Deck 14: Exporting, Importing, and Countertrade

Question 1

Exporters often face voluminous paperwork,complex formalities,and many potential delays and errors.

Answer 1

True

Question 2

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

Answer 2

True

Question 3

Firms that actively export often lose out on significant opportunities for growth and cost reduction.

Answer 3

False

Question 4

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

Question 5

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

Question 6

Unlike their German and Japanese competitors,many U.S.firms do not have adequate information when they seek export opportunities.

Question 7

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

Question 8

The advantage of export management companies is that they are experienced specialists that can help the neophyte exporter identify opportunities and avoid common pitfalls.

Question 9

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

Question 10

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.

Question 11

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

Question 12

Commercial banks and major accounting firms are less willing to assist small firms in starting export operations due to higher default risks.

Question 13

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 14

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

Question 15

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

Question 16

Export Legal Assistance Network (ELAN),an organization within the U.S.Department of Commerce,is dedicated to providing businesses with assistance for attacking foreign markets.

Question 17

Low growth prospects makes firms reactive about seeking opportunities for exporting.

Question 18

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

Question 19

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 20

The advantage of export management companies is that they are experienced specialists that can help the neophyte exporter identify opportunities and avoid common pitfalls.

Question 21

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 22

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 23

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

Question 24

Banks charge exporters a fee for issuing a letter of credit.

Question 25

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

Question 26

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 27

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

Question 28

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 29

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

Question 30

Large firms generally tend to be _____ about seeking opportunities for profitable exporting.

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

Question 31

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 32

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 33

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 34

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

Question 35

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 36

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 37

Which of the following is an advantage of exporting?

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 38

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

Question 39

In international commerce,time drafts are negotiable instruments.

Question 40

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

Question 41

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 42

The _____ refers to 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
E) Ex-Im Network

Question 43

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 44

A(n)_____ refers to an export specialist that acts as an export marketing department for client firms.

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

Question 45

Through its _____ program,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.

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 46

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 47

Which of the following is true of the export performance of the United States,Germany,and Japan?

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 48

The _____ is a government organization that helps potential exporters.It employs 76 district international trade officers and 10 regional international trade officers throughout the United States as well as a 10-person international trade staff in Washington,DC.

A) Federal Trade Commission
B) U.S. Commercial Service
C) International Trade Administration
D) Small Business Administration
E) sogo shosha

Question 49

The U.S.Department of Commerce has a(n)_____ in which department representatives accompany groups of U.S.businesspeople abroad to meet with qualified agents,distributors,and customers.

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

Question 50

Many medium-sized and small firms 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 overestimate the time and expertise needed to cultivate business in foreign countries.

Question 51

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 Bureau of Competition
E) The Bank of New York

Question 52

The International Trade Administration provide the potential exporter with a(n)_____,which 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) ELAN list
B) "best prospects" list
C) "comparison shopping service"
D) SCORE list
E) export management list

Question 53

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 54

Which of the following is true of exporting?

A) It takes a very short time before all foreigners are comfortable enough to purchase in significant quantities.
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) Large firms are usually unfamiliar with foreign market opportunities.
E) Large firms do not consider exporting until their domestic market is saturated.

Question 55

Which of the following is true of the International Trade Administration and the U.S.Commercial Service?

A) They are private organizations that assist U.S. exporters.
B) They are the great trading houses of the United States.
C) They are organizations within the U.S. Department of Commerce.
D) They are departments in the Small Business Administration.
E) They are global export management companies.

Question 56

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 57

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 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 departments or international departments for their client firms.
E) It starts exporting operations for firms until they are well established.

Question 58

Japan's great trading houses are referred to as _____.

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

Question 59

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 60

Which of the following is a reason why firms are not proactive about seeking export opportunities?

A) They are unfamiliar with foreign market opportunities.
B) domestic regulations limit their ability to export profitably.
C) they overestimate the time and expertise needed to cultivate business in foreign countries.
D) they do not find the foreign market challenging enough.
E) the export market is similar to the home market in terms of legal and business practices.

Question 61

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 62

Which of the following stands at the center of international commercial transactions and is issued by a bank at the request of an importer?

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

Question 63

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 64

A _____ is issued by a bank,and it indicates that the bank will make payments under specific circumstances.

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

Question 65

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 66

Which of the following is true of a letter of credit in international trade?

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 67

Which of the following is true of an export management company (EMC)?

A) It coordinates the Export Legal Assistance Network, a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters.
B) It provides a potential exporter with a "best prospects" list.
C) It assembles a "comparison shopping service" for 14 countries.
D) It organizes trade events that help potential exporters make foreign contacts.
E) It specializes in serving firms in particular industries and in particular areas of the world.

Question 68

In international trade,an exporter wants to be paid before a consignment is shipped.Correspondingly,the importer wants to pay only upon receipt of the consignment.These conflicting preferences of the parties are a manifestation of _____.

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

Question 69

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 70

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 71

In international commerce,a _____ refers to 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) counterpurchase
E) buyback

Question 72

Which of the following is a function of an export management company?

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 73

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 74

Which of the following is a drawback of relying on an export management company (EMC)?

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 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 75

In international commerce,a draft is sometimes referred to as a _____.

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

Question 76

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 77

Which of the following is an advantage of a letter of credit for an importer?

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 78

Which of the following is a strategic step taken to increase a firm's 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 79

A letter of credit reduces an importer's ability to borrow funds for other purposes because:

A) the importer has to request for it.
B) it is a financial liability against the importer.
C) the importer has to pay for the merchandise even before receiving the documents.
D) the importer has to pay even if the conditions stated in the letter are not satisfied.
E) it does not give the importer any extra time to resell the merchandise before requiring payment.

Question 80

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