SIMULATION 3

BACKGROUND:
You are the letter of credit issuer at ABC Bank plc and are requested to identify five
irregularities in the application form attached.

Application for Documentary Letter of Credit

Applicant:
Issuing bank:
Amount:

Savage Steel plc

ABC Bank Plc
USD 120,000.00

Savage Steel Facilities with ABC Bank plc

USD 1,600,000
Current Exposure
USD 1,104,000

SUPPORTING DOCUMENTATION:
1. Documentary credit application form

INSTRUCTIONS TO CANDIDATES:

Identify the five discrepancies in the attached documents using the discrepancy
checklist.

DISCREPANCY CHECKLIST

1.

Applicants facilities with issuing bank would be exceeded if

documentary credit issued.

2.

Description of goods unacceptable.

3.

Inappropriate insurance specification.

4.

Latest shipment date/expiry date incompatible with

presentation period.

5.

Pricing of goods does not match value of the credit.

6.

Request for validation of document(s) unacceptable.

7.

Issuer of some document(s) is ambiguous.

8.

Additional instructions incompatible.

9.

Confirmation instructions ambiguous.

10.

Inconsistent insurance requirement.

Irrevocable documentary credit application form

Applicant:
Savage Steel plc
Tilton Road
Birmingham
England

Issuing bank:
ABC Bank plc
London
England

Date of Application: 1 March XX

Expiry Date and Place for Presentation of

documents
Expiry Date: 31.5.XX

Issue by (air) Mail with brief advice by

teletransmission
Issue by teletransmission
Transferable Credit
Confirmation of the Credit:
not requested
requested authorised
if requested
by Beneficiary
allowed

Partial shipments

Transhipments allowed

not allowed

not allowed

Insurance will be covered by us

Shipment From: Newark, New Jersey
For transportation to: Southampton, England

Place for Presentation: Pittsburgh

Beneficiary: Kirovski Steel Supplies
Pittsburgh
Pennsylvania USA
Amount in figures and words (Please use ISO
Currency Codes):
USD 120,000.00
Dollars one hundred and twenty thousand
Credit available with Nominated Bank:
Second Pennsylvania Bank, Pittsburgh
by payment at sight
by deferred payment at:
by acceptance of drafts at:
by negotiation
Against the documents detailed herein:
and Beneficiarys drafts(s) drawn on: ABC Bank,
London

Not later than: 15 May XX

Goods (Brief description without excessive details):
Flat rolled steel as per previous
Letter of Credit ref DC 731264
Dated 10 January XX

Terms:
FAS
FOB

CIF
Other

CFR

as per

terms:
INCOTERMS

Commercial
Invoice

signed, original
and

copies

Transport Document:
Multimodal Transport Documents, covering at least two different modes of transport (full set)
Marine/Ocean Bill of Lading covering a port-toport shipment
Non-negotiable Sea Waybill covering a port-toport shipment
Air Waybill, original for the consignor
Other transport document
to the order of: Kirovski Steel Supplies, Pittsburgh,
Pennsylvania, USA
endorsed in blank
marked freight
prepaid
payable at destination
notify: Savage Steel plc, Tilton Road, Birmingham,
England
Insurance Document:
Policy

Certificate

Certificates:
Origin USA
Inspection Issued and signed by qualified official
Health

Declaration under an open cover. Covering the

following risks:
All Risks excluding surface rust

 Other
Other Documents:
Packing List Goods description must exactly match Letters of Credit terms
Weight List Two copies
Documents to be
21 days after the date but within the validity of the Credit.
presented within
of shipment
Additional Instructions:
One original transport document to be sent direct to:
Savage Steel plc
Tilton Road
Birmingham
England

We request you to issue on our behalf and for our

account your Irrevocable Credit in accordance with
the above instructions (marked (x) where
appropriate). This Credit will be subject to the
Uniform Customs and Practice for Documentary
credits (2007) Revision Publication No. 600 of the
International Chamber of Commerce, Paris, France),
Insofar as they are applicable.

R SAVAGE
R Savage________
Name and signature of the Applicant