Chapter 16 Exporting, Importing, and Countertrade
True / False Questions
1.
Proactive firms do not consider exporting until their domestic market is
saturated.
FALSE
Proactive firms continually seek opportunities for profitable exporting and
systematically scan foreign markets to see where the opportunities lie for
leveraging their technology, products, and marketing skills in foreign
countries. This is unlike the reactive firms who do not even consider
exporting until their domestic market is saturated.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-01 Explain the promises and risks associated with exporting.
Topic: The Promise and Pitfalls of Exporting
2.
Poor understanding of competitive conditions in the foreign market is a
common problem facing exporters.
TRUE
Common pitfalls of exporting include poor market analysis, a poor
understanding of competitive conditions in the foreign market, a failure to
customize the product offering to the needs of foreign customers, lack of an
effective distribution program, a poorly executed promotional campaign, and
problems securing financing.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-01 Explain the promises and risks associated with exporting.
Topic: The Promise and Pitfalls of Exporting
3.
Exporters often face voluminous paperwork and complex formalities.
TRUE
Exporters often face voluminous paperwork, complex formalities, and many
potential delays and errors.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
4.
Japan’s great trading houses are called Samurai houses.
FALSE
Japan’s great trading houses are called sogo shosha.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
5.
The U.S. Department of Commerce organizes trade events that help
potential exporters make foreign contacts and explore export opportunities.
TRUE
The U.S. Department of Commerce organizes trade events that help
potential exporters make foreign contacts and explore export opportunities.
The department organizes exhibitions at international trade fairs, which are
held regularly in major cities worldwide.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
6.
SCORE is a nationwide group of international trade attorneys who provide
free initial consultations to small businesses on export-related matters.
FALSE
Through its Service Corps of Retired Executives (SCORE) program, the SBA
also oversees some 850 volunteers with international trade experience to
provide one-on-one counseling to active and new-to–export businesses.
The SBA also coordinates the Export Legal Assistance Network (ELAN), a
nationwide group of international trade attorneys who provide free initial
consultations to small businesses on export-related matters.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Improving Export Performance
7.
Nearly every state in the U.S. maintains active trade commissions to
promote exports.
TRUE
In addition to the Department of Commerce and SBA, nearly every state and
many large cities maintain active trade commissions, whose purpose is to
Topic: Improving Export Performance
8.
EMCs are governmental agencies that help the U.S. Department of
Commerce to promote export in the United States.
FALSE
EMCs are export specialists that act as the export marketing department or
international department for their client firms.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-02 Identify the steps managers can take to improve their firm’s export performance.
Topic: Improving Export Performance
9.
Hiring an EMC will help a novice exporter identify opportunities and
navigate the paperwork involved in exporting.
TRUE
For the novice exporter, it helps to hire an EMC or at least an experienced
export consultant to help identify opportunities and navigate the paperwork
and regulations so often involved in exporting.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-02 Identify the steps managers can take to improve their firm’s export performance.
Topic: Improving Export Performance
10.
Firms commonly employ a reputable bank as third party in international
transactions.
TRUE
The parties involved in international trade often find it difficult to trust each
other. The problem is solved by using a third party trusted by both—
normally a reputable bank—to act as an intermediary.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
11.
A letter of credit states that an exporter has availed credit from the bank to
manufacture goods.
FALSE
A letter of credit states that the bank will pay a specified sum of money to a
beneficiary, normally the exporter, on presentation of particular, specified
documents.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
12.
Exporters usually issue a letter of credit to importers in international
transactions.
FALSE
Usually, importers avail a letter of credit from their bank to engage in
international transactions.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
13.
The bank promises to pay on behalf of the importer when a bank is used as
third party in international transactions.
TRUE
When trading with bank as a third-party, the importer obtains bank’s
promise to pay on importer’s behalf at first. Then, the bank promises
exporter to pay on behalf of importer. The exporter ships the items after
this.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
14.
A draft is the instrument normally used in international commerce to effect
payment.
TRUE
A draft, sometimes referred to as a bill of exchange, is the instrument
normally used in international commerce to effect payment.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
15.
A draft is simply an order written by an exporter instructing an importer to
pay a specified amount of money at a specified time.
TRUE
A draft 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.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
16.
A sight draft allows for a delay in payment.
FALSE
Unlike a time draft, a sight draft is payable on presentation to the drawee.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
17.
A time draft is payable on presentation to the drawee
FALSE
Unlike a sight draft, a time draft allows for a delay in payment—normally 30,
60, 90, or 120 days.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
18.
When a time draft is drawn on and accepted by a business firm, it is called
a trade acceptance.
TRUE
When a time draft is drawn on and accepted by a business firm, it is called
a trade acceptance.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
19.
Time drafts cannot be sold to investors at a discount from its face value.
FALSE
Time drafts are negotiable instruments; that is, once the draft is stamped
with an acceptance, the maker can sell the draft to an investor at a discount
from its face value.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
20.
The bill of lading is a product guarantee issued by the exporter to the
importer.
FALSE
The bill of lading is issued to the exporter by the common carrier
transporting the merchandise.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
21.
A bill of lading serves as a receipt, a contract, and a document of title.
TRUE
A bill of lading serves three purposes: it is a receipt, a contract, and a
document of title.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
22.
The bill of lading does not serve as a document of title as such.
FALSE
A bill of lading serves three purposes: it is a receipt, a contract, and a
document of title. As a document of title, it can be used to obtain payment
or a written promise of payment before the merchandise is released to the
importer.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
23.
The bill of lading can function as collateral against which funds may be
advanced to the exporter by its local bank.
TRUE
The bill of lading can function as collateral against which funds may be
advanced to the exporter by its local bank before or during shipment and
before final payment by the importer.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
24.
An importer obtains a letter of credit from a bank in the exporter’s country
in a typical international transaction.
FALSE
The importer obtains a letter of credit from a local bank in a typical
international transaction.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-04 Recognize the basic steps involved in export financing.
Topic: Export and Import Financing
25.
U.S. organizations can get financing aid from the Export-Import Bank.
TRUE
U.S. organizations can get financing aid from the Export-Import Bank and
export credit insurance from the Foreign Credit Insurance Association.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Export Assistance
26.
The Export-Import Bank is an independent agency of the World Trade
Organization.
FALSE
The Export-Import Bank, often referred to as Ex-Im Bank, is an independent
agency of the U.S. government.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Export Assistance
27.
Ex-Im Bank has a direct lending operation under which it lends dollars to
foreign borrowers.
TRUE
Ex–Im Bank has a direct lending operation under which it lends dollars to
foreign borrowers for use in purchasing U.S. exports.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Export Assistance
28.
Foreign borrowers can avail loans from Ex-Im Bank to pay U.S. suppliers.
TRUE
Ex-Im Bank has a direct lending operation under which it lends dollars to
foreign borrowers for use in purchasing U.S. exports. The foreign borrowers
use the loans to pay U.S. suppliers and repay the loan to Ex-Im Bank with
interest.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Export Assistance
29.
Foreign Credit Insurance Association is a part of the U.S Department of
Commerce and guides the activities of the Export-Import Bank.
FALSE
In the United States, export credit insurance is provided by the Foreign
Credit Insurance Association (FCIA), an association of private commercial
institutions operating under the guidance of the Export-Import Bank.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Export Assistance
30.
The Foreign Credit Insurance Association does not provide coverage against
political risks faced by exporters.
FALSE
The Foreign Credit Insurance Association provides coverage against
commercial risks and political risks.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-03 Identify information sources and government programs that exist to help exporters.
Topic: Export Assistance
31.
Countertrade is an alternative means of structuring an international sale
when conventional means of payment are difficult, costly, or nonexistent.
TRUE
Countertrade is an alternative means of structuring an international sale
when conventional means of payment are difficult, costly, or nonexistent.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
32.
Countertrade denotes a whole range of agreements that involve financial
exchanges.
TRUE
Countertrade denotes a whole range of barter-like agreements; its principle
is to trade goods and services for other goods and services when they
cannot be traded for money.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
33.
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.
FALSE
Barter is the direct exchange of goods and/or services between two parties
without a cash transaction.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
34.
Barter is viewed as the least restrictive countertrade arrangement.
FALSE
Barter has two disadvantages. First, if goods are not exchanged
simultaneously, one party ends up financing the other for a period. Second,
firms engaged in barter run the risk of having to accept goods they do not
want, cannot use, or have difficulty reselling at a reasonable price. For
these reasons, barter is viewed as the most restrictive countertrade
arrangement.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
35.
Barter is primarily used for one-time-only deals in transactions with trading
partners who are not creditworthy or trustworthy.
TRUE
Barter is viewed as the most restrictive countertrade arrangement. It is
primarily used for one-time-only deals in transactions with trading partners
who are not creditworthy or trustworthy.
36.
Counterpurchase occurs when a firm agrees to purchase a certain amount
of materials back from a country to which a sale is made.
TRUE
Counterpurchase is a reciprocal buying agreement. It occurs when a firm
agrees to purchase a certain amount of materials back from a country to
which a sale is made.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
37.
A counterpurchase gives exporters more flexibility than an offset.
FALSE
From an exporter’s perspective, an offset is more attractive than a straight
counterpurchase agreement because it gives the exporter greater flexibility
to choose the goods that it wishes to purchase.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
38.
The term switch trading refers to the use of a specialized third-party trading
house in a countertrade arrangement.
TRUE
The term switch trading refers to the use of a specialized third-party trading
house in a countertrade arrangement.
AACSB: Analytic
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade
39.
A buyback occurs when a direct exchange of goods or services occur
between two parties without a cash transaction.
FALSE
A buyback occurs when a firm builds a plant in a country—or supplies
technology, equipment, training, or other services to the country—and
agrees to take a certain percentage of the plant’s output as partial payment
for the contract.
AACSB: Analytic
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 16-05 Describe how countertrade can be used to facilitate exporting.
Topic: Countertrade