Deck 13: Exporting,Importing,and Countertrade

Question 1

Simple ignorance of potential opportunities is a huge barrier to exporting.

Answer 1

True
Explanation: Simple ignorance of the potential opportunities is a huge barrier to exporting.

Question 2

Firms that export lose out on opportunities of growth and cost reduction.

Answer 2

False
Explanation: Firms that do not export often lose out on significant opportunities for growth and cost reduction.

Question 3

Some EMCs appear to add little value to the exporting company.

Answer 3

True
Explanation: The quality of EMCs varies.While some perform their functions very well,others appear to add little value to the exporting company.

Question 4

Until recently the United States has been a relatively self-contained continental economy in which international trade played a minor role.

Question 5

Unfortunately due to higher default risks,commercial banks and major accounting firms are less willing to assist small firms in starting export operations than they were a decade ago.

Question 6

The United Nations has calculated that the time involved in preparing documentation,along with the costs of common errors in paperwork,often amounts to 10 percent of the final value of goods exported.

Question 7

A letter of credit is sometimes referred to as a bill of exchange.

Question 8

Exporting is often not an end in itself,but merely a step on the road toward establishment of foreign production.

Question 9

Most novice exporters realize the amount of management resources that have to be dedicated to cultivate business in foreign countries.

Question 10

In theory,the advantage of EMCs is that they are experienced specialists who can help the neophyte exporter identify opportunities and avoid common pitfalls.

Question 11

Due to the lack of trust between two parties to an international transaction,both have the same preferences as to how the transaction should be configured.

Question 12

Studies have shown that while small firms tend to be proactive about seeking opportunities for profitable exporting,systematically scanning foreign markets to see where the opportunities lie for leveraging their marketing skills in foreign countries,many large firms are very reactive.

Question 13

The firm that enters many markets at once runs the risk of spreading its limited management resources too thin.

Question 14

According to the Small Business Administration,exporters still account for only a tiny percentage of U.S.firms-less than 5 percent of firms with fewer than 500 employees

Question 15

The United States has now evolved an institutional structure for promoting exports that is better than that of either Germany or Japan.
United States has not yet evolved an institutional structure for promoting exports similar to that of either Germany or Japan.

Question 16

Lack of trust in international trade is exacerbated by the distance between the two parties in space,language,and culture.

Question 17

Within the U.S.Department of Commerce are two organizations dedicated to providing businesses with intelligence and assistance for attacking foreign markets: the Service Corps of Retired Executives (SCORE)and the Export Legal Assistance Network (ELAN).

Question 18

EMCs normally accept only one type of export assignment where they start exporting operations for a firm with the understanding that the firm will take over operations after they are well established.

Question 19

Unlike their German and Japanese competitors,many U.S.firms are relatively blind when they seek export opportunities;they are information disadvantaged.

Question 20

It often makes sense to enter a foreign market on a large scale to reduce the costs of any subsequent failure.

Question 21

The letter of credit reduces the importer's ability to borrow funds for other purposes.

Question 22

In the event of the lack of a letter of credit,export credit insurance can protect the exporter against the possibility of importer's default on payment.

Question 23

The two forms of government-backed assistance that prospective U.S.exporters can draw on to help finance their export programs are financing aid from the Export-Import Bank and export credit insurance from the Foreign Credit Insurance Association.

Question 24

Time drafts are negotiable instruments.

Question 25

The person or business initiating a draft is known as the drafter and the party to whom the draft is presented is known as the draftee.

Question 26

The bill of lading can function as collateral against which funds may be advanced to the exporter by its local bank before final payment by the importer.

Question 27

Offset refers to the use of a specialized third party trading house in a countertrade arrangement.

Question 28

When issuing a letter of credit,the bank charges the exporter a fee for the service.

Question 29

In domestic transactions,the buyer can often obtain possession of the merchandise without signing formal documents acknowledging his/her obligation to pay.

Question 30

The mission of the Foreign Credit Insurance Association is to provide financing aid that will facilitate exports,imports,and the exchange of commodities between the U.S.and other countries.

Question 31

Barter is primarily used with trading partners who are not creditworthy or trustworthy.

Question 32

The combination of _____ and _____ associated with foreign market opportunities probably explains why exporters still account for only a tiny percentage of U.S.firms.

A)unfamiliarity;intimidation
B)unpredictability;regulations
C)unviability;volatility
D)lack of financing;marketing know-how

Question 33

Exporting is nearly always a way to increase the company's revenue and profit base because

A)there is little competition in the international market.
B)foreign governments welcome imports from other countries.
C)international markets are less complex than domestic ones.
D)the international market is normally so much larger than the firm's domestic market.

Question 34

Sight draft allows for a delay in payment.

Question 35

Which of the following statements about medium and small-sized firms is true?

A)Most of these firms are proactive about seeking opportunities for profitable exporting.
B)They consider exporting only after domestic markets are saturated.
C)These firms go out in the world to seek opportunities.
D)These firms have a high degree of familiarity with the foreign market opportunities.

Question 36

Large firms generally tend to be _____ about seeking opportunities for profitable exporting,whereas medium-sized and small firms are _____.

A)passive;aggressive
B)risk averse;risk takers
C)cautious;adventurous
D)proactive;reactive

Question 37

Countertrade's main attraction is that it can give a firm a way to finance an export deal through in hard currency.

Question 38

Between 30 and 40 percent of world trade by value is now in the form of countertrade.

Question 39

Countertrade is most attractive to large,diverse multinational enterprises that can use their worldwide network of contacts to dispose of goods acquired in countertrading.

Question 40

Why are small and medium-sized firms not proactive in seeking export opportunities?

A)They are familiar with the foreign market and know where they lie.
B)The export market is similar to the home market in terms of legal and business practices.
C)They are intimidated by the complexities and mechanics of exporting to countries.
D)Domestic regulations limit their ability to export profitably.

Question 41

The sogo shosha of Japan:

A)proactively,continuously seek export opportunities for their affiliated companies.
B)exclusively serve the largest and most prestigious companies in Japan.
C)have offices concentrated in the business district of Tokyo.
D)have monopolized the export market in the country.

Question 42

A company of export specialists that acts as an export marketing department for client firms is called a(n):

A)export management company.
B)export-import firm.
C)foreign direct investment management firm.
D)strategy-management company.

Question 43

The United Nations has calculated that the time involved in preparing documentation,along with the costs of common errors in paperwork,often amounts to _____ percent of the final value of goods exported.

A)75
B)25
C)10
D)50

Question 44

A good EMC has all of the following qualities EXCEPT:

A)a network of contacts in potential markets.
B)a good knowledge of different business mores.
C)be fully conversant with the ins and outs of the exporting process and with local business regulations.
D)a staff comprising English-speaking employees alone.

Question 45

Which of the following institutions within the U.S.Department of Commerce is dedicated to providing businesses with intelligence and assistance for attacking foreign markets?

A)The International Trade Administration
B)The Small Business Administration
C)The Federal Trade Commission
D)The Department of State

Question 46

Faced with complexity and diversity,firms sometimes hesitate to seek export opportunities.The way to overcome ignorance is to

A)make commitments.
B)create revenue.
C)make decisions.
D)collect information.

Question 47

By expanding the size of the market,exporting can enable a firm to achieve _____,thereby lowering its unit costs.

A)economies of scale
B)returns to scale
C)diseconomies of scale
D)network externalities

Question 48

A program in which department representatives accompany groups of U.S.businesspeople abroad to meet with qualified agents,distributors,and customers is called the:

A)matchmaker program.
B)best prospects program.
C)SCORE program.
D)STAR program.

Question 49

Which organization is affiliated with the Service Corps of Retired Executives?

A)Foreign Credit Insurance Association
B)International Trade Administration
C)Small Business Administration
D)U.S Department of Commerce

Question 50

Which of the following is true about international comparisons in exporting?

A)The United States has long made its living as a trading nation.
B)Historically,Germany has been a relatively self-contained continental economy.
C)Unlike Japan,U.S.firms have a strong information advantage when they seek export opportunities.
D)The United States has not yet evolved an institutional structure for promoting exports similar to that of Germany.

Question 51

For U.S.firms,the most comprehensive source of export opportunities information is the:

A)Small Business Administration.
B)U.S.Department of Commerce.
C)Federal Trade Commission.
D)Federal Bank.

Question 52

According to Don Gallion,president of FCX Systems,finding a good _____ is a critical factor in achieving success in exporting that will keep the firm out of trouble when it comes to customs and what one should and shouldn't do.

A)local representative
B)home-country financier
C)location in the host country
D)local market

Question 53

Which of the following is a drawback of relying on an EMC?

A)They do not provide references and have no antecedents.
B)The exporting company can fail to develop its own exporting capabilities.
C)They do not constitute of expert specialists to help the neophyte exporter identify opportunities.
D)They typically lack knowledge about the local business regulations.

Question 54

Which of the following is one of the ways in which the U.S.Department of Commerce helps potential exporters?

A)It oversees about 850 volunteers with international trade experience.
B)It has assembled a "comparison shopping service" for 14 countries that are major markets for U.S.exports.
C)It coordinates a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
D)It provides export specialists who act as the export marketing department or international department for their client firms.

Question 55

The _____ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.

A)TradeNet Export Advisor
B)Export Trade Assistance Partnership
C)United States Trade Service
D)Export Legal Assistance Network

Question 56

The _____ program has about 850 volunteers with international trade experience providing one-on-one counseling to active and new-to-export businesses.

A)Export Legal Assistance Network (ELAN)
B)Service Corps of Retired Executives (SCORE)
C)International Trade Veteran's (ITV)
D)Network of Foreign Trade Executives (NFTE)

Question 57

Great trading houses in Japan are called:

A)kaizen.
B)sogo shosha.
C)MITI.
D)guanxi.

Question 58

The International Trade Administration and the United States and Foreign Commercial Service are both:

A)private organizations that assist U.S.exporters.
B)great trading houses of the U.S.
C)organizations within the U.S.Department of Commerce.
D)departments in Small Business Administration.

Question 59

A _____ gives the names and addresses of potential distributors in foreign markets along with businesses they are in,the products they handle,and their contact person.

A)matchmaker list
B)best prospects list
C)potential exporter list
D)SCORE list

Question 60

EMCs normally accept two types of export assignments.One,startup services are performed with the understanding that the EMC will have continuing responsibility for selling the firm's products.Two,they

A)start exporting operations for a firm with the understanding that the firm will take over operations after they are well established.
B)collect duties on exported products and convert the currency of one country into the currency of another.
C)serve firms in particular industries and in different areas of the world.
D)collect duties on exported products and set interest rates charged to foreign investors.

Question 61

3M has built its export success on all of the following principles EXCEPT:

A)adding additional product lines once exporting operations are successful.
B)getting into a market first and then learning about the country.
C)hiring locals to promote the firm's products.
D)entering on a small scale to reduce risks.

Question 62

Which of the following steps can increase a firm's probability of exporting successfully?

A)Avoid hiring EMCs to contain costs
B)Enter several markets simultaneously to hedge risk
C)Enter a foreign market on a small scale
D)Wait for export opportunities to come

Question 63

Lack of trust between two parties engaged in international trade is accentuated by:

A)similar preferences as to how the transaction should be configured.
B)narrowing distance between two parties due to technological advances.
C)the problems of using an underdeveloped international legal system to enforce contractual obligations.
D)the possibility of doing business with someone from another country with whom they have been associated for a long time.

Question 64

Which of the following is an advantage of the letter of credit system to the exporter?

A)Payment for merchandise only after delivery is made
B)Facilitates obtaining of preexport financing
C)Higher price is obtained for goods
D)Lower shipping costs are incurred

Question 65

Which of the following stands at the center of international commercial transactions?

A)Bill of lading
B)Time draft
C)Letter of credit
D)Sight draft

Question 66

A draft is sometimes referred to as a:

A)bill of exchange.
B)letter of credit.
C)bill of lading.
D)counterpurchase.

Question 67

The two categories of drafts are:

A)contract drafts and lending drafts.
B)single-party drafts and multi-party drafts.
C)title drafts and quantity drafts.
D)sight drafts and time drafts.

Question 68

A _____ is simply an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.

A)bill of lading
B)draft
C)letter of credit
D)barter

Question 69

The letter of credit is issued by a bank at the request of a(n):

A)exporter.
B)government.
C)importer.
D)shipping company.

Question 70

When an exporter ships goods to the bank which issued a letter of credit,it gives the bank title to the goods in the form of a:

A)merchandise bill.
B)bill of lading.
C)bill of exchange.
D)draft.

Question 71

How does the international practice of settling trade transactions differ from domestic practice?

A)In international business,a formal promise to pay is required before obtaining the merchandise.
B)In international business,the seller usually ships merchandise on an open account.
C)In domestic business,a draft is used to settle trade transactions.
D)In international business,the exporter sends a commercial invoice that specifies the amount due and the terms of payment to the importer.

Question 72

When a letter of credit is used in exporting arrangements

A)no cash deposit or collateral is required from the importer.
B)the exporter pays the bank a fee for the service.
C)the letter of credit becomes a financial contract between the bank and the exporter.
D)the importer directly pays the exporter upon delivery of goods.

Question 73

What is the drawback for the importer in using a letter of credit?

A)The importer loses control over the process of trading.
B)The system is skewed heavily in favor of the exporter.
C)It may reduce his ability to borrow funds for other purposes.
D)The loan must be repaid even before the merchandise has been solD.

Question 74

Why does a letter of credit reduce an importer's ability to borrow funds?

A)The importer has to pay fees to the bank for the letter of credit.
B)It is a financial liability against the importer.
C)The importer has to pay for the merchandise immediately.
D)The importer has to pay for unsatisfactory products.

Question 75

Which of the following is an advantage of the letter of credit system to the importer?

A)Payment for merchandise is made only after receiving the documents.
B)It facilitates the obtaining of preexport financing.
C)Lower price for goods.
D)Lower shipping costs.

Question 76

A party initiating a draft is known as the _____,while the party to whom the draft is presented is known as the _________________

A)maker;drawee
B)importer;exporter
C)buyer;vendor
D)agent;principal

Question 77

The letter of credit

A)states that the bank will pay a specified sum of money to a beneficiary on presentation of particular,specified documents.
B)is an order written by an exporter instructing an importer to pay a specified amount of money at a specified time.
C)serves as a receipt,a contract,and a document of title.
D)indicates that the carrier has received the merchandise described on the face of the document.

Question 78

In international trade,the supplier (exporter)of a good wants to be paid before he ships his consignment.Correspondingly,the buyer (importer)wants to make payment only upon the receipt of the good.These varying,often conflicting,preferences of parties to a trade are a manifestation of:

A)corporate greed.
B)acculturation.
C)their lack of trust.
D)an absence of commitment.

Question 79

The text suggests that exporting is not an end in itself,but merely a step toward:

A)self-sufficiency in domestic markets.
B)foreign production.
C)market saturation.
D)product standardization.

Question 80

International trade often occurs between parties who may never have met,live in different countries,speak different languages,and abide by different legal systems.These factors could result in:

A)parties being easy to track.
B)a lack of trust between the parties.
C)good enforcement of contractual obligations.
D)acculturation.