International Business Payments: Navigating the Complexities of Global Trade, Exams of International Business

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International Business Payments | IBP

Exam Practice Test No.

Q1. When calculating landed cost for imported goods, which of the following is NOT typically included? A) Freight charges B) Customs duties C) Local transportation in the destination country D) Seller's profit margin Q2. A company is evaluating potential suppliers for raw materials in different countries. Which of the following factors is the most important in assessing the long-term viability of a supplier? A) Proximity to the company's headquarters B) Supplier's financial stability C) Supplier's offer of the lowest price D) Supplier's advertising and brand reputation Q3. In the context of Incoterms, which of the following best describes the FCA (Free Carrier) term? A) The seller is responsible for the goods until they reach the buyer's warehouse. B) The seller delivers the goods to a carrier chosen by the buyer at a named place. C) The seller covers all transportation costs and risks to the destination port. D) The buyer assumes responsibility once the goods are shipped from the seller's premises. Q4. A company exporting machinery to a country with strict quality standards should prioritize which of the following in their supply chain strategy?

A) Expedited shipping B) Comprehensive product testing and certification C) Lowering the cost of goods D) Simplifying packaging to reduce shipping costs Q5. A foreign trade intern is asked to assess the political risk of entering a new market. Which of the following should they examine? A) The country’s GDP growth rate B) The level of government stability C) The availability of skilled labor D) The cost of raw materials in the country Q6. A company is deciding whether to use a bonded warehouse for its imports. What is the primary advantage of using a bonded warehouse? A) Faster customs clearance B) Deferred payment of duties and taxes C) Lower storage costs D) Enhanced security for high-value goods Q7. A business has to manage fluctuating demand for its products in foreign markets. Which inventory management strategy is best suited to handle this challenge? A) Just-in-time inventory B) Economic order quantity (EOQ) C) Safety stock D) Consignment inventory Q8. A company is importing high-value electronics and is concerned about potential damage during transit. What type of insurance should they ensure is included in their shipping contract? A) Basic marine insurance

B) All-risk cargo insurance C) Third-party liability insurance D) General liability insurance Q9. In a scenario where a company is exporting to a country with a history of currency devaluation, what strategy should the company use to protect its profit margins? A) Accept payments in the buyer's local currency B) Utilize a forward exchange contract C) Open a local bank account in the buyer's country D) Increase the selling price to offset potential losses Q10. A company is planning to enter a new market with a high level of import restrictions. Which entry strategy is likely to be the most effective? A) Direct exporting B) Licensing a local partner C) Establishing a joint venture D) Setting up a wholly-owned subsidiary Q11. A logistics firm is considering different shipping routes for a time- sensitive delivery. What is the most important factor to consider when choosing the route? A) The length of the route B) The reliability of the carriers C) The cost of shipping D) The availability of insurance coverage Q12. In international trade, a company receives a Letter of Credit (L/C) with a discrepancy in the documentation. What should the company do first? A) Ship the goods immediately B) Contact the issuing bank to resolve the discrepancy

C) Request an amendment to the L/C from the buyer D) Reject the L/C and request a new one Q13. A foreign trade intern is analyzing the cost structure for a company's exports. Which cost is typically considered a variable cost in this context? A) Salaries of the export management team B) Freight and shipping costs C) Depreciation on export-related equipment D) Rent for the export warehouse Q14. A company has received a significant number of orders from a country that has recently imposed strict import quotas. What should the company do to fulfill the orders? A) Prioritize shipments to meet the quota limits B) Delay the shipments until the next quota period C) Request an exemption from the importing country's authorities D) Increase prices to reduce demand Q15. A business is facing high customs duties on its imports of raw materials, which is affecting its profit margins. What strategy can the company use to alleviate this burden? A) Reclassify the raw materials under a different HS code B) Increase the sales price of the finished product C) Source raw materials from a country with a favorable trade agreement D) Reduce the volume of imports Q16. A company is exporting perishable goods and is concerned about potential delays at customs. What is the most effective measure to prevent spoilage? A) Use refrigerated containers for the shipment B) Choose a faster shipping method

C) Pre-clear the goods with a customs broker D) Increase the shelf life of the goods Answers: Q1. B) Utilize a forward exchange contract - Explanation: A forward exchange contract allows the company to lock in an exchange rate, protecting against potential losses from currency devaluation. Q2. C) Establishing a joint venture - Explanation: A joint venture with a local partner can help navigate import restrictions by leveraging the partner’s knowledge and access to the local market. Q3. B) The reliability of the carriers - Explanation: For time-sensitive deliveries, the reliability of carriers is crucial to ensure the shipment arrives on time, even more so than the route length or cost. Q4. C) Request an amendment to the L/C from the buyer - Explanation: If there’s a discrepancy in the L/C documentation, the safest first step is to request an amendment to ensure compliance before proceeding. Q5. B) Freight and shipping costs - Explanation: Freight and shipping costs vary depending on the volume and destination of shipments, making them a variable cost in the export cost structure. Q6. A) Prioritize shipments to meet the quota limits - Explanation: Prioritizing shipments allows the company to fulfill orders within the imposed import quotas, maximizing the number of orders that can be fulfilled. Q7. C) Source raw materials from a country with a favorable trade agreement - Explanation: Sourcing from a country with a favorable trade agreement can reduce or eliminate customs duties, alleviating the burden on profit margins. Q8. C) Pre-clear the goods with a customs broker - Explanation: Pre- clearing the goods can minimize delays at customs, which is crucial for preventing spoilage of perishable goods. Q9. B) Utilize a forward exchange contract - Explanation: A forward exchange contract allows the company to lock in an exchange rate, protecting against potential losses from currency devaluation.

Q10. C) Establishing a joint venture - Explanation: A joint venture with a local partner can help navigate import restrictions by leveraging the partner’s knowledge and access to the local market. Q11. B) The reliability of the carriers - Explanation: For time-sensitive deliveries, the reliability of carriers is crucial to ensure the shipment arrives on time, even more so than the route length or cost. Q12. C) Request an amendment to the L/C from the buyer - Explanation: If there’s a discrepancy in the L/C documentation, the safest first step is to request an amendment to ensure compliance before proceeding. Q13. B) Freight and shipping costs - Explanation: Freight and shipping costs vary depending on the volume and destination of shipments, making them a variable cost in the export cost structure. Q14. A) Prioritize shipments to meet the quota limits - Explanation: Prioritizing shipments allows the company to fulfill orders within the imposed import quotas, maximizing the number of orders that can be fulfilled. Q15. C) Source raw materials from a country with a favorable trade agreement - Explanation: Sourcing from a country with a favorable trade agreement can reduce or eliminate customs duties, alleviating the burden on profit margins. Q16. C) Pre-clear the goods with a customs broker - Explanation: Pre- clearing the goods can minimize delays at customs, which is crucial for preventing spoilage of perishable goods.