Quick Quiz

1.  The term CFR requires who to pay the costs and freight necessary to bring the goods to the named port of destination?

a)  the buyer

b)  the seller

c)  the banker

d)  the forwarder

2.  Which of the following terms means the seller has the obligation to pay costs and freight necessary to bring the goods to the named port of destination, in addition he has to procure marine insurance against the buyer’s risk of loss or damage of the goods during the carriage. 

a) FOB 

b) CIF

c) CFR

d) DDP

3.  EXW requires who to arrange export clearance and loading at the seller's premises, bearing cost and risk as well?

a)  the buyer

b)  the seller

c)  the banker

d)  the forwarder

4.  Under FOB, FCA, CFR and CPT, who will be responsible for arranging insurance?

a)  the buyer

b)  the seller

c)  the shipper

d)  the forwarder

5.  Under Irrevocable LC term, can the LC be canceled or withdrawn after it has been opened and notified to the exporter?

a)  can

b)  cannot

6.  When there is no description on the time limit for negotiation of the bills of exchange on the LC, and if they are brought to the bank more than 21 days later than the date of issuance of the BL, can the bank refuse to purchase the documents?

a)  can 

b)  cannot

7.  If the LC terms demand that the bill of exchange drawn by the exporter is the type which requires the importer to pay when the bill is presented to him by the reimbursing bank, this LC is called:

a)  sight LC

b)  acceptance LC

c)  cash LC

d)  confirmed LC

8.  Which one of the following would cost more to the buyer?

a)  DES - delivered ex ship

b)  DEQ - delivered ex quay

c)  DDU - delivered duty unpaid

d)  DDP - delivered duty paid

9.  Which one of the following types of B/L best described this situation:  A document is issued for receipt of cargo in a first port of unloading at Myanmar for transfer into another vessel in Singapore serving the final destination in Hamburg.

a)  cargo receipt

b)  direct BL

c)  through BL

d)  air waybill

10.  A forwarder works for and is responsible to carry out the instructions received from whom in a CFR or CIF contract?

a)  buyer

b)  seller

c)  consignee

d)  shipping line

Write to us for answers.  A small token will be given for those with correct answers.

INCOTERMS

Incoterms is an abbreviation for International Commercial Terms.  This is an international rule for the interpretation of the most commonly used trade terms in international trade prepared by ICC (International Chamber of Commerce) which is based in Paris.  The purpose of the Incoterms is to avoid dispute between trading parties arising from different interpretation of such trade terms in different countries.

Today, most of the businesses of international trade in the world are conducted using Icoterms as a general business customs.  In order to avoid misunderstanding and confusion between a seller and a buyer, it is advisable for the exporter to add to the contract or correspondence, which constitutes the agreement between term, a clause to the effect that interpretation of trade terms are based on Incoterms.

Most commonly, they stipulate the wording in the general terms and conditions of the contract.  They put such phrases like "Trade terms such as FOB, CIF adn any other terms which may be used in this contract shall have the meanings defined and interpreted by Incoterms 2000, ICC, as amended, unless otherwise specifically provided in this contract".

There are 13 Incoterms as follows:

EXW :  ex works

FCA :   free carrier

FAS :   free alongside ship

FOB :  free on board

CFR :  cost and freight (Formerly C&F)

CIF:    cost, insurance and freight

CPT :  carriage paid to

CIP:    carriage and insurance paid

DAF:  delivered at frontier

DES:   delivered ex-ship

DEQ:  delivered ex quay (duty paid)

DDU:  delivered duty unpaid

DDP:  delivered duty paid

For a precise understanding of Incoterms, check out the website http://www.icc.org/incoterm

Quote: My inspiration takes my beauty higher