Trade Documentation & Payment Methods Flashcards

What is the difference between a 'straight' bill of lading and an 'order' bill of lading?

Answer: A straight B/L names a specific consignee and is non-negotiable; an order B/L is negotiable and can transfer title

A straight B/L consigns goods to a named party and cannot be endorsed; an order B/L (made out 'to order') is negotiable and transfers title through endorsement.

Under a Documentary Collection (D/A — Documents against Acceptance), when does the buyer receive the shipping documents?

Answer: Upon signing a time draft, promising to pay at a future date

Under D/A terms, the buyer accepts (signs) a time/usance draft promising future payment, and the bank releases the shipping documents upon that acceptance.

A phytosanitary certificate is specifically required for which type of exported product?

Answer: Live plants, seeds, and plant-based agricultural products

A phytosanitary certificate, issued by the USDA APHIS, certifies that plant and plant-based commodities are free of pests and diseases and meet the importing country's agricultural requirements.

Which document serves as the exporter's formal instruction to the freight forwarder, detailing shipping, documentation, and handling requirements for a shipment?

Answer: Shipper's Letter of Instruction (SLI)

The Shipper's Letter of Instruction (SLI) is the exporter's authorization and instruction set given to the freight forwarder, covering routing, documentation preparation, and AES filing.

A 'back-to-back' letter of credit arrangement is most commonly used when:

Answer: A middleman/trader uses an incoming LC from the buyer as collateral to open a new LC in favor of the actual supplier

In a back-to-back LC, a trading intermediary uses the buyer's LC as security to obtain a new LC issued to the manufacturer/supplier, enabling the trade without revealing the end buyer.

For U.S. export compliance, the Export Administration Regulations (EAR) classify goods using the:

Answer: Export Control Classification Number (ECCN)

The ECCN (Export Control Classification Number) is the alphanumeric code used under the EAR to classify dual-use goods and determine whether an export license is required.

What does 'available by negotiation' mean in the context of a letter of credit?

Answer: Any nominated bank can purchase (negotiate) the documents and advance funds to the beneficiary before the issuing bank pays

An LC 'available by negotiation' allows any bank (or a nominated bank) to purchase the complying documents and extend financing to the beneficiary, with reimbursement later from the issuing bank.