Final SCM 411 EXAM Study Guide

The liability of a single P&I club is limited to

$7 million

A ship valued at $1,337,500 is carrying a cargo of iron ore valued at $125,000, and a cargo of coal valued at $100,000. The ship is stranded and the captain jettisons what is later determined to be $12,500 worth of iron ore. The stranded ship is towed to port, receives a bill from the tug company of $56,250 and is determined to have suffered $71,875 worth of damage to the ship. The captain declares a general average. How much liability will the company shipping the coal have?

$9,000

Tariffs can be calculated

1) ad valorem. 2) as a fixed amount per unit imported. 3) in a mixed system of a fixed amount per unit imported plus a percentage of the value of the goods imported. 4) All of the above

An intermediary that purchases goods in the exporting country and resells them to a customer in a foreign country is called a(n)

1) agent. 2) export management corporation. 3) principal. 4) contract manufacturer. 5) None of the above

Most of the ships that sink each year

1) are older ships. 2) are bulk ships. 3) are ships flying third world countries' flags. Correct Answer 4) All of the above

At Lloyd's, the individuals assuming (insuring) risks are grouped together in

1) associations. 2) underwriting instruments. 3) agencies. 4) Baileys. 5) None of the above

In order to protect their fixed assets, companies should implement which of the following physical barriers?

1) build fences around the perimeter 2) lock all access doors 3) have enough outside lights 4) install backup electric generators 5) All of the above

To protect cargo, markings should

1) display only the net weight. 2) display only the gross weight. 3) only be in metric units. 4) only be in English units. 5) None of the above

Which of the following companies are exposed to the risk of currency fluctuations?

1) firms that do not evaluate international currency transaction risks clearly. 2) firms that do not follow a specific policy on currency exchange. 3) firms that have management that is not well-versed in the intricacies of international trade. 4) firms that do not hedge their foreign receivables. 5) all of the above

Coverage A of the Institute Marine Cargo Clauses is the maximum coverage an exporter or importer would normally need to purchase

1) for most trade lanes of the world. 2) for shipments from one developed country to another. 3) for shipments that stay away from political hot spots of the world. 4) All of the above

In the Harmonized System of classification, an incomplete or unfinished product is classified

1) in several classifications, depending upon the raw materials of the product. 2) in several classifications, depending upon the classifications of the sub-assemblies of the product. 3) in the classification of the closest similar product. 4) under a special classification designated "unfinished product." 5) None of the above

S.R. & C. C. coverage

1) includes direct physical damage to the insured goods. 2) does not include incidental damage caused by delay to market. 3) does not cover financial losses that accompany a delay in the sale of cargo. 4) All of the above

A special cargo policy

1) is an insurance policy that covers only one shipment. 2) allows a firm to purchase coverage that specifically fits a particular shipment. 3) results in cumbersome efforts to purchase insurance for each shipment. 4) All of the above

Under an American Conditions Free of Particular Average policy

1) partial losses are covered if they happen on the same voyage as a fire. 2) there is excellent coverage for containerized or break-bulk cargo. 3) partial losses are not covered if they result directly from a fire. 4) it would be enough to cover the minimum insurance requirements of a CIF or CIP shipment. 5) None of the above

A tariff-rate quota

1) places a two-tiered tariff rate on a specific category of products. 2) keeps the tariff low until the quota is reached. 3) raises the tariff after the quota is reached. 4) All of the above

Proper marking on cargo as it is shipped is important because proper marking

1) protects the cargo from poor handling. 2) protects the cargo from theft. 3) protects the cargo from pilferage. 4) protects the cargo from delays due to failure to comply with carrier and government safety and security requirements. 5) All of the above

Non-tariff barriers may appear in the form of

1) requiring a special sticker to be applied to an imported product. 2) slowing down Customs clearance processes. 3) multiplying the number of documents required for importing products. 4) Making documentation requests that are very difficult to fulfill (sewing tickets) 5) All of the above

In its absolute form, the exchange rate determination theory of Purchasing Power Parity

1) says that exchange rates should reflect the price differences of each and every product between countries. 2) says that the exchange rate should equalize price differences of similar products between countries. 3) is impossible to achieve. 4) is rarely noticeable, even for identical products sold worldwide 5) All of the above

European countries have experienced significant violent attacks from which of the following terrorist group(s)?

1) the Organisation de l'Armée Secrète 2) the Provisional Irish Republican Army 3) Rote Armee Fraktion 4) the Baader-Meinhof Gang 5) All of the above

The policy of a one-hundred-percent inspection is considered flawed because

1) the costs are staggering. 2) the amount of room it requires is greater than what is normally available. 3) the personnel needed is very large. 4) it is ineffective. 5) All of the above

What strategy is often followed when access to the market is limited by high tariffs or non-tariff barriers, when shipping costs are prohibitive, or when the exporter is not interested in pursuing the market?

1) use of a foreign trade zone 2) use of an agent 3) use of an export management company 4) use of a maquiladora 5) None of the above

A foreign sales corporation is a device used by U.S. exporters to reduce taxes. To qualify, the goods exported must have _____ percent U.S. content. This results in a tax reduction of _____ percent.

50, 15

In conditions of high humidity, paperboard loses up to _____ percent of its strength.

60

An intermodal container is designed to withstand the weight of up to how many similar containers placed on top of it?

8

The standardized size of pallets in Europe is

80 centimeters by 120 centimeters.

A two-tiered tariff rate on a specific category of products in which the tariff that is low until a quota is reached and then it goes much higher is called a(n)

Tariff-rate quota.

The management philosophy that "encourages every employee, at every level, to recognize the importance of security within the corporation, and suggest improvements in processes and procedures" is

Total Security Management

The risk resulting from possible fluctuations in currency exchange rates is called

Transaction Exposure

When a security detection process determines that a cargo contains dangerous goods, even though the goods are innocuous (safe), what type of error is it?

Type 1 Error

When a security detection process determines that a cargo is innocuous (safe), even though the goods are dangerous, what type of error is it?

Type 2 Error

Required documentation for entry into essentially all countries includes

a form designated for entry, a Certificate of Origin, and a commercial invoice.

A time-sensitive shipment like an express package can be expedited through Customs by

a surety bond.

Premiums in an open ocean cargo policy

are based upon the value of shipments made under the policy

Goods shipped "under deck"

are stowed inside the ship

Airfreight insurance policies

are written as "All Risks" policies.

SDRs of the International Monetary Fund can be used in international transactions:

as an artificial currency.

C-TPAT program offers companies the following advantages:

assistance from Customs' Supply Chain Security Specialists.

A letter of credit usually requires

certificate of insurance

Generally speaking, countries with scarce foreign currency resources will attempt to limit the granting of import licenses to companies that have generated export revenues and

companies purchasing goods for which no close domestic substitute is available.

As a company grows in exporting sophistication, it should not become involved with an export trading company because

customers abroad are customers of the export trading company, not the exporter.

A "Sue and Labor" clause

directs the shipper to act in the best interest of the insurance company when a loss occurs

When a company is engaged in an international transaction and agrees to use a foreign currency to conduct the transaction

it is exposed to a certain amount of risk.

More companies are selling their goods on an "open-account" basis because

it is possible to purchase credit insurance to cover the risk of non-payment.

Because of the threat to hardwood forests caused by the long-horned beetle

wood pallets from China are not allowed in the United States unless they have been fumigated, heat-treated, or pressure-treated with a pesticide.

Customs brokers are usually compensated on

a fee per transaction.

Most duty is collected ad valorem which means

it is based on the value of the import.

Coverage A of the Institute Marine Cargo Clauses requires a special endorsement to cover

Strikes and other disturbances

The SAFE initiative was implemented by

World Customs Organization

In valuing a currency, the direct quote is

the value of the foreign currency expressed in units of the domestic currency

The customs status of a maquiladora is similar to that of

1) a foreign trade zone located only in the United States. 2) a foreign trade zone located only in Mexico. 3) a Customs office. 4) what is outlined in the Foreign Corrupt Practices Act. 5) None of the above

"Warehouse-to-Warehouse" coverage is an extension to the traditional

1) All Risks policy. 2) With Average policy. 3) Free of Particular Average policy. 4) All of the above

The following mathematical expression Ft + 1(et) = S(et + 1) is of what theory of exchange rate determination?

1) Interest Rate Parity 2) Fisher effect 3) Purchasing Power Parity 4) Big Mac IndexNone of the above None!!!

What good packaging should be like? (Functions/qualities/expectations of good packaging)

1) It should protect the goods against the hazards of shipping. 2) It should enhance customer service. 3) It should facilitate handling. 4) It should be environmentally friendly. 5) All of the above

In addition to the C-TPAT program, the United States has also created which program(s) or initiative(s) to improve security?

1) Maritime Transportation Security Act 2) Security and Accountability For Every Port Act 3) Transportation Workers' Identification Credential 4) Container Security Initiative 5) All of the above

The European Union based its security initiatives on which international organization's guidelines?

1) World Trade Organization 2) the United Nations 3) the International Chamber of Commerce 4) All of the above 5) None of the above

When a firm realizes that it wants to exploit the possibilities that sales abroad can bring, and decides to become directly involved in its exporting activities, it is said to be involved in

Active Exporting

Which of the following is a marine insurance company?

Cigna

A major financial problem occurred for Lloyd's of London due to its coverage of

Asbestos

International exchange rates began to float

At the end of the gold standard

At Lloyd's, individuals assuming (insuring) risks on their personal fortunes are called

Bespoke Names

Cargo, such as trucks, that cannot be containerized because it is too large and won't fit in a traditional container or because it exceeds the maximum weight of a container load or that the shipper chooses not containerize and ships as separate units is called

Breakbulk Cargo

Documentation designed to indicate what country a product initially came from is contained in the

Certificate of Origin

Agents usually sell more than one product and represent more than one company. The products they sell are

Complementary

The strongest type of shipping crates are

Constructed with 3-way corners

A value-added tax is eventually only paid by

Consumers

is not truly a method of entry into a country for an exporter.

Contract Manufacturing

Condensation damage is covered by All Risks policy and

Coverage A of the Institute Marine Cargo Clauses.

According to John Waite, chief surveyor of the Salvage Association, the biggest hazard(s) for container ships is/are

Fire

The mathematical representation (1 + real interest rate) x (1 + inflation rate) = 1 + nominal interest rate is of what theory of exchange rate determination?

Fisher Effect

Countries representing the greatest percentage of world trade all have _____ currencies.

Floating

When manufacturing costs are lower abroad, when shipping costs are prohibitive, when domestic manufacturing capacity is reached, or when the product has significant intangible content, such as services, a company may consider

Production Abroad

One strategy a company can follow to protect itself from currency fluctuations is use of

Forward Market Hedges

In the United States, the Wall Street Journal publishes the forward rates for the currencies of _____ countries.

Four

A typical container will be handled _____ times in each of the ports of departure and destination.

Four to six

Marine cargo insurance can be purchased from

Freight Forwarder

FCL cargo stands for

Full Container Load

FIBCs are used for shipping _____ cargo.

Granular

An exporter in a developing country sells under CIF terms to an importer in a developed country. The exporter provides the minimum required insurance coverage. If there is a loss, the importer would

Have to file a claim with an insurer in the developing country

Hazardous cargo shipped by sea is regulated by the

IMO

Usually, a distributor is located

In the Importing Country

If an importer has a good reputation regarding its following of Customs regulations, the likelihood that one of its shipments is going to be inspected is minimal, therefore minimizing delays at entry and allowing the importer to organize its supply chain more predictably. This is an application of the concept of

Informed Compliance

Which international organization was involved in developing security measures?

International Maritime Org

Institute Marine Cargo Clauses Coverage C

Is required by Incoterms CIF and CIP

Most cargo tends to be shipped by air in

Its secondary Packaging

Because agents tend to be individuals or very small firms, governments in some countries put them under

Labor Law

Attempts to reduce business practices that include corruption and bribery have been made by the

Organisation for Economic Co-operation and Development

A customer of a firm enters a foreign market by setting up a manufacturing facility. It tells its suppliers that they will need to supply parts for assembly at the manufacturing facility and for customer service. Therefore, the suppliers are engaged in what kind of exporting?

Piggy-Backing

The biggest problem(s) in transportation of air cargo is/are

Pilferage and Theft

Cigna Insurance Company published a guide to cargo handling in

Ports of the World

Packaging designed to appeal to and be functional for consumers is called

Primary Packaging

In its relationship with an agent, an exporter is known as the

Principal

The fee a licensee pays a licensor for each use of an intellectual property is called a(n)

Royalty

Argentina, after being chastised by the World Trade Organization for having increased its duty rate on footwear, reduced them, and immediately reimposed them through a _____ tax designed to protect its footwear industry against foreign competition.

Safeguard

An exporter has the most control over its foreign sales through a(n)

Sales or Marketing Subsidary

Which U.S. agency is NOT involved with security enforcement?

Secret Service

Efforts by corporations to reduce the vulnerability of their international supply chain to more traditional criminal activities is called

Security Management

Color-coding to identify a company's shipments

Should be changed on a regular basis

The following factor(s) do NOT influence the type of security measures that ports put in place?

Size

SWIFT Stands for

Society for Worldwide Interbank Financial Telecommunication

Unique, powerful Japanese trading companies are called

Sogo Shosha

In an options market hedge there is the option to sell or purchase certain currencies at a certain exchange rate either on or before a certain date. The agreed-upon exchange rate is called the

Strike Price

To protect breakbulk or LCL cargo from being lost or shipped to the wrong consignee, it should be clearly marked with

The Cosignee's name

Countries outside of Europe and North America reacted with policies that mirrored the policies of which country or area?

The European Union

Historical exchange rate data can easily be obtained from

The Federal Reserve System

In most countries, the general process of clearing Customs begins with

The Filing of an "entry"

When a company has a subsidiary in a foreign country, as far as the foreign country's government is concerned that subsidiary is

The Importer of Record

Maquiladoras are located on the border between

The United States and Mexico

Insurance coverage designed to fill the gap between what an importer would like to have covered under its open cargo policy and what is covered under its supplier's CIF or CIP coverage is called

a Difference in Conditions coverage.

The part of a trip during which cargo is at most risk for theft is

The inland Leg

The primary role of the World Customs Organization has traditionally been

The simplification and harmonization of customs' procedures

For countries in the World Trade Organization, the valuation of goods for import purposes is based upon

The transaction value of the sale.

Characteristic(s) of fiber drums is/are

They are more resistant to pilferage than bags

Characteristic(s) of steel drums is/are

They can withstand a good amount of abuse

At Lloyd's, the individuals assuming (insuring) risks have

Unlimited Liability

n order for an importer to come under the scope of informed compliance, it must show that it

has exercised reasonable care in the filing of its Customs entries.

As a theory of exchange rate determination, the Fisher effect

holds that a country's nominal interest rate is comprised of the inflation rate and the real interest rate of money, essentially identical for all countries.

A forward market hedge

involves selling forward foreign currency yet to be received.

nstitute for Marine Cargo Clauses Coverage B

is a "named-perils" policy.

The International Bank for Reconstruction

is also known as the World Bank.

An "assist"

is an item the importer provided to the exporter to produce the good (such as a mold or die used in manufacturing the product).

Market-based forecasting of exchange rates

is based on the premise that "the market knows best." attempts to capture the collective knowledge of sophisticated speculators in the future spot rate of a currency. does not take into account potential government interventions.

Duty is usually based upon

product classification, valuation, and origin.

Companies that will successfully and regularly retain their risk of currency fluctuation are those that

re very large traders, sophisticated in international finance.

An export management company earns its revenue through

sales commissions.

Countries may require pre-shipment inspections because

the country wants an expert opinion on the classification and the value of the products about to enter its territory.