19/05/2015 1 Case study International Trade and Finance Foreign Trade University Case study – DC method Question 1: A DC subject to UCP 600 has the following stipulation: "Purchase Contract No. 123456 dated 24 July 2007 attached herewith forms an integral part of this documentary credit." Is this stipulation acceptable and what are the risks? Question 2: You are a Documentary Credit specialist at an advising bank and receive the attached documentation today. The following questions relate to a documentary credit issued on the MT700. Please refer to attachment
19/05/2015 2 Article 4 Credits v. Contracts • a . A credit by its nature is a separate transaction from the sale or other contract on which it may be based. Banks are in no way concerned with or bound by such contract, even if any reference whatsoever to it is included in the credit. Consequently, the undertaking of a bank to honor, to negotiate or to fulfil any other obligation under the credit is not subject to claims or defences by the applicant resulting from its relationships with the issuing bank or the beneficiary. • b . An issuing bank should discourage any attempt by the applicant to include, as an integral part of the credit, copies of the underlying contract, proforma invoice and the like. Question 3: A documentary credit for USD 150,000 calls for a full set of bills of lading and an insurance certificate for cover all risks. The bill of lading presented indicates an on board date of 15 December. Which of the following insurance documents are acceptable? Explain your answer. Policy for USD 185,000 Certificatedated 17 December Declarationsigned by a broker on their own behalf Certificatesubject to a franchise or excess Question 4: A documentary credit expiring on 10 June requires the following documents: • Signed commercial invoice indicating goods of German origin • Bill of lading evidencing shipment in the middle of May •
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