Chapter 16

Which of the following 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.

Japan's great trading houses are called _____. A. Nikei B. sogo shosha C. Yen houses D. Samurai houses

_____ is a nationwide group of international trade attorneys who provide free initial consultations to small businesses on export-related matters. A. SCORE B. SBDC C. ELAN D. CIBER

_____ are export specialists that act as the export marketing department or international department for their client firms. 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)

Firms commonly employ a(n) _____ as third party in international transactions. A. reputable bank B. stock exchange C. export management company D. customs broker The parties involved in international trade often find it difficult to trust each other. The problem is solved by using a third party trusted by both—normally a reputable bank—to act as an intermediary.

Importers usually issue a _____ to importers in international transactions. A. sight draft B. letter of credit C. time draft D. bill of lading

A ____ is the instrument normally used in international commerce to effect payment. A. bill of lading B. letter of credit C. draft D. countertrade

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

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

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

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

The Export-Import Bank is an independent agency of the _____. A. European Union B. World Trade Organization C. United Nations D. U.S. government

_____ can avail loans from Ex-Im Bank to pay U.S. suppliers. A. Foreign borrowers B. Individuals C. Domestic borrowers D. U.S.-based corporations

The Foreign Credit Insurance Association provides coverage: A. to insure products during shipment. B. against commercial risks and political risks faced by exporters. C. to insure that products are delivered that have already been paid for. D. against political risks faced by importers.

_____ 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

In the modern era, the concept of countertrade arose as a way for the _____ to purchase imports. A. United States B. European Union C. ASEAN countries D. Soviet Union and the Communist states of Eastern Europe

_____ is viewed as the most restrictive countertrade arrangement. A. Barter B. Offset C. Buyback D. Switch trading

____ 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

_____ 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

A(n) _____ 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. counterpurchase B. offset C. barter D. buyback

The main attraction of a(n) _____ is that it can give a firm a way to finance an export deal when there are no other means available. A. countertrade B. buyback C. counterpurchase D. offset

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.

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.

Which of the following statements 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.

Which of the following 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.

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

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

Which of the following statements is true about Small Business Administration (SBA)? A. It is the most comprehensive source of export opportunities information. B. SBA is a private organization managed by leaders of large corporate. C. The SBA employs trade officers throughout the United States. D. SBA offers help exclusively to small businesses that sell products within U.S.

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

Through its _____ program, the SBA oversees about 850 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

Which of the following statements is true of 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.

In theory, the advantage of EMCs 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.

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.

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.

Which of the following is a document used to give the title of the products to a bank? A. Bill of lading B. Letter of credit C. Draft D. Promissory note

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

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.

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.

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 bank. C. the importer has paid the bank. D. the bank promises to pay on the importer's behalf.

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 pre-export financing. C. It helps international traders engage in trade with trust. D. It guarantees the importer extra funds for other purposes.

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.

The person or business initiating a draft is known as the ____. A. beneficiary B. drawee C. maker D. trustee

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

A _____ is payable on presentation to the drawee. A. bill of lading B. time draft C. sight draft D. letter of credit

A _____ allows for a delay in payment. A. bill of lading B. time draft C. sight draft D. letter of credit

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.

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

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.

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.

The Export-Import Bank: A. is an international financial institution that provides loans for capital programs. B. provides finance to facilitate trade between 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.

Which of the following statements is true of export credit insurance? A. Exporter will require more insurance if a letter of credit is used in transactions. B. The FCIA 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.

_____ 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

_____ denotes a whole 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

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.

_____ 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

_____ is viewed as the most restrictive countertrade arrangement and is primarily used for one-time-only deals in transactions with trading partners who are not creditworthy or trustworthy. A. Switch trading B. Offset C. Barter D. Buyback

_____ is a reciprocal buying agreement and occurs when a firm agrees to buy a certain amount of materials back from a country to which a sale is made. A. Counterpurchase B. Barter C. Offset D. Switch trading

In a(n) ____, one party agrees to purchase goods and services with a specified percentage of the proceeds from the original sale and this party can fulfill the obligation with any firm in the country to which the sale is being made. A. switch trade B. offset C. barter D. buyback

Which of the following terms refers to the use of a specialized third-party trading house in a countertrade arrangement? A. Counterpurchase B. Barter C. Offset D. Switch trading

A(n) _____ occurs when a firm builds a plant in a country and agrees to take a certain percentage of the plant's output as partial payment for the contract. A. buyback B. barter C. offset D. switch trade

Which of the following is an advantage of countertrade? A. Countertrade uses instruments such as time draft and sight draft. B. It is an effective way of doing business with developing nations. C. It provides exporters and opportunity to obtain direct revenue. D. Countertrade prevents exchange of unusable or poor-quality goods.

Which of the following is a major drawback of engaging in countertrade? A. Countertrade is not useful when trading with developing nations. B. Financing is difficult when engaging in a countertrade. C. It is not attractive to small organizations. D. Countertrade may involve the exchange of unusable goods.

Countertrade is: A. most attractive to small, primarily domestic enterprises. B. least attractive to small, primarily domestic enterprises. C. most attractive to large, diverse multinational enterprises. D. least attractive to large, diverse multinational enterprises.

A(n) _____ can help new exporters identify opportunities and avoid common pitfalls. A. MITI B. Export-Import Bank C. in-house trading department D. export management company

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

_____ can be used when a government restricts the convertibility of its currency to preserve its foreign exchange reserves so they can be used to service international debt commitments and purchase crucial imports. A. A buyback B. Countertrade C. An offset D. Switch trading

_____ occurs when a third-party trading house buys the firm's counterpurchase credits and sells them to another firm that can better use them. A. Countertrading B. Offsetting C. Switch trading D. Bartering

The main attraction of _____ is that it can give a firm a way to finance an export deal when other means are not available. A. switch trading B. counterpurchase C. offsets D. countertrade

Which of the following is a disadvantage of countertrade? A. Countertrade contracts may involve the exchange of unusable or poor-quality. B. Countertrade requires the firm to use an out-of-house trading company to which much of the profit will go. C. Countertrade contracts often involve high-quality, expensive goods that the firm cannot move enough of to be profitable. D. Countertrade requires employing lawyers who specialize in these unique types of contracts.

Which of the following 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.