Question 1

National exhaustion provides that once a firm has sold its trademarked product in a specific country,it cannot restrict the further distribution of that product in that country.

Accepted Answer

National exhaustion allows for the free movement and distribution of trademarked products within a specific country, even after they have been sold by the original owner. This means that individuals or other companies can further distribute the product without fear of trademark infringement. However, the exhaustion principle only applies within the borders of the country where the product was sold, and the original owner may still have the right to control distribution in other countries or regions.

Question 2

Governments often examine transfer prices carefully as they are often aimed at supporting parallel imports.

Accepted Answer

Transfer prices are usually examined by governments to ensure that there is no tax evasion or profit shifting within a multinational company by artificially inflating or deflating prices of goods and services being transferred between its subsidiaries. They are not usually aimed at supporting parallel imports, which refer to the importation of genuine products from one market to another without the permission of the manufacturer or authorized distributor in the destination market.

Question 3

CIF refers to credit,insurance,and freight.

Accepted Answer

CIF stands for Cost, Insurance, and Freight, which is a trade term requiring the seller to arrange for the carriage of goods by sea to a port of destination, and provide the buyer with the documents necessary to obtain the goods from the carrier.

Question 4

Free on board (FOB)designates that the seller is responsible for the costs of shipping and insuring a purchased product.

Accepted Answer

FOB indicates that the buyer is responsible for the costs associated with shipping and insuring a purchased product.

Question 5

Parallel imports are the import of illegal products through legal channels.

Accepted Answer

Parallel imports refer to the import of genuine products through unauthorized or non-official distribution channels. These are not necessarily illegal products.

Question 6

Countertrade is popular among customers who prefer to pay with hard currency.

Accepted Answer

Countertrade is popular among customers who prefer to pay with non-hard currency, such as bartering or exchanging goods or services rather than using traditional currency.

Question 7

CIF refers to cost,insurance,and freight.

Accepted Answer

CIF stands for cost, insurance, and freight.

Question 8

CFR refers to cost,freight and return.

Accepted Answer

CFR actually stands for Cost and Freight, which refers to a trade term where the seller is responsible for the cost and freight of delivering the goods to a named port of destination. The buyer is responsible for the unloading of the goods and any further transportation to their final destination. There is no reference to a return in CFR.

Question 9

A South African law requires parallel importers to alert consumers to the fact that authorized dealers are under no obligation to honor the manufacturer warranty of a parallel import.

Accepted Answer

The statement correctly reflects the requirement of South African law regarding parallel importers and manufacturer warranty.

Question 10

Parallel imports are commonly used by MNCs to optimize global pricing.

Accepted Answer

Parallel imports, also known as gray market imports, are typically not used by multinational corporations (MNCs) themselves to optimize global pricing. Instead, they are usually carried out by independent businesses or individuals who import products from one country to another without the permission of the intellectual property owner, often to take advantage of price differences between markets.

Question 11

Free on board (FOB)designates that the buyer is responsible for the costs of shipping and insuring a purchased product.

Accepted Answer

FOB means that the seller is responsible for getting the product to the point of shipment, but the buyer assumes responsibility and bears the cost of shipping and insuring the product from that point forward.

Question 12

Companies try to accumulate more profits in a high-tax country in order to help governments increase tax revenue.

Accepted Answer

Companies may try to minimize their tax liability in high-tax countries by engaging in tax planning strategies such as relocating their profits to low-tax jurisdictions. This reduces the amount of tax revenue that governments can collect, rather than increasing it.

Question 13

An international transfer price is the price paid by the importing or buying unit of a firm to the exporting unit of the same firm.

Accepted Answer

An international transfer price is the price paid between different units of the same firm located in different countries for goods or services transferred from one unit to another.

Question 14

Firms can control parallel imports by reducing prices in higher priced markets and limiting supplies to wholesalers in lower priced markets.

Accepted Answer

By reducing prices in higher priced markets, firms can reduce the incentive for parallel importers to purchase goods from these markets and sell them in lower priced markets. Additionally, by limiting supplies to wholesalers in lower priced markets, firms can reduce the availability of the goods that parallel importers seek to acquire in these markets. Both of these strategies can help firms to control parallel imports.

Question 15

Parallel imports hurt governments because they do not pay taxes.

Accepted Answer

Parallel imports are products that are brought into a country from another market without the permission of the trademark owner in that country. While it is considered legal, parallel imports do not necessarily avoid taxes. In fact, parallel importers may still be required to pay taxes and customs duties when importing products into a country. Therefore, governments may still receive tax revenues from parallel imports.

Question 16

When two currencies are involved,there is the risk that a change in exchange rates may occur between the invoicing date and the settlement date for the transaction.

Accepted Answer

This statement is true. Exchange rates between two currencies can fluctuate over time, resulting in a different exchange rate at the settlement date compared to the invoicing date. This can lead to either a gain or a loss for one party involved in the transaction.

Question 17

Compensation transactions are typical for large governmental purchases,such as defense projects,especially when a country wants to obtain some extra exports in exchange for the awarding of a contract.

Accepted Answer

Compensation transactions are commonly used in large governmental purchases, particularly in defense projects, to secure extra exports in exchange for awarding a contract.

Question 18

Parallel imports are often supported by governments because they increase tax revenues considerably.

Accepted Answer

Parallel imports, sometimes referred to as grey market goods, are products that are legally sold in one country but imported and sold in another country without the authorization of the manufacturer. Governments generally do not support parallel imports because they can undermine intellectual property rights, harm local businesses, and potentially endanger consumer safety. While parallel imports may generate some tax revenues, these are usually outweighed by the negative economic effects.

Question 19

A South African law requires parallel importers to alert consumers to the fact that their products might be counterfeit.

Accepted Answer

The statement is not correct. The South African law does not require parallel importers to alert consumers to the fact that their products might be counterfeit. However, it is illegal to import counterfeit goods in South Africa.

Question 20

CIF refers to classified industrial freight.

Accepted Answer

CIF actually refers to Cost, Insurance, and Freight. It is a trade term used in international shipping contracts to specify that the seller is responsible for the cost of goods, insurance, and freight until the goods arrive at the agreed port of destination.

Quiz 12: Pricing for International and Global Markets