CCP Export Credit & Letters of Credit 3

Question 1

A usance or deferred payment letter of credit benefits the importer by:

Accepted Answer

Granting the buyer a period of credit before payment is due

Answer

Usance LCs specify a future payment date (e.g., 60 or 90 days after shipment), giving the buyer time to sell goods and generate cash before paying.

Question 2

Which Incoterm places the maximum responsibility on the seller for delivering goods to the buyer's named destination?

Accepted Answer

DDP (Delivered Duty Paid)

Answer

DDP requires the seller to bear all costs and risks, including import duties and taxes, until goods are delivered to the buyer's named place.

Question 3

A back-to-back letter of credit involves:

Accepted Answer

A new LC issued using an existing LC as collateral to pay a supplier

Answer

In a back-to-back arrangement, the intermediary uses the master LC from their buyer as collateral to open a second LC in favor of their own supplier.

Question 4

Under the Foreign Credit Insurance Association (FCIA) or EXIM Bank export credit insurance, a short-term policy typically covers credit periods of:

Accepted Answer

Up to 360 days

Answer

Short-term export credit insurance generally covers receivables with repayment terms up to 360 days (one year), applicable to consumer goods and raw materials.

Question 5

Which party in an LC transaction is also known as the 'opener' or 'accountholder'?

Accepted Answer

Applicant

Answer

The applicant is the buyer/importer who instructs their bank to issue the LC and is responsible for reimbursing the issuing bank.

(CCP) Certified Credit Professional Practice Test

(CCP) Certified Credit Professional Practice Test

CCP Export Credit & Letters of Credit 3