Deck 14: Exporting, Importing, and Countertrade

Question 1

For U.S.firms,the most comprehensive source of information on export opportunities is the U.S.Department of Commerce.

Answer 1

True

Question 2

While small firms tend to be proactive about seeking opportunities for profitable exporting,large firms are very reactive.

Answer 2

False

Question 3

Export management companies (EMCs)start exporting operations for a firm with the understanding that the firm will take over operations after they are well established.

Answer 3

True

Question 4

German and Japanese firms are relatively more information-disadvantaged than U.S.firms.

Question 5

The Export-Import Bank provides financing aid to prospective U.S.exporters.

Question 6

A letter of credit may reduce an importer's ability to borrow funds for other purposes.

Question 7

In domestic trade transactions,a buyer can often obtain possession of merchandise without signing a formal document acknowledging his or her obligation to pay.

Question 8

A draft,an instrument normally used in international commerce to effect payment,is also known as a letter of credit.

Question 9

Compared to a decade ago,commercial banks and major accounting firms are rarely willing to assist small firms in starting export operations due to high default risks.

Question 10

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

Question 11

In international commerce,a sight draft allows for a delay in payment.

Question 12

In international commerce,time drafts are negotiable instruments.

Question 13

In international commerce,a 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 14

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 United States and other countries.

Question 15

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

Question 16

Reactive firms do not consider exporting until their domestic market is saturated.

Question 17

Only large companies have benefited significantly from the moneymaking opportunities of exporting.

Question 18

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

Question 19

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

Question 20

Issued by a bank at the request of an importer,a bill of lading states that the bank will pay a specified sum of money to a beneficiary,normally the exporter,on presentation of particular,specified documents.

Question 21

Export credit insurance protects an exporter against the possibility of a foreign importer's default on payment when there is a lack of a letter of credit.

Question 22

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

Question 23

Which of the following is true of exporting?

A)Many foreign customers require face-to-face negotiations on their home turf.
B)Large firms tend to wait for the world to come to them,rather than going out into the world to seek opportunities.
C)Exporters have the advantage of reduced paperwork and fewer formalities.
D)Medium-sized and small firms are proactive about seeking opportunities for profitable exporting.
E)Firms that focus only on exporting often lose out on significant opportunities for growth and cost reduction.

Question 24

While seeking opportunities for profitable exporting,large firms generally tend to be

A)passive.
B)risk averse.
C)wary.
D)proactive.
E)neutral.

Question 25

The most comprehensive source of information on export opportunities for U.S.firms is the

A)Small Business Administration.
B)Department of Commerce.
C)Federal Trade Commission.
D)Bureau of Competition.
E)Bank of New York.

Question 26

Japan's great trading houses are referred to as

A)kaizen.
B)sogo shosha.
C)zaibatsu.
D)guanxi.
E)kanban.

Question 27

Unhappy with the speed with which the company's export initiative was going,the CEO called Mary Adams,the person in charge of exports at Ambient Products,to understand the reasons for the company's delay.Which of the following is a valid defense that Mary Adams can use?

A)The U.S.government does not provide any help for exporters.
B)Novice exporters tend to overestimate the time required to cultivate business in foreign countries.
C)Exporters often face voluminous paperwork,complex formalities,and many potential delays and errors.
D)Small firms are usually familiar with foreign market opportunities.
E)Large firms do not consider exporting until their domestic market is saturated.

Question 28

Darren Bloom,the sales manager for John Fountain Products,a small family business,is eager to get the company on an export path.The CEO of the company is not convinced,however.Which of the following is an advantage of exporting that Bloom should use to convince the CEO?

A)It helps in easy currency conversion.
B)It provides large revenue and profit opportunities.
C)It reduces the administrative costs incurred by a company.
D)It helps companies increase their unit costs.
E)It reduces paperwork and complex formalities.

Question 29

Which of the following is a common pitfall that novice exporters come across?

A)poor understanding of the opportunities in the domestic market
B)low unit costs
C)increased economies of scale
D)problems securing financing
E)familiar distribution systems

Question 30

Mary Warner,the sales manager for a medium-sized apparel company,is facing a tremendous challenge in convincing her boss to get the company to export.As she reflected on this challenge,she realized that many medium-sized firms like hers are not proactive in seeking export opportunities because

A)they are familiar with the foreign market and do not find it challenging enough.
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 foreign countries.
D)domestic regulations limit their ability to export profitably.
E)they can't recruit managers with the expertise needed to cultivate business in foreign countries.

Question 31

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

Question 32

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

A)They are proactive about seeking opportunities for profitable exporting.
B)They consider exporting only after their domestic market is saturated.
C)They are not intimidated by the complexities of foreign legal systems.
D)They have a high degree of familiarity with foreign market opportunities.
E)They explore foreign markets to see where the opportunities lie for leveraging their technology.

Question 33

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)International Trade Administration
B)Small Business Administration
C)Federal Trade Commission
D)Bureau of Competition
E)Bank of New York

Question 34

Due to the complexity and diversity of foreign markets,firms sometimes hesitate to seek export opportunities.These firms can best overcome ignorance by

A)shortening production runs.
B)creating revenue.
C)outsourcing decisions.
D)collecting information.
E)lowering unit costs.

Question 35

The sogo shosha of Japan

A)proactively and 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.
E)consider export only when there is excess production at home.

Question 36

The principle of countertrade is to trade goods and services for money.

Question 37

Countertrade's main attraction is that it can give a firm a way to finance an export deal when other means are not available.

Question 38

Hans (from Germany),Abe (from Japan)and Chris (from the U.S.)were having a heated argument at an international electronics trade show.The argument was about the export performance of companies from the three countries.Which of the following is a valid statement made by the three people involved in the argument?

A)Historically,the United States has made its living as a trading nation.
B)Germany has been a relatively self-contained continental economy in which international trade played a minor role.
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.
E)The Ministry of International Trade and Industry (MITI)in the United States is always on the lookout for export opportunities.

Question 39

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

A)there is little competition in the international market.
B)foreign governments encourage imports from other countries.
C)international markets are less complex than their domestic counterparts.
D)the international market is much larger than the domestic market.
E)it does not involve wasting resources on paperwork.

Question 40

Darren Bloom,the sales manager for John Fountain Products,a small family business,is eager to get the company on an export path.The CEO of the company is not convinced,however.To convince the CEO,Bloom should point out that firms that do not export often

A)face problems of currency conversion.
B)lose out on significant opportunities for cost reduction.
C)are able to reduce their unit costs.
D)are not intimidated by the business practices of foreign countries.
E)explore foreign markets to see where they can leverage their technology.

Question 41

The Small Business Administration oversees almost 11,500 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses through its program known as the

A)Export Legal Assistance Network.
B)Service Corps of Retired Executives.
C)International Trade Veteran's Group.
D)Network of Foreign Trade Executives.
E)Export Management Company.

Question 42

The list provided by the International Trade Administration to a potential exporter with the names and addresses of potential distributors in foreign markets,along with businesses they are in,is called the

A)ELAN list.
B)"best prospects" list.
C)"comparison shopping service."
D)SCORE list.
E)export management list.

Question 43

A lack of trust between two parties engaged in international trade is exacerbated by the

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

Question 44

Florida Jetskis,based in Miami,wants to export,but,being a small third generation family business is cautious,particularly with respect to financial risk.The CEO,Armand Millard is contemplating the firm's approach to exporting.Which of the following is a strategic step that you would advise Florida Jetskis to take to increase its probability of exporting successfully?

A)avoiding the use of export management companies to contain costs
B)entering several markets simultaneously to hedge risk
C)entering a foreign market on a small scale
D)waiting for export opportunities
E)avoiding recruitment of local personnel

Question 45

Delios Trading is exporting for the first time to Japan and has contracted with Abe Imports in Tokyo for an initial order valued at $110,000.Delios Trading wants Abe Imports to secure a document from a Tokyo bank that would indicate that the bank would pay Delios Trading $110,000 upon presentation of specified documents by the exporter.What is the name of the document that Delios Trading is asking for?

A)bill of lading
B)time draft
C)letter of credit
D)sight draft
E)bill of exchange

Question 46

Which of the following is true of a letter of credit?

A)It states that the bank will pay a specified sum of money to a beneficiary on presentation of particular,specified documents.
B)It is a document written by an exporter instructing an importer to pay a specified amount of money at a specified time.
C)It serves as a receipt,a contract,and a document of title.
D)It indicates that the carrier has received the merchandise described on the face of the document.
E)It allows buyers to obtain possession of merchandise without signing a formal document acknowledging his or her obligation to pay.

Question 47

John Ciro,the CEO of Ciro Products,a small manufacturer,told his employees that he is part of a group that was going abroad along with representatives of the U.S.Department of Commerce and other U.S.businesspeople to meet with qualified agents,distributors,and customers.Ciro was most likely talking about the

A)matchmaker program.
B)"best prospects" listing.
C)SCORE program.
D)"comparison shopping service."
E)export-import program.

Question 48

The Forlan Group is a firm that acts as an export marketing department for client firms.As an export specialist,The Forlan Group is a(n)

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

Question 49

The Forlan Group is an export management company (EMC).It has found that potential clients are often confused as to what an EMC does.Which of the following is a function of an export management company such as The Forlan Group?

A)It starts exporting operations for a firm with the understanding that the firm will take over operations after they are well established.
B)It coordinates the Export Legal Assistance Network,a nationwide group of international trade attorneys.
C)It oversees volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses.
D)It collects duties on exported products and sets interest rates for charging foreign investors.
E)It gives novice exporters the names and addresses of potential distributors in foreign markets along with businesses they are in.

Question 50

Southern Products is a ninety-year old,fourth generation family business located in Pooler,Georgia.The company had concentrated on the U.S.market its entire life by selling its products primarily in the southern United States.Due to increased competition in the domestic market,Southern Products now wants to sell abroad.The company and its top management team is hesitant,however.Firms engaged in international trade deal with people they may have never seen,who live in different countries,who speak different languages,and who abide by different legal systems.These factors result in

A)easy tracking of the parties involved.
B)a lack of trust between the parties.
C)strict enforcement of contractual obligations.
D)rapid acculturation.
E)better understanding of how transactions should be configured.

Question 51

Which of the following organizations runs the Service Corps of Retired Executives (SCORE)program?

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

Question 52

Stacy Morgan Apparel is new to exporting and is worried about not getting paid for its goods.Ally Jones,its CFO,is trying to convince the company CEO that by insisting on a letter of credit,Stacy Morgan Apparel is well covered financially.Which of the following aspects of a letter of credit in international trade should convince the company CEO?

A)No cash deposit or collateral is required from the importer.
B)The exporter pays the trusted third party (usually a bank)a fee for the service.
C)It becomes a financial contract between the trusted third party (usually a bank)and the exporter.
D)It is issued by the exporter at the request of the importer.
E)The creditworthiness of the importer is irrelevant when issuing a letter of credit.

Question 53

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

A)It oversees volunteers with international trade experience and directs them to provide one-on-one counseling to active and new-to-export businesses.
B)It assembles a "comparison shopping service" for 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 departments or international departments for their client firms.
E)It starts exporting operations for firms until they are well established.

Question 54

In terms of using a third party in international trade,title to the products is given to a bank by the exporter in the form of a document known as a

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

Question 55

Firms engaged in international trade deal with people they may have never seen,who live in different countries,who speak different languages,and who abide by different legal systems.These factors result in

A)easy tracking of the parties involved.
B)a lack of trust between the parties.
C)strict enforcement of contractual obligations.
D)rapid acculturation.
E)better understanding of how transactions should be configured.

Question 56

A firm that enters many markets at once

A)runs the risk of spreading its limited management resources too thin.
B)becomes established in all the markets.
C)gets the time to learn about each market.
D)has fewer export opportunities.
E)reduces the costs of any subsequent failure.

Question 57

Which of the following is an advantage of having a letter of credit?

A)It allows payment for merchandise after its delivery.
B)It facilitates an exporter to obtain pre-export financing.
C)It allows an exporter to get a higher price for his or her goods.
D)It helps exporters incur lower shipping costs.
E)It does not require the importer to pay any fee.

Question 58

As an exporter,Delios Trading wants to be paid before a consignment is shipped.Correspondingly,its importer in Japan,Abe Imports,wants to pay only upon receipt of the consignment.These conflicting preferences of Delios Trading and Abe Imports are most likely a manifestation of

A)corporate greed.
B)acculturation.
C)lack of trust.
D)cultural insensitivity.
E)countertrading opportunities.

Question 59

Omar Arroyo,an international trade attorney,provides free consultations to small businesses on export-related matters as part of a nationwide group coordinated by the Small Business Association.Omar is a member of the group called the

A)TradeNet Export Advisor.
B)Export Trade Assistance Partnership.
C)United States Trade Service.
D)Export Legal Assistance Network.
E)Ex-Im Network.

Question 60

Abby Goodwin,the sales manager of Ark Techno Products is wary of using an export management company (EMC)to get the company on the exporting path.Her CEO,John Mosco is very much in favor of hiring an EMC.Which of the following is a drawback of relying on an export management company (EMC)that Abby Goodwin can use to support her contention?

A)It does not provide references and has no antecedents.
B)The exporting company can fail to develop its own exporting capabilities.
C)It does not have expert specialists to help a neophyte exporter identify opportunities.
D)It typically lacks information about local business regulations.
E)The exporting company cannot avoid the common pitfalls of exporting.

Question 61

For an importer,which of the following is a disadvantage of using a letter of credit for international transactions?

A)It results in the importer losing control over the process of trading.
B)It reduces the exporter's level of trust in the importer.
C)It reduces the importer's ability to borrow funds for other purposes.
D)It requires the importer to repay the loan even before the merchandise is sold.
E)It is not issued at the importer's request.

Question 62

When serving as collateral,the bill of lading

A)can be used to advance funds to the exporter by its local bank before or during shipment.
B)specifies that the carrier is obligated to provide a transportation service in return for a certain charge.
C)can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.
D)states that the bank will pay a specified sum of money to a beneficiary,normally the exporter,on presentation of particular,specified documents.
E)is an order written by an exporter instructing an importer,or an importer's agent,to pay a specified amount of money at a specified time.

Question 63

Repayment of medium- and long-term loans that U.S.commercial banks make to foreign borrowers for purchasing U.S.exports is guaranteed by the

A)United Nations.
B)Central Bank.
C)World Bank.
D)Ex-Im Bank.
E)Export Credit Insurance Association.

Question 64

Johnson Goods,a U.S.company is exporting to Watanabe Trading,a Japanese importer.The two parties agree on a draft,but Johnson Goods wants it to be a draft that is payable on presentation to Watanabe Trading.Johnson Goods is asking for a(n)

A)bill of lading.
B)sight draft.
C)letter of credit.
D)time draft.
E)offset.

Question 65

When a time draft is presented to a drawee,he or she signifies acceptance of it by

A)delivering the goods immediately.
B)paying the draft amount immediately.
C)providing a collateral for the amount specified in the bill.
D)writing or stamping a notice of acceptance on its face.
E)selling the draft to an investor at a discount from its face value.

Question 66

When a bill of lading is used to obtain payment or a written promise of payment before the merchandise is released to the importer,it serves as a

A)document of title.
B)contract.
C)receipt.
D)time draft.
E)collateral.

Question 67

Hatfield Manufacturing wants to import an important machine from Sweden.However,the company's head of manufacturing is reluctant to spend the time required to provide the documentation required to obtain a letter of credit that the Swedish exporter insists on.You are the company's CFO.Which of the following would you use as an advantage of a letter of credit to convince the head of manufacturing?

A)The importer does not have to pay for the merchandise until the documents have arrived.
B)Obtaining pre-export financing becomes easier.
C)It helps the importer to get goods for a lower price.
D)It results in lower shipping costs.
E)The importer does not have to pay the third party a fee for facilitating the transaction.

Question 68

Which of the following is true with respect to the international and domestic practices of settling trade transactions?

A)In an international transaction,a formal promise to pay is required before the buyer can obtain the merchandise.
B)In an international transaction,the seller usually ships merchandise on an open account.
C)In a domestic transaction,a draft is used to settle trade transactions.
D)In an international transaction,the exporter sends a commercial invoice that specifies the amount due and the terms of payment to the importer.
E)In an international transaction,there is more trust between the exporter and the importer than in a domestic transaction.

Question 69

When a time draft is drawn on and accepted by a business firm,it is known as a(n)

A)trade acceptance.
B)in-transit bill.
C)banker's acceptance.
D)bill of lading.
E)letter of credit.

Question 70

Which of the following is the first step in a typical international trade transaction?

A)The exporter agrees to ship under a letter of credit and specifies relevant information such as prices and delivery terms.
B)The importer applies to a trusted third party (usually a bank)for a letter of credit to be issued in favor of the exporter for the merchandise the importer wishes to buy.
C)The importer places an order with the exporter and asks the exporter if he would be willing to ship under a letter of credit.
D)The exporter ships the goods to the importer on a common carrier.An official of the carrier gives the exporter a bill of lading.
E)The trusted third party (usually a bank)issues a letter of credit in the importer's favor and sends it to the exporter's bank.

Question 71

Johnson Goods,a U.S.company is exporting to Watanabe Trading,a Japanese importer.The two parties agree on a draft,but Watanabe Trading wants it to be a draft that allows for a delay in payment.Watanabe Trading is asking for a(n)

A)sight draft.
B)time draft.
C)bill of lading.
D)counterpurchase.
E)offset.

Question 72

Jamal Steel,a rapidly growing small steel company with annual revenues of $8 million is looking to buy a large industrial furnace from Japan that is expected to cost $2 million.The exporter wants Jamal Steel to produce a letter of credit.Jamal Steel's CFO is reluctant to do so.Instead,the CFO wants an order written by the exporter instructing Jamal Steel to pay $2 million at a specified time.In international commerce,what the CFO is asking for is known as a

A)bill of lading.
B)draft.
C)letter of credit.
D)counterpurchase.
E)buyback.

Question 73

Once accepted by the drawee,a time draft becomes a(n)

A)asset for the drawee.
B)in-transit bill.
C)promise to pay by the accepting party.
D)bill of lading.
E)letter of credit.

Question 74

Financing aid that will facilitate exports,imports,and the exchange of commodities between the United States and other countries is provided by the

A)sogo shosha.
B)World Bank.
C)Overseas Commercial Service.
D)Ex-Im Bank.
E)Export Credit Insurance Association.

Question 75

When a time draft is drawn on and accepted by a bank,it is known as a

A)trade acceptance.
B)banker's check.
C)banker's acceptance.
D)bill of lading.
E)letter of credit.

Question 76

Jamal Steel,a rapidly growing small steel company with annual revenues of $8 million is looking to buy a large industrial furnace from Japan that is expected to cost $2 million.The exporter wants Jamal Steel to produce a letter of credit.Jamal Steel's CFO is reluctant to do so.Which of the following disadvantages of using a letter of credit for international transactions is likely the reason for the CFO's reluctance?

A)It results in the importer losing control over the process of trading.
B)It reduces the exporter's level of trust in the importer.
C)It reduces the importer's ability to borrow funds for other purposes.
D)It requires the importer to repay the loan even before the merchandise is sold.
E)It is not issued at the importer's request.

Question 77

When a bill of lading specifies that the carrier is obligated to provide a transportation service in return for a certain charge,it serves as a

A)contract.
B)receipt.
C)document of title.
D)letter of credit.
E)bill of exchange.

Question 78

Which of the following is a characteristic of a time draft?

A)It has no value given the deferred nature of the document.
B)It is generally not preferred in international transactions.
C)It is a negotiable instrument.
D)It is also known as a bill of lading.
E)It cannot be sold by an exporter.

Question 79

Jamal Steel,a rapidly growing small steel company with annual revenues of $8 million is looking to buy a large industrial furnace from Shinto Manufacturing,a Japan-based company.Rather than have a letter of credit binding the two parties,both agree on a draft.In international commerce,Shinto Manufacturing,the party initiating the draft is known as the

A)maker.
B)drawee.
C)buyer.
D)agent.
E)drafter.

Question 80

Which of the following is issued to an exporter by a common carrier transporting the merchandise and serves as a receipt,a contract,and a document of title?

A)bill of lading
B)collateral
C)draft
D)letter of credit
E)bill of exchange