Question 1

It is common for international trade disputes to be settled through international arbitration partly because the costs of litigation exceed the costs of arbitration.

Accepted Answer

International arbitration is often chosen as a method of settling trade disputes because it is generally quicker, more flexible, and less expensive than traditional litigation. The costs of litigation can be prohibitively high, especially in international disputes, which involve diverse legal systems, languages, and cultures.

Question 2

The growth in international trade has come from an increase in the international sale of goods but not services.

Accepted Answer

This statement is false. The growth in international trade has come from an increase in both the international sale of goods and services.

Question 3

The governing convention on shipping terms and responsibilities involved in international transportation is called FOB (Free On Board).

Accepted Answer

The governing convention on shipping terms and responsibilities involved in international transportation is called Incoterms (International Commercial Terms), not FOB. FOB is just one of the terms within Incoterms.

Question 4

A document which is drawn by the buyer's bank at the buyer's request,and guarantees that the bank will pay the agreed-on amount when all prescribed conditions,such as satisfactory delivery,have been completed,is called a sight draft.

Accepted Answer

The correct term for the document described is a "letter of credit," not a sight draft. A sight draft is a type of bill of exchange that requires the payment of the specified amount of money immediately upon presentation or at sight, rather than guaranteeing payment upon completion of conditions.

Question 5

Typically,international purchasing offices (IPOs)are used when the company has an established presence in the same geographic region where important suppliers are located.

Accepted Answer

International Purchasing Offices (IPOs) are often established specifically to facilitate sourcing and purchasing from suppliers in regions where the company does not have a significant presence, allowing them to better access and manage overseas suppliers.

Question 6

Countertrade historically has been very common in the sale by U.S.firms of armaments to other nations,but very uncommon in civilian procurement projects.

Accepted Answer

This statement is true. Countertrade, which refers to the exchange of goods or services instead of currency, has been commonly used in armament sales by U.S. firms to other countries, but it is not a common practice in civilian procurement projects.

Question 7

A foreign trade zone (FTZ)in the U.S.is completely different in purpose from a maquiladora in Mexico.

Accepted Answer

Both a Foreign Trade Zone (FTZ) in the U.S. and a maquiladora in Mexico are designed to encourage foreign trade and investment by offering tax and customs duty benefits. While they operate under different regulatory frameworks and in different countries, their primary purpose of promoting international trade and manufacturing for export purposes aligns them closely.

Question 8

Commercial letters of credit (CLCs)are the least actively used structured payment instruments in global trade.

Accepted Answer

CLCs are actually one of the most commonly used payment instruments in global trade, with an estimated 80-90% of international trade transactions involving their use.

Question 9

The NAFTA,the EU,ASEAN and the WTO are all examples of Free Trade Agreements which were designed to facilitate trade between and among member countries.

Accepted Answer

The NAFTA (North American Free Trade Agreement), the EU (European Union), ASEAN (Association of Southeast Asian Nations), and the WTO (World Trade Organization) are all examples of Free Trade Agreements that were created to promote free and open trade between member countries.

Question 10

Improvements in transportation and communications have reduced the lead time for offshore purchases.

Accepted Answer

Improvements in transportation and communications have made it easier and quicker to purchase goods offshore, reducing the lead time.

Quiz 14: Global Supply Management