Management Associate Assessment – Supply Chain Management

Area: INCOTERMS
Date:
Name:
P.No.

Instructions:

i. Total Marks 12 (01 x 12 questions)

ii. Time: 10 minutes
iii. Attempt all questions
iv. Circle the correct answer

1. As a seller you will most prefer which method of payment?

A. Open Account
B. Documentary Collections
C. Letters of Credit
D. Cash in Advance

Correct Answer

D. Cash in Advance

Explanation

As a seller, considering the lowest risk methods of payment is important for ensuring the security
of the transaction. Cash in advance is the most secure option as it requires the buyer to make full
payment before the goods are delivered or the services are rendered. This eliminates the risk of
non-payment or any other potential financial issues that may arise. By choosing cash in advance,
the seller can protect themselves from potential losses and ensure that they receive payment
before fulfilling the order.

2. As a buyer you will most prefer which method of payment?

A. Open Account
B. Documentary Collections
C. Letters of Credit
D. Cash in Advance

Correct Answer

D. Open Account

Explanation

As a buyer, considering the lowest risk methods of payment is important for ensuring the
security of the transaction. Open Account is the most secure option as it requires the buyer to
make full payment after the goods are delivered or the services are rendered. This eliminates the
risk of non-delivery or any other potential financial issues that may arise. By choosing open
account, the buyer can protect themselves from potential losses and ensure that they receive
goods/services before fulfilling the payment.
 Management Associate Assessment – Supply Chain Management
Area: INCOTERMS
Date:
Name:
P.No.

3. Which organization governs UCP 600?

A. International Chamber of Commerce.
B. World Customs Organization
C. World Trade Organization
D. World Bank

Correct Answer

A. Open Account

Explanation

UCP 600 is a set of rules that govern international trade and the use of letters of credit. It was
first published by the International Chamber of Commerce (ICC) in 2007 and came into effect on
July 1, 2007. Therefore, the given answer "2009" is incorrect as it does not align with the actual
effective date of UCP 600.

4. The ISBP publications amend UCP 600

A. Yes
B. NO

Correct Answer

B. NO

Explanation

The ISBP publications do not amend UCP 600. ISBP (International Standard Banking Practice)
provides guidelines for the interpretation and application of UCP 600, but it does not have the
authority to amend UCP 600. UCP 600 is a set of rules that governs the use of letters of credit in
international trade, while ISBP provides additional guidance on how to apply those rules.
Therefore, the correct answer is NO.

5. Complying presentation means a presentation of documents that is:

A. Within LC validity only
B. Presenting of all shipping documents
C. In accordance with LC terms & conditions
D. After LC expiry

Correct Answer

C. In accordance with LC terms & conditions

Explanation

A complying presentation refers to a presentation of documents that fully adhere to the terms
and conditions specified in the Letter of Credit (LC). This means that all the shipping documents
required by the LC are included and meet the specified criteria. The presentation must also be
made within the validity period of the LC. In other words, a complying presentation is one that
follows all the guidelines and requirements outlined in the LC.
 Management Associate Assessment – Supply Chain Management
Area: INCOTERMS
Date:
Name:
P.No.

6. If the beneficiary is not happy with the terms & conditions of LC, he can ask applicant for:
A. Fresh letter of credit (replacement)
B. An amendment
C. Applicant confirmation
D. Withdrawal of Letter of Credit

Correct Answer

B. An amendment

Explanation

If the beneficiary is not satisfied with the terms and conditions of the LC (Letter of Credit), he can
request an amendment from the applicant. This means that the beneficiary can propose changes
or modifications to the existing LC to better suit his requirements. By requesting an amendment,
the beneficiary can negotiate new terms and conditions that are more favorable to him, ensuring
his satisfaction with the LC.

7. Issuing bank is bound by a Letter of Credit

A. From the time of issue LC
B. From the time the payment under LC becomes due
C. From the time LC is received by the beneficiary
D. From the time of document presentation

Correct Answer

A. From the time of issue LC

Explanation

The correct answer is "From the time of issue LC." This means that the issuing bank is bound by
the terms and conditions of the Letter of Credit (LC) from the moment it is issued. The LC serves
as a guarantee of payment to the beneficiary, and the issuing bank must honor its obligations as
stated in the LC once it is issued.

8. Banking day means a day on which a bank is …………….at the place at which an act subject to
these rules is to be performed.
A. Regularly open for an act
B. Start from Monday to Friday
C. Normal days including Eid holiday
D. Normal days excluding Eid holiday

Correct Answer

A. Regularly open for an act

Explanation

Banking day refers to a day when a bank is regularly open for conducting various banking
activities. This means that the bank is operational and accessible to customers for performing
 Management Associate Assessment – Supply Chain Management
Area: INCOTERMS
Date:
Name:
P.No.

transactions, such as deposits, withdrawals, and other financial services. It does not include
weekends or public holidays when the bank is closed. Therefore, the correct answer suggests
that a banking day is a day when the bank is open and available for conducting banking
operations.

9. Nominated bank means the bank:

A. The intermediary bank that facilitates LC routingThe issuing bank
B. LC is available with
C. The bank that confirms the Letter of Credit

Correct Answer

C. LC available with

Explanation

The term "nominated bank" refers to the bank where the Letter of Credit (LC) is available. This
means that the LC can be accessed and used by the beneficiary through this bank. The
nominated bank is responsible for advising the LC to the beneficiary and facilitating the
transaction.

10. A credit can neither be amended nor cancelled without the agreement of the following
Parties:
A. The issuing bank & The confirming bank
B. The confirming bank & The beneficiary
C. The issuing, confirming bank & the beneficiary
D. Beneficiary only

Correct Answer

C. The issuing, confirming bank & the beneficiary

Explanation

In a credit transaction, the issuing bank is responsible for issuing the credit, the confirming bank
provides a guarantee of payment to the beneficiary, and the beneficiary is the party who will
receive payment. All three parties are involved in the credit process and their agreement is
required to make any amendments or cancellations to the credit. Therefore, the correct answer
is that the issuing bank, confirming bank, and beneficiary must all agree for a credit to be
amended or cancelled.

11. Advising bank means the bank that advises the credit at the request of the………………
A. The issuing bank
B. The confirming bank
C. The beneficiary
D. The applicant

Correct Answer
 Management Associate Assessment – Supply Chain Management
Area: INCOTERMS
Date:
Name:
P.No.

A. The issuing bank

Explanation

The advising bank refers to the bank that provides advice or notification to the beneficiary
regarding the credit, at the request of the issuing bank. The issuing bank is the bank that opens
the letter of credit and is responsible for making payment to the beneficiary upon fulfillment of
the specified terms and conditions. Therefore, the correct answer is the issuing bank

12. Cash Against Documents, also known as ‘Documents Against Payment’, is a method of
financing which requires the buyer (or importer)
A. to pay for their goods before receiving them
B. to pay for their goods before after receiving them
C. to pay for their goods before production commences
D. to pay for their goods when they are packaged

Correct Answer

A. to pay for their goods before receiving them

Explanation

Cash Against Documents, also known as ‘Documents Against Payment’, is a method of financing
which requires the buyer (or importer) to pay for their goods before receiving them. In other
words, there is no release of the product to the buyer – or importer – until the payment has
been made, meaning both party’s responsibilities are equally fulfilled at the time of exchange.