International Trade Risks and Regulations
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Questions and Answers

What is one of the key risks associated with international trade that involves the risk of collecting money?

  • Credit Risk (correct)
  • Mercantile Risk
  • Market Risk
  • Exchange Risk

    • Which type of risk involves fluctuations in market prices over time during international trade?

  • Market Risk (correct)
  • Exchange Risk
  • Credit Risk
  • Delay Risk

    • Which risk in international trade is specifically related to changes in exchange rates?

  • Exchange Risk (correct)
  • Market Risk
  • Credit Risk
  • Amount Risk

    • What type of risk is described as the risk of not receiving goods during international transactions?

    <p>Mercantile Risk</p> Signup and view all the answers

    Which factor is NOT mentioned as a risk associated with international trade?

    <p>Regulatory Risk</p> Signup and view all the answers

    What is the primary consideration when evaluating target items for export?

    <p>Price</p> Signup and view all the answers

    In which phase is a market deemed 'partially opened'?

    <p>Market Opening Phase</p> Signup and view all the answers

    Which factor is NOT considered a competitive element in market selection?

    <p>Market demand phase</p> Signup and view all the answers

    Which of the following terms refers to the market that has no openings for foreign trade?

    <p>Unopened</p> Signup and view all the answers

    Which economic development phase is characterized by a lack of infrastructure and a low standard of living?

    <p>Under Developed</p> Signup and view all the answers

    What is the focus of secondary considerations in item selection for export?

    <p>Comparative advantage and disadvantage</p> Signup and view all the answers

    What does a strong government interference suggest in the context of market selection?

    <p>High levels of control and regulation</p> Signup and view all the answers

    Which of the following is a key aspect of selecting transportation companies during international trade?

    <p>Signing an insurance contract</p> Signup and view all the answers

    What is the primary purpose of the United Nations Convention on Contract for the International Sales of Goods (CISG)?

    <p>To provide a reference for contracts between sellers and buyers</p> Signup and view all the answers

    Which set of rules pertains specifically to terms used in international commercial contracts?

    <p>INCOTERMS (2020)</p> Signup and view all the answers

    Which of the following Acts is related to marine insurance?

    <p>Marine Insurance Acts (1968)</p> Signup and view all the answers

    The Warsaw Convention (1929) is primarily concerned with which mode of transport?

    <p>Air transport</p> Signup and view all the answers

    What are the INCOTERMS used for in international trade?

    <p>To interpret trade terms</p> Signup and view all the answers

    Which regulation outlines uniform procedures for documentary credits in international trade?

    <p>UCP (UCP 600)</p> Signup and view all the answers

    What type of contract do the Uniform Rules for a Combined Transport Document (1973) address?

    <p>Transportation contracts</p> Signup and view all the answers

    What is the focus of the Hague-Visby Rules (1968)?

    <p>Maritime transport liability</p> Signup and view all the answers

    What is the primary function of a drop-shipping distributor?

    <p>Sells merchandise from the supplier directly to the customer</p> Signup and view all the answers

    Which of the following steps is NOT part of the drop-shipping process?

    <p>Seller manufactures the product</p> Signup and view all the answers

    What distinguishes an agent from a drop-shipping distributor?

    <p>An agent performs fewer services than a distributor</p> Signup and view all the answers

    Which statement about agents is correct?

    <p>Agents earn a commission on sales</p> Signup and view all the answers

    In the context of international trade, where are export agents typically located?

    <p>In the country where the product is produced</p> Signup and view all the answers

    What happens after the buyer places an order in the drop-shipping process?

    <p>The wholesaler ships directly to the customer</p> Signup and view all the answers

    Which role does NOT take title to the goods?

    <p>Export agent</p> Signup and view all the answers

    What is the main revenue model for agents?

    <p>Commissions based on sales they facilitate</p> Signup and view all the answers

    What is the purpose of using Incoterms in international trade?

    <p>To specify the delivery terms and responsibilities of parties</p> Signup and view all the answers

    Which of the following is NOT a characteristic of an international trade contract?

    <p>Requires adherence to a single currency</p> Signup and view all the answers

    What is the primary focus of the main contract in international trade?

    <p>Establishing quality, quantity, and price of goods</p> Signup and view all the answers

    During which phase of international trade is market research and credit inquiry conducted?

    <p>Phase 1</p> Signup and view all the answers

    What does the phase of 'bargaining with prospective buyer' primarily involve?

    <p>Negotiating payment methods and terms of exchange</p> Signup and view all the answers

    What is the role of a subsidiary contract in international trade?

    <p>It relates to aspects like transportation and insurance</p> Signup and view all the answers

    Which term refers to different modes or methods of payment in international trade?

    <p>Terms of Payment</p> Signup and view all the answers

    What is the significance of conducting a market survey in international trade?

    <p>It identifies the market price and competitive landscape</p> Signup and view all the answers

    Study Notes

    International Trade

    • International trade involves transactions between businesses located in different countries.
    • International trade is distinct from domestic trade which involves businesses within the same country.

    Risks of International Trade

    • Transactions occur between parties who may not know each other.
    • Time delays create vulnerabilities for business dealings.
    • Credit Risk: Potential for not receiving payment for goods or services.
    • Mercantile Risk: Potential for not receiving the goods as ordered, or not receiving them on time.
    • Exchange Risk: Potential for financial losses from fluctuations in exchange rates during the time between agreeing on a price and payment.
    • Market Risk: Potential for financial losses from fluctuations in the market price of goods or services.

    International Trade Law & Regulations

    • CISG (United Nations Convention on Contracts for the International Sale of Goods): Serves as a reference rule when drafting contracts between sellers and buyers.
    • INCOTERMS (International Rules for the Interpretation of Trade Terms): Standardizes commercial terms used in international trade, defining responsibilities and costs.
    • Hague Rules (1924) and Hague-Visby Rules (1968): International regulations governing the liability of carriers in the transportation of goods by sea.
    • Warsaw Convention (1929): International regulation governing the liability of carriers in the transportation of goods by air.
    • Uniform Rules for a Combined Transport Document (1973): Governs the liability of carriers in multimodal transport.
    • Marine Insurance Acts (1968): Legislation related to marine insurance contracts.
    • Institute Cargo Clause (ICC): Standardized clauses used in marine insurance policies.
    • Uniform Rules for Collection (1995): Defines standards for international collections.
    • UCP (Uniform Customs and Practices for Documentary Credits): Defines standards for issuing and processing documentary credits.

    The Process of International Trade

    • Item Selection & Overseas Market Research:

      • Target Item Selection: Evaluate competitiveness and differentiate factors of the goods to be exported.
        • Primary Considerations: Price, Quality, Usage, Design, Major Consumers.
        • Secondary Considerations: Differentiation Factors, Comparative Advantages and Disadvantages.
      • Market Selection: Identify the most suitable market for the target items.
        • Market Demand Phase: Introduce, Grow, Mature, Potential.
        • Economic Development Phase: Underdeveloped, Developing, Developed.
        • Market Opening Phase: Unopened, Partially Opened, Opened, Fully Opened.
        • Competitive Elements: Monopoly, Oligopoly, Potential Competitors.
        • Government Interference: Strong, Medium , Weak.
        • Other Elements: Culture, Climate, Religion, Propensity to Consume.

    • Import/Export Marketing: Strategies and activities to promote and sell goods in international markets.

    • Discovery of Trading Partners & Credit Investigation: Identifying potential business partners and assessing their financial stability.

    • Negotiation & Acceptance of Trade Terms & Conditions:

      • Define the conditions for the trade engagement.
      • Payment Terms: L/C, D/A, D/P, T/T etc.
      • Payment Currency & Exchange Rate: Exchange Rate Risk Management.
      • Incoterms: Selection of LSP (Logistics Service Provider).
      • Transportation Mode & Logistics Cost: Cost Analysis.
      • Duty & Tax: Market Price & Market Survey.

    • Signing a Trade Contract: Legal agreement outlining the terms and conditions of the trade deal.

      • Characteristics of International Trade Contract:
        • Negotiation between parties in different countries.
        • Dealing with different languages, customs, trade practices, currencies, and laws.
      • Sales Contract: Agreement for the sale of goods.
        • Main Contract: Key aspects of the sales agreement (Quality, Quantity, Price).
        • Subsidiary Contracts: Agreements related to transportation, insurance, letters of credit, foreign exchange, and other aspects of the trade.

    • Issuing & Accepting of L/C (Letter of Credit): A financial instrument used to guarantee payment to the seller.

    • Selection of Transportation Company & Sign an Insurance Contract: Selecting a logistics provider and securing insurance coverage for the goods.

    • Import/Export Customs Clearance & Payment & Acceptance: Completing required customs procedures and finalizing payment.

    • Claim & Arbitration: Resolving any disputes that may arise concerning the trade transaction.

    Drop Shipping

    • A distributor who sells merchandise for delivery directly from a supplier to the customer without physically handling the product.
    • The drop-shipping distributor takes title to the goods before delivery to its customer.
    • Drop-shipping process:
      1. Find Products: Locate suitable products to sell.
      2. Advertise Products: Promote the products to potential buyers.
      3. Find Seller: Locate a supplier who will fulfill orders.
      4. Find Customers: Identify and engage with buyers.
      5. Buyer places order & pays.
      6. Order & Payment made to Seller:
      7. Seller Ships to Buyer.

    Agent

    • an intermediary who arranges transactions between buyers and sellers.
    • Export Agents: work in the country where the product is produced.
    • Import Agents: work in the country where the product will be sold.
    • Agents typically receive a commission for their services.
    • Agents do not take title to the goods.

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    IUT_SBL 2024 Fall Trade Business PDF

    Description

    Explore the complexities of international trade, including the various risks that businesses face when engaging in transactions across borders. This quiz covers critical aspects of credit, mercantile, exchange, and market risks, alongside the relevant legal frameworks like the CISG.

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