Deck 16: Exporting, Importing, and Countertrade

Question 1

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

Answer 1

True

Question 2

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

Answer 2

True

Question 3

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

Answer 3

True

Question 4

Japan's great trading houses are called Samurai houses.

Question 5

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

Question 6

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

Question 7

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

Question 8

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

Question 9

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

Question 10

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

Question 11

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

Question 12

Exporters often face voluminous paperwork and complex formalities.

Question 13

The bill of lading is a product guarantee issued by the exporter to the importer.

Question 14

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

Question 15

EMCs are governmental agencies that help the U.S.Department of Commerce to promote export in the United States.

Question 16

Poor understanding of competitive conditions in the foreign market is a common problem facing exporters.

Question 17

Firms commonly employ a reputable bank as third party in international transactions.

Question 18

A time draft is payable on presentation to the drawee

Question 19

Exporters usually issue a letter of credit to importers in international transactions.

Question 20

A sight draft allows for a delay in payment.

Question 21

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

Question 22

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

Question 23

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

Question 24

Barter is viewed as the least restrictive countertrade arrangement.

Question 25

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

Question 26

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

Question 27

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

Question 28

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

Question 29

An importer obtains a letter of credit from a bank in the exporter's country in a typical international transaction.

Question 30

The Export-Import Bank is an independent agency of the World Trade Organization.

Question 31

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

Question 32

A counterpurchase gives exporters more flexibility than an offset.

Question 33

Countertrade is least attractive to large,diverse multinational enterprises.

Question 34

The Foreign Credit Insurance Association does not provide coverage against political risks faced by exporters.

Question 35

A buyback occurs when a direct exchange of goods or services occur between two parties without a cash transaction.

Question 36

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

Question 37

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

Question 38

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

Question 39

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

Question 40

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 41

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 42

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 43

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

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

Question 44

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 45

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 46

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 47

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 48

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 49

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 50

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 51

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 52

Bank charges on letter 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 sale

Question 53

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 54

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 55

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 56

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 57

Japan's great trading houses are called _____.

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

Question 58

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

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

Question 59

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 bank guarantee to an exporter

Question 60

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 61

_____ 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 62

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 63

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 64

_____ 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 65

_____ 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 66

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 67

A(n)_____ occurs when a firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment for the contract.

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

Question 68

A _____ allows for a delay in payment.

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

Question 69

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 70

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 71

Which of the following terms refers to the use of a specialized third-party trading house in a countertrade arrangement?

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

Question 72

_____ 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 73

Which of the following is an advantage of countertrade?

A) Countertrade uses instruments such as time draft and sight draft.
B) It is an effective way of doing business with developing nations.
C) It provides exporters and opportunity to obtain direct revenue.
D) Countertrade prevents exchange of unusable or poor-quality goods.

Question 74

_____ 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 75

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 76

A _____ is payable on presentation to the drawee.

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

Question 77

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 78

A _____ is issued to the exporter by the common carrier transporting the merchandise and serves as a receipt,a contract,and a document of title.

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

Question 79

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 80

Which of the following is a major drawback of engaging in countertrade?

A) Countertrade is not useful when trading with developing nations.
B) Financing is difficult when engaging in a countertrade.
C) It is not attractive to small organizations.
D) Countertrade may involve the exchange of unusable goods.