QN1: The bill of lading is a contract of carriage between the shipper and the steamship company; and the inland bill of lading is issued by the railway carrier or trucking firm.
QN2: The three modes of transportation are available for exporting products overseas include air, ocean and inland, and rail and truck.
QN3: Ocean shipping is the most expensive and the dominant mode of transportation in foreign trade. It is especially suitable for moving bulk freight such as commodities and other raw materials.
Answer
Answer: False. Ocean shipping is the least expensive and the dominant mode of transportation in foreign trade.
QN4: Types of ocean cargo include neo-bulk, tankers, and combination carriers.
Answer
Answer: False. These are not ocean cargo but types of ocean vessels.
QN5: The maximum limitation of liability under the Hague rules is $600 per package. Under the Hague-Visby rules, it is $1,500 per package.
Answer
Answer: False. The maximum limitation of liability is $500 per package. Under the Hague-Visby rules, it is $1,000 per package.
QN6: Forwarders are prohibited from providing any rebates to shippers or sharing any compensation or forwarding fees with shippers, consignees, or sellers.
QN7: The major international rules for carriage of goods by air include the Warsaw Convention (1929) and the amended Warsaw Convention (1945).
Answer
Answer: False. The amended Warsaw Convention (1955) is the second set of rules.
QN8: Documents frequently used in export-import transactions include commercial invoice, dock receipt, shipper’s import declaration, and import packing list.
Answer
Answer: False. A shipper’s export declaration and export packing list are used.
QN9: The carriage of goods by sea is based on three conventions that cover rights and duties of parties to a contract of carriage by sea: the Hague Rules, the Hague-Visby Rules, and the Hanover Rules.
QN10: An exchange rate is the number of units of a given currency that can be purchased for one unit of another currency.
QN11: It is common practice in world currency markets to use the direct quotation; that is, quoting all exchange rates per U.S. dollar.
Answer
Answer: False. It is common practice in world currency markets to use the indirect quotation.
QN12: Hedging is not always the most appropriate technique to limit foreign exchange risks, but it helps protect long-term cash flows.
Answer
Answer: False. Hedging is not always the most appropriate technique to limit foreign exchange risks, and does not protect long-term cash flows.
QN13: A swap transaction is a simultaneous purchase and sale of a certain amount of foreign currency for three different value dates.
Answer
Answer: False. A swap transaction is a simultaneous purchase and sale of a certain amount of foreign currency for two different value dates.
QN14: One of the criteria that countries must meet in order to participate in the single European currency is that inflation rates need to be below 2 to 3 percent.
QN15: Public debt cannot be more than 50 percent GDP, and the budget deficit must be less than or equal to 3 percent GDP for countries that wish to participate in the single European currency.
Answer
Answer: False. Public debt cannot be more than 60 percent GDP.
QN16: The United Kingdom and Austria are countries that declined to participate in the Euro.
Answer
Answer: False. Austria did not decline.
QN17: One reason for the existence of the foreign exchange market is foreign direct investment and the purchase of foreign stocks and bonds.
QN18: A swap transaction’s central feature is that the bank arranges to the swap as a double transaction, usually between two partners.
Answer
Answer: False. A swap transaction’s central feature is that the bank arranges the swap as a single transaction, usually between two partners.
QN19: Latin American countries are known to peg their currencies to the U.S. dollar.
QN20: On an open account, the distributor assumes all risk.
QN21: A disadvantage for companies that insist on less risky transactions, such as a letter of credit, is that they may be losing business to competitors who sell on open accounts.
QN22: In international business transactions, banks are concerned with documents, not the merchandise.
QN23: Export drafts must be paid before the seller receives shipping documents.
QN24: A confirmed letter of credit is preferred to a documentary draft because it guarantees payment to the seller.
QN25: Straight bills of lading are negotiable.
QN26: The role of banks in documentary payment transactions is to verify the documents received and comply with instructions.
QN27: In letters of credit, the buyer pays the issuing bank on or before the draft maturity date.
QN28: When discrepancies occur, the buyer can always waive them to allow the bank to pay the seller.
QN29: In transferable letters of credit, the beneficiary is the buyer.
QN30: Presently, countertrade is estimated to account for 20 to 25 percent of world trade.
Answer
Answer: False. It is estimated to account for 15 to 20 percent.
QN31: One of the benefits of countertrade for exporters is transfer of technology.
Answer
Answer: False. It is one of the benefits for importers, but not for exporters.
QN32: Countertrade is correlated with a country’s level of exports.
QN33: In countries where exchange control restrictions are in place, countertrade is quite common.
QN34: Countertrade is more ancient than (precedes) barter.
QN35: Parallel transactions include clearing arrangements and counterpurchase.
Answer
Answer: False. Parallel transactions include buyback, counterpurchase, and offsets.
QN36: In clearing arrangements, trade imbalances are settled in hard currency payments, transfer of goods, or switch trading.
QN37: Countertrade violates the national treatment and most-favored nation standard of the WTO.
QN38: The U.S. government prohibits the use of countertrade in international business transactions.
Answer
Answer: False. The U.S. government prohibits federal agencies from promoting countertrade in their business or official contracts.
QN39: Buyback and counterpurchase are called parallel transactions.
QN40: Many small and medium-sized businesses suffer from undercapitalization and/or poor management of financial resources, often during the first few years of operation.
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