JAIBP Finance of International Trade & Related Treasury Operations Syllabus

Finance of International Trade & Related Treasury Operations syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Finance of International Trade & Related Treasury Operations in JAIBP, not a summary of it.

1. 1

   Introduction to International Trade

   3 topics

   • Trade Terms and Incoterms
   • Documents in International Trade
   • Parties to a Trade Transaction
2. 2

   Methods of Payment in Trade

   3 topics

   • Advance Payment and Open Account
   • Documentary Collections
   • Letters of Credit
3. 3

   Trade Finance Products

   3 topics

   • Import and Export Financing
   • Bank Guarantees and Standby LCs
   • Bills Discounting and Negotiation
4. 4

   Foreign Exchange Regulations

   3 topics

   • Foreign Exchange Manual
   • Exchange Control and SBP Regulations
   • Reporting Requirements
5. 5

   Treasury Operations

   3 topics

   • Functions of a Treasury
   • Foreign Exchange Markets and Dealing
   • Derivatives and Hedging Instruments
6. 6

   Trade and Treasury Risk Management

   3 topics

   • Foreign Exchange Risk
   • Country and Settlement Risk
   • Trade-Based Money Laundering Controls

Finance of International Trade & Related Treasury Operations flashcards for JAIBP

20 of 53 cards from the Finance of International Trade & Related Treasury Operations deck — real questions with worked answers.

1. In Incoterms 2020, what does FOB (Free On Board) require of the seller, and where does risk transfer to the buyer?

   The seller clears the goods for export and delivers them on board the vessel nominated by the buyer at the named port of shipment. Risk transfers from seller to buyer once the goods are placed on board the vessel. FOB is used only for sea and inland waterway transport.

2. Under Incoterms 2020 CIF (Cost, Insurance and Freight), what costs does the seller bear and at what point does risk pass?

   The seller pays the cost and freight to bring goods to the named destination port and arranges minimum (Institute Cargo Clause C) marine insurance for the buyer. However, risk passes to the buyer when the goods are loaded on board at the port of shipment, not at destination. CIF is sea/inland-waterway only.

3. What is the key difference between CIF and CIP under Incoterms 2020 regarding insurance cover?

   Both require the seller to arrange insurance, but the level of cover differs: CIF requires only minimum cover (Institute Cargo Clause C), while CIP requires the seller to obtain maximum cover (Institute Cargo Clause A). CIF is sea-only; CIP applies to any mode of transport.

4. Under Incoterms 2020 DDP (Delivered Duty Paid), which party bears the maximum obligation and what does it include?

   DDP imposes maximum obligation on the seller. The seller delivers goods, cleared for import, at the named place of destination, bearing all costs and risks including import duties, taxes and customs clearance. It is the opposite extreme of EXW (Ex Works), where the buyer bears almost all obligations.

5. Which Incoterms 2020 rules can be used for ANY mode of transport, and which are restricted to sea/inland waterway only?

   Any mode: EXW, FCA, CPT, CIP, DAP, DPU, DDP. Sea and inland waterway only: FAS, FOB, CFR, CIF. (DPU replaced the old DAT term in Incoterms 2020.)

6. What change did Incoterms 2020 make to DAT, and what is the new equivalent term?

   DAT (Delivered At Terminal) was renamed DPU (Delivered at Place Unloaded). DPU is broader because delivery (with unloading) can take place at any named place, not just a terminal. DPU is the only Incoterm requiring the seller to unload the goods at destination.

7. What is a Bill of Lading and what three functions does it perform in international trade?

   A Bill of Lading (B/L) is a document issued by a carrier to a shipper. Its three functions are: (1) a receipt for goods shipped, (2) evidence of the contract of carriage, and (3) a document of title to the goods (when issued 'to order' it is negotiable and transferable by endorsement).

8. What is the difference between a 'clean' and a 'claused' (dirty/foul) Bill of Lading?

   A clean B/L bears no clause or notation declaring a defective condition of the goods or packaging. A claused/dirty B/L contains remarks noting damage or deficiency. Under a documentary credit, banks accept only clean B/Ls unless the credit expressly permits claused ones.

9. What is a Bill of Exchange (draft), and what is the difference between a sight draft and a usance (time) draft?

   A Bill of Exchange is an unconditional written order by the drawer instructing the drawee to pay a sum to the payee/bearer. A sight draft is payable on presentation/demand. A usance (time/term) draft is payable at a fixed or determinable future date (e.g., 90 days after sight), granting the buyer credit.

10. What is the purpose of a Certificate of Origin in international trade, and who commonly issues it?

    A Certificate of Origin certifies the country in which the goods were produced or manufactured. It is used for customs clearance, to determine duty rates, preferential tariff treatment, and to comply with quotas or trade agreements. It is typically issued/certified by a Chamber of Commerce.

11. Name the principal parties to an international trade transaction settled under a documentary credit.

    The exporter/seller (beneficiary), the importer/buyer (applicant), the issuing bank (importer's bank), the advising bank (in the exporter's country), the confirming bank (if any), the nominated/negotiating bank, and the carrier/freight forwarder. Insurers and inspection agencies may also be involved.

12. In an LC transaction, distinguish between the 'applicant' and the 'beneficiary'.

    The applicant is the party (the importer/buyer) on whose request and instructions the issuing bank opens the letter of credit. The beneficiary is the party (the exporter/seller) in whose favour the credit is issued and who is entitled to payment upon presenting complying documents.

13. What is 'Open Account' trade, and which party bears the greatest risk?

    Open Account is an arrangement where goods are shipped and delivered before payment is due (commonly 30, 60 or 90 days). It is most advantageous to the buyer (importer) and carries the greatest risk for the seller (exporter), who has no banking security and depends entirely on the buyer's willingness to pay.

14. What is 'Advance Payment' (cash in advance) in trade, and which party bears the greatest risk?

    Advance Payment requires the buyer to pay before goods are shipped. It is the most secure method for the exporter (seller) but carries the greatest risk for the importer (buyer), who pays before receiving goods and relies on the seller actually shipping conforming goods.

15. Rank the four main international payment methods from most secure to least secure for the EXPORTER.

    For the exporter, from most to least secure: (1) Cash in Advance, (2) Letter of Credit (especially confirmed), (3) Documentary Collection, (4) Open Account. The ranking is exactly reversed from the importer's perspective.

16. What is a Documentary Collection, and which set of ICC rules governs it?

    A Documentary Collection is a method where the exporter's bank (remitting bank) sends shipping/financial documents to the importer's bank (collecting/presenting bank) with instructions to release them to the importer only against payment or acceptance. It is governed by the ICC Uniform Rules for Collections (URC 522).

17. Distinguish between D/P (Documents against Payment) and D/A (Documents against Acceptance) in a documentary collection.

    Under D/P, the collecting bank releases documents to the importer only when payment is made (sight). Under D/A, documents are released against the importer's acceptance of a usance bill of exchange, promising to pay at a future date, giving the buyer credit but leaving the seller exposed until maturity.

18. In a documentary collection, do banks guarantee payment or examine documents for compliance?

    No. Under URC 522, banks act only as agents to forward documents and collect payment; they do not guarantee payment and have no obligation to examine documents beyond checking they appear to be those listed in the collection instruction. This is the key difference from an LC.

19. What is a Letter of Credit (Documentary Credit), and which ICC rules govern it?

    A Letter of Credit is an undertaking by the issuing bank, at the applicant's request, to pay the beneficiary a stated amount against presentation of stipulated complying documents within a set time. It is governed by the ICC Uniform Customs and Practice for Documentary Credits (UCP 600).

20. State the 'principle of autonomy' and the 'doctrine of strict compliance' in letters of credit.

    Autonomy: the credit is a separate transaction from the underlying sale contract; banks deal in documents, not goods, and are not concerned with the contract. Strict compliance: the bank pays only if the documents presented strictly conform to the terms and conditions of the credit.

See more Finance of International Trade & Related Treasury Operations flashcards →

Planning Finance of International Trade & Related Treasury Operations for JAIBP

Finance of International Trade & Related Treasury Operations (JAIBP) FAQ