources required to ensuresuccess.

Do not worry about how much time is left before the examination. You have plannedadequately to allow for the maximum use of your time.

Take breaks, exercise. Keep your body and mind relaxed.

A sample Study Plan is shown on the next page you may wish to reproduce it to

assist you in your preparation for the examination.


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Study plan

Content Outline Topic Page Reference CompletedContents pageNext section


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Section 7

Keys to Studying for Success

As adults we know that we learn in a variety of ways that differ significantly from theways we learned as children. As you read the Study Text you will be able to comparethe information with your own experience and knowledge. You can use the informationyou are studying in several ways:

Xif this is information you already know, the materials will reinforce yourknowledge;Xif the information is new to you, you can relate it to your own experience andconsider how the information can be used in your job;X

each chapter has objectives and study questions that will assist you as you focuson the key elements within a chapter;Xuse your memory effectively:

frequent recall and use: build regular reviews into your study sessions. Beselective about what you need to recall use key terms and facts; indicate significance: make the information you need to recall stand out byemphasizing it; link the information to your experience; use mnemonics; link to other items: link information to your own experience; look for patternsand relationships among the items; compare and contrast information; regular review: plan regular review of key points; end a session by summarizing

what you have studied;Xgetting started can be difficult: starting a session with a brief review of theprevious session may be helpful;Xif you are not feeling motivated, consider why you started this study in the firstplace and think about what the CDCS credential will enable you to do;Xbuild in rewards at the end of study sessions; at the completion of apredetermined number of study sessions; and when you have completed yourstudy;


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Xit is important to think positively during your preparation period. If you do notfeel comfortable about your memory, monitor your progress. You will be pleasedat how much you can recall;

Xthere are no trick questions. As you take and study the sample test, you will seehow straightforward the questions are;

Xthe answers to all multiple-choice questions have been documented to the StudyText.

Successful students offer the following advice on planningyour study and preparation for the CDCS examination

.To develop my study plan, I reviewed the syllabus and study materials. ThenI divided the Study Text and the study topics into the number of weeks

before the exam, allowing time for review..Design your plan with short study sessions (about 45 minutes) on a regularbasis. This builds a study habit and makes it easier to stick to your plan..When planning your schedule or timetable of study, always build in extratime for contingencies, time off and relaxation and fun. There is nothingworse than feeling like a prisoner of the examination preparation process.If you build in extra study sessions, you can afford to be flexible and remainin control of your time..Plan to revise your study schedule as you go along..

Tell your family, friends and colleagues what you are doing. They will thenknow what to expect of your schedule and be more supportive..Take charge of your own studies. Spend time getting to know the structureand layout of the materials. Monitor your study progress against your planand make adjustments as needed. Expect success if you put the effortin, you will pass.At the Examination Site

1.Plan to arrive at least 30 minutes early, as identification will be checked prior to

your being allowed into the examination room.

2.The examination will start promptly.

3.You will be allowed a full three hours to take the examination.

4.Read all instructions carefully.

5.Pace yourself: the examination has been written to allow approximately 1

hours for each part of the CDCS examination.


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Section 8

CDCS Study Groups

There is a great deal of benefit to studying with others. Conference calls, email andthe internet provide access to your colleagues preparing for the CDCS examination.Usually two types of information are shared in study groups:

Xtopic information from the Study Text;Xinformal study tips, support and general assistance.

There are several ways to form study groups; most candidates preparing for othercertification examinations prefer the following two:

XLocal Study Group: if there are others in your bank or city preparing for theexamination that is your first and probably best option;

XElectronic Study Group: identify others preparing for the examination who arewilling to share ideas, information and provide support by phone, fax and/oremail.

All questions on the examination are referenced to the Study Text; it is very importantto use the Study Text as the sole reference. It should be supplemented by the Rules

outlined in Section E of the Content Outline.

Study Groups Tips

1.Select the format that meets the schedules within your group:Weekly usually meets for 1 1 hours per sessionSemi-monthly usually meets twice a month for 3-hour sessionsMonthly usually meets for 3 or 4 hours per sessionTwo days often 4 6 hours per dayThree days often 4 6 hours per day


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2.Determine the number and length of sessions.3.Determine the topic schedule: number of sessions on topic material andnumber of sessions focused on study tips etc.4. Determine how presentations will be made to the group:Xwill leadership rotate and each individual assume responsibility for certainsections of the Study Text, which they will prepare for the rest of thegroup?

Xwill you have experienced managers, supervisors or CDCSs from thebanks discuss the chapters in the Study Text?

5.Supplement the sessions with review of the Self-Study Guide.6.After individual or group review of a chapter, answer the questions at theend of each chapter. They are not in the examination format but highlightthe important information in each chapter.

7.Prepare test questions for other members of the group.8.Prepare glossary cards based on the terms in the Study Guide and other keyterms identified from the Study Text.Contents pageNext section


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Section 9

Multiple-choice Question Formats

Levels of multiple-choice questions

Section A of the CDCS examination is entirely multiple-choice questions. There arethree levels of questions based on the cognitive or thinking levels required tocorrectlyanswer a question.

XKnowledge (KN) questions are recall questions.

XApplication (AP) questions apply knowledge.

XAnalysis (AN), also called higher level thinking, questions require both knowledge

and application skills.

There are several standard formats for multiple-choice questions. Becoming familiarwith the various types will assist candidates as they prepare for the examination.

Sample Generic Questions

Correct answers are noted by an *

Recall/Knowledge: recall or knowledge questions recognize specific informationand facts that do not vary by situation. Such questions are predominantly an effort ofmemory and include the recall of specific facts, generalizations, concepts, theories,formulae and procedures. There will be 51 knowledge or recall questions on theexamination.


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XWhich of the following is a primary color?

A. purpleB. green* C. redD. orangeApplication: application questions require comprehension, interpretation, ormanipulation of concepts or data. They primarily test simple interpretations orapplications of limited data. Questions may require recognition of more than oneelement or concept and the ability to apply knowledge to a specific situation. Therewill be a total of 34 application questions on the examination.

XIf the time in London, using Greenwich Mean Time, is 7.30 pm, what timewill it be in New York, using Eastern Standard Time (EST)?

A. 12:30 amB. 1:30 am

C. 1:30 pm* D. 2:30 pmAnalysis: analysis questions require the integration or synthesis of a variety of conceptsand/or elements to solve a specific problem situation. Questions test the ability togather information, evaluate data and make decisions. Analysis questions often requirevalue judgments concerning the effectiveness, appropriateness or best course ofactionin a given situation. There will be five analysis questions on the examination.

X

If a flight taking off from London at 12:35 pm takes 6.5 hours to reach NewYork, what time will it land, using Eastern Standard Time (EST)?

A. 1:05 pm* B. 2:05 pmC. 12:35 amD. 1:05 amDirect or Closed Question: a complete question followed by four options; there isonly one correct answer to direct or closed questions.

XWho was the King of England in 1484?

A. George I* B. Richard IIIC. Edward IVD. Henry VOpen Question or Incomplete Sentence: an incomplete sentence with fouroptions; there is only one correct answer to incomplete sentence questions.

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Multiple-choice question formats

XConfederate Commander General Robert E. Lees horse was named

A. TriggerB. Silver* C. TravelerD. ChampionComplete Question that includes the phrase which of the following: usedwhen there is more than one correct answer to a question, but ONLY one of thecorrect answers is offered in the options.

XWhich of the following is a prime number?

* A.7B. 10C. 12D. 15Complex Multiple-choice: there may be more than one correct answer. Theresponse will include options.

XWhich of the following cities are capitals of their respective countries?

1. Paris2. Washington DC3. Chicago4. SydneyA. 4 only* B. l and 2 onlyC. l, 3 and 4 onlyD. 2, 3 and 4 onlyNegatively Worded or EXCEPT questions: three of the four options are correctand only one option is incorrect. There is only one answer for EXCEPT questions.

XAll of the following are primary colors EXCEPT

* A. orangeB. redC. blueD. greenKey Words LEAST, BEST, MOST: the question requires evaluation and theselection of the appropriate option.

X

Most color blind males inherit the gene from their

A. father* B. motherC. maternal grandmotherD. paternal grandfather39


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Situational Set: there is one answer to each question in situational sets. Theremaybe more than one question for each information set.XMichael has $100 to purchase clothes. Costs are: shirts, $20 each; sweaters$30 each; slacks $40 per pair; and socks $5 per pair.

1.If Michael purchased 1 pair of slacks and 1 sweater, how many shirts can hebuy with his remaining money?* A. 1B. 2C. 3D. 42.If Michael spent 40% of his money on socks, how many pairs did he purchase?A. 4B. 5* C.8D. l0Contents page

Next section

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Section 10

Simulation Exercises

Section B of the examination consists of FIVE analysis questions and SIX simulationexercises. The simulations test the information gathering and decision-making skillsof the candidate by requiring them to analyze the information provided and identifythe irregularities/discrepancies in the documents for each simulation.

XEach simulation exercise has five responses that equate to FIVE questions per

simulation.

XEach simulation will include samples of documents to review.

XThe content of each simulation is designed to reflect real work situations and to

be relevant to the responsibilities of Documentary Credit Specialists.

XThere will be a series of documents that the candidate must review prior to

answering the questions for each simulation.

Candidates are required to identify the FIVE correct discrepancies or irregulari

tiesfrom a checklist of a possible 15.



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Section 11

Tips for Answering Multiple-choiceQuestions

XIn multiple-choice questions the answer follows the question. There are fouroptions and only one is correct. Your task is to identify the correct answer fromthe plausible, but incorrect, distracter answers. The correct answer is called thekey and the other options are called distracters.

XRemember that all multiple-choice questions have the same format fouroptions but only one correct answer.

X

The correct answer is the best answer for each question.

XOnly correct answers are scored, so it is to your advantage to answer everyquestion.

XAnalyze what the question is asking.

XTry to answer the question before looking at the options. Then decide whichoption is closest to your answer and is the best option.

XIt is best to answer questions as you proceed through the test booklet.

XPlace question marks in the margin of your test booklet to indicate questionsthat require more time or you cannot answer. You can return to these questionswhen you have completed the other questions.

XAs you cannot bring extra paper into the examination room, it is helpful to writedirectly in your test booklet.

XBe careful of making pencil marks on the answer sheet. An Optical Mark Readermachine scores the answer sheet. It is very important to completely erase pencilmarkings if you change your mind. Do not make notes on the answer sheet.

XYou can waste valuable time and increase the opportunity for error if you markyour answers on the answer sheet individually. A preferred method is to circleyour answer in the test booklet and transfer your answers in blocks to the


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answer sheet. Test experts recommend transferring answers after completingeach page of questions.


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XThe more questions you answer, the better your chances of achieving a passingscore. For best results pace yourself, periodically checking your progress.

XIf you are near the end of the examination period, make your best guess at theunanswered questions by eliminating the incorrect/wrong options. You could getthe answer correct.

XRead all instructions carefully.



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Section 12

Pre-examination Checklist

The admission ticket or attendance notice will be received two weeksprior to examination.

Select the best route to the test center and identify parking options.Plan to arrive at the test center 30 minutes prior to the examination

start.

Plan on three full hours to complete the examination after instructions

by the test center supervisor.Bring your admission ticket and two forms of identification; one must bea picture ID.

Bring several HB/ #2 sharpened pencils; most test centers will not havepencil sharpeners.

Bring an eraser and watch as the test center may not have a clock.Do not bring food, beverages, extra paper, books, supplies, etc into theexamination room.

Do not bring electronic devices into the examination room. You will bedisqualified if a pager or phone rings.Become familiar with the answer sheet on pages 48-49.

Contents page

Next section


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Previous sectionSection 13

Sample Answer Sheet

XThe sample answer sheet on the next pages is for illustrative purposes only: thespatial layout for the CDCS examination will be slightly different, eg to allowforthe incorporation of the ifs/International Financial Services Association logos.

XThe instructions to candidates will be as follows:

use only HB/#2 pencil to complete this form; make sure that you mark your choice with a straight line; to amend an answer, THOROUGHLY erase and mark the appropriate box; mark ONE box only for each question; answer all 120 questions;

XRegistration No. your candidate number as advised to you on your attendanceletter/notice.XSession No. as advised on your attendance letter/notice.


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49Sample answer sheetContents pageNext section


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Section 14

Sample Test

Answers to the Sample Test are in Section 16 page 65

Part A Multiple-choice Questions

1.Which of the following clauses or notations appearing on the face of theTransport Document would preclude it from being accepted?A. Oil drums are leaking.B. Highly flammable material.C. Potentially explosive material.D. Refrigerated seafood, may spoil during voyage.2.An Issuing Bank becomes bound by the terms of an amendment to aDocumentary Credit at the time at which the:A. Beneficiary accepts the amendment whether expressly or by implication.

B. Reimbursing Bank agrees to the Applicants request for an amendment.C. Advising Bank advises the amendment to the Beneficiary.D. Issuing Bank issues the amendment to the Advising Bank.


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3.When an Advising Bank adds its confirmation to a Documentary Credit,which of the following risks has the Beneficiary mitigated?1. Issuing Bank.2. Foreign Exchange.3. Political.4. Fraud.A. 1 and 3 only.B. 1 and 4 only.C. 2 and 3 only.D. 2 and 4 only.4.A Beneficiary receives an Irrevocable Documentary Credit for which USD22,500 may be drawn during each month of the Documentary Credits one-year validity. The Documentary Credit also indicates that reinstatement ison a cumulative basis. Full monthly drawings were made during the first,second, fourth, fifth and seventh months and there have been no otherdrawings. In the last month of the Documentary Credits validity, theBeneficiary expects to make a final shipment. What is the maximum valueavailable for this final drawing?A. USD 112,500

B. USD 135,000C. USD 157,500D. USD 180,0005.Which of the following Incoterms is correctly described?Incoterm Insurance Doc. Transport Doc.

A. DDP Required marked Freight Paid.B. CFR Required marked Freight Collect.C. FOB Not required marked Freight Paid.D. FCA Not required marked Freight Collect.6.Prior to advising a Documentary Credit to the Beneficiary, the Advising Bank

is responsible for:A. effecting payment against conforming documents.B. checking the apparent authenticity of the Documentary Credit.C. notifying the Issuing Bank that the Documentary Credit is being advised.D. checking that the reimbursement method is effective?


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Sample test

7.A Documentary Credit states that shipment must be made on or about 27June. Which of the following shipment dates would be acceptable?1. 20 June2. 27 June3. 02 July4. 03 JulyA. 1 and 2 only.B. 1 and 4 only.C. 2 and 3 only.D. 3 and 4 only.8.If an Exporter is willing to release the shipping documents directly to theBuyer, but wishes to retain some guarantee of payment should the Buyer failto pay on the due date, which of the following Documentary Credits BESTsuits the Exporters needs?A. Transferable.B. Revolving.C. Standby.D. Evergreen.9.

Where a Documentary Credit includes a shipping schedule and an instalmentis NOT shipped within the stipulated period, which of the followingstatements concerning the Documentary Credit is correct?A. It continues to be available for that instalment only.B. It continues to be available for that and other instalments.C. It ceases to be available for that instalment only.D. It ceases to be available for that and other instalments.10. A Marine Bill of Lading acts as:1. an acknowledgement of receipt of the goods by the carrier.2. evidence of a contract of carriage.3. a document of title for the goods.4. evidence of the contract between the seller and the forwarding agent?A. 1 and 3 only.

B. 2 and 4 only.C. 1, 2 and 3 only.D. 2, 3 and 4 only.11.Which Documentary Credit enables a Beneficiary to obtain pre-shipmentfinancing without impacting his facility?A. Transferable.B. Red Clause.C. Irrevocable, payable at sight.D. Confirmed Irrevocable, payable at maturity.


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12.Which of the following percentages represents the minimum insured valueof goods on the insurance document unless otherwise stated in theDocumentary Credit where the CIF/CIP value can be determined?A. 100%.B. 105%.C. 110%.D. 115%.13.Documents are presented in accordance with the terms of an UnconfirmedDocumentary Credit payable at sight and the Nominated Bank chooses tonegotiate them. Which of the following statements best describes theNominated Banks actions?1. Make immediate payment to the Beneficiary.2. Effect payment on receipt of covering funds.3. Present documents to the Issuing Bank.4. Confirm sight to the Reimbursing Bank.A. 1 and 3 only.B. 1 and 4 only.C. 2 and 3 only.D. 2 and 4 only.

14.A Documentary Credit is received without a stipulation of whether partialshipments are allowed. Which of the following statements is applicable?A. They are allowed.B. Refer to the Issuing Bank.C. Refer to the Beneficiary.D. They are prohibited.15.When a bank confirms an Irrevocable Transferable Documentary Credit itassumes the credit risk of which party?A. The Applicant.B. The Issuing Bank.C. The First Beneficiary.

D. The Second Beneficiary16.When an Advising Bank has accepted a Time/Usance Draft under an AdvisedDocumentary Credit, they are responsible for effecting payment at maturitywhen:A. they have received funds from the Issuing Bank.B. they have received funds from the Reimbursing Bank.C. the draft is verified by the Applicant.D. the draft is presented by the Beneficiary.


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Sample test

17.Delivery of goods has been made to the buyer on 08 October. The relevantdocuments were presented in order, including a CMR dated 15 days prior todelivery. The Documentary Credit terms state that payment is to be effected30 days after shipment. On which date will payment be made? (There areNO bank holidays and Saturdays and Sundays are NOT banking days.)A. Friday 22 October.B. Monday 25 October.C. Friday 05 November.D. Monday 08 November.18.The Confirming Bank receives documents on Friday 02 April and finds themto be in order on 05 April. Tenor is 30 days after the Bill of Lading date. TheBill of Lading is dated 01 April, and the Confirming Bank agrees to pay theBeneficiary immediately. On what date would the Confirming Bank expectto receive funds from the Issuing Bank? (There are NO bank holidays andSaturdays and Sundays are NOT banking days.)A. 05 April.B. 12 April.C. 30 April.D. 03 May.

19.If an Applicant requests that the Documentary Credit expires for presentationat the Issuing Bank with drafts drawn on the Issuing Bank 90 days aftersight, how should the Documentary Credit be made available?A. By sight payment.B. By deferred payment.C. By acceptance.D. By negotiation.20.A Documentary Credit that will become available for presentation of shippingdocuments to the Issuing Bank only after it has received and approved aperformance guarantee is usually described as:A. Standby.

B. Revocable.C. Inoperative.D. Advance Payment.21.In accordance with UCP, what is the maximum number of banking days(inclusive of presentation date) that a Confirming Bank is allowed to refusethe documents?A. One.B. Three.C. Seven.D. Eight.


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22.What should an Advising Bank do if it receives a Documentary Credit fromthe Issuing Bank which includes the term Transmissible?A. Disregard the term.B. Seek clarification.C. Advise the Documentary Credit as transferable.D. Refuse to advise the Documentary Credit.23.A Documentary Credit calls for presentation of an Insurance Certificate.Which of the following insurance documents would be acceptable for CIFshipment where the invoice value is USD 75,000?1. Insurance Certificate for USD 82,500.2. Insurance Policy for USD 85,000.3. Insurance Declaration under Open Cover for USD 75,000.4. Insurance Certificate for USD 75,000.A. 1 and 2 only.B. 1 and 4 only.C. 2 and 3 only.D. 3 and 4 only.24.In accordance with UCP all the following statements relating to commercial

invoices under a non-transferable Documentary Credit are correct EXCEPTthe commercial invoices must:A. be manually signed by the Beneficiary.B. be made out in the name of the Applicant.C. appear to have been issued by the named Beneficiary.D. indicate the description of goods corresponding with the DocumentaryCredit.25.An Issuing Bank has issued a sight Documentary Credit to a Beneficiaryauthorizing a Nominated Bank to pay the Beneficiary for all documentspresented in accordance with the Documentary Credit terms and conditions.Upon receipt of complying documents drawn under the Documentary Creditdirect from the Beneficiary, the Issuing Bank should:

A. examine the documents and pay the Beneficiary.B. verify the documents and pay the Nominated Bank.C. return the documents to the Beneficiary for presentation to theNominated Bank.D. remit the documents to the Nominated Bank for examination.


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Sample test

26.Which party has the MOST responsibility to examine the terms and conditionsof a Documentary Credit against the sales agreement?A. Applicant.B.Beneficiary.C. Issuing Bank.D. Confirming Bank.27.Which of the following classification types BEST describes a Standby Creditthat is intended to be the primary means of payment?A.Bid bond.B.Direct pay.C. Performance.D. Advance payment.28.In the case of a Non-cumulative Revolving Documentary Credit available forUSD 10,000 per month and valid for six months, which of the followingstatements is correct?

1.The face value of the credit is USD 10,000.2.The face value of the credit is USD 60,000.3.The amount(s) not utilized in one month may be carried over to thenext.4.The total undertaking of the Issuing Bank is USD 60,000.A. 1 and 3 only.B.1 and 4 only.C. 2 and 3 only.

D. 2 and 4 only.29.A Confirming Bank examines documents under a Documentary Credit, whichrequires presentation of an Invoice, Certificate of Origin and an Ocean Billof Lading. The Documentary Credit also includes the following clause:Special condition all packages must be clearly marked with the country

of origin.Where the documents do NOT show that the packages have been markedin this way and are otherwise in order, the Confirming Bank should:

A.reject the documents and suggest to the Beneficiary that he present a

certificate evidencing that this condition has been complied with.B.reject the documents and suggest to the Beneficiary that the Certificateof Origin be amended to include the special condition.C. contact the Issuing Bank and withhold payment until clarification isreceived.D. ignore the special condition and honour the Beneficiarys presentation ofdocuments.


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30.Documents under a Documentary Credit are tendered at the counters ofthe Confirming Bank and are mistakenly found to comply with its terms andconditions. The Confirming Bank pays the Beneficiary and forwards thedocuments to the Issuing Bank. Upon receipt by the Issuing Bank, thedocuments are checked and found to be discrepant. The Issuing Bank notifiesthe Confirming Bank of all discrepancies ten banking days after receipt andrefuses to reimburse. In considering whether the Confirming Bank can recoverfunds paid, which of the following statements are correct? It:1. can recover from the Beneficiary.2. cannot recover from the Beneficiary.3. can recover from the Issuing Bank.4. cannot recover from the Issuing Bank.A. 1 and 3 only.B. 1 and 4 only.C. 2 and 3 only.D. 2 and 4 only.31.An Exporter based in New York has agreed to sell goods to a company inLondon. The Importer is responsible for arranging freight and insurance.Which of the following shipping terms is correct?

A. CIF London.B. FAS London.C. CIF New York.D. FAS New York.32.What is the applicable Incoterm for an Airway Bill marked Freight Prepaid?A. FCA.B. CFR.C. CPT.D. DAF.


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Sample test

Part B Simulation

INSTRUCTIONS

You are the Letter of Credit issuer at ABC Bank plc and are requested to identifyfive irregularities in the application form attached.

INFORMATION

Application for Documentary Letter of Credit

Applicant: Savage Steel plcIssuing Bank: ABC Bank PlcAmount: USD 120,00.00

Savage Steel Facilities with ABC Bank plcUSD 1,600,000Current ExposureUSD 1,104,000

SUPPORTING DOCUMENTATION

1) Irregularity checklist.2) Irrevocable Documentary Credit Application Form.

INSTRUCTIONS TO STUDENTS

Identify the five irregularities on the attached irregularity checklist (document 1)then transfer your answer to the main answer sheet.


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Irrevocable Documentary Credit Application Form

Applicant: Issuing Bank:Savage Steel plc ABC Bank plcTilton Road LondonBirmingham EnglandEnglandDate of Application: 1 March XX Expiry Date and Place for Presentation ofdocumentsExpiry Date: 31.5.XXPlace for Presentation: PittsburghBeneficiary:Kirovski Steel SuppliesPittsburghPennsylvania USAIssue by (air) Mailwith brief advice by teletransmission(see UCP 500 Article 11)

Issue by teletransmission (see UCP500 Article 11)Transferable Credit As per UCP 500Article 48Confirmation of the Credit: Amount in figures and words (Please usenot requested requested ISO Currency Codes):authorized if requested by Beneficiary USD 120,000Dollars one hundred and twentythousand

Partial shipmentsallowed not allowedCredit available with Nominated Bank:Second Pennsylvannia Bank,Pittsburghby payment at sightby deferred payment at:by acceptance of drafts at:

by negotiationAgainst the documents detailed herein:and Beneficiarys drafts(s) drawn on:ABC Bank, LondonTranshipmentsallowed not allowed


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Please refer to UCP 500 transport Articlesfor exceptions to this conditionInsurance will be covered by usShipment as defined in UCP 500 Article46From: Newark, New JerseyFor transportation to: Southampton,EnglandNot later than: 15 May XXGoods (Brief description withoutexcessive details See UCP 500Article 5):Flat rolled steel as perpreviousLetter of Credit ref DC 731264Dated 10 January XX Terms: FAS CIF FOB Other terms:

CFR as per INCOTERMS


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Sample test

Irrevocable Documentary Credit Application Form (continued)

CommercialInvoice 1 signed, originaland 4 copiesTransport Document:Multimodal Transport Documents, covering at least two different modes oftransport (full set)

Marine/Ocean Bill of Lading covering a port-to-port shipmentNon-negotiable Sea Waybill covering a port-to-port shipmentAir Waybill, original for the consignorOther transport documentto the order of: Kirovski Steel Supplies, Pittsburgh, Pennsylvania,USA

endorsed in blankmarked freight prepaid payable at destinationnotify: Savage Steel plc, Tilton Road, Birmingham, EnglandInsurance Document:

Policy Certificate

Declaration under an open cover.Covering the following risks:All Risks excluding surfacerust

Certificates:

Origin USAInspection Issued and signed by qualified official

HealthOtherOther Documents:Packing List Goods description must exactly match Letters of CredittermsWeight List Two copiesDocuments


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Irregularity Checklist

1. Applicants facilities with Issuing Bank would be exceeded if.

Documentary Credit issued.

2. Description of goods unacceptable. .3. Inappropriate insurance specification. .4. Latest shipment date/expiry date incompatible with.

presentation period.

5. Pricing of goods does not match value of the credit. .6. Request for validation of document(s) unacceptable. .7. Incorrect type of transport document requested .8. Additional instructions incompatible. .9. Shipping terms incompatible with transport document. .10. Issuer of some document(s) is ambiguous. .11. Draft drawee unacceptable. .

12. Non-documentary condition(s) stipulated. .13. Inconsistent insurance requirement. .14. Country of origin not specified. .15. Confirmation instructions ambiguous .Contents pageNext section


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Contents page

Previous sectionSection 15

Scoring the Examination

The decision to use the objective testing methodology of a multiple-choice examinationas the assessment instrument for the Certified Documentary Credit Specialist (CDCS)credential allows a range of established statistical methods to be employed to supportthe testing and grading processes.

An objective test such as the CDCS examination can be defined as a test constructedin such a way that every question has a single unique correct answer. Multiple-choice tests are one form of an objective test and the opportunity to easily collectperformance data for multiple-choice examinations has led to the development ofnumerous techniques for test evaluation and monitoring.

A variety of tried and tested techniques will be applied to the CDCS examination.XAll questions are reviewed extensively through a peer review process.XAll questions are analyzed prior to use by an established panel of internationalexperts.XPost examination analysis of individual question performance through the analysisof parameters, such as facility indices (which measure the difficulty of eachquestion) and discrimination indices (which measure the ability of the question

to distinguish between strong and weak candidates). This feedback providesinformation for use in the development of future examination questions and willalso be useful in identifying possible areas for increased learning support.XIn addition, each test as a whole will also be reviewed in terms of reliabilitymeasures, etc, to ensure that the examination is consistent and valid over time.

Contents pageAnswers


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Section 16

Answers to Sample Test

Multiple-choiceQuestion Number12345678910111213

141516171819202122

Correct AnswerAD

ACDBCCDCBCAAB

DBDCCDA


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Question Number Correct Answer

23 A24 A25 A26 B27 B28 B29 D30 C31 D32 C26 B27 B28 B29 C30 D31 C32 D33 C34 D

Simulation Irregularities

2 4 810 13



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Section 17

CDCS Website

XThe CDCS website is available for your use and is a helpful tool as you preparefor the CDCS examination www.cdcs.org.

XFor additional information or if you do not receive your materials, visit eitherthe ifs or IFSA website or contact ifs or IFSA directly:

Institute of Financial ServicesIFS House, 4-9 Burgate LaneCanterbury, Kent, CT1 2XJ, United Kingdomhttp://www.ifslearning.com

The International Financial Services Association9 Sylvan Way, First FloorParsippany NJ 07054 USAhttp://www.intbanking.org


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