Deck 16: Exporting, Importing, and Countertrade

Question 1

Ignorance of the potential opportunities is a huge barrier to exporting.

Answer 1

True

Question 2

When a time draft is drawn on and accepted by a business firm, it is called a trade acceptance.

Answer 2

True

Question 3

The Small Business Administration organizes trade events that help potential exporters make foreign contacts and explore export opportunities, held in major cities worldwide.

Answer 3

False

Question 4

An export packer can advise companies who are unfamiliar with exporting on appropriate design and materials for the packaging of their items.

Question 5

The most comprehensive source of information for U.S. firms on exporting opportunities is the U.S. Department of Commerce.

Question 6

Hiring an export management company (EMC) will help a novice exporter identify opportunities and navigate the paperwork involved in exporting.

Question 7

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

Question 8

Nearly every state in the United States maintains active trade commissions to promote exports.

Question 9

Time drafts cannot be sold to investors at a discount from face value.

Question 10

U.S. organizations can get financing aid from the Export-Import Bank.

Question 11

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

Question 12

Lack of knowledge is one of the biggest impediments to a company becoming a successful exporter.

Question 13

The bill of lading does not serve as a document of title as such.

Question 14

Exporters often face voluminous paperwork and complex formalities.

Question 15

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

Question 16

A sight draft allows for a delay in payment.

Question 17

The Japanese sogo shosha have offices all over Japan, and companies wishing to trade with Japan must go through them.

Question 18

A letter of credit states that an exporter has availed credit from the bank to manufacture goods.

Question 19

Ex-Im Bank has a direct lending operation under which it lends dollars to foreign borrowers.

Question 20

The bank promises to pay on behalf of the importer when a bank is used as a third party in international transactions.

Question 21

Which of the following is a nationwide group of international trade attorneys who provide free initial consultations to miniature businesses on export-related matters?

A) ELAN
B) EMC
C) MITI
D) SCORE

Question 22

What is a common difficulty that traders face when exporting goods or services to other countries?

A) Small firms tend to be more aggressive than larger firms in global trade.
B) Governments do not provide much assistance to exporters.
C) Growth opportunities are often limited in global markets.
D) Exporters often face voluminous paperwork and complex formalities.

Question 23

What is true of exporting?

A) A common pitfall of exporting is a poor understanding of competitive conditions in the foreign market.
B) Securing financing is rarely a problem for exporters.
C) A common pitfall of exporting is trying too hard to customize a product offering rather than "sticking with what you know."
D) Most exporters have a very good understanding of the competitive conditions in the foreign market.

Question 24

What is true of reactive firms?

A) Reactive firms consider a variety of markets for selling their products and services.
B) They consider exporting only after their domestic market is saturated.
C) They systematically scan foreign markets for profitable export opportunities.
D) They create excess productive capacity and actively hunt for opportunities in foreign markets.

Question 25

Countertrade is least attractive to large, diverse multinational enterprises.

Question 26

________ are export specialists that offer a full menu of services to handle all aspects of exporting, similar to having an internal exporting department within your own firm.

A) Small business development centers (SBDCs)
B) Centers for international business education and research (CIBERs)
C) Export legal assistance networks (ELANs)
D) Export management companies (EMCs)

Question 27

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

Question 28

Which of the following statements is true of export management companies (EMCs)?

A) An EMC is a transportation company that engages in international business.
B) EMCs are export-import banks that manage foreign exchanges.
C) EMCs are export specialists that act on behalf of their client firms.
D) An EMC is an intermediary that facilitates talks between two nations.

Question 29

A counterpurchase gives exporters more flexibility than an offset.

Question 30

The great promise of exporting is that

A) large revenue opportunities are often found in foreign markets.
B) it provides more opportunities to smaller firms than larger firms.
C) international trade is protected against exchange risks.
D) it reduces the need for insuring businesses against political risks.

Question 31

Japan's ________ have offices all over the world, and they proactively, continuously seek export opportunities for their affiliated companies large and small.

A) sogo shosha
B) kaizen
C) MITI
D) Samurai

Question 32

Which of the following statements is true of exporting?

A) It increases the trade deficit that nations have.
B) Exporting leads to diseconomies of scope.
C) It helps a firm achieve economies of scale.
D) Exporting is not beneficial to a country's economy.

Question 33

In the ________ program organized by the U.S. Department of Commerce, department representatives accompany groups of U.S. businesspeople abroad to meet with qualified agents, distributors, and customers.

A) best prospects
B) SCORE
C) capital assistance
D) matchmaker

Question 34

The Foreign Credit Insurance Association is part of the U.S Department of Commerce and guides the activities of the Export-Import Bank.

Question 35

Countertrade denotes a whole range of barter-like agreements that involve trading goods and services when they cannot be traded for money.

Question 36

Barter is a reciprocal buying agreement that occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

Question 37

________ can help new exporters identify opportunities and avoid common pitfalls.

A) An MITI
B) An export-import bank
C) An in-house trading department
D) An export management company

Question 38

Through its ________ program, the SBA oversees about 11,500 volunteers with international trade experience to provide one-on-one counseling to active and new-to-export businesses.

A) matchmaker
B) SCORE
C) ELAN
D) trade fair

Question 39

What is a reason that firms take a reactive approach to exporting rather than a proactive approach?

A) Most firms are familiar with the foreign market opportunities and therefore do not need to utilize proactive approaches.
B) They are intimidated by the complexities and mechanics of exporting to countries where business practices, language, culture, legal systems, and currency are very different from the home market.
C) Most firms already know where the market potential and opportunities are and they do not need to be proactive.
D) They are not intimidated by the complexities and mechanics of exporting to foreign countries and can, therefore, use the same reactive approaches that work in their home market.

Question 40

Which of the following statements is true about the Small Business Administration (SBA)? 

A) It is the most comprehensive source of export opportunities information.
B) The SBA is a private organization managed by leaders of large corporations.
C) The SBA employs trade officers throughout the United States.
D) The SBA offers help exclusively to small businesses that sell products within the United States.

Question 41

Which of the following is a disadvantage of using a letter of credit (L/C)?

A) A letter of credit does not give protection to the importer.
B) A letter of credit does not give protection to the exporter.
C) The exporter cannot avail pre-export financing when using a L/C.
D) The importer must pay a bank fee for the letter of credit.

Question 42

In a letter of credit transaction, the importer secures the letter of credit

A) before product shipment.
B) after product shipment.
C) from the exporter's bank.
D) after receiving the product.

Question 43

Which of the following is a major advantage of using a letter of credit?

A) It gives the importer time to resell the merchandise before payment.
B) It guarantees the exporter preexport financing.
C) It helps international traders engage in trade with trust.
D) It guarantees the importer extra funds for other purposes.

Question 44

A ________ is simply 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.

A) letter of credit
B) bill of lading
C) draft
D) banker's letter

Question 45

A draft used in international transactions

A) is a document requesting payment.
B) explains the conditions of a contract.
C) is the same as a letter of credit.
D) gives a bank guarantee to an exporter.

Question 46

A ________ is payable on presentation to the drawee.

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

Question 47

Japan's great trading houses are called

A) Nikei.
B) sogo shosha.
C) Yen houses.
D) Samurai houses.

Question 48

A banker's acceptance

A) is payable to the drawee immediately on presentation in a bank.
B) is a time draft that has been drawn on and accepted by a bank.
C) is a sight draft that can be used as a negotiable instrument in banks.
D) allows a buyer possession of the merchandise without signing any formal documents.

Question 49

The person or business initiating a draft is known as the

A) beneficiary.
B) drawee.
C) maker.
D) trustee.

Question 50

As a receipt, the bill of lading indicates that the carrier

A) provides a written promise of payment before releasing the merchandise.
B) has obtained the merchandise described on the face of the document.
C) receives payment from a third-party such as a bank or trading house.
D) is obligated to provide a transportation service in return for a certain charge.

Question 51

A ________ states that the bank will pay a specified sum of money to a beneficiary, normally the exporter, on presentation of particular, specified documents.

A) bill of exchange
B) bill of lading
C) letter of credit
D) bank statement

Question 52

A ________ is issued to the exporter by the common carrier transporting the merchandise.

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

Question 53

In a typical international trade transaction, the

A) exporter should obtain a letter of credit to initiate transactions.
B) importer and exporter maintain an account with the same bank.
C) importer's bank sends a letter of credit to the exporter's bank.
D) importer's bank sends the draft and bill of lading to the exporter's bank.

Question 54

Bank charges on letters of credit will depend on the

A) Exporter's creditworthiness.
B) size of the transaction.
C) Exporter's means of finance.
D) time taken to approve the sale.

Question 55

The exporter endorses the ________ so title to the goods is transferred to the bank.

A) bill of lading
B) letter of credit
C) draft
D) promissory note

Question 56

Which of the following is a successful exporting strategy used by 3M?

A) Add additional products once exporting becomes successful.
B) Enter many markets at one time to gain maximum exposure.
C) Bring in expert marketing specialists to promote the firm's products.
D) Enter on a large scale to flood the market.

Question 57

A ________ allows for a delay in payment.

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

Question 58

In an international transaction involving a bank as a third party, the exporter ships the product after

A) the bank receives materials from the importer.
B) receiving a cleared payment through the bank.
C) the importer has paid the bank.
D) the bank promises to pay on the importer's behalf.

Question 59

Firms commonly employ ________ as a third party in international transactions.

A) a reputable bank
B) a stock exchange
C) an export management company
D) a customs broker

Question 60

In theory, the advantage of export management companies is that they are

A) managed by governments that provide export subsidies.
B) not-for-profit organizations that provide free service.
C) subsidized by the Department of Commerce.
D) experienced specialists who can help the neophyte exporter.

Question 61

Countertrade emerged in the 1960s as a way for the ________ to purchase imports.

A) United States
B) European Union
C) ASEAN countries
D) Soviet Union and the then-communist states of Eastern Europe

Question 62

An importer obtains a ________ from a local bank in a typical international transaction.

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

Question 63

________ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.

A) Floating exchange system
B) Countertrade
C) Letter of credit trade
D) Fixed exchange system

Question 64

A ________ serves as a receipt, a contract, and a document of title.

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

Question 65

A ________ allows for a delay in payment-normally 30, 60, 90, or 120 days.

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

Question 66

________ is an alternative means of structuring an international sale when conventional means of payment are difficult, costly, or nonexistent.

A) Barter
B) Offset
C) Countertrade
D) Buyback

Question 67

Which of the following statements is true of export credit insurance?

A) Exporters will require more insurance if a letter of credit is used in transactions.
B) The Foreign Credit Insurance Association provides coverage against commercial risks and political risks.
C) Private associations cannot offer export insurance in the United States.
D) Organizations do not receive coverage against political risks of global trade.

Question 68

________ occurs when a firm supplies technology, equipment, training, or other services in a country and agrees to take a certain percentage of the resultant output as partial payment for the contract.

A) A counterpurchase
B) An offset
C) A barter
D) A buyback

Question 69

________ denotes a range of barter-like agreements and its principle is to trade goods and services for other goods and services when they cannot be traded for money.

A) Countertrade
B) Cross-selling
C) Matchmaking
D) Letter of credit

Question 70

________ is the direct exchange of goods and/or services between two parties without a cash transaction and is the simplest arrangement.

A) Counterpurchase
B) Barter
C) Offset
D) Switch trading

Question 71

________ is primarily used for one time-only deals in transactions with trading partners who are not creditworthy or trustworthy.

A) Counterpurchase
B) Barter
C) Offset
D) Buyback

Question 72

________ is viewed as the most restrictive countertrade arrangement.

A) Barter
B) Offset
C) Buyback
D) Switch trading

Question 73

The ________ is issued to the exporter by the common carrier transporting the merchandise.

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

Question 74

As a document of title, a ________ can be used to obtain payment or a written promise of payment before the merchandise is released to the importer.

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

Question 75

________ occurs when a firm agrees to purchase a certain amount of materials back from a country to which a sale is made.

A) Barter
B) Offset
C) Counterpurchase
D) Buyback

Question 76

The main attraction of ________ is that it can give a firm a way to finance an export deal when there are no other means available.

A) a countertrade
B) a buyback
C) a counterpurchase
D) an offset

Question 77

Which of the following statements is true of countertrade?

A) Countertrade reduces the profitability of competing firms and is considered an unethical practice.
B) Countertrade is a conventional means to pay exporters.
C) Smaller organizations commonly use countertrade in international transactions.
D) Countertrade occurs when goods and services are traded for other goods and services.

Question 78

A ____ is the instrument normally used in international commerce to effect payment.

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

Question 79

________ is viewed as the most restrictive countertrade arrangement and is primarily used for onetime-only deals in transactions with trading partners who are not creditworthy or trustworthy.

A) Switch trading
B) Offset
C) Barter
D) Buyback

Question 80

The Export-Import Bank

A) is an international financial institution that provides loans for capital programs.
B) provides finance to facilitate cross-border trade between the United States and other countries.
C) is an independent agency of the United Nations.
D) focuses on policies that have an impact on the exchange rate and the balance of payments.