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SCMN 2150- Junior Year > Chapter 6a: Global Export Operations > Flashcards

Chapter 6a: Global Export Operations Flashcards

1
Q

T or F: From a supply chain standpoint, domestic trade is much more challenging and time consuming than global trade.

A

False; GLOBAL TRADE is more challenging/time-consuming

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1
Q

includes negotiating the terms of trade, preparing the trade documents, and protecting freight against loss or damage; (these 3 activities must take place before initiating the delivery process)

A

export preparations (middle phase of global SC process)

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2
Q

If you don’t think through the export preparation issues and plan for potential disruptions, then the subsequent jury and import activity will be more _____ and ______ than desired.

A

costly; risky

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3
Q

What are the 4 things that are the foundation of a solid agreement (between the buyer and seller when negotiating the terms of trade)?

A
  1. Product specification
  2. Price
  3. Quantity
  4. Discounts
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4
Q

SC Issues and Cost Responsibilities:
Companies must clearly articulate in terms of trade what 3 things?

A
  1. Responsibilities for packing and shipping of goods (who will be responsible for this)
  2. Payment of transportation fees and duties.
  3. In-Transit Responsibilities (resolving any problems that occur from the time the goods leave the export factory until they arrive at the importers final destination)
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5
Q

When negotiating the terms of trade, the hard/time-consuming way to do this is to negotiate each export step and process individually. What is the smart way to do this?

A

use INCTOTERMS (standardized international commercial terms)

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6
Q

the global standard for the interpretation of the most common terms in foreign trade

A

INCOTERMS

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7
Q

Who created incoterms? Who recognizes them as the global standard for the interpretation of the most common terms in foreign trade?

A

The International Chamber of Commerce; United Nations Commission on International Trade Law

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8
Q

Use of ________ can reduce/remove uncertainties that arise from different interpretations of trade terms in different countries.

A

incoterms

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9
Q

Incoterms clarify what 3 important issues for buyers and sellers in international trade?

A
  1. the obligations of each party (who’s responsible for each step in the process)
  2. responsibility for payments (who must pay for packing, delivery, insurance, duties, etc.)
  3. the risks assumed by each party (who’s financially liable if something goes wrong, who must resolve issues that arise from product flows from origin to destination)
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10
Q

What are the 6 things incoterms do?

A
  1. Provide a consistent level of knowledge.
  2. Offer protection to both parties.
  3. Save negotiation time.
  4. Clarify costs.
  5. Minimize confusion about responsibility.
  6. Help manage risk.
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11
Q

Incoterms when included in a sales contract, appear to be simple _____ letter _______ accompanied by a specifically named ______.

A

three; acronyms; place (ex: FOB Oakland, CIF Antwerp, etc.)

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12
Q

The three letters in incoterms define when and where the ______ ________ takes place between the seller and the buyer (includes who’s responsible for the physical goods, who has to make the payments, and who has legal ownership or title to the goods at various points in the global journey).

A

transfer responsibility

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13
Q

There are _____ incoterms that can be used in a contract. In comparison, there are typically ______ delivery terms used in most domestic contracts. What are these?

A
  • 11; 2
  • FOB Origin
  • FOB Destination
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14
Q

where the buyer takes responsibility at the sellers location.

A

FOB Origin

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15
Q

where the seller takes responsibility all the way to the buyers location.

A

FOB Destination

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16
Q

What are the 2 main categories of incoterms? What are they organized by?

A
  • Group 1 and Group 2
  • organized by mode of transportation
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17
Q

Which main category of incoterms does this describe:
incoterms that only apply to sea and inland waterway transportation

A

Group 2

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18
Q

Which main category of incoterms does this describe:
incoterms that apply to any mode of transportation

A

Group 1

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19
Q

Incoterms start with one of four letters:

A

E,F,C,or D

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20
Q

Which incoterm group (E,F,C, or D) is where the importer/buyer has full responsibility from the door of seller (fully responsible for all transportation)

A

Group E.

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21
Q

In Group E incoterms, there is maximum responsibility for the (buyer/seller) and minimum responsibility for the (buyer/seller).

A

buyer; seller

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22
Q

Why would buyers use Group E incoterms (where they have maximum responsibility)?

A

provides total control (buyer chooses the mode, route, and carrier, negotiates the transportation rate, and manages the flow)

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23
Q

Which Group of incoterms does this apply to?
Buyer arranges to pick up goods at the seller’s factory/warehouse and then manage the entire process– getting the goods to the port, arranging international transportation, getting them through customs, and onward delivery to the final location.

A

Group E

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24
Q

Match each of the following to the Group of Incoterms they pertain to:
a. Arrival Terms
b. Main Carriage Paid
c. Main Carriage Unpaid
d. Departure Terms

A

a. Group D
b. Group C
c. Group F
d. Group E

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25
Q

T or F: Only buyers with great expertise in global transportation should use the EXW option.

A

True

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26
Q

Which incoterm group (E,F,C, or D) is where the seller is responsible for arranging transportation to the port, selecting the international carrier, and contracting for the transportation services; buyer must also manage that final leg of delivery and customs clearance.

A

Group C

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27
Q

Which incoterm group (E,F,C, or D) is where the seller is responsible for packing the goods and getting the goods to a named place, usually a port of export. The buyer is then responsible from the named place to their location.

A

Group F

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28
Q

Which incoterm group (E,F,C, or D) is where the seller has the greatest level of responsibility. The seller bears all the costs and risks of bringing the goods from country-of-origin to the country-of-destination.

A

Group D

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29
Q

Which incoterm group is a low risk, easy option for the buyer, and is ideal for a buyer that has little to no international transportation or trade experience. However, the seller has total control, they’ll pick the carriers and charge you for their expenses incurred.

A

Group D

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30
Q

Which incoterm group:
- buyer responsible for arranging the main carriage– (the long-distance international move from the named place across the border and onto the final destination)
- Responsibilities for insurance, customs clearance, duties and other fees also fall to the buyer.
- The buyer avoids the challenges of moving goods inside the country of origin where they may have limited experience, however, the buyer would maintain control for the remainder of the journey.

A

Group F

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31
Q

The term DDP requires the (seller/buyer) to pay the duties, clear customs, and make the final delivery to the location.

A

seller

32
Q

For Group C incoterms, the seller only assumes the responsibilities and obligation for purchasing ________ if the letter “i” is present in the incoterm (ex: CIF, CIP). Otherwise, the buyer assumes the risk of loss/damage to the good or additional cost due to events occurring after dispatch.

A

insurance

33
Q

Which group of incoterms does this pertain to:
- Buyer must also manage that final leg of delivery and customs clearance. If a buyer has very little experience or clout with international carriers, then it may be wise to let the seller manage these issues and processes.
- The seller should be able to identify quality carriers and negotiate advantageous rates.

A

Group C

34
Q

Which incoterm group puts the least amount of responsibility on the seller?
a. Group F
b. Group E
c. Group C
d. Group D

A

b. Group E (buyer does all the work)

35
Q

What is the 3 steps in the incoterms decision process (when companies are choosing which of the 11 incoterms to deploy)?

A
  1. Decide on the main mode of transport.
  2. Consider the 4 letter segments and the individual terms
  3. Consider which option balances the responsibilities and risks vs. the control and cost benefits.
36
Q

T or F: Typically, companies depend on only a few incoterms to minimize confusion.

A

True

37
Q

What are the 3 benefits of incoterms?

A
  1. Facilitate intelligent, transparent contracting.
  2. Layout specific rights and obligations regarding freight management all along the supply chain.
  3. Provide clarity to avoid buyer-seller disputes.
38
Q

T or F: Incoterms increase chances for success, and you should engage the expertise of international logistics service providers in planning and incoterm choice.

A

True

39
Q

documentation needed to facilitate transaction, payment, fulfillment, and transportation of your order.

A

trade documents

40
Q

For domestic trade, information is pretty ______ and the required documents are fairly _________.

A

basic; standardized

41
Q

T or F: For global trade, a great deal of information must be shared to facilitate the flow of goods, and documentation requirements can be complex, numerous, and vary by country export and import.

A

True

42
Q

What are the 3 criterias that documentation must meet (for trade documents)? Documentation must be:

A
  1. Available on time (late submission documents often causes delays)
  2. Accurate (import quotas and duties are based on the information contained in the documents. Suspected paperwork here will lead to customs inspections and possible penalties)
  3. Establish Accountability (documentation must identify the importer of record because that party is responsible for using reasonable care to enter, classify, and determine the value of imported merchandise.
    If there’s any paperwork availability or accuracy problems, the importer is accountable for resolving the situation)
43
Q

T or F: Most countries use the same base global trade documents to facilitate the transaction, transportation, protection, compliance and payment.

A

True

44
Q

Why is documentation so important in global transactions?

A

It drives the entire export process

45
Q

What are the 5 types of global trade documents?
Which of these is the key transaction document?
Which of these is the primary transportation document?

A
  1. Commercial Invoice – *key transaction document
  2. Bill of Lading– *primary transportation document
  3. Insurance Certificate
  4. Certificate of Origin
  5. Letters of Credit
46
Q

Which global trade document does this describe?
contains info relevant to the transaction from start to finish; looks like a bill of sale from the exporter, but it’s used by customs agencies to determine the true value of the imported goods for the duty assessment.

A

Commercial Invoice

47
Q

A commercial invoice (a global trade document) must identify the buyer and seller and accurately provide what 6 things?

A
  1. Date and terms of sale
  2. Quantity, weight, and/or volume of shipment.
  3. Type of packaging
  4. Complete description of goods
  5. Unit value and total value
  6. Insurance, shipping, and other charges.
48
Q

Which global trade document does this describe?
assures the coverage of loss or damage to the freight during transit. (freight protection document)

A

Insurance Certificate

49
Q

Which global trade document does this describe?
document required to move the freight; most accompany the shipped goods no matter the form of transportation and must be signed by an authorized representative from the carrier, shipper, and receiver.

A

Bill of Lading

50
Q

What are the 3 purposes of the Bill of Lading?

A
  1. Evidence of contract of carriage → details the type, quantity, and destination of the goods being carried.
  2. Receipt of goods → provides proof that the carrier has received the goods from the shipper or their agent in good condition
  3. Document of title to the goods → serves as proof of ownership/title of the cargo.
51
Q

Which global trade document does this describe?
- verifies the country in which the goods were manufactured; accuracy is critical, as the country of origin affects import restrictions, duty rates, trade compliance, and quotas.
- Usually signed by a semi-official organization such as a local Chamber of Commerce.

A

Certificate of Origin

52
Q

The Certificate of Origin promotes ________ _________ by attesting to the production or manufacturing origin of the export item.

A

trade compliance

53
Q

Which global trade document does this describe?
- Protects the buyer and seller in an international transaction.
- This bank document guarantees that the seller will receive payment in full as long as the delivery conditions are met.
- In the event that the buyers are unable to make a payment on the purchase, the bank will cover the outstanding amount.

A

Letters of Credit

54
Q

T or F: Exporters and importers often work with documentation specialists like International Freight Forwarders and Customs Brokers to ensure their documentation is available when needed, accurately completed, and provides proper accountability.

A

True

55
Q

T or F: carriers must provide import documents electronically to the Customs agency prior to loading or arrival.

A

True

56
Q

Many countries require that carriers provide _______ ________ information electronically to the customs agency ____ hours prior to containerized freight being loaded at port onto the ocean vessel.
What country was the first country to adopt this requirement, followed by Canada, China, and the European Union?

A
  • import manifest; 24
  • United States

(Gives customs agency time to review documentation and request inspection of questionable containers before they’re loaded)

57
Q

Air manifest information is required ____ hours prior to arrival in the United States, railroad manifest information is required ____ hours prior to arrival at the U.S. port of entry, and roadway manifest information is required ____ hours prior to arrival in the United States, _____ minutes for F.A.S.T participants.

A

4; 2; 1; 30

58
Q

T or F: Many countries are converting key international trade documents to electronic format for better security.

A

True

59
Q

The international air transport association is creating a paper free air cargo supply chain through an initiative called _______. → intended to replace the most widely used airway bills, invoices, certificates of origin, and other paper documents.

A

E-Freight

60
Q

an electronic platform in the U.S. intended to facilitate rapid flows of legitimate trade, while targeting goods that present a security threat. → Will require that all import and export manifest data be electronically transmitted to US customs and border protection. → With full implementation, the trade community will have the ability to effectively and efficiently comply with US security requirements and trade regulations.

A

automated commercial environment (A.C.E)

61
Q

Trade facilitation, freight control, money transfers, and security each require PROPER documentation, which means the right _____, at the right ______, in the right _____, 100% ______ → is essential for international shipment.

A

paperwork; time; format; accurate

62
Q

Damage to freight causes everyone involved both _____ and ______.

A

time; money

63
Q

What are the 4 risks in regards to freight protection?

A
  1. Freight Theft
  2. Product Damage
  3. Shipment Delay
  4. Limited Carrier Liability
64
Q

Match each of the following descriptions with what risk of freight protection they describe:
a. multibillion dollar annual problem for companies, and it’s growing; targets high value electronics, apparel, alcoholic beverages and pharmaceutical products; the issue of piracy remains a challenge.
b. can occur due to port congestion, equipment availability issues, a lack of truck drivers, and misplacement/misrouting of the freight.
c. chance of not being reimbursed for the loss. Carriers don’t take title to the goods in their temporary possession.
d. ocean transport exposes good to saltwater, high humidity, and sometimes a very rough ride.

A

a. Freight Theft
b. Shipment Delay
c. Limited Carrier Liability
d. Product Damage

65
Q
  • With limited carrier liability, carriers become the “_______”: a person to whom the possession of goods is transferred without title to those goods.
  • As this, the carrier is only responsible for loss or damage to the freight from the carrier’s _______.
  • However, there are many exceptions that allow the carrier to avoid responsibility/absolve liability. → Freight loss due to what 3 things?
A
  • bailee
  • negligence
  • storms, terrorist attacks; improper packaging
66
Q

What are 3 less common/additional risks in relation to freight protection?

A
  1. Product Contamination
  2. Jettison
  3. Piracy
67
Q

where cargo is thrown overboard to prevent a ship from sinking

A

jettison

68
Q

What are the 3 logical steps in risk mitigation (how can organizations protect against risks as freight moves through global supply chain)?

A
  1. Focus on damage prevention
  2. Limit Theft Opportunities
  3. Manage the Financial Risk
69
Q

Experts estimate that _____% of all cargo damage is avoidable with proper planning.

A

80%

70
Q

What are 3 ways you can limit theft opportunities of freight in a global supply chain?

A
  1. Work with trusted partners who have a strong track record of protecting freight.
  2. Avoid high risk routes and highly congested ports, as well as those with a reputation for poor security.
  3. Avoid advertising that there is high value freight inside containers.
71
Q

Which risk mitigation does this describe:
When you can’t afford to incur a total loss of shipment, purchase cargo insurance from an underwriter.

A

Manage the Financial Risk

72
Q

T or F: Some companies decide to not use insurance and take on the financial risks of freight protection.

If true, why would they not purchase insurance?

A

True; if risks are low or insurance is expensive

73
Q

Cargo insurance is a _______ purchase and not a guaranteed cure-all. There is unique _______ to understand, limits to _______ to decipher, and ________ to unravel.

A

complex; terminology; liability; traditions

74
Q

The insurance policy may not fully compensate you for the expenses involved in a freight mishap. There may be an insurance _______, there are people _______ involved managing claims, and _______ expertise may be needed.

A

deductible; costs; legal

75
Q

Freight Loss and damage is a ______ ______ situation.

A

buyer beware

76
Q

Tactics for freight loss and damage:
- use appropriate ________
- _______ the freight
- purchase ________

A
  • incoterms
  • protect
  • insurance
77
Q

What are 3 strategies to reduce in-transit damage (from that video we watched)?

A
  1. Distribute weight evenly across container floor
  2. Prevent freight from moving side to side
  3. Prevent freight from moving front to back
78
Q

Before getting started on export preparations, companies should do what 3 things?

A
  1. prepare strategic plans
  2. engage experts
  3. assign key roles

SCMN 2150- Junior Year (14 decks)

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