ACCA LW Transportation and payment in international trade: practice questions with answers

Answer: C. Bank transfers move funds between accounts without cash. In a credit transfer the payer instructs its own bank to transfer funds to the payee (the payment is 'pushed'); this is the type governed by the UNCITRAL Model Law on International Credit Transfers. In a debit transfer the payee instructs its bank to collect funds from the payer's account, relying on authority previously given by the payer (the payment is 'pulled'), as with a direct debit.

Answer: A. A credit transfer is the series of operations, beginning with the originator's payment order, made to place funds at the disposal of the beneficiary. Under the Model Law, the transfer is completed when the beneficiary's bank accepts a payment order for the benefit of the beneficiary. From then on, the beneficiary's bank is indebted to the beneficiary for the amount of the order it accepted.

Answer: B. A received for shipment bill records only that the carrier has taken the goods into its charge, for example at a port terminal, before loading. Once the goods are loaded, a shipped or on board bill is issued (or the received bill is annotated with the date of loading and the vessel). Because buyers and banks want evidence that the goods are actually on their way, letters of credit usually call for shipped (on board) bills. Separately, a bill is clean or claused depending on whether it notes defects, and order or straight depending on whether it is transferable.

Answer: D. The Convention applies to two kinds of international instrument. A bill of exchange is an unconditional order by the drawer to the drawee to pay a definite sum to the payee or to its order; the drawee becomes liable when it accepts. A promissory note is an unconditional promise by the maker to pay a definite sum to the payee or to its order; there is no drawee, and the maker is primarily liable from the outset.

Answer: D. Bank transfers are of two kinds, depending on who initiates the transfer:

- In a credit transfer the payer (originator) instructs its own bank to transfer funds to the payee's account: funds are pushed from payer to payee. Standing orders, salary payments and payment orders sent by the payer to its bank are credit transfers.
- In a debit transfer the payee initiates collection through its own bank, under the payer's authority, and funds are pulled from the payer's account. Cheques (the payer's written authority, presented by the payee) and direct debits (based on a standing authority to debit given by the payer) are the main forms.

Answer: D. In a documentary letter of credit, the issuing bank (the buyer's bank) gives the seller (the beneficiary) a definite undertaking to pay against documents that comply with the credit. If another bank, usually in the seller's country, confirms the credit, it adds its own definite undertaking to honour complying presentations, so the seller has two banks to look to and does not depend solely on a foreign bank. An advising bank merely notifies the seller of the credit and checks its apparent authenticity, without any obligation to pay. In all cases the banks deal only with documents, not with the goods.