Exam CRCM topic 1 question 220 discussion

Actual exam question from ABA's CRCM

Question #: 220
Topic #: 1

First National Bank opened a letter of credit in favor of ABC Co., a U.S. company, for ABC's sale of goods to Country X, a foreign country that participates in a boycott. The letter of credit contains no boycott provisions, but First National Bank knows that ABC Co. has agreed to supply a certification to Country X that ABC has not dealt with any blacklisted firms as a condition of receiving the letter of credit in its favor. What should First National Bank do?

A. Implement the letter of credit because there is no boycott language on its face
B. Require ABC to indemnify the bank against any potential loss for participation in a boycott
C. Not implement the letter of credit
D. Have the letter of credit confirmed by a bank in Country X

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Suggested Answer: C 🗳️

by Cam22 at March 17, 2024, 1:01 a.m.

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Cam22

4 months ago

Selected Answer: C

The correct answer is C. Not implement the letter of credit. Even though the letter of credit itself does not contain boycott language, First National Bank's awareness that ABC Co. has agreed to comply with a boycott condition as part of the transaction requires the bank to adhere to U.S. laws and regulations concerning participation in or support of international boycotts not sanctioned by the U.S. government. Implementing the letter of credit under these circumstances could be seen as facilitating the boycott indirectly.

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Exam CRCM topic 1 question 220 discussion

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Cam22

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