Question Tag: precautions for right goods

• Your customers, Roofing Technologies (RT), located at Tema Industrial Area, are specialist manufacturers of roofing sheets. The company is finding it difficult to obtain supply of raw materials as their main Ukraine Suppliers have completely shut down due to the war with Russia.

The company has now identified a South African supplier, who can meet the raw material needs of RT, but only against Secure Methods of Payment. Goods will be shipped under CIF Terms. Tema Port. In a meeting with the Chief Operating Officer today, you have been asked to establish an Irrevocable Letter of Credit in favour of the South African suppliers. Your customers advised you during the meeting that they do not understand the implications of this Secure Method of Payment to the new suppliers as they were used to Documents Against Acceptance with their Ukraine Suppliers.

In order to give them proper understanding, you are required to provide answers to the following:

a) Define Documentary Credit under UCP 600. What implication does the definition have on Roofing Technologies? [2 marks each] [4 Marks]

b) Mention two (2) risks each to RT and the beneficiary. [1 mark each] [4 Marks]

c) Mention three (3) documents (excluding Bill of Exchange) which RT should call for. Mention one (1) detail on each document which RT would expect to find if the bank agreed to establish the Letter of Credit. [2 marks each] [6 Marks]

d) Mention three (3) precautions that RT can take to ensure that they receive the right goods, while at the same time satisfying the seller’s needs. [2 marks each] [6 Marks]

[Total Marks 20]