In valuing a currency, the direct quote is
the value of the foreign currency expressed in units of the domestic currency
In the United States, the Wall Street Journal publishes the forward rates for the currencies of _____ countries.
Four
Countries representing the greatest percentage of world trade all have _____ currencies.
Floating
As a theory of exchange rate determination, the Fisher effect
holds that a country's nominal interest rate is comprised of the inflation rate and the real interest rate of money, essentially identical for all countries.
Market-based forecasting of exchange rates
is based on the premise that "the market knows best."
attempts to capture the collective knowledge of sophisticated speculators in the future spot rate of a currency.
does not take into account potential government interventions.
Companies that will successfully and regularly retain their risk of currency fluctuation are those that
re very large traders, sophisticated in international finance.
A forward market hedge
involves selling forward foreign currency yet to be received.
In an options market hedge there is the option to sell or purchase certain currencies at a certain exchange rate either on or before a certain date. The agreed-upon exchange rate is called the
Strike Price
SDRs of the International Monetary Fund can be used in international transactions:
as an artificial currency.
The following mathematical expression Ft + 1(et) = S(et + 1) is of what theory of exchange rate determination?
1) Interest Rate Parity
2) Fisher effect
3) Purchasing Power Parity
4) Big Mac IndexNone of the above
None!!!
The mathematical representation (1 + real interest rate) x (1 + inflation rate) = 1 + nominal interest rate is of what theory of exchange rate determination?
Fisher Effect
Historical exchange rate data can easily be obtained from
The Federal Reserve System
International exchange rates began to float
At the end of the gold standard
SWIFT Stands for
Society for Worldwide Interbank Financial Telecommunication
The International Bank for Reconstruction
is also known as the World Bank.
In its absolute form, the exchange rate determination theory of Purchasing Power Parity
1) says that exchange rates should reflect the price differences of each and every product between countries.
2) says that the exchange rate should equalize price differences of similar products between countries.
3) is impossible to achieve.
4) is rarely
The risk resulting from possible fluctuations in currency exchange rates is called
Transaction Exposure
When a company is engaged in an international transaction and agrees to use a foreign currency to conduct the transaction
it is exposed to a certain amount of risk.
Which of the following companies are exposed to the risk of currency fluctuations?
1) firms that do not evaluate international currency transaction risks clearly.
2) firms that do not follow a specific policy on currency exchange.
3) firms that have management that is not well-versed in the intricacies of international trade.
4) firms t
One strategy a company can follow to protect itself from currency fluctuations is use of
Forward Market Hedges
A typical container will be handled _____ times in each of the ports of departure and destination.
Four to six
According to John Waite, chief surveyor of the Salvage Association, the biggest hazard(s) for container ships is/are
Fire
Most of the ships that sink each year
1) are older ships.
2) are bulk ships.
3) are ships flying third world countries' flags.
Correct Answer
4) All of the above
Which of the following is a marine insurance company?
Cigna
The part of a trip during which cargo is at most risk for theft is
The inland Leg
A ship valued at $1,337,500 is carrying a cargo of iron ore valued at $125,000, and a cargo of coal valued at $100,000. The ship is stranded and the captain jettisons what is later determined to be $12,500 worth of iron ore. The stranded ship is towed to
$9,000
An exporter in a developing country sells under CIF terms to an importer in a developed country. The exporter provides the minimum required insurance coverage. If there is a loss, the importer would
Have to file a claim with an insurer in the developing country
Marine cargo insurance can be purchased from
Freight Forwarder
Premiums in an open ocean cargo policy
are based upon the value of shipments made under the policy
A special cargo policy
1) is an insurance policy that covers only one shipment.
2) allows a firm to purchase coverage that specifically fits a particular shipment.
3) results in cumbersome efforts to purchase insurance for each shipment.
4) All of the above
A letter of credit usually requires
certificate of insurance
The liability of a single P&I club is limited to
$7 million
Coverage A of the Institute Marine Cargo Clauses requires a special endorsement to cover
Strikes and other disturbances
Coverage A of the Institute Marine Cargo Clauses is the maximum coverage an exporter or importer would normally need to purchase
1) for most trade lanes of the world.
2) for shipments from one developed country to another.
3) for shipments that stay away from political hot spots of the world.
4) All of the above
Goods shipped "under deck
are stowed inside the ship
nstitute for Marine Cargo Clauses Coverage B
is a "named-perils" policy.
Institute Marine Cargo Clauses Coverage C
Is required by Incoterms CIF and CIP
Under an American Conditions Free of Particular Average policy
1) partial losses are covered if they happen on the same voyage as a fire.
2) there is excellent coverage for containerized or break-bulk cargo.
3) partial losses are not covered if they result directly from a fire.
4) it would be enough to cover the mini
S.R. & C. C. coverage
1) includes direct physical damage to the insured goods.
2) does not include incidental damage caused by delay to market.
3) does not cover financial losses that accompany a delay in the sale of cargo.
4) All of the above
A "Sue and Labor" clause
directs the shipper to act in the best interest of the insurance company when a loss occurs
Insurance coverage designed to fill the gap between what an importer would like to have covered under its open cargo policy and what is covered under its supplier's CIF or CIP coverage is called
a Difference in Conditions coverage.
Airfreight insurance policies
are written as "All Risks" policies.
At Lloyd's, individuals assuming (insuring) risks on their personal fortunes are called
Bespoke Names
At Lloyd's, the individuals assuming (insuring) risks are grouped together in
1) associations.
2) underwriting instruments.
3) agencies.
4) Baileys.
5) None of the above
At Lloyd's, the individuals assuming (insuring) risks have
Unlimited Liability
A major financial problem occurred for Lloyd's of London due to its coverage of
Asbestos
More companies are selling their goods on an "open-account" basis because
it is possible to purchase credit insurance to cover the risk of non-payment.
Condensation damage is covered by All Risks policy and
Coverage A of the Institute Marine Cargo Clauses.
Warehouse-to-Warehouse" coverage is an extension to the traditional
1) All Risks policy.
2) With Average policy.
3) Free of Particular Average policy.
4) All of the above
FCL cargo stands for
Full Container Load
Cargo, such as trucks, that cannot be containerized because it is too large and won't fit in a traditional container or because it exceeds the maximum weight of a container load or that the shipper chooses not containerize and ships as separate units is c
Breakbulk Cargo
Proper marking on cargo as it is shipped is important because proper marking
1) protects the cargo from poor handling.
2) protects the cargo from theft.
3) protects the cargo from pilferage.
4) protects the cargo from delays due to failure to comply with carrier and government safety and security requirements.
5) All of the above
Most cargo tends to be shipped by air in
Its secondary Packaging
Hazardous cargo shipped by sea is regulated by the
IMO
What good packaging should be like? (Functions/qualities/expectations of good packaging)
1) It should protect the goods against the hazards of shipping.
2) It should enhance customer service.
3) It should facilitate handling.
4) It should be environmentally friendly.
5) All of the above
Packaging designed to appeal to and be functional for consumers is called
Primary Packaging
An intermodal container is designed to withstand the weight of up to how many similar containers placed on top of it?
8
The standardized size of pallets in Europe is
80 centimeters by 120 centimeters.
Because of the threat to hardwood forests caused by the long-horned beetle
wood pallets from China are not allowed in the United States unless they have been fumigated, heat-treated, or pressure-treated with a pesticide.
In conditions of high humidity, paperboard loses up to _____ percent of its strength.
60
Cigna Insurance Company published a guide to cargo handling in
Ports of the World
The strongest type of shipping crates are
Constructed with 3-way corners
FIBCs are used for shipping _____ cargo.
Granular
Characteristic(s) of steel drums is/are
They can withstand a good amount of abuse
Characteristic(s) of fiber drums is/are
They are more resistant to pilferage than bags
To protect cargo, markings should
1) display only the net weight.
2) display only the gross weight.
3) only be in metric units.
4) only be in English units.
5) None of the above
To protect breakbulk or LCL cargo from being lost or shipped to the wrong consignee, it should be clearly marked with
The Cosignee's name
The biggest problem(s) in transportation of air cargo is/are
Pilferage and Theft
Color-coding to identify a company's shipments
Should be changed on a regular basis
Most duty is collected ad valorem which means
it is based on the value of the import.
Tariffs can be calculated
1) ad valorem.
2) as a fixed amount per unit imported.
3) in a mixed system of a fixed amount per unit imported plus a percentage of the value of the goods imported.
4) All of the above
A value-added tax is eventually only paid by
Consumers
A two-tiered tariff rate on a specific category of products in which the tariff that is low until a quota is reached and then it goes much higher is called a(n)
Tariff-rate quota.
Generally speaking, countries with scarce foreign currency resources will attempt to limit the granting of import licenses to companies that have generated export revenues and
companies purchasing goods for which no close domestic substitute is available.
If an importer has a good reputation regarding its following of Customs regulations, the likelihood that one of its shipments is going to be inspected is minimal, therefore minimizing delays at entry and allowing the importer to organize its supply chain
Informed Compliance
Required documentation for entry into essentially all countries includes
a form designated for entry, a Certificate of Origin, and a commercial invoice.
Duty is usually based upon
product classification, valuation, and origin.
In the Harmonized System of classification, an incomplete or unfinished product is classified
1) in several classifications, depending upon the raw materials of the product.
2) in several classifications, depending upon the classifications of the sub-assemblies of the product.
3) in the classification of the closest similar product.
4) under a spe
For countries in the World Trade Organization, the valuation of goods for import purposes is based upon
The transaction value of the sale.
Argentina, after being chastised by the World Trade Organization for having increased its duty rate on footwear, reduced them, and immediately reimposed them through a _____ tax designed to protect its footwear industry against foreign competition.
Safeguard
A tariff-rate quota
1) places a two-tiered tariff rate on a specific category of products.
2) keeps the tariff low until the quota is reached.
3) raises the tariff after the quota is reached.
4) All of the above
Non-tariff barriers may appear in the form of
1) requiring a special sticker to be applied to an imported product.
2) slowing down Customs clearance processes.
3) multiplying the number of documents required for importing products.
4) Making documentation requests that are very difficult to fulfill (
Countries may require pre-shipment inspections because
the country wants an expert opinion on the classification and the value of the products about to enter its territory.
In most countries, the general process of clearing Customs begins with
The Filing of an "entry
Customs brokers are usually compensated on
a fee per transaction.
A time-sensitive shipment like an express package can be expedited through Customs by
a surety bond.
n order for an importer to come under the scope of informed compliance, it must show that it
has exercised reasonable care in the filing of its Customs entries.
Documentation designed to indicate what country a product initially came from is contained in the
Certificate of Origin
An "assist
is an item the importer provided to the exporter to produce the good (such as a mold or die used in manufacturing the product).
Unique, powerful Japanese trading companies are called
Sogo Shosha
As a company grows in exporting sophistication, it should not become involved with an export trading company because
customers abroad are customers of the export trading company, not the exporter.
An export management company earns its revenue through
sales commissions.
In its relationship with an agent, an exporter is known as the
Principal
Because agents tend to be individuals or very small firms, governments in some countries put them under
Labor Law
An exporter has the most control over its foreign sales through a(n)
Sales or Marketing Subsidary
An intermediary that purchases goods in the exporting country and resells them to a customer in a foreign country is called a(n)
1) agent.
2) export management corporation.
3) principal.
4) contract manufacturer.
5) None of the above
Agents usually sell more than one product and represent more than one company. The products they sell are
Complementary
Usually, a distributor is located
In the Importing Country
When manufacturing costs are lower abroad, when shipping costs are prohibitive, when domestic manufacturing capacity is reached, or when the product has significant intangible content, such as services, a company may consider
Production Abroad
The customs status of a maquiladora is similar to that of
1) a foreign trade zone located only in the United States.
2) a foreign trade zone located only in Mexico.
3) a Customs office.
4) what is outlined in the Foreign Corrupt Practices Act.
5) None of the above
is not truly a method of entry into a country for an exporter.
Contract Manufacturing
When a firm realizes that it wants to exploit the possibilities that sales abroad can bring, and decides to become directly involved in its exporting activities, it is said to be involved in
Active Exporting
What strategy is often followed when access to the market is limited by high tariffs or non-tariff barriers, when shipping costs are prohibitive, or when the exporter is not interested in pursuing the market?
1) use of a foreign trade zone
2) use of an agent
3) use of an export management company
4) use of a maquiladora
5) None of the above
Attempts to reduce business practices that include corruption and bribery have been made by the
Organisation for Economic Co-operation and Development
A customer of a firm enters a foreign market by setting up a manufacturing facility. It tells its suppliers that they will need to supply parts for assembly at the manufacturing facility and for customer service. Therefore, the suppliers are engaged in wh
Piggy-Backing
When a company has a subsidiary in a foreign country, as far as the foreign country's government is concerned that subsidiary is
The Importer of Record
A foreign sales corporation is a device used by U.S. exporters to reduce taxes. To qualify, the goods exported must have _____ percent U.S. content. This results in a tax reduction of _____ percent.
50, 15
The fee a licensee pays a licensor for each use of an intellectual property is called a(n)
Royalty
Maquiladoras are located on the border between
The United States and Mexico
Efforts by corporations to reduce the vulnerability of their international supply chain to more traditional criminal activities is called
Security Management
Which international organization was involved in developing security measures?
International Maritime Org
The following factor(s) do NOT influence the type of security measures that ports put in place?
Size
The primary role of the World Customs Organization has traditionally been
The simplification and harmonization of customs' procedures
The SAFE initiative was implemented by
World Customs Organization
C-TPAT program offers companies the following advantages:
assistance from Customs' Supply Chain Security Specialists.
In addition to the C-TPAT program, the United States has also created which program(s) or initiative(s) to improve security?
1) Maritime Transportation Security Act
2) Security and Accountability For Every Port Act
3) Transportation Workers' Identification Credential
4) Container Security Initiative
5) All of the above
The European Union based its security initiatives on which international organization's guidelines?
1) World Trade Organization
2) the United Nations
3) the International Chamber of Commerce
4) All of the above
5) None of the above
European countries have experienced significant violent attacks from which of the following terrorist group(s)?
1) the Organisation de l'Arm�e Secr�te
2) the Provisional Irish Republican Army
3) Rote Armee Fraktion
4) the Baader-Meinhof Gang
5) All of the above
Countries outside of Europe and North America reacted with policies that mirrored the policies of which country or area?
The European Union
Which U.S. agency is NOT involved with security enforcement?
Secret Service
The management philosophy that "encourages every employee, at every level, to recognize the importance of security within the corporation, and suggest improvements in processes and procedures" is
Total Security Management
In order to protect their fixed assets, companies should implement which of the following physical barriers?
1) build fences around the perimeter
2) lock all access doors
3) have enough outside lights
4) install backup electric generators
5) All of the above
When a security detection process determines that a cargo contains dangerous goods, even though the goods are innocuous (safe), what type of error is it?
Type 1 Error
When a security detection process determines that a cargo is innocuous (safe), even though the goods are dangerous, what type of error is it?
Type 2 Error
The policy of a one-hundred-percent inspection is considered flawed because
1) the costs are staggering.
2) the amount of room it requires is greater than what is normally available.
3) the personnel needed is very large.
4) it is ineffective.
5) All of the above