IB minitest 7 Chapter 7 – Export and Import Practices
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INTERNATIONAL BUSINESS
Mini Test
Chapter 7 – Export and Import Practices
I. Choose the best answers
1. Companies become involved in exporting for a number of reasons, all of which are
linked to the desire to:
A) increase profits and sales.
B) protect profits and sales from being eroded.
C) both "a" and "b".
D) none of the above.
2. Which of the following is not a reason for exporting?
A) To offset cyclical sales of the global market.
B) To satisfy a host government's requirement that the local subsidiary export.
C) To remain competitive in the home market.
D) To test foreign markets and foreign competition inexpensively.
3. A major reason given for a firm not exporting is:
A) preoccupation with corporate restructuring.
B) preoccupation with the vast American market.
C) no knowledge of foreign operations.
D) insufficient capital to expand foreign markets.
4. The first step in locating foreign markets, whether for export or for foreign
manufacturing is to determine whether:
A) sufficient personnel are available to handle the foreign operations.
B) sufficient capital is available to expand internationally.
C) excess production capacity exists in the home market.
D) a market exists for the firm's product.
5. An export marketing plan is ________________ a domestic marketing plan.
A) essentially the same as
B) more comprehensive than
C) more detailed than
D) more specific than
6. If a foreign customer insists on a FAS (free alongside ship), the seller:
A) quotes a price that includes the cost of the goods, insurance and all transportation
costs.
B) quotes a price that includes the cost of the goods and all transportation costs.
C) pays all of the transportation and delivery expense up to the ship's side.
D) quotes a price that covers all costs up to the border.
7. The sales agreement should specify:
A) all of the terms and conditions of the sale.
B) as simply as possible the duties of the representative and the firm.
C) as comprehensively as possible the duties of the representative and the firm.
D) none of the above.
8. Which of the following is not one of the kinds of payment terms offered by exporters
to foreign buyers?
A) Cash on delivery.
B) Cash in advance.
C) Consignment.
D) Documentary drafts.
9. An unconditional order that is drawn by the seller on the buyer to pay the draft's
amount on presentation or at an agreed future date and that must be paid before the buyer
receives shipping documents is called:
A) an unconditional draft.
B) a presentation draft.
C) an export draft.
D) a documentary draft.
10. Although exporters would prefer to sell on the almost riskless letter of credit terms,
increased foreign competition and the universally tight money situation are forcing them
to:
A) accept payment in foreign currency.
B) accept export drafts.
C) accept documentary drafts.
D) offer credit.
11. When non-exporters complain about the complexity of export procedures, they are
generally referring to:
A) government regulations.
B) dealing with foreign regulations.
C) documentation.
D) all of the above.
12. Which of the following is not one of the purposes served by the export bill of lading?
A) It is a contract for carriage between the shipper and carrier.
B) It is a receipt from the carrier for the goods shipped.
C) It is a certificate of ownership.
D) It is a certificate for release of liability.
II. Decide whether the statements are true or false.
1. Exporting allows a company to achieve additional sales, which allow the firm to use its
excess production capacity to lower per-unit cost.
2. The Foreign Traders Index is a list of foreign importers with descriptions of each one
and the products it wishes to export.
3. If a firm decides to set up its own export operation versus indirect exporting, the firm
must obtain overseas distribution.
4. In FAS (free alongside ship, port of call) the buyer pays all the transportation and
delivery expense up to the ship's side and clears the goods for export.
5. 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.
III. Answer the questions.
a. N7 has purchased a large order from their manufacturer in China of three full
containers of electronics and plans to import them by vessel. They would like their
Chinese partners to arrange inland shipping to the port of Shanghai and load the vessel.
N7 will make contact with their import broker to clear the goods for import into the U.S.
at the port of Long Beach and assume the risks of the shipment once loaded at the port of
Shanghai. Once delivered they will ship the goods by truck to their warehouse in
Eastvale. What INCOTERM should be used? Explain.
b. N7 just signed on a new, large distributor. This distributor is well versed in exporting
from the U.S. and prefers using their appointed trucking service to collect the goods from
N7’s warehouse in Eastvale. They use an export agent to send the goods from the port of
New York to their location in Tel Aviv, Israel. The buyer has agreed to pay additional
costs for N7 to load the truck at N7’s premises. The buyer will be responsible both for
exporting out of the U.S. and importing into Israel. What INCOTERM should be used?
Explain.
