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Student name:__________
TRUE/FALSE – Write ‘T’ if the statement is true and ‘F’ if the statement is false.
1) The two major reasons U.S. firms give for not exporting are (1) preoccupation with the
vast American market and (2) reluctance to become involved in a new and unknown operation.
⊚ true
⊚ false
2) The first step in finding a foreign market for a product is to determine whether a product’s
pricing is right for that market.
⊚ true
⊚ false
3) CIBER is an international business research and education program located at U.S.
universities.
⊚ true
⊚ false
4) A common mistake exporters make is not keeping their focus on the home market,
despite what is happening in the export market.
⊚ true
⊚ false
5) Often new exporters think that they won’t have to localize their approach, assuming that a
marketing technique or distribution system that works in one country will work in another.
⊚ true
⊚ false
6) Incoterms are internationally standardized terms that describe the responsibilities of the
buyer and seller in international trade.
⊚ true
⊚ false
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7) The sales agreement should specify as simply as possible the duties of the buyer and the
firm.
⊚ true
⊚ false
8) Most international customers will pay cash in advance unless the order is for a custom-
made product.
⊚ true
⊚ false
9) On an open account, the buyer assumes all of the payment risk.
⊚ true
⊚ false
10) A disadvantage for companies that insist on less risky transactions, such as a letter of
credit, is that they may be losing business to competitors who sell on open accounts.
⊚ true
⊚ false
11) A confirmed letter of credit guarantees payment to the seller under certain conditions.
⊚ true
⊚ false
12) Export drafts must be paid before the buyer receives shipping documents.
⊚ true
⊚ false
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13) Factoring allows the exporter to be more competitive by selling on open account rather
than by a letter-of-credit method.
⊚ true
⊚ false
14) Free trade zones are areas designated by the government of a country for duty-free entry
of imported goods.
⊚ true
⊚ false
15) A shipper’s export declaration (SED) is a document required by the Department of
Agriculture to control exports and supply export statistics.
⊚ true
⊚ false
16) A straight bill of lading is nonnegotiable.
⊚ true
⊚ false
17) Fires and hurricanes fall under the marine insurance policy of broad named perils.
⊚ true
⊚ false
18) Exporting using ocean freight rather than air freight is a much cheaper alternative,
particularly when calculated on the basis of total costs.
⊚ true
⊚ false
19) Customhouse brokers have functions that are the same as those of foreign freight
forwarders, but on the export side of the transaction.
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⊚ true
⊚ false
20) The main problem with the Harmonized Tariff Schedule of the United States is that every
country uses a different system.
⊚ true
⊚ false
MULTIPLE CHOICE – Choose the one alternative that best completes the statement or
answers the question.
21) What is one reason companies choose not to export?
A) They do not wish to increase their sales.
B) They do not feel a need for exporting.
C) They are preoccupied with the host market.
D) They are reluctant to embark on a new and unknown operation.
22) Managers generally mention three areas in which they lack knowledge related to
exporting, including identification of foreign markets, export procedures, and
A) identifying international agents.
B) identifying international distributors.
C) payment and financing procedures.
D) hiring a customs broker.
23) The government’s trade portal where you can get help with most things related to trade is
A) trade.gov.
B) export.gov.
C) trade.com.
D) commerce.gov.
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24) Once a firm has determined there is a need for the firm’s products in a foreign market, the
next step is to
A) request information from the International Trade Administration.
B) choose between exporting or licensing.
C) set up its own export operation.
D) draft the export marketing plan.
25) The ITA’s Global Markets Unit specialists seek to provide which service to U.S. firms?
A) advocacy for market access
B) monitor foreign country compliance with trade agreements
C) shaping industry-specific trade policies and promotion strategies
D) organizing trade missions and fairs
26) Which unit of the International Trade Administration promotes the trade interests of U.S.
industries by helping to shape industry-specific trade policies and promotion strategies, including
trade missions, fairs, and seminars?
A) Global Markets Unit
B) Industry and Analysis Unit
C) Enforcement and Compliance Unit
D) Small Business Administration
27) The Small Business Administration (SBA) provides what kind of assistance?
A) grant programs to support international research
B) education assistance
C) financial assistance
D) coupon redemption service
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28) The Enforcement and Compliance unit of the ITA helps American business by
A) providing advocacy for market access.
B) monitoring foreign country compliance with trade financing.
C) monitoring and enforcing U.S. trade law and agreements.
D) organizing trade missions and fairs.
29) Which organization offers a matching service, bringing potential exporters together with
business partners in specific markets?
A) Global Markets Unit
B) U.S. Department of Commerce
C) Enforcement and Compliance Unit
D) Small Business Administration
30) Which organization provides an acquisition support program that searches for suitable
acquisitions in foreign locations?
A) Global Markets Unit
B) U.S Department of Commerce
C) Enforcement and Compliance Unit
D) Small Business Administration
31) What private sector organization is active in 91 countries and provides networking
opportunities and an online trading system?
A) Global Markets Unit
B) U.S Department of Commerce
C) World Trade Centers Association
D) Small Business Administration
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32) Dun & Bradstreet, the Finance, Credit, and International Business Association (FCIB),
and the exporter’s bank are all sources of
A) export financing.
B) networking opportunities.
C) credit information.
D) business strategy consulting.
33) Which of these is one of the 12 most common mistakes and pitfalls awaiting new
exporters listed in the textbook?
A) failure to develop a domestic marketing plan
B) not treating international distributors on an equal basis with domestic counterparts
C) too much attention on selecting overseas distributors
D) overuse of an export management company
34) If exporting turns out to be unfeasible because of import restrictions or insufficient
human or financial resources, but the firm still wants to sell its products overseas, the firm should
consider
A) establishing itself domestically first.
B) waiting until the import policies change.
C) pursuing licensing or joint venture agreements.
D) finding a different country to export to.
35) Incoterms are developed and maintained by the
A) U.S. Chamber of Commerce.
B) International Chamber of Commerce.
C) World Trade Organization.
D) United Nations.
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36) Incoterms are divided into two basic categories:
A) open account and L/C.
B) general and water transportation.
C) ship and ground transport.
D) export and domestic shipments.
37) Incoterms describe three issues that arise in a commercial transaction, including
A) which party collects the payments.
B) which party’s jurisdiction is used to resolve conflicts.
C) which party determines the goods to be sent.
D) which party covers the costs.
38) FOB (free on board) means that
A) the cost and risk transfer to the seller at the ship’s rail.
B) the seller pays for carriage to the named place and assumes all risk until the goods
are unloaded.
C) the seller pays cost of freight to bring goods to the destination port, but not insurance.
D) the seller loads the goods on board the ship identified by the buyer and clears them
for export, and both the cost and the risk then transfer to the buyer.
39) The Incoterm for the situation when the seller hands over goods to a carrier at a specified
place, where risk then passes is to the buyer, is
A) FCA.
B) DAT.
C) CIF.
D) CFR.
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40) The Incoterm for the situation when carriage is paid to a specified destination, the seller
pays for carriage, while risk passes to the buyer when the goods are handed to the carrier is
A) FCA.
B) DAT.
C) CIF.
D) CPT.
41) What is the Incoterm for the situation when carriage and insurance are paid to a specified
destination, while risk passes to the buyer when the goods are handed to the carrier?
A) CIP
B) DAT
C) CIF
D) CPT
42) What is the Incoterm for the situation where the product is delivered at the specified
destination, and the seller pays for carriage to the named place and assumes all risk until goods
are unloaded?
A) CIP
B) DAT
C) CIF
D) DAP
43) What is the Incoterm for the situation where the product is delivered at the specified
destination and the seller pays for carriage to the named place, as well as all duties, taxes, and
customs charges?
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A) DDP
B) DAT
C) CIF
D) DAP
44) What is the Incoterm for the situation where the seller loads the goods onto the ship and
the risk passes to the buyer once they are aboard the ship?
A) CFR.
B) DAT.
C) CIF.
D) FOB.
45) What is the Incoterm for the situation where the seller pays the costs of freight to bring
goods to the destination port and the risk passes to the buyer once the goods are loaded aboard
the ship?
A) CFR.
B) DAT.
C) CIF.
D) FOB.
46) On pricing, which of the following terms of sale are more convenient for foreign buyers
because to establish their cost, they merely have to add the import duties, landing charges, and
freight from the port of arrival to their warehouse?
A) CFR
B) CIP
C) DAT
D) DAP
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47) Most of what is contained in a sales agreement is the same in the contract for a domestic
representative as for an export sale. However, what is one of the two areas requiring special
attention in an export sales contract?
A) designation of responsibilities for collection of monies
B) designation for managing promotion of the product
C) designation of responsibilities for patent and trademark registration
D) designation of the deadline and mechanisms for completing the sale
48) Most of what is contained in a sales agreement is the same in the contract for a domestic
representative as for an export sale. However, what is one of the two areas requiring special
attention in an export sales contract?
A) Designation of the deadline for concluding the agreement and disseminating funds.
B) Designation for managing promotion of the product.
C) Designation of responsibilities for shipping and insurance of the goods while in
transit.
D) Designation of the country and state or province whose laws will govern any
contractual dispute.
49) On a consignment sale, the payment risk is
A) assumed by the buyer.
B) assumed to be equally shared.
C) carried by the seller.
D) covered by insurance.
50) Which action is the most risky for an exporter?
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A) open account
B) irrevocable letter of credit
C) bank collection time draft
D) cash in advance
51) The payment terms discussed in the text that exporters can offer to foreign buyers are
cash in advance, open account, consignment, letters of credit, and
A) documentary drafts.
B) cash on delivery.
C) long-term financing.
D) barter arrangements.
52) Which of these actions is the least risky for an exporter?
A) open account
B) irrevocable letter of credit
C) bank collection time draft
D) cash in advance
53) With which payment mechanism is it the case that once the seller has accepted the credit,
the customer cannot alter or cancel it without the seller’s consent?
A) irrevocable letter of credit
B) open account
C) consignment
D) bank collection time draft
54) What is an unconditional order drawn by the seller on the buyer instructing the buyer to
pay the amount of the order on presentation?
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A) an unconditional letter of credit
B) a time draft
C) a consignment
D) a sight draft
55) In a ________, a correspondent bank in the seller’s country confirms that it will honor the
issuing bank’s letter of credit.
A) irrevocable L/C
B) guaranteed L/C
C) standard L/C
D) confirmed L/C
56) When an air carrier presents a bill of lading as proof that the shipment has been made, it
is called a(n)
A) way airbill.
B) air waybill.
C) destination bill.
D) bill of delivery.
57) A simple irrevocable L/C requires several steps to clear payment. Once the exporter and
buyer agree on the terms of a sale, that happens next?
A) The buyer arranges for its bank to open a letter of credit that specifies the documents
needed for payment.
B) The exporter’s freight forwarder is contacted to make sure that the shipping date can
be met.
C) The exporter arranges with the freight forwarder to deliver the goods to the
appropriate port or airport.
D) The exporter (or the freight forwarder) presents documents, evidencing full
compliance with the letter of credit terms, to the U.S. bank.
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58) A confirmed letter of credit and a documentary draft are similar, EXCEPT that
A) a letter of credit is issued by the seller’s bank.
B) a documentary draft offers more protection than a letter of credit.
C) a letter of credit specifies no conditions.
D) there is no guarantee of payment with a documentary draft.
59) What is the term for the sale of an exporter’s accounts receivable on ordinary goods, with
the balance of the payment due upon delivery or soon after?
A) forfaiting
B) consignment
C) factoring
D) time draft
60) What is the term for when the sale of an exporter’s accounts receivable on capital goods,
commodities, and other high-value goods has the payment due at least 180 days out?
A) forfaiting.
B) consignment.
C) factoring.
D) banker’s acceptance.
61) A time draft with a maturity of less than 270 days that has been accepted by the bank on
which the draft was drawn, thus becoming the accepting bank’s obligation is called a(n)
A) short-term draft.
B) banker’s acceptance.
C) factored sale.
D) irrevocable letter of credit.
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62) More than 90 percent of the Ex-Im Bank’s transactions in 2016 supported
A) domestic corporations.
B) start-up firms.
C) U.S. small businesses.
D) foreign conglomerates.
63) Which is the principal government agency responsible for aiding the export of American
goods and services through a variety of loan, guarantee, and insurance programs?
A) U.S. Export-Import Bank (Ex-Im Bank)
B) Overseas Private Investment Corporation (OPIC)
C) Foreign Sales Corporation (FSC)
D) Major League Baseball (MLB)
64) Company X was concerned about the risks of exporting to a developing country, so it
approached the ________ government organization to inquire about insurance against
expropriation, currency inconvertibility, and damages from wars or revolutions.
A) U.S. Export-Import Bank (Ex-Im Bank)
B) Federal Trade Commission
C) Foreign Sales Corporation (FSC)
D) Overseas Private Investment Corporation
65) Free ports, transit zones, and export processing zones are examples of
A) free perimeters.
B) free trade zones.
C) customs zones.
D) foreign trade zones.
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66) A ________ is an area designated by a government as outside its customs territory.
A) free trade zone
B) free ports
C) transit zones
D) export processing zones
67) When manufacturing or assembly is done in FTZs using imported components,
A) no duties need ever be paid if the finished product is exported.
B) duties are paid upon export of the finished product.
C) duties are paid on the individual parts used to make the product.
D) duties are only paid on materials originating from the host country.
68) A rebate on a customs duty is called
A) an excise tax.
B) a tax refund.
C) a customs drawback.
D) a restricted duty.
69) Correct documentation is vital to the success of any export shipment, yet error rates
reported for export and import documentation hover around
A) 10 to 20 percent.
B) 25 to 40 percent.
C) 50 to 70 percent.
D) 80 to 90 percent.
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70) What U.S. Department of Commerce form contains the names and addresses of the
shipper and consignee, the U.S. port of exit and foreign port of unloading, a description and
value of the goods, and other information?
A) export license
B) bill-of-lading
C) shipper’s export declaration
D) carrier’s manifest
71) Collection documents are
A) for debt carried in cash receivables.
B) needed to load and unload transported goods.
C) presented to the buyer for payment.
D) required for customs approval.
72) Which of these is a common type of collection document?
A) export documentation
B) proof of insurance
C) inspection certificates
D) customer certification
73) A document issued by the carrier that is a contract for the shipment, a receipt for the
goods shipped, and a certificate of ownership is called a(n)
A) export bill of lading.
B) shipper’s export declaration.
C) freight bill.
D) customs bill.
74) In the area of shipment risk, ocean vessels assume
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A) all the risk for the safety of their cargo.
B) none of the risk for the safety of their cargo, except for negligence.
C) exporters will have bought adequate insurance.
D) marine environments are usually safe.
75) Basic named perils that marine insurance will cover include
A) perils of the sea, fires, jettisons, and hurricanes.
B) theft and larceny.
C) piracy on the seas.
D) human-error accidents.
76) Which statement about all-risks marine insurance is true?
A) All-risks insurance does not cover all physical loss or damage.
B) All-risks marine insurance is more expensive than the other two types of insurance.
C) All-risks insurance covers war risks.
D) Premiums for all-risks insurance are fixed and not dependent on other factors.
77) The European Union uses a Conformité Européene (CE) mark on shipments, which
indicates that
A) the shipment has been paid for by the shipper.
B) the merchandise conforms to European requirements.
C) the country of origin is in the EU.
D) the shipment must be inspected when sent to any EU country.
78) An inspection certificate that is required by buyers of grain, foodstuffs, and live animals
is issued in the United States by
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A) the Federal Trade Commission.
B) the Department of Agriculture.
C) the Department of Commerce.
D) the Food Safety Commission.
79) One means of shipment that reduces theft and handling costs is to use ________, which
are sent sealed and opened at the destination.
A) containers
B) cartons
C) crates
D) pods
80) Delivery speed matters most when the shipment is
A) perishable.
B) lightweight.
C) fragile.
D) expensive.
81) What is the name of the innovation in cargo handling that has brought the benefits of
containerization to ports unable to invest in the expensive lifting equipment required for
containers?
A) LASH
B) lighters
C) RO-RO
D) Panamax
82) Independent businesses that handle import shipments for compensation are
A) bonded warehouses.
B) freight forwarders.
C) importing agents.
D) customhouse brokers.
83) When exporting, what would a business use to arrange transportation for the goods after
they leave customs and keep track of import quotas and how much of the quota has been filled at
the time of the import?
A) bonded warehouses.
B) freight forwarders.
C) importing agents.
D) customhouse brokers.
84) A(n) ________ is an area authorized by customs authorities for storage of goods on
which payment of import duties is deferred until their removal.
A) customhouse
B) import warehouse
C) bonded warehouse
D) collection area
85) The ________ is a classification system for the commodities traded internationally, and it
includes interpretive notes that help determine the classifications.
A) Harmonized System
B) International Classification System
C) Unit Reporting System
D) Customs Classification System