Chapter 6 Terms of Trade or Incoterms

The DAF Incoterm means "Deliver All Freight." T/F

False

The CFR Incoterm means "Cost and Freight." T/F

True

The Incoterm CPT means "____________________ Paid To."

Carriage

The customer-focused exporter gives the importer a quote in which the importer can determine which ____________________ should govern the transaction.

Incoterm

Variants to the CFR Incoterm were created to reflect which of the trade partners was responsible for unloading costs. When the exporter bears the costs, the term "CFR ____________________" is used.

Landed

As far as the importer is concerned, under the DDP Incoterm, receiving an international shipment is no different that receiving a(n) _____________________ shipment.

domestic

Incoterms stands for a. terminal incorporation procedures. d. intercontinental term standards. b. in-country termination. e. None of the above c. international company terminology.

e. None of the above

The Incoterm EXW specifies what regarding delivery? a. the mode of transportation for delivery d. All of the above b. who pays for delivery e. None of the above c. who buys insurance for delivery

e. None of the above

Under the CFR Incoterm, if the pre-paid contract of carriage does not include the unloading of the ship, then the____________________ must pay for it.

importer

Under the CPT Incoterm, the ____________________ is responsible for unloading the goods from the carrier's truck, clearing customs, and paying for any inland transportation beyond the city of destination.

importer

Under the CPT Incoterm, the bill of ____________________ can act as a proof of delivery from the carrier.

lading

Under the DES Incoterm, the exporter is responsible for the goods until they are placed at the disposal of the importer at the ____________________ of destination.

port

In planning their export strategy, companies generally determine which Incoterm they will use on a case-by-case basis. T/F

False

It is always best to use only one term of trade in a quote to a potential customer so that there is no possible confusion. T/F

False

The Cost, Insurance, and Freight Incoterm is specifically designed for land transportation. T/F

False

The DES Incoterm is mostly used for bulk shipments of commodities where the parties wish to have the exporter pay for the unloading of the ship. T/F

False

The Incoterm CPT means "Cargo Placed at Terminal." T/F

False

Under Incoterm DEQ, transfer of responsibility for cargo from importer to exporter is at the ship's rail as the cargo is loaded onto the ship. T/F

False

Under the Cost, Insurance, and Freight Incoterm, the importer takes responsibility for the goods when they are placed upon the importer's loading dock. T/F

False

Under the DAF Incoterm, the exporter is responsible for the costs of transportation from the border city to the final destination and for the costs of clearing customs. T/F

False

Under the DDP Incoterm, the importer usually takes control of the goods at the city where the exporter is located. T/F

False

Under the FOB Incoterm, in countries where export authorities require a pre-shipment inspection, the importer must pay for it. T/F

False

The least customer-friendly of the Incoterms in the EXW (Ex-Works) Incoterm. T/F

True

Under Incoterms EXW, FCA, and FAS, the importer is the party responsible for loading the goods onto the carrier. T/F

True

Under the CIF Incoterm, the proof of delivery is an ocean bill of lading or a sea waybill. T/F

True

Under the DDU Incoterm, it is the responsibility of the importer to arrange and pay for the unloading of the goods. T/F

True

Under the Free Carrier Incoterm, the exporter is responsible for clearing the merchandise for export. T/F

True

Use of Electronic Data Interchange (EDI) is still fairly new and limited to developed countries. T/F

True

The Incoterm FCA means a. Free Carrier. d. Free Customs Administration. b. From California. e. None of the above. c. For Countries Abroad.

a. Free Carrier.

While on the surface Incoterms determine who pays what when, ultimately the _____ directly or indirectly pay(s) the costs of transportation and international shipping. a. importer d. All of the above b. exporter e. None of the above c. customs office

a. importer

Under the Incoterm FOB, responsibility for the cargo a. shifts from exporter to importer at the ship's rail. d. shifts from exporter to importer when the importer pays the exporter. b. shifts from exporter to importer when the goods are placed on the exporter's loading dock. e. None of the above c. shifts from exporter to importer when the goods are unloaded from the ship in the country to which the goods are going

a. shifts from exporter to importer at the ship's rail.

The only difference between the Delivered Ex Ship Incoterm and the Delivered Ex Quay Incoterm is a. the unloading costs of the ship at the port of destination are borne by the exporter in the Delivered Ex Quay transaction. d. unloading costs are borne by the ship owner in the Delivered Ex Quay transaction. b. the unloading costs of the ship at the port of destination are borne by the importer in the Delivered Ex Quay transaction. e. None of the above c. both importer and exporter share unloading costs of the ship at the port of destination in the Delivered Ex Quay transaction.

a. the unloading costs of the ship at the port of destination are borne by the exporter in the Delivered Ex Quay transaction.

In terms of cost and responsibility, the easiest Incoterm for the exporter which is, in turn, the most difficult for the importer is a. Delivered Duty Unpaid (DDU). d. Delivered at Frontier (DAF). b. Ex-Works (EXW). e. None of the above c. Delivered Duty Paid (DDP).

b. Ex-Works (EXW).

As of the revision in 2000, the only Incoterm which requires the importer to clear the merchandise for export from the country from which it is coming is a. Free Alongside Ship. d. Delivered Ex Quay. b. Ex-Works. e. None of the above c. Cost and Freight.

b. Ex-Works.

Delivered at Frontier is an Incoterm designed specifically for a. ocean transportation. d. barge transportation. b. land transportation. e. None of the above c. air transportation.

b. land transportation.

The Incoterm DDU means "Delivered _____________________ Unpaid."

Duty

An advantage of the Free Alongside Ship Incoterm is the thorough documentation of the receipt of goods at a port holding area or to the quay alongside the ship. T/F

False

A bill of lading or equivalent document (air waybill, sea waybill, multi-modal bill of lading) acts as proof of delivery under the CIP Incoterm. T/F

True

An Incoterm expressed as "CIP Sofia, Bulgaria, Incoterms 2000" means that under Incoterms as of 2000, the goods are "Carriage and Insurance Paid" to Sofia, Bulgaria, where the importer will take control of them. T/F

True

Conceptually, the CPT Incoterm is the same as the CFR Incoterm, except it applies to goods shipped by means other than ocean transport, or shipped by sea without being handed over the ship's rail (roll-on-roll-off cargo or intermodal containers). T/F

True

Under the ancient maritime custom regarding Free On Board, if a piece of cargo breaks loose while crossing the ship's rail and lands on the ship, it becomes the responsibility of a. the exporter. d. All of the above b. the importer. e. None of the above c. the harbor master

b. the importer.

Incoterms determine a. how much the agents commission will be. d. All of the above b. which tasks will be performed by the exporter. e. None of the above c. how much duty will be charged by the importing country

b. which tasks will be performed by the exporter.

In a quote which includes multiple Incoterms, so that the customer can choose, the Incoterm that has the highest invoiced amount is a. EXW. d. CIP. b. FCA. e. None of the above c. DDP.

c. DDP.

The Incoterm(s) requiring the exporter to pay import duty is/are a. FCA. d. All of the above b. CIP. e. None of the above c. DDP.

c. DDP.

Among the following, the most customer-friendly Incoterm is a. FCA. d. DES. b. CIP. e. None of the above c. DDU.

c. DDU.

The FOB term not only means "Free On Board," it is also sometimes referred to as a. Freight On Bow. d. Freight Over Ballast. b. Free Over Bow. e. None of the above c. Freight On Board.

c. Freight On Board.

Electronic Data Interchange (EDI) has changed what issue in Incoterms? a. who pays for insurance d. All of the above. b. who pays for import clearance e. None of the above. c. documentation of delivery

c. documentation of delivery

The choice of the Incoterm is almost always the decision of the a. importer. d. distributor. b. agent. e. None of the above c. exporter.

c. exporter.

The choice of an Incoterm, as well as the choice of the method of payment and of other related transaction alternatives, constitute an exporter's ____________________ service strategy

customer

FOB is a. Free On Board. d. All of the above b. an Incoterm that can be used for any merchandise. e. None of the above c. an Incoterm specifically designed for ocean transportation.

d. All of the above

The choice of a proper Incoterm is a critical decision because a. it can be an integral part of export strategy. d. All of the above b. it is linked to the level of customer service the firm is attempting to provide. e. None of the above c. it can be a competitive advantage.

d. All of the above

The document that corresponds clearly to the transfer of responsibility for a Free Carrier shipment is the receipt given by the carrier to the exporter. This receipt can be a. a sea waybill. d. All of the above b. an air waybill. e. None of the above c. a multi-modal bill of lading.

d. All of the above

Under the Cost, Insurance, and Freight Incoterm, a. the exporter must pre-pay the insurance. d. All of the above b. the insurance must total at least 110 percent of the value of the goods. e. None of the above c. the exporter pays all shipping costs, except for inland freight.

d. All of the above

Under the Delivered Duty Unpaid Incoterm, unloading costs are borne by the a. railroad. d. harbor. b. ship line. e. None of the above c. exporter.

e. None of the above

Under the FAS Incoterm, in countries where export authorities require a pre-shipment inspection, the ____________________ has to pay for it.

exporter

Under the CFR Incoterm, until the merchandise has cleared the ship's ____________________, it is the responsibility of the exporter, after that, of the importer.

rail