Chapter 16- Exporting, Importing, and Countertrade

Question 1

a solution to the problem of getting paid by a foreign company; it is an agreement putting the bank in the middle of an international transaction

Answer 1

letter of credit

Question 2

when a company gets a letter of credit from a smaller bank, and you want them to get that letter of credit backed up by a larger bank that you know for sure will be able to pay you

Answer 2

confirmed letter of credit

Question 3

a letter of credit pays on _____

Answer 3

documents; the bank never sees the goods; they just have to have all of the right documents required by the letter of credit before they will pay it off

Question 4

something issued by a common carrier; contract between you and the shipper stating where the thing is going

Answer 4

bill of lading

Question 5

bill of exchange; when the bank receives this they have to pay

Answer 5

draft

Question 6

what are the two types of drafts

Answer 6

sight and time

Question 7

upon the bank getting this type of draft and the other documents required by the letter of credit, it has to immediately pay

Answer 7

sight draft

Question 8

upon the bank getting this type of draft, it will pay but within a certain number of days

Answer 8

time draft; stipulates when the bank pays

Question 9

______ try to get time drafts so that they have time to sell the goods

Answer 9

buyers

Question 10

_____ normally prefers sight drafts so that they can be paid as soon as possible

Answer 10

sellers

Question 11

person initiating a draft

Answer 11

maker

Question 12

the party to whom the draft is presented (has to pay it)

Answer 12

drawee (ex. the foreign bank)

Question 13

the letter of credit can require an ________ from an inspector

Answer 13

inspector’s certificate; do this to make sure the goods are there and accounted for before paying

Question 14

what are three documents that might have to be presented to a bank that has issued a letter of credit in order to get paid

Answer 14

a bill of lading, a draft (bill of exchange), and/or an inspector’s certificate

Question 15

fancy word for bartering and trading; exchanging and trading in goods (commodities)

Answer 15

countertrade

Question 16

why do people engage in countertrade

Answer 16

the purchasing party may not have enough money or cash in order to trade

Question 17

associated with counter trade; GE wants to sell a power plant, the larger one will be cheaper in the long run but they can only afford the small one; promise to buy back the extra capacity that it produces until you need that extra

Answer 17

buyback

Question 18

if contract is silent on something and those countries signed this treaty then the treaty covers it; if you don’t want this as the default then you either need to cover it in the contract or opt out

Answer 18

United Nations Convention on Contracts for the International Sale of Goods (CISG)

Question 19

what do shipping terms help us to determine

Answer 19

where ownership and risk of loss passes

Question 20

FOB shipping point

Answer 20

title passes to the buyer when the goods ship; changes hands in the seller’s city

Question 21

FOB destination

Answer 21

title passes when it arrives at its destination

Question 22

international shipping terms published by the International Chamber of Commerce in Paris

Answer 22

INCOTERMS

Question 23

the two most common types of shipping contracts

Answer 23

FOB and CIF

Question 24

one other type of shipping contract

Answer 24

EXW

Question 25

cost insurance freight

Answer 25

CIF

Question 26

freight on board

Answer 26

FOB

Question 27

a shipping contract but has the economic effect of a destination contract

Answer 27

CIF; title passes to buyer in Atlanta but seller insures it until it gets to destination

Question 28

what is important in exporting

Answer 28

having an adequate market analysis

Question 29

what is are three impediments that make it difficult for some companies to gain knowledge of opportunities in foreign countries

Answer 29

time, language, and distance

Question 30

Kevin is in charge of finding out all of the available export opportunities for his company; the best source for him to begin is

Answer 30

the US Department of Commerce

Question 31

what would be included on a "best prospects" list supplied by the US Department of Commerce

Answer 31

the name of a potential distributor in a foreign market and the products sold by that potential distributor in a foreign market

Question 32

what is the primary task of a freight forwarder

Answer 32

to combine smaller shipments into a single large shipment to lower shipping costs

Question 33

what firms are export specialists that handle all aspects of marketing for their clients

Answer 33

export management companies (EMC)

Question 34

Michelle contacted another company to see if they could provide the lawnmowers she needed for an overseas client because her company does not produce lawnmowers

Answer 34

piggyback marketing

Question 35

what are the four diagnostic tools found on globalEDGE that assist companies with exporting

Answer 35

CORE, PARTNER, DISTRIBUTOR, and FREIGHT

Question 36

______ and _____ are both financial devices that were created in response to a lack of trust that can develop when companies export products

Answer 36

the letter of credit and a bill of lading

Question 37

what can you (the seller of goods) use as collateral

Answer 37

the letter of credit

Question 38

while a ____ draft is negotiable, a ____ draft is not

Answer 38

time | sight

Question 39

a _____ acts as a receipt, contract, and document of title

Answer 39

bill of lading

Question 40

what are the two negatives associated with a letter of credit

Answer 40

the importer has to pay the bank's fee for the letter of credit; it could limit the importer's ability to borrow since it is a liability

Question 41

an organization that is an independent agency of the US government that was set up to provide financing to facilitate exports, imports, and the exchange of commodities

Answer 41

Export-Import Bank

Question 42

what is one way to avoid payment default on a foreign export sent without a letter of credit

Answer 42

to purchase export credit insurance

Question 43

trading goods for other goods when they can't be traded for money

Answer 43

countertrade

Question 44

what are three forms of countertrade

Answer 44

offset, buyback, and barter