Lecture 9

Question 1

Incoterms

Answer 1

intended to establish world standard norms, relative to the obligations of sellers and buyers in international transactions.
=> 11 terms, divided in 2 groups, in accordance with the means of transportation used in the delivery of the merchandise.

Question 2

Maritime transportation - FAS

Answer 2

Free alongside ship

Question 3

Maritime transportation - FOB

Answer 3

Free on Board

Question 4

Maritime transportation - CFR

Answer 4

Cost and Freight

Question 5

Maritime transportation - CIF

Answer 5

Cost, Insurance, Freight

Question 6

Any means of transportation - EXW

Answer 6

Ex works

Question 7

Any means of transportation - FCA

Answer 7

Free Carrier

Question 8

Any means of transportation - CPT

Answer 8

carrier paid to

Question 9

Any means of transportation - CIP

Answer 9

carriage and insurance paid to

Question 10

Any means of transportation - DAT

Answer 10

Delivered at terminal

Question 11

Any means of transportation - DAP

Answer 11

Delivered at place

Question 12

Any means of transportation - DDP

Answer 12

Delivered duty paid

Question 13

Countertrade

Answer 13

• Classical Barter
• Counter - purchase
• Compensation Arrangements ou Buy-Back
• Switch Trade

Question 14

Cash in advance

Answer 14

need to hedge: none

Question 15

open account

Answer 15

Only used when there is complete trust among the parties; in such cases, no need to hedge

Question 16

Consignment

Answer 16

need to hedge: moderate

Question 17

Letter of credit

Answer 17

most used instrument of hedging against the risk of default (lack of payment of an Invoice).
finance instrument because it has associated to it the capacity to finance the transaction through the involvement of Banks in the trade operation.

Question 18

Sale with deferred payment

Answer 18

(30 days, 45 days, etc.) – Need to hedge depending on the creditor quality and the risk associated to the specific foreign location.

Question 19

bill of lading

Answer 19

receipt for goods delievered to the common carrier for transportation,
contract for services rendered by the carrier,
document of title

Question 20

Trade documents

Question 21

Letter of credit “Confirmed”

Answer 21

gives the exporter a double guarantee of payment, one from the issuing bank and one from the advisory bank

Question 22

Letter of credit “irrevocable”

Answer 22

a guarantee for payment issued by a bank for goods and services purchased, which cannot be cancelled during some specified time period

Question 23

Barter

Answer 23

Products are exchanged directly for products of equal value without the use of cash or credit

Question 24

Buyback

Answer 24

A supplier of capital or equipment agreed to accept future output generated by the investment as a payment

Question 25

Offset

Answer 25

An exporter sells products for cash and then helps the importer find opportunities to earn hard currency for payment

Question 26

Switch or swap trading

Answer 26

one company sells to another its obligation to purchase something in a foreign country

Question 27

Counter-Purchase

Answer 27

A company sells its products to a foreign country, promising to make a future purchase of a specific product made in that country