SCMT 3643 Final Exam Questions and Answers Graded A+
What are INCOTERMS? - Answers The international commerce rules that decide who is
responsible for the transport of goods at each stage, the customs clearance and the risks
involved with international transportation
What is pre-carriage? - Answers Domestic transportation of exporting country
What is main carriage? - Answers The international transportation between the exporting
country and the importing country
What is on-carriage? - Answers The domestic transportation in the importing country
What rules do INCOTERMS formally define? - Answers Which tasks will be performed by the
exporter and importer
Which activities will be paid for by the exporter and importer
The exact point at which responsibility transfers from exporter to importer
Who maintains INCOTERMS? - Answers The ICC (international chamber of commerce)
What factors are important when considering which INCOTERM to use? - Answers Type of
product being sold
Method of shipment
Ability and willingness of importer or exporter to perform tasks
Amount of trust in each party
Which four INCOTERMS can only be used for ocean transportation? - Answers FAS, FOB, CFR
AND CIF
In what situation would you want the supplier to perform all tasks for you (as the importer)? -
Answers When you know very little about the foreign market (the less you know the more
services you will want)
What are the three aspects of each INCOTERM? - Answers Scope: type of products for which it
can be used
Modality: mode of transport for which it can be used
Syntax: way it has to be stated on invoices and paperwork
What are the four families of INCOTERMS? - Answers E - everything (importer does everything)
F - free on board
, C - carriage (main transportation leg)
D - delivery (exporter does everything)
What are the most common errors involved with INCOTERMS? - Answers Confusion with
domestic terms of trade
Confusion with older INCOTERMS
Improper use of the correct INCOTERM
Not specifying the rule version
What is the most common improper use of the correct INCOTERM? - Answers FOB for air
shipment (only used for maritime)
How do INCOTERMS add value? - Answers INCOTERMS are a type of service that is added to
the end customer
Each INCOTERM has a cost and risk associated with it, most of which will be transferred to the
end consumer
Why are international payments difficult? - Answers Credit information can be hard to find
Lack of personal contact
Collections are difficult and expensive
No easy legal recourse
Higher litigation costs
What is the difference of risk and exposure? - Answers Risk is the probability of not getting paid
or getting paid late (the probability of an event occurring)
Exposure is the consequence of a loss
What are the traditional methods of payment? - Answers Letter of credit
Cash in advance
Open account
Documentary collection
What are INCOTERMS? - Answers The international commerce rules that decide who is
responsible for the transport of goods at each stage, the customs clearance and the risks
involved with international transportation
What is pre-carriage? - Answers Domestic transportation of exporting country
What is main carriage? - Answers The international transportation between the exporting
country and the importing country
What is on-carriage? - Answers The domestic transportation in the importing country
What rules do INCOTERMS formally define? - Answers Which tasks will be performed by the
exporter and importer
Which activities will be paid for by the exporter and importer
The exact point at which responsibility transfers from exporter to importer
Who maintains INCOTERMS? - Answers The ICC (international chamber of commerce)
What factors are important when considering which INCOTERM to use? - Answers Type of
product being sold
Method of shipment
Ability and willingness of importer or exporter to perform tasks
Amount of trust in each party
Which four INCOTERMS can only be used for ocean transportation? - Answers FAS, FOB, CFR
AND CIF
In what situation would you want the supplier to perform all tasks for you (as the importer)? -
Answers When you know very little about the foreign market (the less you know the more
services you will want)
What are the three aspects of each INCOTERM? - Answers Scope: type of products for which it
can be used
Modality: mode of transport for which it can be used
Syntax: way it has to be stated on invoices and paperwork
What are the four families of INCOTERMS? - Answers E - everything (importer does everything)
F - free on board
, C - carriage (main transportation leg)
D - delivery (exporter does everything)
What are the most common errors involved with INCOTERMS? - Answers Confusion with
domestic terms of trade
Confusion with older INCOTERMS
Improper use of the correct INCOTERM
Not specifying the rule version
What is the most common improper use of the correct INCOTERM? - Answers FOB for air
shipment (only used for maritime)
How do INCOTERMS add value? - Answers INCOTERMS are a type of service that is added to
the end customer
Each INCOTERM has a cost and risk associated with it, most of which will be transferred to the
end consumer
Why are international payments difficult? - Answers Credit information can be hard to find
Lack of personal contact
Collections are difficult and expensive
No easy legal recourse
Higher litigation costs
What is the difference of risk and exposure? - Answers Risk is the probability of not getting paid
or getting paid late (the probability of an event occurring)
Exposure is the consequence of a loss
What are the traditional methods of payment? - Answers Letter of credit
Cash in advance
Open account
Documentary collection
