Trade Documentation & Payment Methods Flashcards

A U.S. exporter ships goods to Brazil under a letter of credit requiring a 'clean on board' bill of lading. The shipping company notes a damaged carton on the B/L. What is the result?

Answer: The B/L becomes a 'claused' or 'foul' document and the bank will likely reject it

A 'clean on board' LC requirement means the B/L must show no damage notation; any exception clause makes it a foul B/L that banks will reject.

Which Incoterm places the MAXIMUM responsibility on the seller, including delivery to the buyer's named destination with import duties paid?

Answer: DDP (Delivered Duty Paid)

Under DDP, the seller is responsible for all costs and risks including import customs clearance and duties at the named destination.

An exporter receives a documentary collection instruction marked 'D/P' (Documents against Payment). When should the buyer receive the shipping documents?

Answer: Only after making full payment to the collecting bank

Under D/P (sight draft), the buyer must pay the full amount to the collecting bank before receiving the documents needed to claim the goods.

What is the primary purpose of a Shipper's Export Declaration (now AES filing) in U.S. export transactions?

Answer: To collect export trade statistics and enforce export controls

The AES (Automated Export System) filing, which replaced the SED, is required by the U.S. Census Bureau to collect trade statistics and by BIS to enforce export controls.

Under UCP 600 rules governing letters of credit, how many banking days does an issuing bank have to examine documents and decide to honor or refuse?

Answer: 5 banking days

UCP 600 Article 14 gives banks a maximum of 5 banking days following the day of presentation to examine documents and determine compliance.

A forwarder-issued FIATA Multimodal Transport Bill of Lading (FBL) differs from a standard ocean B/L in that it:

Answer: Covers the entire multimodal journey under a single document issued by a freight forwarder

The FBL is a negotiable multimodal transport document issued by a freight forwarder that covers door-to-door or port-to-port movements across multiple transport modes.

When an LC specifies 'latest shipment date: August 15' and 'expiry date: September 5,' what does this mean for the exporter?

Answer: Goods must be shipped on or before August 15 and documents presented to the bank by September 5

The latest shipment date controls when goods must be loaded, while the expiry date is the final deadline for presenting compliant documents to the bank.