FIT Summer 2014

Q.1 Pakistan’s exchange policy has undergone several changes, since inception. Up until 1971, the country’s exchange rate remained pegged to the British Pound Sterling. In 1982, an exchange rate regime of managed float was adopted, which was based on a basket of currencies. After 1991, the process of financial sector reforms was initiated. List 5 key measures taken by State Bank of Pakistan in the last decade for reforming the Foreign Exchange regime. Q.2 A. List at least 2 advantages and 3 disadvantages of a letter of credit to an exporter. B. List at least 3 advantages and 2 disadvantages of a letter of credit to an importer. Q.3 Say, the Advising Bank fails to advise a L/C to the beneficiary, who consequently suffers losses and files a suit against the Advising Bank. Is the Advising Bank legally responsible for any loss? Please explain with the help of an example. Q.4 A. Differentiate between Combined and Multimode transport documents? B. Describe major risks associated with a shipment under charter party Bill of Lading? C. Explain the procedure for issuance of a Shipping Guarantee? Q.5 A. How do correspondent banking arrangements help the respondent bank in facilitation of international trade transactions? B. What is meant by Relationship Management Agreement (RMA)? Can two banks have an RMA in absence of any correspondent bank arrangement? Q.6 Explain any 5 intermediaries that are involved in international trade transactions. Q.7 A. A company, Awan Traders deals in hardware goods. At present, the company is buying from a wholesaler in the local market but it wants to evaluate the idea of importing the same products from Germany. Awan Trader believes that this will improve its profit margin. Since it will be Awan Traders’ first order, suppliers in Germany will demand payment on a sight letter of credit. Elaborate the various steps, (at least 5) with proper explanation, that would be involved in the import process until final clearance of the consignment. B. Explain any 2 types of finance facilities that are extended by banks to importers. Q.8 A. Describe any 3 benefits of INCOTERMS in international trade transactions. (Marks 3) B. Describe the main point of difference(s) between ‘CPT’ and ‘CIP’ terms and state whether these INCOTERMS are permissible under local exchange control regulations. (Marks 2)

Q.9 A. Explain any 3 objectives of the World Trade Organization.

B. List any two ways by which the Prudential Regulations facilitate international trade transactions.