Question 1

The difference between terms "CFR" and "CIF" is that under "CIF" term of sale,the buyer must procure his own marine insurance coverage on the goods.

Accepted Answer

Under CIF (Cost, Insurance, and Freight), the seller is responsible for arranging and paying for the marine insurance coverage on the goods, not the buyer.

Question 2

Because importers and exporters assume different risks,the most preferred way to conduct business and minimize these risks is:

Accepted Answer

Documentary sale involves the use of shipping and financial documents to ensure that both parties fulfill their obligations. The exporter ships the goods and provides the necessary documents, including a bill of lading and commercial invoice, to the importer's bank. The bank releases the documents to the importer only after they have paid or accepted a financial obligation, which mitigates the risk for both parties. This method is thus preferred as it minimizes the risks perceived by both importers and exporters. The other options, cash in advance and open account, are less preferred as they place an unequal burden of risk on either party.

Question 3

The purpose of the bill of lading is to:

Accepted Answer

The bill of lading serves as a legal document that acknowledges the receipt of goods and serves as evidence of a contract of carriage. It also enables the seller to transfer title of the goods to the buyer and receive payment.

Question 4

Because negotiable bearer documents are transferred by delivery,they are not used in foreign trade.

Accepted Answer

Negotiable bearer documents are used in foreign trade because they can be transferred by delivery, which makes them easy to use in international transactions.

Question 5

A carrier can be held liable for breach of contract for damages for the misdelivery of goods.

Accepted Answer

A carrier can indeed be held liable for breach of contract if they misdeliver goods, and may be required to pay damages as a result.

Question 6

In the U.S.,the use of bills of lading is governed by:

Accepted Answer

The use of bills of lading in the U.S. is governed by the Federal Bills of Lading Act. This law regulates the issuance, transfer, and discharge of bills of lading for the transportation of goods in interstate or foreign commerce. It provides specific requirements for bills of lading, liabilities of carriers, and the rights of shippers and consignees.

Question 7

A carrier is entitled to release a shipment covered by a negotiable bill of lading to a holder in possession of a clean copy of the bill of lading only if the holder also presents a written guarantee of ownership.

Accepted Answer

A carrier is entitled to release a shipment covered by a negotiable bill of lading to a holder in possession of a clean copy of the bill of lading, but there is no legal requirement for the holder to present a written guarantee of ownership. However, the carrier may request additional documentation or information to ensure the lawful release of the shipment.

Question 8

According to Incoterms,the risk of loss under contract terms "FAS Name of Vessel" passes to the buyer when the goods are delivered alongside the named vessel.

Accepted Answer

According to Incoterms, the risk of loss under contract terms "FAS Name of Vessel" passes to the buyer when the goods are delivered alongside the named vessel.

Question 9

Shipment contracts are more common in international trade than destination contracts.

Accepted Answer

Shipment contracts, such as FOB (Free on Board) or CIF (Cost, Insurance, and Freight), are more common in international trade than destination contracts because they specify the point at which the risk and responsibility for the goods transfer from the seller to the buyer. In destination contracts, such as Delivered Duty Paid (DDP), the seller bears the risk and responsibility until the goods are delivered to the buyer's specified destination.

Question 10

Incoterms are published by the International Chambers of Commerce based in Paris,France.

Accepted Answer

The International Chambers of Commerce based in Paris, France publishes Incoterms.

Question 11

A sale made "CIF foreign port" implies that the terms of the sale are:

Accepted Answer

CIF (Cost, Insurance, Freight) is an Incoterm that means the seller is responsible for the cost of the goods, insurance, and freight to transport the goods to the foreign port of destination. In a CIF sale, the buyer must pay the seller as soon as the documents related to the shipment are presented. Therefore, a sale made CIF foreign port implies that the terms of the sale are "cash against documents" (B), which means the buyer must pay for the goods immediately upon presentation of the shipping documents by the seller or their agent.

Question 12

The Incoterms definitions will automatically become a part of a contract for the sale of goods,governed by the UN Convention for the International Sale of Goods.

Accepted Answer

The Incoterms definitions do not automatically become a part of a contract for the sale of goods governed by the UN Convention for the International Sale of Goods. They must be explicitly referenced and agreed upon by the parties in the contract.

Question 13

According to Incoterms,the risk of loss or damage to goods under a CIF contract passes from seller to buyer when:

Accepted Answer

According to Incoterms, under a CIF contract, the risk of loss or damage to goods passes from the seller to the buyer when the goods cross the ship's rail at the port of shipment. Therefore, option A is the correct answer.

Question 14

The trade terms "FOB" and "CIF" are defined by which of the following:

Accepted Answer

The trade terms "FOB" and "CIF" are defined by Incoterms, which are a set of standardized international trade terms published by the International Chamber of Commerce. The Uniform Commercial Code and the Revised American Foreign Trade Definitions are separate from Incoterms and do not define these specific trade terms.

Question 15

According to Incoterms,the trade term that represents the minimum responsibility of the seller is:

Accepted Answer

Ex Works (EXW) represents the minimum responsibility of the seller. This term requires the seller to make the goods available at their premises and the buyer is responsible for all transportation costs and risks. The seller has no obligation to load the goods onto a vehicle provided by the buyer or clear the goods for export.

Question 16

Under an FOB contract,the seller delivery's the goods on board the ship decks and has no further transportation obligations.

Accepted Answer

Under an FOB (Free On Board) contract, the seller is responsible for delivering the goods on board the ship at the shipping port. Once the goods are delivered on board, the seller has fulfilled their delivery obligations, and any further transportation, insurance, or costs are the responsibility of the buyer.

Question 17

In addition to the bill of lading,other documents that may be required for shipment include all but which of the following:

Accepted Answer

All of these documents may be required for shipment, including the inspection certificate, consular invoice, and commercial invoice, in addition to the bill of lading.

Question 18

Under Incoterms,a sale on terms "DDP" represents the maximum responsibility of the seller and the maximum responsibility of the buyer.

Accepted Answer

DDP (Delivered Duty Paid) is a term that places the maximum responsibility on the seller, as they are responsible for delivering the goods to the buyer's premises and paying for all costs involved in the delivery process, including customs duties and taxes. The buyer's responsibility is simply to receive the goods at the agreed destination. Therefore, option A is the correct answer.

Question 19

A sale made with terms "CIF Tokyo" includes in the price quoted for the goods which of the following:

Accepted Answer

CIF stands for "Cost, Insurance, Freight" and is a trade term used to indicate that the seller must pay the costs and freight necessary to bring the goods to the named port of destination. Therefore, the price quoted for the goods includes the cost of the goods themselves, the cost of insurance to cover any potential damage or loss in transit, and the cost of freight to transport the goods from the seller to the buyer's named port of destination. Cash, in-transit expenses, foreign exchange expenses, and currency exchange expenses are not included in the price quoted.

Question 20

All Incoterms are intended for use with ocean cargo.

Accepted Answer

Incoterms can be used for all modes of transportation, including ocean, air, rail, and trucking.

Quiz 5: The Documentary Sale and Terms of Trade