Deck 16: Exporting, Importing, and Countertrade

Question 1

A sight draft allows for a delay in payment.

Answer 1

False
Explanation: Unlike a time draft, a sight draft is payable on presentation to the drawee.

Question 2

Foreign Credit Insurance Association is a part of the U.S Department of Commerce and guides the activities of the Export-Import Bank.

Answer 2

False
Explanation: In the United States, export credit insurance is provided by the Foreign Credit Insurance Association (FCIA), an association of private commercial institutions operating under the guidance of the Export-Import Bank.

Question 3

Nearly every state in the U.S. maintains active trade commissions to promote exports.

Answer 3

True
Explanation: In addition to the Department of Commerce and SBA, nearly every state and many large cities maintain active trade commissions, whose purpose is to promote exports.

Question 4

Ex-Im Bank has a direct lending operation under which it lends dollars to foreign borrowers.

Question 5

The bank promises to pay on behalf of the importer when a bank is used as a third party in international transactions.

Question 6

When a time draft is drawn on and accepted by a business firm, it is called a trade acceptance.

Question 7

Hiring an EMC will help a novice exporter identify opportunities and navigate the paperwork involved in exporting.

Question 8

U.S. organizations can get financing aid from the Export-Import Bank.

Question 9

Proactive firms do not consider exporting until their domestic market is saturated.

Question 10

A counterpurchase gives exporters more flexibility than an offset.

Question 11

The U.S. Department of Commerce organizes trade events that help potential exporters make foreign contacts and explore export opportunities.

Question 12

Countertrade denotes a whole range of agreements that involve financial exchanges.

Question 13

Exporters often face voluminous paperwork and complex formalities.

Question 14

The bill of lading does not serve as a document of title as such.

Question 15

Time drafts cannot be sold to investors at a discount from its face value.

Question 16

Lack of knowledge is one of the biggest impediments to a company becoming a successful exporter.

Question 17

Barter is a reciprocal buying agreement that occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

Question 18

A draft is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.

Question 19

A letter of credit states that an exporter has availed credit from the bank to manufacture goods.

Question 20

The bill of lading can function as collateral against which funds may be advanced to the exporter by its local bank.

Question 21

The Foreign Credit Insurance Association provides coverage:

A) to insure products during shipment.
B) against commercial risks and political risks faced by exporters.
C) to insure that products are delivered that have already been paid for.
D) against political risks faced by importers.

Question 22

In the modern era, the concept of countertrade arose as a way for the _____ to purchase imports.

A) United States
B) European Union
C) ASEAN countries
D) Soviet Union and the Communist states of Eastern Europe

Question 23

_____ is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy.

A) Counterpurchase
B) Barter
C) Offset
D) Buyback

Question 24

An importer obtains a _____ from a local bank in a typical international transaction.

A) draft
B) bill of lading
C) letter of credit
D) bill of exchange

Question 25

A ____ is the instrument normally used in international commerce to effect payment.

A) bill of lading
B) letter of credit
C) draft
D) countertrade

Question 26

A _____ allows for a delay in payment-normally 30, 60, 90, or 120 days.

A) bill of lading
B) sight draft
C) bill of exchange
D) time draft

Question 27

_____ is viewed as the most restrictive countertrade arrangement.

A) Barter
B) Offset
C) Buyback
D) Switch trading

Question 28

_____ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.

A) SCORE
B) SBDC
C) ELAN
D) CIBER

Question 29

The Export-Import Bank is an independent agency of the _____.

A) European Union
B) World Trade Organization
C) United Nations
D) U.S. government

Question 30

Which of the following is true of exporting?

A) A common pitfall of exporting is a poor understanding of competitive conditions in the foreign market.
B) Securing financing is rarely a problem for exporters.
C) A common pitfall of exporting is trying too hard to customize a product offering rather than "sticking with what you know."
D) Most exporters have a very good understanding of the competitive conditions in the foreign market.

Question 31

The _____ is issued to the exporter by the common carrier transporting the merchandise.

A) bill of lading
B) sight draft
C) letter of credit
D) time draft

Question 32

_____ can avail loans from Ex-Im Bank to pay U.S. suppliers.

A) Foreign borrowers
B) Individuals
C) Domestic borrowers
D) U.S.-based corporations

Question 33

_____ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.

A) Barter
B) Offset
C) Countertrade
D) Buyback

Question 34

Countertrade is least attractive to large, diverse multinational enterprises.

Question 35

_____ are export specialists that act as the export marketing department or international department for their client firms.

A) Small Business Development Centers (SBDCs)
B) Centers for International Business Education and Research (CIBERs)
C) Export Legal Assistance Networks (ELANs)
D) Export Management Companies (EMCs)

Question 36

A _____ serves as a receipt, a contract, and a document of title.

A) letter of credit
B) bill of lading
C) draft
D) bill of exchange

Question 37

Japan's great trading houses are called _____.

A) Nikei
B) sogo shosha
C) Yen houses
D) Samurai houses

Question 38

Importers usually issue a _____ to importers in international transactions.

A) sight draft
B) letter of credit
C) time draft
D) bill of lading

Question 39

Firms commonly employ a(n) _____ as third party in international transactions.

A) reputable bank
B) stock exchange
C) export management company
D) customs broker

Question 40

The term switch trading refers to the use of a specialized third-party trading house in a countertrade arrangement.

Question 41

Which of the following is a common difficulty that traders face when exporting goods or services to other countries?

A) Small firms tend to be more aggressive than larger firms in global trade.
B) Governments do not provide much assistance to exporters.
C) Growth opportunities are often limited in global markets.
D) Exporters often face voluminous paperwork and complex formalities.

Question 42

Which of the following statements is true about Small Business Administration (SBA)?

A) It is the most comprehensive source of export opportunities information.
B) SBA is a private organization managed by leaders of large corporate.
C) The SBA employs trade officers throughout the United States.
D) SBA offers help exclusively to small businesses that sell products within U.S.
The SBA employs 76 district international trade officers and 10 regional international trade officers throughout the United States as well as a 10-person international trade staff in Washington,D.C.

Question 43

The main attraction of a(n) _____ is that it can give a firm a way to finance an export deal when there are no other means available.

A) countertrade
B) buyback
C) counterpurchase
D) offset

Question 44

Which of the following is a document used to give the title of the products to a bank?

A) Bill of lading
B) Letter of credit
C) Draft
D) Promissory note

Question 45

Which of the following statements is true of reactive firms?

A) Reactive firms consider a variety of markets for selling their products and services.
B) They consider exporting only after their domestic market is saturated.
C) They systematically scan foreign markets for profitable export opportunities.
D) They create excess productive capacity and actively hunt for opportunities in foreign markets.

Question 46

Through its _____ program, the SBA oversees about 850 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses.

A) matchmaker
B) SCORE
C) ELAN
D) trade fair

Question 47

Which of the following statements is true of exporting?

A) It increases the trade deficit that nations have.
B) Exporting leads to diseconomies of scope.
C) It helps a firm achieve economies of scale.
D) Exporting is not beneficial to a country's economy.

Question 48

In a letter of credit transaction, the importer secures the letter of credit:

A) before product shipment.
B) after product shipment.
C) from the exporter's bank.
D) after receiving the product.

Question 49

Bank charges on letters of credit will depend on the:

A) exporter's creditworthiness.
B) size of the transaction.
C) exporter's means of finance.
D) time taken to approve the sale.

Question 50

Japan's _____ have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small.

A) sogo shosha
B) kaizen
C) MITI
D) Samurai

Question 51

A(n) _____ occurs when a firm supplies technology, equipment, training, or other services in a country and agrees to take a certain percentage of the resultant output as partial payment for the contract.

A) counterpurchase
B) offset
C) barter
D) buyback

Question 52

Which of the following is a nationwide group of international trade attorneys who provide free initial consultations to miniature businesses on export-related matters?

A) ELAN
B) EMC
C) MITI
D) SCORE

Question 53

Which of the following is a successful exporting strategy used by 3M?

A) Add additional products once exporting becomes successful.
B) Enter many markets at one time to gain maximum exposure.
C) Bring in expert marketing specialists to promote the firm's products.
D) Enter on a large scale to flood the market.

Question 54

_____ occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

A) Barter
B) Offset
C) Counterpurchase
D) Buyback

Question 55

In the _____ program organized by the U.S. Department of Commerce, department representatives accompany groups of U.S. businesspeople abroad to meet with qualified agents, distributors, and customers.

A) best prospects
B) SCORE
C) capital assistance
D) matchmaker

Question 56

In theory, the advantage of EMCs is that they are:

A) managed by governments that provide export subsidies.
B) not-for-profit organizations that provide free service.
C) subsidized by the Department of Commerce.
D) experienced specialists who can help the neophyte exporter.

Question 57

Which of the following statements is true of EMCs?

A) An EMC is a transportation company that engages in international business.
B) EMCs are export-import banks that manage foreign exchanges.
C) EMCs are export specialists that act on behalf of their client firms.
D) An EMC is an intermediary that facilitates talks between two nations.

Question 58

A _____ states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.

A) bill of exchange
B) bill of lading
C) letter of credit
D) bank statement

Question 59

The great promise of exporting is that:

A) large revenue opportunities are often found in foreign markets.
B) it provides more opportunities to smaller firms than larger firms.
C) international trade is protected against exchange risks.
D) it reduces the need for insuring businesses against political risks.

Question 60

A draft used in international transactions:

A) is a document requesting payment.
B) explains the conditions of a contract.
C) is the same as a letter of credit.
D) gives a bank guarantee to an exporter.

Question 61

A _____ is simply an order written by an exporter instructing an importer, or an importer's agent, to pay a specified amount of money at a specified time.

A) letter of credit
B) bill of lading
C) draft
D) banker's letter

Question 62

A _____ allows for a delay in payment.

A) bill of lading
B) time draft
C) sight draft
D) letter of credit

Question 63

_____ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.

A) Floating exchange system
B) Countertrade
C) Letter of credit trade
D) Fixed exchange system

Question 64

Which of the following is a major advantage of using a letter of credit?

A) It gives the importer time to resell the merchandise before payment.
B) It guarantees the exporter pre-export financing.
C) It helps international traders engage in trade with trust.
D) It guarantees the importer extra funds for other purposes.

Question 65

_____ denotes a whole range of barter-like agreements and its principle is to trade goods and services for other goods and services when they cannot be traded for money.

A) Countertrade
B) Cross-selling
C) Matchmaking
D) Letter of credit

Question 66

A _____ is payable on presentation to the drawee.

A) bill of lading
B) time draft
C) sight draft
D) letter of credit

Question 67

_____ is viewed as the most restrictive countertrade arrangement and is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy.

A) Switch trading
B) Offset
C) Barter
D) Buyback

Question 68

_____ is a reciprocal buying agreement and occurs when a firm agrees to buy a certain amount of materials back from a country to which a sale is made.

A) Counterpurchase
B) Barter
C) Offset
D) Switch trading

Question 69

The person or business initiating a draft is known as the ____.

A) beneficiary
B) drawee
C) maker
D) trustee

Question 70

_____ is the direct exchange of goods and/or services between two parties without a cash transaction and is the simplest arrangement.

A) Counterpurchase
B) Barter
C) Offset
D) Switch trading

Question 71

Which of the following is a disadvantage of using a letter of credit (L/C)?

A) A letter of credit does not give protection to the importer.
B) A letter of credit does not give protection to the exporter.
C) The exporter cannot avail pre-export financing when using a L/C.
D) The importer must pay a bank fee for the letter of credit.

Question 72

As a receipt, the bill of lading indicates that the carrier:

A) provides a written promise of payment before releasing the merchandise.
B) has obtained the merchandise described on the face of the document.
C) receives payment from a third-party such as a bank or trading house.
D) is obligated to provide a transportation service in return for a certain charge.

Question 73

In a(n) ____, one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale and this party can fulfill the obligation with any firm in the country to which the sale is being made.

A) switch trade
B) offset
C) barter
D) buyback

Question 74

A _____ is issued to the exporter by the common carrier transporting the merchandise.

A) bill of lading
B) sight draft
C) time draft
D) letter of credit

Question 75

Which of the following statements is true of countertrade?

A) Countertrade reduces the profitability of competing firms and is considered an unethical practice.
B) Countertrade is a conventional means to pay exporters.
C) Smaller organizations commonly use countertrade in international transactions.
D) Countertrade occurs when goods and services are traded for other goods and services.

Question 76

In a typical international trade transaction, the:

A) exporter should obtain a letter of credit to initiate transactions.
B) importer and exporter maintain an account with the same bank.
C) importer's bank sends a letter of credit to the exporter's bank.
D) importer's bank sends the draft and bill of lading to the exporter's bank.

Question 77

The Export-Import Bank:

A) is an international financial institution that provides loans for capital programs.
B) provides finance to facilitate trade between United States and other countries.
C) is an independent agency of the United Nations.
D) focuses on policies that have an impact on the exchange rate and the balance of payments.

Question 78

A banker's acceptance:

A) is payable to the drawee immediately on presentation in a bank.
B) is a time draft that has been drawn on and accepted by a bank.
C) is a sight draft that can be used as a negotiable instrument in banks.
D) allows a buyer possession of the merchandise without signing any formal documents.

Question 79

Which of the following statements is true of export credit insurance?

A) Exporter will require more insurance if a letter of credit is used in transactions.
B) The FCIA provides coverage against commercial risks and political risks.
C) Private associations cannot offer export insurance in the United States.
D) Organizations do not receive coverage against political risks of global trade.

Question 80

In an international transaction involving a bank as a third party, the exporter ships the product after:

A) the bank receives materials from the importer.
B) receiving a cleared payment through bank.
C) the importer has paid the bank.
D) the bank promises to pay on the importer's behalf.