Question 1

A ________ is a request for payment that is created when an importer asks its bank to write a letter to an exporter indicating that the importer's bank will honor the request.

Accepted Answer

A

Question 2

When an exporter is dealing with a high credit risk customer,________ as a form of payment is most often used.

Accepted Answer

When dealing with a high credit risk customer, it is best for the exporter to use cash in advance as a form of payment, as it eliminates the risk of non-payment and provides the exporter with immediate funds. Other payment methods like drafts, banker's acceptances, and open accounts do not guarantee payment and can leave the exporter vulnerable to financial losses.

Question 3

The Export-Import Bank of the United States is the only independent U.S.government corporation whose sole purpose is to support ________ in their efforts to conduct international trade.

Accepted Answer

The Export-Import Bank of the United States (EXIM) exists solely to support U.S. exporters in their efforts to conduct international trade. It provides financing and insurance solutions to U.S. companies looking to sell their goods and services abroad. EXIM does not support foreign importers or foreign exporters to the U.S. and while it does offer services to small businesses, its primary purpose is to support all U.S. exporters, regardless of size.

Question 4

What is the name of the company that purchases the accounts receivable of other firms?

Accepted Answer

A company that purchases the accounts receivable of other firms is called an export factor. They provide financing to exporters by purchasing their accounts receivable at a discount and then collecting the full amount from the customer.

Question 5

A documentary credit reduces the uncertainty of a transaction by

Accepted Answer

A documentary credit, also known as a letter of credit, clearly establishes the acts that the exporter must carry out in order to receive payment. This reduces uncertainty for both the exporter and importer, as the exporter knows what they need to do to receive payment and the importer has a guarantee that payment will only be made once the exporter has fulfilled the necessary requirements. Documentary credits do not provide guarantees of payment by the importer, insurance in case of loss or damage, or extended repayment terms.

Question 6

The Financial Credit Insurance Association offers two basic types of insurance polities to protect exporters against ________ and ________ risks.

Accepted Answer

The two basic types of insurance policies offered by the Financial Credit Insurance Association are commercial and political risks. This includes protection against non-payment by foreign buyers or government intervention. Exchange rate and economic risks are not specifically mentioned. Logistics is also not included as a type of risk covered by this type of insurance.

Question 7

The Export-Import Bank of the U.S.is the only independent U.S.government corporation whose sole purpose is to support ________ in their efforts to conduct international trade.

Accepted Answer

The Export-Import Bank of the U.S. is specifically designed to assist U.S. exporters by providing financial assistance, insurance, and other services to encourage and facilitate the export of U.S. goods and services to international markets.

Question 8

In which one of the following payments does the exporter retain title to the shipment as long as possible?

Accepted Answer

Documentary collection is a payment method in which the exporter retains title to the shipment until the importer has paid for the goods.

Question 9

If the transfer of title for the shipped goods is desired,which type of bill of lading is used?

Accepted Answer

An order bill of lading is used when the transfer of title or ownership of the shipped goods is desired. This type of bill of lading allows the holder (whoever possesses the original document) to take possession of the goods upon delivery, as stated in the bill of lading. This means that the holder can claim ownership of the goods and sell or transfer them to another party. Unlike a straight bill of lading, which designates a specific party as the recipient of the goods, an order bill of lading allows for more flexibility in the transfer of ownership.

Question 10

Insurance policies that covers all of the exports of a firm are known as

Accepted Answer

Insurance policies that cover all of the exports of a firm are called floating policies. These policies are specific to the exporter and cover all exports for a certain period.

Question 11

If a bank accepts a ________ draft,it may become a ________.

Accepted Answer

When a bank accepts a time draft, it becomes a banker's acceptance, which is a promise by the bank to pay the specified amount at a future date.

Question 12

The terms and conditions of a(n)________ documentary credit cannot be changed unless all parties involved first agree to the change.

Accepted Answer

An irrevocable documentary credit cannot be changed without the consent of all parties involved, making it a more secure payment method for international trade.

Question 13

A(n)________ is a document required by certain countries which forces the exporter to provide information to customs officials in the importing country with the goal of preventing false declarations of the value of the merchandise.

Accepted Answer

A consular invoice is a document required by some countries to prevent false declarations of merchandise value. It provides information about the exporter and importer, description of the goods, and the agreed price. It is verified and stamped by the consul of the importing country located in the exporting country. This type of invoice helps customs officials determine the correct amount of duty and taxes to be paid.

Question 14

What is the correct term for documentary credit that cannot be changed unless all parties involved first agree to the change?

Accepted Answer

The term for a documentary credit that cannot be changed unless all parties involved first agree to the change is "irrevocable." This type of credit provides a secure payment mechanism for the seller, as it ensures that payment will be received as long as the seller complies with the terms and conditions of the credit.

Question 15

The International Chamber of Commerce provides the following EXCEPT:

Accepted Answer

The International Chamber of Commerce does not provide writing export credit insurance. However, it does promote international trade and investment, set rules and standards for international trade, and offer arbitration and other forms of dispute resolution services.

Question 16

When a bank accepts a time draft for payment and sells it in the money markets,it is known as a

Accepted Answer

When a bank accepts a time draft and sells it in the money markets, it is called a banker's acceptance. It is a common method of financing trade transactions and provides assurance to the seller that they will receive payment at a future date. The bank's acceptance of the time draft makes it a more secure form of payment, which enables the seller to sell it in the money markets to obtain immediate funds.

Question 17

What is the name of the request for payment that is created when an importer asks its bank to write a letter to an exporter indicating that the importer's bank will honor the request?

Accepted Answer

The request for payment created when an importer asks its bank to write a letter to an exporter indicating that the importer's bank will honor the request is known as a draft.

Question 18

A(n)________ is a contract issued to an exporter by the shipping company that agrees to transport the goods to their destination.

Accepted Answer

A bill of lading is a legal document issued by a carrier or shipping company to the exporter as a contract of carriage of goods to their destination. It describes the type, quantity, and destination of the goods, and serves as proof of ownership and receipt of the goods by the carrier.

Question 19

With forfaiting,an irrevocable guarantee,known as a(n)________,may be created by the importer's government.

Accepted Answer

An irrevocable guarantee known as an aval may be created by the importer's government in forfaiting. Trade acceptance, documents against payment, and documents against acceptance are not related to forfaiting.

Question 20

With a ________,the exporter retains title and control of the goods until the importer has paid for the goods.

Accepted Answer

A documentary collection is a process where the seller's bank acts as an intermediary to collect payment from the buyer's bank in exchange for shipping documents. The exporter retains control of the goods until the importer pays for them, which is confirmed by the release of the shipping documents by the seller's bank. This provides some security to the exporter in case the importer defaults on payment. Sight and time drafts are types of payment instruments, while a clean bill of lading indicates that the goods have been shipped without damage or discrepancies.

Quiz 18: Financing International Trade