International Test 3

Suppose that for a given firm, holding costs are 20% per year per dollar of average inventory. If one given product that is worth $100 sits in the warehouse for one year, how much will the holding costs for this product be?

*$20*

In the example, why was the in-transit holding costs ZERO for the DDP & open account payment option?

*Because payment is only made when goods arrive at the Old Navy warehouse.*

*Lesson 15*

*Customs Clearance*

What are the two types of holding costs?

*Cycle stock and in-transit holding costs*

When CIF is the incoterm used in a transaction, what are the cost items that the invoice issued by the seller will use?

*Price of the product at the seller s warehouse + Transportation costs to port in country of export + International Ocean Transportation + Insurance*

*Lesson 13*

*Terms of Payment*

*Lesson 12*

*Terms of Sale*

Which party issues the commercial invoice?

*The seller* The buyer The carrier The government in the country of export The government in the country of impor

*Lesson 14*

*Total Logistics Cost Exercise*

Usually the goods are not released to the importer until duties are paid, or there is evidence that they will be paid

*True* or False?

Each Incoterm specifies the following, EXCEPT

*a. Which party pays for inspection expenses.* b. Which tasks will be performed by each party c. who will arrange and pay for each of the tasks d. where the responsibility (liability) for the goods will be transferred from seller to buyer e. no exception, all of the above are defined by incoterms.

For the FOB incoterm option, which cost components would be included in the invoice issued by the Chinese supplier to Old Navy?

*b. Cost of the ink can at the supplier warehouse + transportation costs to the Port of Shanghai*

Which alternative lists the terms of payment in the order of increasing risks to the seller?

*cash in advance, sight draft, date draft, open account* sight draft, cash in advance, date draft, open account date draft, cash in advance, sight draft, open account date draft, sight draft, open account, cash in advance open account, sight draft, date draft, cash in advance

Which party is called Beneficiary in a letter of credit transaction?

*exporter* importer issuing bank confirming bank ocean carrier

In the problem, how much would the in-transit holding costs be for the FOB option if payment was delayed until the shipment s delivery at ON warehouse?

*zero*

In most developed countries the importer of record is...

1. responsible for *classifying the goods* 2. responsible for determining the *amount of duty*

Most countries will have at least _____ tariff schedules

2

Choose the Incoterm from the list below that requires the highest level of responsibility in terms of tasks to be performed and pre-paid to the importer.

DAP CFR FOB FAS *EXW*

Which Incoterms are used for any transportation mode?

DAT: delivered at terminal DAP: delivered at place DDP: delivered duty paid EXW: Ex-works

Which of the following is NOT a purpose of documentation in an international transaction?

Documents foster common understanding by all parties involved. Documentation is needed to fulfill regulations. Documentation is important to manage risk. Documents are used for record keeping. *All of the above are purposes of documentation.*

Which of the following Incoterms require the exporter to arrange for the international ocean carriage?

EXW FAS FOB *CFR*

Which Incoterms are ocean only?

FAS: Free alongside ship FOB: Free on board CFR: cost and freight CIF: cost, insurance, and freight

For both CIF and CFR the responsibility changes places at the some point as the ___________.

FOB (which is after the exporter loads the goods onto the ship at the port of export)

General classification rule

If you are shipping wood to build a table, the code/classification would be table - not wood or furniture parts. The most specific description is the correct one Leading to its "essential character" is correct.

What does a confirmed L/C mean?

It cannot be revoked once issued. The exporter agrees to the L/C issued by the importer's bank. The seller and buyer have reached an agreement about the conditions of the L/C. *Seller uses a bank in the seller's country in addition to the bank in the importing country.* The transaction is approved by appropriate government bodies of the exporting and importing countries. The ocean carrier has agreed to carry the goods as requested.

Which of the following statements does NOT refer to the bill of lading?

It is the contract of carriage between the shipper and the carrier. It is the receipt for goods provided by the carrier. *It is the confirmation of the legal obligation of the importer to pay for the purchase of good* It is a certificate of title (ownership). It is issued by the carrier.

In the US, a product is classified for customs purposes with a code with how many digits?

a. 6 b. 7 c. 8 d. 9 *e. 10*

In the US, how is a product valuation assessed in order to calculate tariffs?

a. CIF valuation *b. FAS valuation* c. total landed costs valuation d. invoiced price minus taxes e. contract price valuation

Suppose a company manufactures TVs in Japan and then send them to China for packaging. Suppose that, while in China, remote controls manufactured in Taiwan and instruction booklets printed in Malaysia are added to the packaging. Once these items are packaged, the boxes are sent to the US. Suppose that, upon entry in the US, the product is classified as a TV with the same code used when it entered China for packaging. In this scenario, the country of origin of this product for US customs clearance purposes is:

a. China b. Malaysia *c. Japan* d. Taiwan

U.S. companies who use imported parts for manufacturing in the U.S. and then export their products are granted a substantial tax break from CBP, called a:

a. Countervailing duty *b. duty drawback* c. binding ruling d. official note e. product valuation

Complete the following sentence: If a U.S. importer is in doubt about a correct classification, it can ask the Bureau of Customs and Border Protection to issue a(n) _____ on the classification.

a. Countervailing duty b. duty drawback *c. Binding ruling* d. official note

What is the Incoterm in which the exporter is the Importer of Record ?

a. EXW *b. DDP* c. DAP d. CIF e. FOB

What is the customs authority agency in the US?

a. International Chamber of Commerce (ICC) *b. U.S. Customs and Border Protection (CBP)* c. World Trade Organization (WTO) d. United Nations (UN) e. Transportation Security Administration (TSA)

Which of the following is not a role of customs agency?

a. National security b. Revenue collection c. Enforcement of anti-dumping regulations *d. International contracts invoice processing* e. cargo examination and inspection

Which party is always responsible for clearing customs in the US?

a. The exporter in the foreign country *b. the importer of record* c. a customs broker d. the carrier e. the US company

Which organization created and periodically reviews INCOTERMS?

a. World Bank b. International Standards Organization c. United Nations d. *International Chamber of Commerce (ICC)* e. World Trade Organization

Regardless of the Incoterm, the exporter is always required to

a. buy insurance b. pay terminal handling charges *c. package the goods and prepare them for shipment.* d. arrange for transportation of goods in the exporting country e. use a freight forwarder

Which of the following refers to a task involved in shipping goods internationally?

a. clearing the goods for export b. organizing the transportation of goods c. arranging for insurance and possible filing insurance claims d. clearing customs in the importing country *e. all of the above*

Which of the following does NOT impact the duties or tariffs to import a product into the US?

a. product classification b. product value c. product country of origin d. whether the country of origin has a trade agreement with the US *e. Whether the importer is an individual or company*

Who ULTIMATELY pays for transportation and other shipping costs, even if these costs are pre-paid by the exporter?

a. the exporter b. the carriers c. the freight forwarders *d. the importer* e. the shipping costs are always shared between the exporter and importer

What is the delivery point under Incoterms?

a. the international port or airport of arrival in the importing country b. the last international border crossing point c. the final destination of the goods *d. the point of transfer of responsibility for the goods from the exporter to the importer* e. the international port or airport of arrival in the exporting country

Which of the factors listed below impact the selection of a particular Incoterm by a shipper?

a. transportation mode b. level of shipping expertise c. desire to control the shipment d. force of habit *e. all of the above*

comparative method

assess value based on *identical or similar goods* imported

Which of these documents are NOT seen nor used by the exporter or the importer?

certificate of inspection commercial invoice packing list certificate of origin *manifest*

computed method

compute cost of goods based on manufacturing, other costs, and reasonable mark ups.

If the product was valued using CIF

deduct *transportation* and *insurance costs* before valuing the goods

deductive method

determine the price at which goods are sold in the US, and then *"deduce" the import value*

Which party issues the Bill of Lading?

exporter importer issuing bank confirming bank *ocean carrier*

CBP will double check the valuation provided by the ______________________

importer of record

The _________________ must determine the correct valuation to determine the duties payable

importer of record

When the carrier has made a note on the bill of lading about found damage to the cargo, the bill of lading is called

irrevocable non-negotiable clean *soiled* invalid

Under which term of payment a bank guarantees the invoice payment to the seller even if the buyer cannot or does not want to pay when the shipment arrives?

money order *letter of credit* date draft sight draft open account

Duty drawbacks

substantial tax breaks to exporters who use imported parts in products they *re-export*

The country of origin is the country in which the goods underwent a ____________________?

substantial transformation (determined when there is a "tariff shift" in the classification of the product)