I. Answer the following questions.
1. How would you define international trade?
2. What are the reasons for international trade? Can you list some of them?
3. What is economies of scale? Why does it influence international trade?
4. How do countries benefit from the international trade?
5. What are the differences between visible trade and invisible trade? Give a few
examples of invisible trade.
6. What do you think of the trade of balance?
7. What do trade barriers mean? List some example of trade barriers in international
8. How is international trade regulated now?
9. What do trade forms refer to? List some examples of trade forms.
10. What can agents be divided into according to the scope of their rights?
11. What are the differences between agency and distribution?
12. What is the basic characteristic of countertrade? What are the common reasons
13. Explain compensation trade.
14. What are the differences between compensation trade and counterpurchase?
15. What are the differences between exportation and consignment?
16. How is the price decided in bidding?
17. How can you define trade terms? What are the functions of trade terms?
18. What are the trade terms under Incoterms 2000?
19. What are the main differences between CFR and CIF?
20. Why are “C”-terms different from all other terms?
21. What are the characteristics of “D”-terms under Incoterms2000?
22. Which trade terms under Incoterms 2000 can be applied to water transport?
23. Try to compare the differences between FOB, CFR, CIF and FCA, CPT, CIP.
24. How can we choose a proper trade term?
25. Why shall we stipulate the name of commodity in a contract clearly?
26. What are the ways of showing quality of commodity in a contract?
27. How can we stipulate “sale by sample” in a contract?
28. What are FAQ and GMQ?
29. What are the ways of measurement for goods in international trade?
30. Why shall we include a “more or less clause” in a contract? How to stipulate it in
31. What are the functions of packing in international trade?
32. How can we decide which type of packing should be used in a business
33. What modes of transport are usually used in international trade?
34. Why is container transport popular in international trade?
35. What is international multimodal transport?
36. How can we stipulate time of shipment in a contract?
37. If different ports of destination are stipulated in a CFR contract, what shall the
seller pay more attention to?
38. What shall be included in a shipping notice?
39. How can we stipulate partial shipment clause for the advantages of the exporter?
40. If there is no direct sail to port of destination, how should we stipulate the
41. What are the differences of General Average and Particular Average?
42. What is the coverage of marine insurance under CIC?
43. What is All Risks under CIC?
44. How do we take out additional coverage?
45. How do we choose proper insurance coverage?
46. Is the same coverage of ocean marine insurance used for land transport? If not,
what insurance coverage is for land transport?
47. What are the differences between insurance policy and insurance certificate?
48. What are the characteristics of an open policy?
49. What factors shall be taken into consideration when pricing in international trade?
50. What are included in a unit price clause?
51. What are the functions of price terms?
52. What is the relationship between money of account and money of payment?
53. Is hard currency as money of payment more favorable to the exporter? Why?
54. Why does exchange rate influence international trade greatly?
55. What are commission and discount? How can they affect price?
56. Give one example for commission-included price and discount-included price
57. What is the main advantage of L/C?
58. What are the types of L/C?
59. What are the instruments of payment commonly used for international trade?
60. Please describe D/A and D/P.
61. Under what conditions can collection be used in international trade?
62. What is a draft?
63. How can we decide which term of payment we shall use?
64. Arrange the order of terms of payment mentioned in the text as far as the seller’s
benefit is concerned.
65. What are the ways to stipulate the place and time of inspection?
66. How does one decide the place and time of inspection?
67. Why should a penalty clause be included in a contract sometimes?
68. How can one settle the claims?
69. What is force majeure? And how does it influence the international trade?
70. What is arbitration? And what will be included in an arbitration clause?
71. What is the force of an arbitration award?
72. Who will bear the arbitration fee?
73. Why is it necessary to examine L/C and make amendment to L/C?
74. What are the parties involved in an L/C?
75. What is the relationship of opening bank and advising bank?
76. Why shall the seller notify the buyer to apply for the opening of L/C sometimes?
77. How can the buyer apply for the opening of L/C?
78. What are the emphasis of examination of L/C for both the banks and the trade
79. What is the process of amendment to L/C?
80. Who will bear the fee of amendment to L/C?
81. Why is inspection of commodity necessary in international trade?
82. What are the three standards for commodity inspection?
83. Explain the mechanics of inspection in China briefly.
84. What aspects does inspection on import and export commodities cover?
85. How shall the exported commodity be inspected?
86. How shall the imported commodity be inspected?
87. How to inspect a complete set of equipment in large size when importing them?
88. What can inspection certificates be used for?
89. What is the role of forwarding agents?
90. What are the procedures of arranging shipment?
91. What factors will influence freight rate?
92. How can the freight rates for liners be marked with?
93. What does open rate mean?
94. What are the different transport documents for different modes of transport?
95. What is a “Clean on board, to order, blank endorsed B/L”?
96. What shall be considered when arranging shipment?
97. What factors will influence the insurance coverage?
98. What shall the buyer note if the seller takes out insurance under CIF and CIP?
99. How to fix the insured amount?
100.What factors will influence the premium rate?
101.What are the advantages of using an open policy for importers?
102.What should the insured pay attention to when apply for insurance?
103.Why is sea protest needed when filing a claim?
104.How to protect the interests of insurer?
105.How does the China Customs examine the goods entering and leaving China?
106.What is over-landed cargo? How to deal with such cargoes?
107.What is over- carried cargo? How to deal with such cargoes?
108.What is the function of a shipping order and a Bill of Lading?
109.Why is damaged cargo a matter of interest to the customs?
110.Explain general rates and preferential rates.
111.How does the customs make customs valuation?
112.How does the customs deal with it in the case that the duties are short-levied or
113.Why is documentation important in international trade?
114.What are the four major types of documents classified by ICC?
115.What are the requirements for exporting documents?
116.What are the procedures for payment under L/C?
117.Why is documentation especially important under L/C payment?
118.What documents may be needed for payment under L/C?
119.What discrepancies should be avoided about draft for payment?
120.What are the points to check the bill of lading?
121.What may the disputes be about in international trade?
122.What are the ways of settling disputes?
123.What shall be noted when settling disputes through a third party?
124.Why is arbitration commonly used in settlement of international trade disputes?
125.What are the procedures for arbitration?
126.How to execute the arbitral award?
127.What does market claim mean?
128.What shall be noted when handling the disputes in international trade?
II. True or false questions.
1. International trade is only the exchange of goods between nations.
2. Countries trade with each other partly because there is a cost advantage.
3. Trade means countries can provide a wider variety of products for their
4. International trade can greatly expend the market, which enables the suppliers to
take advantage of economies of scale.
5. Exchange rate fluctuations may create many problems for international trade.
6. Still in some cases, political reasons can outweigh economic considerations
7. When we provide shipping insurance service for foreigners, it can be seen as an
example of invisible trade.
8. Trade surplus means that a country’s imports exceed its exports.
9. Tariff and quotas are the examples of trade barriers.
10. Countries can do business freely without regulations in international trade.
11. Trade forms include both direct ones like exportation and importation and indirect
ones like agency and distribution.
12. An agent needs to carry stock as a distributor does.
13. Under the trade form of agency, the principal sets the retail price, retains title and
controls the goods.
14. There is no contractual relationship between the principal and the customers under
trade form of agent.
15. The distributor gains profits from the price difference at which he buys and resells
16. Countertrade means the exchange of goods for goods.
17. Under partial compensation, the export is paid both by goods and by cash.
18. In counterpurchase, the value of countertrade goods has to equal that of the
19. The goods exported on the consignment remain the title to the exporter.
20. The clearing units are available for the purchase of goods from both the creditor
country and the debtor country in switch trade.
21. All international business transactions are done under Incoterms 2000.
22. Trade terms can be called price terms because they stand for the price component.
23. EXW in Incoterms 2000 is the trade term under which the obligations and costs
borne by and risks of the seller are minimum.
24. Under FCA in Incoterms 2000, the risk of loss of or damage to the goods is
transferred from the seller to the buyer at the time the buyer accepts the goods.
25. Generally speaking, under FOB in Incoterms 2000, it is the seller’s responsibility
to apply for the export license and pay the export duty.
26. Under FOB San Francisco, San Francisco is the port of destination.
27. Under CIF, cargo insurance is to be effected by the buyer.
28. The buyer has more responsibilities, costs and risks when using FOB than using
29. The “D”-terms mean arrival contracts, while the “C”-terms evidence departure
30. The DDP should not be used if the seller is unable to obtain import license directly
31. Different commodities have different qualities, but the same commodity must
have the same quality.
32. A term for defining one particular degree of quality in one country may have quite
a different meaning in another country.
33. Whether sale by buyer’s sample or by seller’s sample, the quality of the
commodities should be strictly same as sample. Otherwise, it should be stipulated
in the contract clearly.
34. The grade of the same product is always the same in different countries.
35. Different ways of measurement such as by weight, by length, by area, by volume
and by capacity may be used for different products.
36. In reality, the quantity of goods shipped must be exactly the same with that
stipulated in the contract.
37. Packing can only serve as a form of protection.
38. Packing should be designed according to the need of the cargo.
39. Generally speaking, more packing is required for containerized consignments.
40. Bulk cargoes require little packing.
41. Sea transport is the most important mode of transport in international trade now.
42. The freight of liners is relatively fixed, while the freight of tramps is mainly
determined by the market.
43. Multimodal transport means the goods are carried by at least two modes of
transport under at least two multimodal transport operators.
44. Time of shipment in a contract can only be a fixed period of time.
45. If optional ports of destination are stipulated in the contract, the extra freight due
to selecting port of destination must be paid by the importer.
46. The notice of shipment under CFR is very important, because the buyer will take
out insurance upon receipt of the notice.
47. Partial shipment means that the goods under one contract are shipped in different
terms or by different lots.
48. In case it was stipulated in the contract that “shipment is made during July and
August”, one lot the goods must be shipped in July while another in August.
49. If there is no direct sail to the destination, that “transshipment shall be allowed”
shall be stipulated in the contract.
50. Transshipment may increase the cost of shipment and the possibility of delay in
delivery of commodities.
51. Cargo transport insurance is to protect the interests of traders from any possible
52. The premium charged for the insurance policy is calculated according to the risks
53. Two types of risks are covered by ocean marine insurance under CIC: perils of the
sea and extraneous risks.
54. WPA is a wider cover than FPA.
55. In international trade, if All Risks was covered, any loss caused by any reason on
the way can be compensated by insurance company.
56. The additional coverage can be taken out separately.
57. The insurance coverage of ICC (A), ICC (B), ICC (C) is roughly the same as that
of FPA, WPA, All Risks under CIC respectively.
58. It is the best way to choose a large insurance coverage.
59. Land Transportation Risk is almost equivalent to WPA.
60. When a number of consignments of similar export goods are intended to be
covered, open policy is a better method.
61. A unit price consists of four parts: currency unit, unit price figure, measuring unit
and price terms.
62. Both money of account and money of payment must be stipulated in the contract
63. The fluctuations of exchange rates may influence the interests of both exporter
64. Generally, the price of a foreign exchange is expressed in another currency.
65. Generally speaking, the exporter likes to use hard currency as payment currency.
66. Commission refers to service fees, while discount is a certain percent of price
67. Commission and discount must be stipulated in the price clause in a contract.
68. According to whether the price includes commission or not, the price can be
divided into net price and commission-included price.
69. Discount is usually used as a means of promoting and expanding sales.
70. “USD200 per M/T CIFC2 London” means that the seller will receive 200 US
dollars for per metric ton.
71. There are three parties involved in a draft, while two parties in a promissory note.
72. Remittance involves four parties together.
73. An L/C is a conditional bank undertaking of payment, and refers to banker’s
74. An L/C is an irrevocable one if it does not stipulate whether it is irrevocable or
revocable in it according to UCP 600.
75. The seller prefers a confirmed L/C to an unconfirmed L/C.
76. The payee and the drawer of a draft used in international trade must be the same
person, that is, exporter.
77. A check can be seen as a special draft.
78. Under the terms of D/A, it is the bank in exporter’s country who makes
acceptance to the draft and delivers documents to the importer.
79. As to the seller, the risk of D/A 60 days after sight is greater than D/P 60 days
80. In the case of D/P, documents will not be released to the importer until payment is
81. The agency to inspect the commodities in international trade must be decided by
the seller and the buyer.
82. When EXW or DDP is used, the commodity is generally inspected in the
83. All export commodities should be inspected by commodity inspection bureaus.
84. Landed quality and weight means that the inspection carried out at the port of
destination will be final.
85. For one contract, the same method of inspection should be used for inspection and
reinspection to avoid disputes.
86. Once the payment of penalty is made, the contract is no longer to be performed.
87. In international commodity sales contract, penalty and compensation for the losses
is the same thing.
88. The seller should bear the loss cause by force majeure.
89. Arbitration is the best way to solve problems in international trade.
90. The arbitral award once made is the final decision and has the force of law.
91. Generally speaking, it is necessary for the buyer to clearly specify a period of
validity of the L/C when applying for the opening of L/C.
92. The issuing bank should be located in the importer’s country, while the advising
bank should be located in exporter’s country.
93. The buyer will inform the seller the opening of L/C and pass the L/C to the seller.
94. The L/C should arrive at the seller several days before the time of shipment.
95. It is only the exporter that should examine the L/C.
96. All the discrepancies in an L/C should be amended.
97. The L/C can be amended directly by applicant and be transferred to the
98. If the exporter does not return the unacceptable amendment notification to
advising bank within 3 says after he receives it, it will be thought that he has
agreed with the amendment.
99. When there are more than two changes in L/C amendment, the beneficiary can
only accept all or refuse all.
100. The amendments should be announced one by one for several times.
101. Inspection by manufacturer himself and the certificates of inspection issued
by him are usually required in the sales contract.
102. Goods shall be first meet the standards stipulated in laws and regulations
when the inspection standards are specified by laws or regulations.
103. There is no need to inspect the goods which do not need legal inspection.
104. The export goods shall be inspected after shipment.
105. If the inspection certificates are overdue, the goods need to be reinspected.
106. The commodity inspection authorities shall go through the procedures for
inspection and issue a certificate without delaying shipment.
107. Import commodity subject to legal inspection can not be marketed or used
before being inspected.
108. Sometimes, the inspection certificates are necessary for claiming
109. In China, State Administration of Import and Export Commodity Inspection
is in charge of the inspection of import and export commodities throughout the
110. In practice, for 0.5% of weight difference in inspection results at ports of
shipment and destination, inspection result at the port of shipment can be
considered final or the difference can be divided between the buyer and the seller.
111. Trading companies can arrange shipment by themselves or through freight
112. The freight forwarding agent usually levies a service fee based on a
percentage of the freight charge for income.
113. Freight rates can be influenced by such factors as mode of transport, origin
and destination of the cargo, and nature of good and packing.
114. One weight ton is equal to one cubic meter, while one measurement ton to
one metric ton.
115. W/M plus Ad Val means that the highest of them will be collected when
freight is calculated.
116. The air freight includes charges such as customs fees and storage fees.
117. Lay time in the contract is the same thing as shipment time.
118. Consignment note is used not only for road or rail transport, but also for
119. Bill of lading represents the title to the goods and needs to be handled
120. The consignee can take delivery of the goods by using originals of B/L or
copies of B/L signed by the carrier.
121. It should be the exporter’s obligation to take out insurance on minimum
cover under CIF or CIP.
122. Although the insurance has been taken out by the exporter, sometimes, the
importer still needs to make extra insurance arrangement for a wider cover.
123. The insured amount should be the actual value of the insured goods plus the
expected operating expenses and profit.
124. According to the usual practices, the insured amount, if not specified in the
sales contract, will be 110% of CIF or CIP price.
125. Generally speaking, the insured amount will not be marked up in an open
126. The past experience of the insurance company is important in fixing the
127. The date of issuance of B/L should be earlier than the date of issuance of
128. Cargo transport insurance is usually taken out on “warehouse to warehouse”
129. No matter what losses the insured suffers, he can lodge a claim for indemnity
from the insurer.
130. The person who lodges a claim should have the insurable interest.
131. All imported and exported cargos must be subject to the necessary customs
132. The customs is held responsible for the unpacking of goods during the
133. Cargo can only be examined at wharves or warehouses under customs
supervision and control.
134. If cargo from the country barred from trade is smuggled in by foreign
merchants, it is required to be disposed of by the customs.
135. Over-landed cargo and over-carried cargo mean different things, while
over-carried cargo and shut-out cargo mean the same thing.
136. A shipping order covers cargo intended for export, and a Bill of Lading refers
to goods intended for import.
137. Duty is abated on damaged import goods.
138. The customs valuation of import and export goods shall be determined by the
customs on the basis of the transaction value of the goods.
139. In case that the person fails paying customs duty within the time limit, a fee
for delayed payment will be imposed by the customs.
140. There is nothing to do when the customs finds that the duties are short-levied.
141. Some trade documents are necessary for customs clearance.
142. The accordance between documents and L/C and between documents and
documents is necessary in L/C settlement.
143. The parties should provide the documents for payment according to the
clauses of L/C.
144. In L/C settlement, banker’s negotiation is merely based on L/C and
documents not contracts and goods.
145. The bank has the right of refusing to pay if the documents are presented later
than the validity of L/C.
146. The drawee of the draft must be a bank in L/C settlement.
147. The issuer of commercial invoice must be the beneficiary of the relevant
148. Amendments must be signed on all originals of bill of lading.
149. The beneficiary may get no payment if some unconformity between the
documents and L/C was found.
150. The documents shall be sent to the buyer by exporter directly under L/C
III. Fill in the blanks with the best choice.
1. _______is the reason why international trade first began.
a. Uneven distribution of resources b. Patterns of demand
c. Economic benefits d. Comparative advantages
2. If one country produces more of a commodity than it uses itself, it will sell the left
to other countries. This reason for international trade is called___________
a. economies of scale b. variety of style
c. specialization d. patterns of demand
3. The cost for the production will decrease if the goods are produced on a large
scale. This is called__________
a. economies of scale b. variety of style
c. specialization d. patterns of demand
4. The following are the special problems for international trade except
a. using foreign languages and foreign currency
b. under foreign laws, customs and regulations
c. having risks
d. numerous cultural differences
5. ___________ refers to an exchange of services or assets between countries.
a. Invisible trade b. Visible trade
c. International trade d. Balance of trade
6. Invisible trade consists of such items as ______
a. transportation services across national borders
b. foreign tourist expenses
c. insurance services across national borders
d. product exchange across national borders
7. ____________ is the difference between the value of the goods and services that a
country exports and the value of the goods and services that it imports.
a. Trade balance b. Trade surplus
c. Trade deficit d. Trade barrier
8. Each country has to earn ______ to pay for imports.
a. money b. foreign exchange c. cash d. currency
9. Which is not the example of trade barriers? ____________
a. Tariffs b. Quotas
c. Import duties d. Income tax
10. Which is the regulation of international trade at the global level? __________
a. WTO b. MERCOSUR
c. NAFTA d. FTAA
11. Which is not correct about the trade form of agency? ____________
a. An agent does not need to carry stock.
b. Generally speaking, agents are usually paid by commission.
c. An agent acts as a middleman between the principal and the customer
d. An agent can operate out of the marketing area authorized by the principal.
12. Which is wrong about the differences between agency and distribution? ______
a. A distributor buys from the principals.
b. A distributor takes title to the goods.
c. Under distribution, there is no contractual relationship between the principal
and the customers.
d. A distributor gains the profit from commission.
13. Who has the exclusive right of selling the goods in a marketing area at the price he
a. Consignor b. Exclusive distributor c. Exclusive agent d. bidder
14. As to the exclusive agent and exclusive distributor, which is correct?
a. The former is sales relationship, the later is agency relationship.
b. The former is agency relationship, the later is sales relationship.
c. They both are agency relationship.
d. They both are sales relationship.
15. Which description of exclusive sales is correct? ____________
a．Both exclusive distributor and exclusive agent have exclusive operating right.
b．Both exclusive distributor and exclusive agent can decide the prices of goods.
c．Both exclusive distributor and exclusive agent have the ownership of goods.
d．Both exclusive distributor and exclusive agent do the business for commission.
16. In international trade, the goods exported are “paid for” by a countersupply of
goods and the value of the countertrade goods is equal to that of the export goods.
We called this__________
a. full compensation b. switch trade
c. counterpurchase c．consignment
17. In international trade, the seller ships the goods to the buyer when there is no
purchase made. The seller retains title to the goods until the buyer has sold them.
This is __________
a. bidding b. agency c. consignment d. auction
18. As to consignment，the ownership of goods belongs to the __________
a. agent b. consignee c. consignor d. distributor
19. Which description of consignment is correct? __________
a. Consignee can sell the goods according to his own will
b. It is a spot transaction with real goods
c. The relation between the consignor and consignees is sale relationship
d. All expenses and risks of goods are undertaken by consignor before the goods
20. How is the price in bidding decided? __________
a. By the buyers
b. By the offers
c. By the sellers
d. By choosing the most advantageous one from the offers of bidders.
21. The trade terms define the responsibilities and expenses of ____
a. both the seller and the buyer b. both the consignee and the consignor
c. both the shipper and carrier d. both the exporter and the operator
22. Under______, the seller minimizes his obligations while the buyer obtains the
goods at the lowest possible price.
a. FOB b. DDP c. DES d. EXW
23. When the seller pays for the goods to be placed alongside the vessel at the named
port of shipment, the term is __________
a. DEQ b. FAS c. FOB d. EXW
24. When the seller pays for the goods to be loaded on board the ship, but does not
pay the freight or insurance, the right term is _______
a. FOB b. FCA c. CFR d. CIF
25. When the seller only pays freight for the goods up to arrival at the port of
destination, the term is _________
a. FOB b. CFR c. DDU d. CIF
26. When the seller pays for the cost of transport and the cost of insurance to a
destination, and he includes these expenses in his sales price, the term is
a. DDU b. CIP c. CPT d. CFR
27. ________ may be used for various modes of transport.
a. FCA CPT CIP b. FCA FOB EXW
c. FCA FAS CIF d. FCA CFR CPT
28. ________ can only be used for waterway transport.
a. CIF CIP DEQ b. CFR CPT CIP
c. FOB CPT CIF d. CIF FOB DEQ
29. Under ____ trade terms, the risk is transferred from the seller to the buyer when
goods pass over the ship’s rail.
a. FCA FOB FAS b. FOB CFR CIF
c. FAS FCA CIF d. FAS CFR FOB
30. The buyer has the minimum obligation under_____.
a. DDU b. DDP c. DAF d. DEQ
41. While sales by sample, if there is no other stipulations on the goods in the
contract , then the goods __________.
a. may be roughly the same as the sample
b. must be the same as the sample
c. may have reasonable tolerance
d. may have reasonable differences on specification
42. The sample made by the seller according to the buyer’s, and then sent to and
confirmed by the buyer is called __________.
a. duplicate sample b. returning sample
c. original sample d. counter sample
43. __________ are usually sold by sale by trade mark or brand name?
a. Manufactured goods with steady quality
b. Raw materials
c. Machine and instrument
d. Goods with special shape
44. The methods commonly used to express the quality include the followings except
a. sale by sample b. sale by materials
c. sale by description d. sale by trade mark or brand name
45. In international trade, the goods that is demanded on special shape or the
characteristics of color and taste should be sold__________.
a. by sample b. by specification
c. by grade d. by name of origin
46. Quality standard of FAQ means that__________.
a. the goods is suitable for sales b. the goods is merchantable
c. the goods has bad quality d. the goods has fair average quality
47. At present, which method we always take to express quality when we export some
handicrafts, clothing and light industrial products? __________
a. Sale by sample b. Sale by specification
c. Sale by grade d. Sale by name of origin
48. If there is a quality tolerance clause in a contract, within the range of the tolerance,
a. can’t refuse to accept the goods
b. can refuse to accept the goods
c. can demand the price to be adjusted
d. can refuse to accept the goods or demand the price to be adjusted
49. A company exports 50 tons of wheat, the seller delivers the extra 2 tons, then the
buyer should __________.
a. accept 52 tons b. refuse to take 52 tons
c. accept extra 1 ton d. refuse to accept extra 2 tons
50. The more or less clause is normally used for ________
a. bulk goods b. packed units c. individual items d. containerized goods
51. The characteristics of liner transport are that ________.
a．the line, the port, the time and the freight rate are fixed
b．its freight is determined by the market.
c．the variety and quantity of goods shipped are more flexible
d．the obligations and rights of both seller and buyer are stipulated in the B/L
52. _______ transport is a major mode of transport in terms of capacity, only second
to sea transport.
a. Road b. Air c. Container d. Rail
53. ________ transport has a high distributive ability of offering a door-to-door
a. Air b. Road c. Sea d. Inland waterway
54. In container transport situation, the shipping company can supply “door to door”
service according to the condition of __________
a. FCL/FCL b. FCL/LCL c. LCL/FCL d. LCL/LCL
55. The operator who signs the multimodal transport documents is__________
a. only responsible for the first stage of the transportation
b. must be responsible for the whole transportation
c. is not responsible for transportation
d. is only responsible for the last stage of the transportation
56. Which stipulation of the date of shipment is often used in a contract? __________
a. one day b. within several days after the L/C has been received
c. prompt shipment d. concrete shipment time
57. Which of the following is right about the stipulation of the port of shipment and
the port of destination clauses in the international trade contract?_______
a．To stipulate two ports roughly
b．Only one port of shipment and one port of destination can be stipulated in the
c．To stipulate two ports of shipment or two ports of destination
d．More than one port is contracted to be port of loading or more than one port is
contracted to be port of destination in case it is difficult to decide.
58. The seller usually sends the _____ to the buyer immediately after the goods are
loaded on board the ship, advising him of the shipment.
a. shipping advice b. shipping instructions c. shipping date d. shipping port
59. Partial shipment may be necessary when ___________
a. direct liners are not available
b. the amount of the cargo is very small
c. the shipping date is very close
d. the export covers a large amount of goods
60. Transshipment may be necessary when ___________
a. direct liners are not available
b. the amount of the cargo is very small
c. the shipping date is very close
d. the export covers a large amount of goods
61. __________ is the practice of sharing among many persons risks that would
otherwise be suffered by only a few.
a. Trade b. Transportation c. Insurance d. Description
62. The losses done to the goods in marine transportation can be classified into two
a. actual total loss and constructive total loss
b. general average and particular average
c. basic loss and additional loss
d. total loss and partial loss
63. In the marine cargo insurance practice, general average is__________
a. a kind of partial loss
b. a kind of total loss
c. partial loss or total loss decided by the time
d. constructive total loss
64. For exporting rice, the goods can not be used according to its original usage
because of its having been soaked by the sea water for a long time owing to the
accident, as a result, the goods has to be sold at a lower price at the destination.
the loss herein is __________
a. particular average b. general average
c. actual total Loss d. constructive total loss
65. WPA was covered for exporting goods, and part of the goods was damaged
because of the rain on the way, then the insurance company should __________
a. compensate for the whole lot
b. compensate for the part damaged
c. compensate for none
d. compensate for all the exporting goods
66. Exporting clothes are soaked heavily because of the ship hitting the submerged
reef in the sea, if the cost dealt with and sent to the destination is more than the
value insured, then the loss can be regarded as __________
a. general average b. actual total loss
c. constructive total loss d. particular average
67. The goods concluded on the CIF basis has been burnt because of the fire after
being loaded , then __________
a. the loss is due to the seller
b. the seller asks the insurance company for compensation
c. the buyer asks the insurance company for compensation
d. the loss is due to the party who pays the freight
68. Particular additional coverage of CIC _________
a. can be covered alone
b. can’t be covered alone
c. can be covered alone when more than two of them are covered
d. can be covered alone when only one of the insured applies for insurance
69. Under CIC, general additional risks include the following except for_________
a. Risk of Shortage b. TPND
c. Failure to delivery d. Risk of odor
70. Basic coverage of marine cargo insurance under CIC includes the following
a. FPA b. War Risk c. WPA d. All Risks
71. Total cost of exporting includes ____________
a. production cost
b. sales price
c. production cost and all charge before exporting
d. production cost, all charge and taxes before exporting
72. Which one is the best expression of unit price for international trade?
a. CIF LONDON US$1010/MT b. CIF LONDON $1,010.00/MT
c. CIF LONDON US$1,010.00/MT d. CIF LONDON $1,010.00/TON
73. The seller reduces the price by a certain percentage of the original price for the
buyer, that’s to say, the seller does proper favor in price for the buyer. The favor is
a. commission b. discount
c. advance payment d. deposit
74. While choosing the money for the payment in international trade, one should
a. choose hard money b. choose soft money
c. choose soft money for export and hard money for import
d. choose hard money for export and soft money when import
75. In international trade, the method of calculating plain commission is__________
a. net price multiply by commission rate
b. commission-included price multiplied by commission rate
c. net price divided by（one minus commission rate）
d. unit price multiplied by commission rate
76. In international trade, the commission is usually collected by __________
a. the seller b. the buyer
c. the insurance company d. the intermediary
77. Which one is the price including commission__________
a. FOBS b. FOBT c. FOBST d. FOBC
78. Which one of the following quotation is wrong? __________
a. FOB QINGDAO USD10.00/PC b. CIF LIVERPOOL GBP125.00/MT
c. FOB SHANGHAI $15.25/PC d. FOB JINAN USD2.00/KG
79. The followings are included in CFR and CPT prices expect for __________
a. production cost b. freight
c. insurance premium d. profit
80. If the unit price clause is stipulated as “USD 200 per metric ton CIF London less
3% discount”. Then the price is called a/an _________
a. net price b. commission-included price
b. discount-included price d. discount-excluded price
81. Which one of the following is not the means of remittance? __________
a. L/G b. M/T c. T/T d. D/D
82. T/T means __________
a. mail transfer b. telegraphic transfer
c. demand draft d. letter of credit
83. Which means of international payment is a kind of bank credit? __________
a. Remittance b. Collection c. L/C d. D/D
84. Which L/C means double guarantee for the beneficiary? __________
a. Revocable L/C b. Documentary L/C
c. Confirmed L/C d. Transferable L/C
85. As to confirmed L/C, the payment responsibility of confirming bank is ______
a. primary b. secondary c. third d. fourth
86. There is a draft whose drawer and drawee are both bankers. Which one is it in the
a. Commercial Draft b. Banker’s Draft
c. Clean Draft d. Documentary Draft
87. A Check is a kind of ____ drawn on a banker.
a. sight draft b. time draft
c. sight promissory note d. time promissory note
88. D/P at sight means__________
a. document against payment after sight b. document against payment at sight
c. documentary collection d. document against acceptance
89. As to the seller, the risk of D/P, D/A and L/C can be arranged (from great to small)
as followings: __________
a. D/A, D/P and L/C b. L/C, D/P and D/A
c. D/P, D/A and L/C d. D/A, L/C and D/P
90. In the following terms of settlement, which is the most risky one for the seller?
a. T/T in advance b. D/A c. D/P at sight d. D/P after sight
91. “Shipping Weight and Landed Quality” means__________
a. to make inspection at the port/place of destination
b. to make inspection at the port/place of destination
c. to make inspection in the exporting country and make reinspection in the
d. to make inspection at the port/place of shipment to take shipped weight as final
and make reinspection at the port/place of destination to make take landed quality
92. Among those inspection methods, the most commonly used one is______
a. to make inspection at the port of shipment
b. to make inspection at the port of destination
c. to make inspection in the exporting country and make reinspection in the
d. to make inspection at the port of shipment to take shipped weight as final and
make reinspection at the port of destination to make take landed quality as final.
93. An exporter delivered the goods according to the stipulation of contract, and
submitted clean B/L to the importer. After receiving the goods, the importer found
that the goods are damaged because of the damage to the outside packing. There is
also a sea protest showing that the damage is due to heavy weather. Whom should
the importer claim to? __________
a. Shipping company b. Insurance company c. Seller d. Buyer
94. When__________ happens, the party that fails to perform the contract is allowed
to relieve liabilities of the non-performance.
a. war b. world market price goes up
c. manufacture fault d. currency devaluation
95. In international commodity sales, the commonly used way to stipulate force
majeure clause is __________
a. in a general way b. without stipulation
c. in a way to list the scope d. in a comprehensive way
96. The necessary condition of settling disputes through arbitration is that
a. the seller and buyer have an arbitration agreement or an arbitration clause in the
b. the seller and buyer have contract
c. the case can’t be settled through conciliation
d. one party comes to nothing through litigation
97. Which descriptions of arbitration award are not correct? __________
a. The award is usually final.
b. The seller or buyer can sue in a law court about the award.
c. If the award is not executed by one party, the other may ask the competent court
to enforce it.
d. The award is binding upon both parties.
98. If the sales contract between a Chinese company and a Japanese B company
stipulates that the arbitration shall be conducted in defendant’s country. Which
place may carry on arbitration if the Japanese company is the complaint.
a. Beijing b. London c. Tokyo d. New York
99. An arbitration clause should specify the following points except for___________
a. an arbitration agency b. a location for arbitration
a. the number of arbitrators d. an arbitral award
100. In international trade, the best method of settling disputes is __________
a. negotiation b. lawsuit c. arbitration d. litigation
101. If a B/L can be transferable, it must be a ___________
a. clean B/L b. transshipment B/L c. order B/L d. on board B/L
102. Based on whether the goods are loaded or not, the B/L can be classified into
a. clean B/L and unclean B/L b. direct B/L and transshipment B/L
c. straight B/L and order B/L d. on board B/L and received for shipment B/L
103. _____ is issued by the shipping company after the goods are actually shipped
on board the designated vessel.
a. Shipped B/L b. Clean B/L c. Received for shipment B/L d. Liner
104. _____ means that there is no definite consignee of the goods.
a. Blank B/L b. Order B/L c. Straight B/L d. Direct B/L
105. Under_____, only the named consignee at the destination is entitled to take
delivery of the cargo.
a. Blank B/L b. Order B/L c. Straight B/L d. Direct B/L
106. ______ merely confirms that the goods have been handed over to and are in
custody of the shipowner.
a. Shipped B/L b. Clean B/L c. Received for shipment B/L d. Liner
107. Combined transport B/L differs from Through B/L in that_______.
a. only one carrier is involved in Through B/L
b. only one carrier is involved in Combined transport B/L
c. combined transport B/L is always connected with sea
d. through B/L is not connected with sea
108. Air waybill differs from B/L in that ____
a. air waybill is not a negotiable title to goods
b. air waybill is a receipt of goods
c. it is evidence of dispatch
d. both a and b
109. Under CIF, freight on the B/L is marked as_______.
a. Freight Prepaid b. Freight Collect
c. Freight Pre-payable d. Freight Unpaid
110. Which one of the following bills of lading can be transferred only after
a. Straight B/L b. Bearer B/L c. Order B/L d. Ocean B/L
111. The insurance policy or certificate will be issued by the insurance company
after the insured pays___________.
a. freight b. premium c. cost d. expenses
112. According to the practice of the international insurance market , cargoes are
generally insured for __________of CIF value
a. 110% b. 120% c. 130% d. 140%
113. The insured amount for a CIF contract usually covers the following except
a. freight b. insurance premium c. expected profits d. import duties
114. The insured amount will not be marked up in __________
a. insurance policy b. insurance certificate
c. open policy d. combined certificate
115. It’s the same as the practice in international market that the period of the
obligations of marine cargoes insurance in our country is from __________
a. door to door b. desk to desk
c. warehouse to warehouse d. port to port
116. The goods was exported under CIF, the whole goods disappeared because of
the accident, then the buyer___________
a. would not pay because of the goods not arriving at the destination
b. should pay with all sets of shipping documents supplied
c. may lodge a claim to the carrier
d. may pay if the bank demanded he should
117. The followings are correct about the principles of insurance except
a. Any person who files a claim should have the insurable interest.
b. Loss of or damage to the insured goods shall be the direct result of the perils
within the scope of the insurance cover
c. Details of the insured goods shall be provided on the principle of utmost good
d. In case of any loss or damage, the consignee should lodge a claim against the
118. The transferring of marine cargoes insurance contract means ___________.
a. the insured transfers his rights and obligations in the contract to another person
b. insurance contract is transferred as the ownership of the goods transferred
c. insurable interests are transferred
d. the articles insured are transferred
119. Buyer’s request for additional coverage can be accepted on condition that
such extra premium is for ___________ account.
a. the seller’s b. the buyer’s c. the insurer’s d. the insured
120. As per our contract, insurance shall be ___________ by the seller.
a. effected b. taken c. amended d. drawn
121. Which one of the followings transport documents is the title document of the
goods in the foreign trade? __________
a. railway bill b. B/L c. consignment note d. packing list
122. If the expiry date of L/C is before Dec. 31st, and the latest shipment date is
before Dec 10th, while the expiry date for presenting documents is within 15 days
after the transport documents being signed and the date of shipment is Dec 10th,
then the latest date of the documents being negotiated is before __________
a. Dec. 10th b. Dec. 25th c. Dec. 20th d. Dec. 31st
123. If there are more than two modifications in L/C amendment,
a. may accept all, or refuse all b. can accept partially and refuse partially
c. must accept all d. can only accept partially
124. The addressee of commercial invoice generally is the __________.
a. beneficiary b. applicant c. issuing bank d. seller
125. The description of goods on B/L __________.
a. should be exactly the same as L/C
b. have to use the full name of the goods
c. can be generally called as long as it does not conflict with L/C
d. should be exactly the same as commercial invoice
126. As to the following documents, which of them can not be refused by the bank.
a. Document submitted later than expiry date for presentation of document
b. Document submitted 15 days later than the date of shipment, but less than 21
c. Document whose content is not in conformity with L/C
d. There is discrepancy between the documents
127. The issuing date of B/L is July 15th, the expire date of L/C is August 15th and
the period of time for presentation of documents is 15 days after the date of
shipment. If Insurance Policy is required by L/C, then its issuing date could
a. 7.30 b. 7.15 c. 7.25 d. 7.10
128. Which is not correct about currency and the sum of money of L/C?
a. The capital and small letter of the sum of money on L/C must be unanimous (无
b. The currency of L/C and contract must be unanimous
c. The money of draft can’t exceed that of L/C
d. If More or Less Clause is stipulated in the contract, there should be relevant
regulations on the sum of money of L/C
129. In L/C settlement, banker’s negotiation is merely based on __________.
a. application of opening L/C b. contract and documents
c. documents and L/C d. goods and documents
130. The payer of the draft used in L/C settlement can’t be __________.
a. applicant b. issuing bank c. beneficiary d. advising bank
IV. Translate the following Chinese expressions into English.
1. 国际贸易 34. 全部补偿
2. 世界贸易 35. 部分补偿
3. 对外贸易 36. 互购
4. 海外贸易 37. 平行贸易
5. 规模经济 38. 转手贸易
6. 经济增长 39. 抵消贸易
7. 外汇 40. 公开招标
8. 汇率 41. 商品描述
9. 国外市场 42. 品名
10. 有形贸易 43. 凭样品买卖
11. 无形贸易 44. 对等样品
12. 贸易差额 45. 原样
13. 贸易顺差 46. 参考样品
14. 贸易逆差 47. 凭规格买卖
15. 贸易壁垒 48. 良好平均品质
16. 非关税壁垒 49. 上好适销品质
17. 财政关税 50. 品牌
18. 保护关税 51. 商标
19. 配额 52. 品质公差
20. 自由贸易 53. 毛重
21. 贸易形式 54. 净重
22. 代理 55. 公吨
23. 经销 56. 溢短装条款
24. 对销贸易 57. 增减条款
25. 寄售 58. 包装
26. 投标 59. 散装货
27. 委托人 60. 大路货
28. 订购代理 61. 运输方式
29. 独立代理 62. 海洋运输
30. 保付代理 63. 班轮
31. 包销商 64. 不定期轮
32. 一般经销商 65. 铁路运输
33. 补偿贸易 66. 公路运输
67. 航空运输 111. 外汇保值条款
68. 集装箱运输 112. 中间商
69. 整箱货 113. 明佣
70. 拼箱货 114. 净价
71. 集装箱站 115. 含佣价
72. 多式联运 116. 暗佣
73. 托运人 117. 现金折扣
74. 收货人 118. 特殊折扣
75. 装运时间 119. 明折扣
76. 装运港 120. 暗折扣
77. 目的港 121. 支付方式
78. 装运通知 122. 支付工具
79. 分批装运 123. 银行票汇
80. 转运 124. 汇付
81. 承保人 125. 信汇
82. 保险公司 126. 电汇
83. 保（险）费 127. 票汇
84. 被保险人 128. 支票
85. 全部损失 129. 本票
86. 部分损失 130. 不可撤销信用证
87. 共同海损 131. 保兑信用证
88. 单独海损 132. 即期信用证
89. 战争险 133. 远期信用证
90. 罢工险 134. 不可转让信用证
91. 平安险 135. 远期汇票
92. 水渍险 136. 商业汇票
93. 一切险 137. 承兑交单
94. 偷窃提货不着险 138. 跟单托收
95. 保险范围 139. 即期付款交单
96. 保险单 140. 远期付款交单
97. 保险凭证 141. 检验
98. 预约保险单 142. 索赔
99. 联合凭证 143. 不可抗力
100. 批单 144. 仲裁
101. 单价 145. 质量检验证书
102. 总值 146. 数量检验证书
103. 欧元 147. 重量检验证书
104. 价格术语 148. 价值检验证书
105. 计价货币 149. 原产地证
106. 支付货币 150. 离岸质量和重量
107. 本币 151. 到岸质量和重量
108. 硬通货币 152. 异议
109. 软货币 153. 罚金
110. 汇率 154. 赔偿
155. 仲裁机构 158. 审理
156. 仲裁庭 159. 首席仲裁员
157. 裁决 160. 独任仲裁员
161. 开证申请人 183. 装卸时间
162. 开证行 184. 滞期费
163. 通知行 185. 速遣费
164. 代理行 186. 航空运单
165. 议付行 187. 运单
166. 偿付 188. 多式联运单据
167. 付款行 189. 已装船提单
168. 清算行 190. 清洁提单
169. 受让人 191. 记名提单
170. 第一受益人 192. 不记名提单
171. 有效期 193. 指示提单
172. 承兑 194. 联运提单
173. 修改通知书 195. 报关
174. 保兑 196. 溢卸货物
175. 运输代理行 197. 漏泄货物/溢载货物
176. 运费率 198. 短卸货物
177. 重量吨 199. 退关货物
178. 尺码吨 200. 装货通知
179. 从价运费 201. 普通税率
180. 议价费率 202. 优惠税率
181. 普通货运费率 203. 海关估价
182. 指定商品运价 204. 短装关税
205. 制单 210. 海关发票
206. 商业发票 211. 进口许可证
207. 托运单 212. 运费预付
208. 装箱单 213. 运费到付
209. 运单 214. 正本提单
V. Fill in the blanks with the words and expressions listed below.
market sold home raw production focused company transportation
More and more of the great corporations have come to consider their “natural”
markets to be the globe, not just their___________ countries. The struggle in
automobiles, in computers, in telecommunications, in steel, is for shares of a
world___________. This is way we find the ___________ such as IBM or General
Motors considering the whole globe as their “sourcing” of ___________ materials,
the location of production and the place of sales effort. With modern rapid
air___________, instant global data information, and highly organized systems of
___________, the manufacture of commodities is more and more easily moved to the
country that produces them more cheaply, and their sale is ___________ on the
countries that represent the richest markets. Thus we have a radio whose parts have
been made in Hong Kong, assembled in Mexico, and___________ in the United
Sates-by a Japanese manufacture.
payment carried contracts customer buy imported
In a countertrade transaction, the foreign ___________ who provides the equipment
or technology undertakes to ___________ from the Chinese firms’ goods of a value
equivalent to that of what he himself supplies. Thus two ___________ are entered
into: one for export by the foreign customer with immediate settlement and the other
for his counterpurchase from the Chinese firms with immediate settlement too. A
countertrade may also be ___________ out by a direct exchange of goods between the
two sides without the cash ___________. The difference, if any, between the price of
the goods exported and that of the goods___________ will be settled in cash.
appoint turnover expenses total grant agency expect quantity
A: I’m here to apply for the sole ___________ of your products in our local market.
What about your ideas?
B: I’m sorry that we can’t agree to ___________ you as our sole agent because the
annual ___________ you promised is too low.
A: Do you mean that you won’t appoint an agent?
B: Of course not. It depends on the total annual turnover you can fulfill.
A: We’ll increase the ___________ to 5,000 sets if you entrust us as your sole agent.
B: We think it is rather conservative. Our price is the lowest among all similar
products. It is not difficult to get customers for our products.
A: Then, I’ll bear a risk and raise quantity by another 5,000 electric fans this year,
making a ___________ of 10,000 sets. We ___________ a commission of 10%.
B: Usually, we ___________ our agents a 3---5% commission. Besides, as the sole
agency, you could control the market easily and don’t have to spend extra
___________. In this case, we can only allow you a 7% commission.
A: That’s a deal.
delivered purposes invoice shipment submit insurance transactions defined
The CIF contract is a type of contract which is more widely and more frequently in
use than any other contracts used for ___________of sea-borne business. A large
number of ___________ are carried out every year under CIF contracts.
The seller’s obligations under CIF contract have been ___________ as follows: (1) to
ship goods as contained in the contract at the port of ___________. (2) to obtain a
contract under which the goods will be ___________ at the destination stipulated by
the contract. (3) to arrange for a/an ___________upon the terms current in the trade
which will be available for the benefits of the buyer. (4) to make out an ___________
with the agreed price, or the actual cost, commission charges, freight, insurance
premium and so on. (5) to ___________ the relative documents to the buyer to enable
him to obtain delivery of the goods.
undergoes given sacrificed minimize pack suited
Experience has shown that the packing used in transportation of goods for home trade
is not usually ____________ to foreign shipping. Most foreign shipping takes many
weeks or months to reach its destination and frequently ____________ rough
handling in loading and unloading. So the packing must be strong enough. Of course,
consideration must also be ____________ to packing cost and the weather conditions
through which the ship sails en route and those in the country of destination. Besides,
the exporter has to ____________the shipment as lightly and compactly as possible in
order to ____________ the freight charges. However, strength and appearance should
not be ____________ for a saving in freight.
under decide allowing choosing regulations avoid
In ____________ port of shipment and port of destination, several considerations
must be made. First, try to make the port of shipment and port of destination clear if it
is possible. Second, allow some flexibility by ____________ optional ports because
sometimes when the contract is concluded, it might not be possible to ____________
precisely on the exact point where the goods should be delivered by the seller for
carriage or at the final destination. Third, consider political factors. For example,
when a country is ____________ an international transaction, sellers might want to
____________ going to the port of that country. Fourth, consider port ____________,
facilities and charges.
policy lodge premiums insured calculated coverage compensation certificate
Insurance is the business for providing financial ___________ for losses that the
insured against. The payments are made from the pool of insurance ___________
and returns on investment of the insurance company. Insurance premiums are the
money the ___________ pay to an insurance company for taking out an insurance
___________. It is ___________ according to the value of what is insured and the
scope of insurance ___________ desired. An insurance policy is the document
issued by the insurer to the insured after premium is paid. It sets out the exact terms in
an insurance transaction such as the insurance coverage, the insured amount, the
premium rate, and the insurance duration. An insurance ___________ can be said to
be a simplified form of an insurance policy. The insurance policy is the key document
for the insured to ___________ a claim in the event of losses. If all the required
documents are found in order and the cause of the loss an insured risk, the insurance
company pays indemnity, which is expressed as the insured value.
problem agreement fluctuate contract rises currency
Each country has its own __________ and, since exchange rates are continuously
changing, the exporter is faced with uncertainty. The danger is that the rate of
exchange will change between the date of the ___________ and the date of payment.
Rates of exchange can ___________ rapidly, particularly when there is no
international ___________to fix the rates for a particular currency. The banks can
help the exporter to overcome this___________ by providing forward exchange cover.
Then it would then be the bank which suffers the loss if and when one currency falls
in value, but he will make a profit if the currency ___________ in value.
payment bank goods collection documents distrust
Payment either by remittance or by ___________ depends on the commercial credit
of the exporter and the importer. While, under L/C, it is the ___________ credit that
both parties count on. This solves the possible problems arising from the
___________ between the exporter and the importer as an L/C enables the exporter to
draw on a named bank when he presents the required documents. Thus, under L/C,
the exporter can feel assured that so long as he has made the delivery of the
___________ and got the required ___________, he can get the payment of the goods
in due course and the importer can also feel at ease that he can get the shipping
documents when he effects the ___________ of the goods.
agreement decision submitted arises binding arbitrate
Arbitration is a procedure whereby a dispute is ________ for a final and binding
decision to a person or persons other than the courts. Arbitration may be required in
certain cases by statute. However, such cases are rare, and the right to arbitrate usually
___________ from a contract clause or an arbitration ___________. The parties are
obligated to arbitrate only those issues that they have agreed to________. The term
“award” describes the___________ of the arbitrators. An award is ___________ on
all issues submitted and may be judicially enforced. Once an issue is submitted for
arbitration, questions of law are for the arbitrators. They are no longer open to judicial
discrepancies information considered expecting interest control
Exporters ____________ to be paid under an L/C may be sadly disappointed.
Although an L/C is ____________ one of the most secure means of obtaining prompt
payment for sale of goods, exporters should be made to understand that they can
never totally ____________ the payment process. It is difficult to obtain
____________ from banks on how often letters of credit go wrong. Since banks are
selling a product, it is understandable that there is little ____________ on their part in
letting the public know how often the product does not work. In practice, delayed
opening of the L/C and ____________ between L/C and contract or other regulations
often occur and influence the payment in international trade.
Advice Instructions packages sailing informing loaded
Before shipment, the buyer generally send his shipping requirements to the seller,
___________the seller in writing of the packing and marks, mode of transportation,
etc., known as the Shipping ___________. On the other hand, the seller (or the
exporter) usually sends a notice to the buyer immediately after the goods are
___________on board the ship, advising him of the shipment, especially under FOB
or CFR terms. Such a notice, known as the Shipping ___________, may include the
following: Contract and/or L/C No., name of the commodity, number of ___________,
total quantity shipped, name of vessel and its ___________ date and sometimes even
the total value of the goods.
turn determined meet calculate left investments
Insurers may refuse to underwrite a certain risk either because they cannot
___________ the likelihood of its happening, or because they lack the financial
strength to cope with it. That financial strength is ____________ by the size of their
capital and surplus----what is ____________ once an insurer’s liabilities have been
deducted from its assets which include premiums and income from ___________.
Most regulators require insurance companies to___________ minimum solvency
standards for this capital and surplus. Insurers may also ____________ down risks
because they cannot buy reinsurance---insurance for insurers.
Customs authorities work closely with the central bank to ____________ that goods
are only imported or exported in accordance with current regulations. They have to
____________ duty, where applicable, on a weight or quantity basis or ad valorem;
and they must ____________ that the goods are being sold at the current market rate
ruling in the country of origin to prevent dumping and the illegal transfer of funds
outside the country.
Customs ____________ are required for both imports and exports. Some
commodities may be actually shipped before an entry is ____________; in this case
the shipping note sent to the wharf-masters will be ____________“Pre-entry not
terms languages according presented differ conformity
It is not a simple job to make all documents errorless because the requirements
___________ from country to country, for example, types of documents needed,
forms of documents, contents of documents, ___________ used in the documents, etc.
To ensure timely payment, exporters should check all the documents carefully before
these documents are ___________. In general, it is important to maintain
___________ between all the documents relating to the same transaction. For
example, the description of goods, the value of the goods, and other ___________ in
different documents should be the same. If documentary credits are used, then all the
documents must be made out ___________ to the L/C terms. More details should be
given when documents are discussed individually.
beneficial maintained settled litigation arise alternative
In international trade, when disputes ____________ between the exporter and the
importer, it can be ____________ through friendly consultation, mediation,
arbitration or litigation. Friendly negotiation or mediation is the best method of all
and____________ to both parties. If the disputes are settled by this way, friendly
business relationship is to be ________ between exporters and importers. If the
disputes cannot be settled through amicable negotiation or mediation, arbitration will
be the next best____________, as ___________ is usually costly and
VI. Translate the following English sentences into Chinese.
1. International trade is the exchange of goods and services between countries. It is
also known as world trade, foreign trade or overseas trade.
2. Trade may occur because of economies of scale, that is, the cost advantages of
3. Visible trade refers to exports and imports of goods, while invisible trade refers to
an exchange of services or assets between countries.
4. If a country’s exports exceed its imports, it has a trade surplus and the trade
balance is said to be positive. If imports exceed exports, the country has a trade
deficit and its trade balance is said to be negative.
5. A tariff is a tax levied on a commodity when it crosses the boundary of a customs
area which usually coincides with the area of a country.
6. A quota limits the imports or exports of a commodity during a given period of
7. Under the trade form of agent, the principal sets the retail price, retains title and
controls the goods, and the profits and risks of losses remain with the principal
unless the agent is a del credere one.
8. Unlike agents, distributors buy from the principals on their own account and take
title to them and resell them to their customers in their area.
9. Countertrade is an umbrella term that includes all forms of the exchange of goods
10. In this way, the two countries can exchange their products without using their
limited reserve of foreign exchanges.
11. Offset is a practice in which the seller has to undertake some sort of activity
favorable to the importer in addition to the supply of the capital goods.
12. The goods exported on the consignment remain the title to the exporter. The
exporter is not paid until the goods are sold in the overseas market.
13. Trade terms, also called price terms or delivery terms, are an important part of a
unit price in international trade, standing for specific responsibilities and
obligations of both the buyer and the seller.
14. It is a set of uniform rules or the interpretation of international commercial terms
defining the costs, risks, and obligations of buyers and sellers in international
15. FOB means that the seller delivers when the goods pass the ship’s rail nominated
by the buyer at the named port of shipment.
16. Hence, the “C”-terms are different from all other terms because they contain two
“key” points, one indicating the point to which the seller is bound to arrange and
bear the costs of carriage and another one for the allocation of risk.
17. Therefore, the “D”-terms mean arrival contracts, while the “F” and “C”-terms
mean shipment contracts and the “E”-terms mean departure contracts.
18. For example, it is appropriate to select CIF if the term of payment agreed by the
parties is documentary L/C but not appropriate to select DES.
19. In order to make sure of this, he may first provide a sample produced according to
the buyer’s original sample and send it to the buyer for confirmation. This sample
is a counter sample.
20. FAQ means a quantity of a product that is offered not on a particular quality
specification but on the basis that is equal to the average quality of the current
group or recent shipment.
21. Tolerance means the permissible range within which the quality supplied by the
seller may be either superior or inferior to the quality stipulated in the contract.
22. It is sometimes difficult to ship the exact quantity of the commodity, then a “more
or less clause”, also called “plus or minus clause”, may be used to allow some
tolerance in the quantity.
23. Generally speaking, unless there is a stipulation that the quantity of the goods
must not be exceeded or reduced, a tolerance of 5% more or 5% less will be
24. Packing should be designed according to the need of the cargo. Bulk cargoes
require little packing. General merchandises require adequate packing of various
25. The container transport offers a door to door service under FCL/FCL, door to cfs
(container freight station) service under FCL/LCL(less than Container Load), cfs
to cfs service under LCL/LCL, and cfs to door service under LCL/FCL.
26. This means the carriage of cargos by at least two modes of transport on the basis
of a multimodal transport contract and only one multimodal transport operator
(MTO) is responsible for taking the cargo from the consignor and delivering them
to the consignee.
27. Under a FOB, CFR or CIF contract, port of shipment is usually proposed by the
exporter and is stipulated in the contract when confirmed by the importer.
28. “Partial shipment” is also called shipment on installments. It means that the goods
under one contract are shipped in different terms or by different lots.
29. The losses can fall into total loss and partial loss. Total loss of goods can further
be divided into actual total loss and constructive total loss. Partial loss can be
either general average or particular average.
30. General average is in use when both the ship and the goods on board are
endangered and the captain, for the safety of the ship and the goods on board,
intentionally and reasonably does some sacrifices or makes some expenses.
Particular average means a partial loss suffered by part of the cargos.
31. It should be noted that “All Risks” does not, as its name suggests, really cover all
32. No additional risk can be purchased to insure goods independently. Additional
risks include general additional risks and special additional risks.
33. An open policy covers these shipments, as soon as they are made, under the
previous arrangement between the insured and the insurer.
34. A unit price consists of four parts, which are currency unit, unit price figure,
measuring unit and price terms.
35. Total amount, as its name suggests, is the sum of the money for one business
transaction. It equals to the unit price multiplied by the quantity of the goods.
36. Money of account is the currency used for price calculation. Money of payment is
the currency for settlement.
37. An exchange proviso clause may be stipulated in the contract to reduce the foreign
38. Commission may be indicated in price clause which is called plain commission. It
is often represented by a capital letter “C” followed a percentage of commission
rate which is inserted into the price term.
39. The unit price is not a net price but a commission-included price.
40. Then the local bank entrusts the correspondent bank to pay the money to the seller
by mail transfer (M/T), telegraphic transfer (T/T) or demand draft (D/D).
41. It is a kind of banker’s credit, which means that the banker is responsible to pay
money and tender documents on behalf of both parties.
42. A confirmed L/C means the undertaking of a bank in the exporter’s country
besides that of opening bank. It means that the confirming bank will pay if the
issuing bank cannot pay.
43. The person who draws the draft, usually the exporter, is called the drawer, and the
person to whom the draft is drawn is called the drawee. There is another party,
payee, the person receiving the payment.
44. D/P calls for actual payment against transfer of shipping documents. There are
D/P at sight and D/P after sight.
45. Inspection certificates are used to show whether the goods are in conformity with
the terms of contract.
46. Sometimes, a penalty clause should be included in the contract in case one party
fails to carry out the contract such as non-delivery, delayed delivery, delayed
opening of L/C.
47. In case of a force majeure event, the party who quotes the clause should give
prompt notice to the other party within the specified time limited.
48. An award is the decision made by the arbitration tribunal.
49. An arbitration agreement or the arbitration clause in the contract shall provide that
which party is to bear the arbitration fees.
50. Under L/C term of payment, the exporter looks to the bank for payment instead of
relying on ability or willingness of the importer to pay, but the exporter cannot get
payment unless he obeys all the terms in the L/C.
51. By issuing a credit, the bank assumes full responsibility for payment after the
proper drafts and documents have been presented.
52. Beneficiary is the party in whose favor the L/C is issued, and who is entitled to
receive the payment, that is, the exporter.
53. In this step, the buyer shall fill up the application with commodity name, quality,
quantity, unit price, total value, trade term, date of payment, packing, shipping
period and so on. It is very common for a buyer to clearly specify a period of
validity of the L/C.
54. Generally speaking, the L/C should arrive to the seller at least 15 days before the
time of shipment to allow sufficient time to check and amend, if necessary, the
L/C and to arrange shipment.
55. If the notification involves two or more clauses, he relevant parties have to accept
or reject them all according to practice, and can not accept one part while reject
the other parts of them.
56. Forwarding agents are experts in the transportation field with an up-to-date and
specialized knowledge of different modes of transport and relative freight rates.
57. Freight can be calculated per metric ton on weight (weight ton) and this method is
marked with “W”. It can be also calculated on measurement ton and this method
is marked with “M”.
58. For valuable cargoes, ad valorem freight rate is charged in proportion to the
estimated value of the cargo and this method is marked with “Ad Val.”
59. The characteristics of air freight are that the freight is charged for airport to airport
(single trip) only, and it is the freight only, excluding other charges such as
customs fees and storage fees.
60. Demurrage and dispatch are considered as a way of encouraging timely shipment.
61. A bill of lading represents the title to the goods.
62. The liability undertaken by the insurance company is on the basis of insurance
63.Should the buyer wish to have the protection of greater cover, he would
either need to reach an agreement with the seller and specify
definitely in the contract or to make his own extra insurance
64. The insured amount is the highest compensation amount undertaken by the insurer,
and it is also the foundation for calculating the insurance premium.
65. So both the insurance clauses adopted in different countries and the international
trade practices stipulate that the insured amount may be a certain percentage over
the actual value of the insured goods.
66. Insurance underwriters take a number of specific factors into consideration when
they decide on the rate of insurance premium.
67. Generally speaking, the premium for one insurance contract is equal to the insured
amount multiplied by the premium rate.
68. Cargo transport insurance is usually taken out on “warehouse to warehouse” basis.
69. If the insured amount is not specified in the sales contract, according to the usual
practices, it is the CIF or CIP price plus 10% CIF or CIP price.
70. In case of loss or damage, the consignee shall determine who will be responsible
for the loss or damage, and thus determine the party against whom he should raise
71. Any person who files a claim should have the insurable interest.
72. The importer or the exporter must submit declarations to customs on goods
entering or leaving Chinese territory.
73. Only after release by the customs may the cargo be discharged or loaded.
74. The examination of the cargo by the customs is a measure to prevent any illegal
cargos being imported into or exported from China.
75. Over-landed cargo is cargo discharged at a port in excess of the amount contracted
76. Over-carried cargo relates to goods, destined for a port but not actually discharged
there, due to error or overweight, and which are carried on to the next port.
77. A shipping order covers cargo intended for export, and a Bill of Lading refers to
goods intended for import.
78. The involvement of customs is essential as duty is abated on damaged goods.
79. The general rates apply to the goods imported from and produced or manufactured
in countries or regions with which China has concluded no agreement for
reciprocal tariff preference. The preferential rates apply to the goods imported
from and produced or manufactured on countries or regions with which China has
concluded such an agreement.
80. The customs valuation of import and export goods shall be determined by the
customs on the basis of the transaction value of the goods.
81. In the case that the duties are over-levied, the customs, upon discovery, shall
refund the money without delay
82. The exporter is responsible for ensuring that the documents for the transport of the
goods are complete, accurate and properly and promptly processed in accordance
with the sales contract.
83. Shipping note, packing list, bill of lading, consignment note and multimodal
transport document are all examples of this category.
84. The accordance between documents and L/C and between documents and
documents are the key in L/C settlement.
85. In L/C settlement, banker’s negotiation is merely based on L/C and documents
rather than on the terms of sale or the condition of the goods sold.
86. He should submit the documents to banks for negotiation before the maturity and
presenting date of L/C.
87. The negotiating bank in turn collects the payment from the paying banks,
exchanges the foreign exchange collected for local currency.
88. If the bank confirms that the documents were correct, he will send them to
importer for further examination.
89. Disputes about buyer’s refusal or failure to fulfill an obligation as stipulated in the
contract mainly cover non-payment, late payment, failure to take delivery of the
goods and so on.
90. No matter whether the arbitrators are appointed by the two parties themselves or
selected from the panels, they should remain impartial and the number of them
should be odd.
91. The parties should automatically execute the arbitral award within the time limit
specified in the arbitral award.
92. But there are also other cases in which the buyer intentionally lodges a claim
against the seller due to the decline of the market price or for some other
unfavorable factors. Such a claim is commonly known as a market claim.
VII. Translate the following English sentences into Chinese.
1. 各种形式的贸易壁垒主要来源于政府干预(government intervention)。
6. 作为你方代理， 我们将不遗余力的(spare no effort)在我们的市场上推销你们的
11. 在 CIF 术语下，除了 CFR 条件下的义务外，卖方还必须办理海洋运输保险。
12. CPT 与 CFR 极为相似，但 CFR 只适用于海洋运输和内河沿运，而 CPT 则适
16. 我们采用纸箱，而不是木箱， 因为纸箱同样适用于海上运输，但成本更少重
21. 我们一般规定装运港为“中国港口” ，这样便于在就近的口岸装运。
22. 如果我们 4 月 15 日装运，货物将在 5 月初到达你方港口，到时候我们将电话
23. 保险由卖方按照发票金额的 115%负责投保。
25. 我想偷窃提货不着险以包含在贵公司的 CIF 报价中。
27. 请你按发票金额的 120%向中国人民保险公司投保水渍险和战争险， 怎么样？
30. 我们希望您报 CIF 伦敦价，包括 3%佣金在内。
31. 价格是上海工厂交货价每公吨 300 英镑。
34. 我们要求 15%的预付货款于装运前一个月汇付至我公司。
39. 买方对货物的索赔应在货物抵达目的港的 30 天内提出。
40. 如果你们要提出索， 需要向我方提交一份由我们同意的检验机构的检验报告。
43. 如合同规定，买方应在装运日期之前 30 天开立以卖方为受益人的信用证。
50. 信用证有效期到 8 月 31 日截至。
VIII. Read the following passage and answer the questions followed.
The Globalization of Business
For better or for worse, globalization has changed the way the world does business.
The international Monetary Fund (IMF) defines globalization as the growing
economic interdependence of countries worldwide through increasing volume and
variety of cross-border transactions in goods and services and of international capital
flows, and also through the more rapid and widespread diffusion of technology. The
challenge that businesses and individuals face is to live with it, manage it, and take
advantage of the benefits it offers.
Technology is one reason for globalization. Computers which have eased
telecommunication burdens are cheaper now than they have ever been and more
powerful, too. New technology will lead to even further global business interaction, as
the Internet becomes more accepted as a business medium worldwide.
Technology has helped small and medium-sized companies take advantages of the
new markets that globalization presents. It is these companies, unencumbered by large
head offices that can exploit global niche markets. Computers, faxes and E-mails have
replaced large parts of the traditional office structures. Smaller companies can operate
more efficiently on a much wider geographical basis with less overhead than ever
Those who argue that globalization is a good thing say that companies dealing on the
world stage will eventually become much more efficient as they benefit from large
economies of scale. Productivity will be boosted and living standards everywhere
have the potential to rise as the world becomes richer and more prosperous because of
globalization. There is ample evidence to support the benefits arguments.
Others take the opposite view, claiming that globalization has, in effect, triggered a
“race to the bottom”. Countries with low wages are attracting jobs from higher
wage-paying nations, thus dragging everyone down to their level. The alleged
“exportation of jobs” has surfaced as an important political issue in most
industrialized countries. For example, Nike has been raked over the coals for paying
Vietnamese 84 cents an hour to make USD 100 sneakers.
Globalization creates more jobs that it actually destroys, but they are in different
sectors and in different geographic regions. It takes more skills, education and
mobility to be employable. The jobs lost in Europe and North America over decades
have generally been those requiring relatively uneducated workers. Indeed, wage
differentials between the skilled and unskilled will likely increase. Both sides can
point to ample examples to support their cases. But in the end, both are probably
exaggerating to some extent. What is irrefutable is that the world economic pie is
indeed bigger because of globalization and it is being sliced differently than before.
1. What does globalization mean by IMF?
2. How does technology help push the globalization of business according to the
3. What are the benefits of globalization according to the passage?
FOB and CIF under Incoterms 2000
FOB means that the seller fulfills his obligation to deliver when the goods have
passed over the ship’s rail at the named port of shipment. This means that the buyer
has to bear all costs and risks of loss or damage to the goods from that point. However,
this term also requires the seller to “deliver the goods on board the vessel”. Clearly, it
is hard to use ship’s rail as a point to divide responsibilities and costs because the
loading of the goods is a continuous performance. As the stipulations in Incoterms are
not imperative, the seller and the buyer can negotiate the division point of
responsibilities and costs. There are several derived terms available to serve this
*FOB Under Tackle
It means that the seller will deliver the goods beside the carrying vessel within the
reach of the vessel’s tackle. The buyer shall bear the loading expense.*FOB Liner
The ship will be responsible for loading.
With these two terms, the buyer bears the loading cost since he is responsible for
contracting and paying for carriage.
The seller is responsible for loading the goods on board the vessel and packing the
goods carefully and closely in the vessel’s hold.
Besides loading the goods on board the vessel, the seller should also trim the goods to
make the vessel evenly balance.
*FOB Free In
This is a combination of a sales term and a transport term. Free In means the carrying
vessel is not responsible for loading the goods.
The seller pays the loading cost under the above three terms.
FOB term requires the seller to clear the goods for export. This term can only be used
for sea or inland waterway transport. It is inappropriate when the seller is called upon
to hand over the goods to a cargo terminal before the ship arrives, since he should
then have to bear the risks and the costs before the goods have passed over the ship’s
rail when he is no longer able to control the goods or to give instructions with respect
to their custody. When the ship’s rail serves no practical purpose, such as in the case
of roll-on/roll-off or container traffic, the FCA is more appropriate to use.
CIF means that the seller must pay the costs and freight necessary to bring the goods
to the named port of destination, and he has to procure marine insurance against the
buyer’s risk of loss or damage to the goods during the carriage. The seller contracts
for insurance and pays the insurance premium. But the seller should note that under
the CIF term the seller is only required to obtain insurance on the minimum coverage.
This term requires the seller to clear the goods for export.
CIF can only used for sea and inland waterway transport. When the ship’s rail serves
no practical purposes such as in the case or roll-on/roll-off or container traffic, the CIP
term is more appropriate to use. To stipulate clearly the responsibility and the cost of
unloading, some derived terms can be used.
* CIF Liner Terms
The ship is responsible for the unloading of goods.
The goods must be unloaded onto the dock.
Under these two terms, the seller is responsible for unloading and pays the cost,
including lighterage and wharfage charges, since he contracts for carriage.
FO means that the ship is not responsible for unloading the goods carried.
*CIF Ex-ship’s hold
The seller fulfils his responsibilities when he has made the goods ready for unloading.
The buyer pays the unloading cost under the above two terms as the cost is not
included in the freight paid by the seller.
However, CIF Free Out does not necessarily mean that the risk and cost for the
discharging operations would fall upon the buyer under the contract of sale, since it
might follow the stipulations of the sales contract or the customs of the port that the
contract or the customs of the port that the contract of the carriage procured by the
seller should have included the discharging operation.
1. What are the derived terms of FOB to help dividing the point of responsibilities
and costs according to the passage?
2. What are the responsibilities of the seller under FOB?
3. What are the derived terms of CIF to stipulate clearly the responsibility and the
cost of unloading according to the passage?
Packaging for Exporting
Packaging for exporting requires a different focus from packaging for domestic use.
Often domestic packaging is primarily designed to display the product for sale, save
weight, or advertise the shipper’s company. Export packaging is primarily designed to
protect the product from hazards of international shipment and to comply with legal
What packaging is best for exported products depends on the nature and value of the
goods, the type of transportation involved and the legal requirements. As we have
already learned, different modes of transport present different dangers to the cargo.
Delicate, high-value goods merit better protection than cheap bulk cargoes. Fresh
fruits and vegetables present particularly difficult problems.
The first rule to be observed when packaging for export is to consider the entire
journey, including the short hauls to and from the primary carriers. Pack the goods so
that they will survive each leg of the trip intact. Special considerations must be taken
when loading containers. Some types of cargoes do not mix with others. For example,
drugs of a noxious chemical are clearly not compatible with food stuffs, and the two
should not be stowed in the same container.
Many nations have requirements that imports be marked with the country of origin,
that is, the country where the material was grown, manufactured, or produced. These
requirements are often very specific. And entry will be refused if delayed, or extra
charges will be levied on goods that do not conform to the requirements.
Some cargo requires special handling. A number of international markings are
available to advise handlers that a certain crate must, for instance, be protected from
heat or freezing or not handled with hooks. These markings should be made on the
package indelibly because damage could be done if they are rubbed off. Stenciling
with good ink is often preferred method. There are special requirements for dangerous
goods such as explosive and radioactive materials. Compliance with all regulations in
all countries of passage will minimize problems and delays with these types of
Finally, it is a temptation to proudly advertise the contents of the container on the side
and place one’s company logo prominently on the shipment. Often this practice is
good advertising domestically, but internationally it only notifies pilferers what booty
is to be had inside. Smart shippers use blind marks that usually consist of coded
strings of letters and numbers to identify the shipment. Blind marks are meaningless
to those who are not privy to the encryption method.
1. What are the focus on domestic packaging and export packaging respectively?
2. What factors will influence the export packaging according to the passage?
3. What do blind marks mean according to the passage? And why are they used
Modes of Transport
Transport is very important in foreign trade because goods sold by seller have to be
delivered to the buyer abroad, and the delivery of goods is made possible by shipping
services. The business of foreign trade shipping is complicated. Though most of the
arrangements are often effected by shipping or forwarding agents, a foreign trade
worker will find it useful to have a fairly good knowledge of the details regarding to
the procedures of shipment, the shipping documents, etc. in order to fulfill an export
transaction and effect shipment in a safe, speedy, accurate and economical way.
As, basically, most world trade is conveyed by sea transport, exporters and importers
are more concerned with transport by sea than in other ways. Transport by sea is,
however, increasing in scope and is best method for certain types of export and import
and under emergency or urgent circumstances, though its limitations are obvious.
The new type of transport of goods by rail and then steamers has had the effect of
greatly encouraging the use of the “container”. Railway containers of various types
are available for shipment by steamer services too, and transport by containers is
sometimes a “door-to-door” service.
Cargo transported by container ships is a modern way of transportation. Goods are
packed into standard containers at the factory or the premises of the exporter and
transported by rail or truck to the wharf on to the container ship which has been
transported to destination.
According to ISO, there are several standard sizes of the containers, the most common
These containers, being of strong metal and of standard size, facilitate loading and
unloading by machinery, expedite the shipping procedures, the time of shipment,
reduce the loss of goods in transit, save packing material, and are with other facilities
Cargo may be placed in special containers that can be transported by ship, train, truck,
or a mixture of the three to complete a journey. It is important to select the right type
of container for the protection of the specific cargo to be shipped, and there are many
types to choose from. Almost all containers have a document holder on them so that
documents can safely accompany the shipment. Aside from this, there is much
similarity between types of containers. The basic design is an enclosed metal box with
doors on the ends. This is called an end-loading, fully enclosed container. It is suitable
for general cargo that is not particularly susceptible to damage from the outside
environment. If the container is to be loaded while on a rail car, a side loading, fully
enclosed container with doors on the sides is preferred so that access will not be
blocked by the rail car in front or behind.
A fully endorsed container has an advantage in that it is often inspected by customs of
the destination country at the factory or other place where it is loaded and then closed
and a seal placed on the door. At the border such a container need not be reinspected,
saving time and money. This operation is called a through shipment.
1. What are the functions of containers according to the passage?
2. What is an end-loading, fully enclosed container?
3. What is called a through shipment?
Ocean Marine Insurance
Ocean Marine Insurance is the oldest form of insurance, probably dating to the
Middle Ages. The organization of Marine Insurance took great steps forward with the
formation and development of an insurance market on Lombard Street in London,
English and subsequently---since 1769---Lloyds of London. Today Lloyds still plays a
prominent role in Marine Insurance. The first American insurer was Insurance
Company of North America, formed in 1794. CNA has operated continuously since
that time, and remains an important market for marine as well as other forms of
property and casualty insurance.
Because of its long tradition, marine policies tend to be the most traditionally worded
policies in the insurance industry, and to have the longest tradition of case law legal
decisions covering the various terms and clauses of the policies. While care should be
taken with any insurance to clarify any definitions provided in the policies, this is
especially true in marine coverage, where the defined terms may have long histories.
Ocean marine insurance is designed to cover various hazards related to the movement
of goods. The first and obvious protection that can be provided is for the cargoes
themselves. This protection can be provided to the seller or the buyer. Where
ownership of and responsibility for the cargo are assumed crucial in determining what
coverage is needed. This used to be a simpler exercise than at present---as a limited
number of shipping terms existed, e.g., FOB, CIF, etc.
In 1990 the international shipping agency agreed on an expanded set of terms, which
allow transfer of ownership and responsibility at various points along the transit route,
including at customs borders. Various terms are set out in graphical format in
Risks are unavoidable in the shipment of goods. Goods are loaded and transshipped.
Travel on the ocean provides its own set of perils. These risks require that the shipper
take reasonable steps to ensure the safety of his goods while in transit, for instance,
with proper packaging and/or containerizing, and shipping on a vessel appropriate for
the goods in question.
Goods are generally handled many times during shipment, and marine insurance is
designed to provide coverage throughout this process. They are first loaded at the
origination point onto a land vehicle. They are held in a port prior to loading onto a
ship. They may be unloaded at an intermediate port, and held for transshipment on a
second vessel. Upon arrival in the destination country, they must be cleared through
customs, then loaded onto land carriers for transfer to the buyer’s premises.(They may
also be transferred between land transports on either the buyer’s or seller’s
end---during which time the goods are under the control of warehouse depot operators,
and additional trucking or rail companies).
The marine policy may be scripted to meet a variety of situations and desired
coverage. Generally, the policy covers perils of the sea, fire, jettison, explosion,
defects in the ship that cause damage, and other perils.
Exclusions in the policy are important, and should be reviewed with a qualified risk
manager, such as your insurance agent. These typically include damage due to
dampness, breakage, delay or loss of market, acts of war, strikes, etc.
1. Please give a brief discount of the historical evolution of insurance.
2. What are some of the hazards that a breakbulk shipment might be subject to
3. What considerations should be kept in mind by the exporter regarding cargo
packing when the importer has not specified packing requirements according to
Currency Choice in Invoicing
One of the most important elements in international commercial transaction is the
currency used for invoicing. Choosing an invoicing currency involves comparing the
amount of the invoice billed directly in domestic currency with the domestic currency
equivalent of the amount of the invoice billed in foreign currency. Making the
comparison is not a straightforward operation. Since payment will be made some time
in the future, the spot rate cannot be used in making the comparison because the spot
rate can, and probably will, change in the meantime. The forward rate is the obvious
solution. In practice, however, the forward rate is not always directly applicable. Take
the case where deliveries and invoices will occur several times over year. Applying
the appropriate forward rate to each separate invoice implies a different price for each
delivery. In this case, an average forward rate would probably be better.
The problem is the same for both the buyer and the seller. If the buyer agrees to be
billed in foreign currency, the amount he owes will be exposed to foreign exchange
risk. If the seller agrees to bill in foreign currency, the amount he receives will be
exposed to foreign exchange risk. One or the other is going to have to cover his
foreign exchange risk and they will both have recourse to the same financial
intermediaries offering the same products. If markets were completely efficient, the
choice of the invoicing currency would be completely neutral. In fact, it is not neutral
at all. In the first place, not all companies have access to the same financial products
at the same prices. Smaller companies are limited in the products they can use and
often pay higher prices for the ones that are available to them. Furthermore, rules and
regulations imposed by the monetary and tax authorities can create barriers and
supplementary costs. Finally, all companies are not equally endowed with the
knowledge and expertise to deal with problems associated with foreign exchange
transactions. Thus, companies with the required know-how can offer the financial
service of billing in their client’s domestic currency along with the merchandise they
are selling and make a profit on both ends.
There can also be speculative element involved in pricing and billing in foreign
currency. A professional that follows the foreign exchange market closely is going to
form opinions on how different currencies will do. He may feel that some currencies
are strong and are likely to appreciate. Others, he may feel, are weak and likely o
depreciate. If he has any confidence in his opinions, he will try to take advantage of
them by selling in strong currencies and purchasing in weak ones. A word of caution
is in order. Most corporate treasures agree that multicurrency invoicing should
exclude exotic currencies with narrow markets where financial services are costly or
1. Why is an average forward price better than spot rate and forward rate?
2. How do the seller and the buyer avoid to be exposed to foreign exchange risk?
Methods of Making Payments
For international payments, the traditional means of settling debts in a domestic
economy such as cash, credit cards and traveler’s cheques, are only relevant for
tourism. Bank transfers are probably the fastest and most efficient means of settling
international debts. In a bank transfer, the importer instructs his bank to debit his
account and credit the exporter’s account at the exporter’s bank. The transfer is made
by telex, or SWIFT, which guarantees its speedy execution. The disadvantage of a
bank transfer is that it is generated at the initiative of the importer and the exporter
and has no guarantee in the cost of non-payment. Consequently, except for cash
payments in advance, bank transfers are appropriate only for the most trustworthy
Checks are another instrument generated at the initiative of the importer. Unlike the
bank transfer, however, they are not rapid. First of all, they have to be sent, which
takes time, and could get lost in the mail. Furthermore, banks credit foreign cheques
only after a long delay due to difficulties in processing and clearing them.
A promissory note is written promise by the importer to pay a given sum on a given
date in the future. They play a small role in international trade but are often used as a
support to financing operations as in bridge loans, for example.
A draft or bill of exchange is the most common means of payment in international
trade. A draft is an unconditional order in writing issued by the exporter, ordering the
importer to pay on demand or at a given future date a given sum of money. A draft is
usually addressed to the importer or the importer’s agent. It can be payable to a
particular beneficiary or to bearer. Bearer drafts are negotiable. When it is paid on
demand it is called a sight draft. When it is payable at a future date it is called a time
In most cases three parties involved in the draft. The drawer is the party that draws up
the draft, sighs it and sends it to the second party called drawee. The drawer is usually
the exporter and the drawee is usually the importer or importer’s agent, or a bank
under L/C. The beneficiary of the draft is called the payee. Normally the drawer and
the payee are the same.
When the drawee receives the draft, he writes “accepted” on its face, followed by the
date and his signature. When this has been done, the draft becomes an acceptance and
the party that does the accepting has the obligation to pay at maturity. If the accepting
party is a commercial enterprise, it is known as a trade acceptance. If a bank accepts
the draft, it is known as a banker’s acceptance.
1. What are the commonly used means of settling debts in international payments
according to the passage?
2. What are trade acceptance and banker’s acceptance?
Among the available dispute resolution alternatives, arbitration is by far the most
commonly used internationally.
Arbitral award is considered final and binding. While several mechanisms can help
parties reach an amicable settlement---for example through conciliation under the ICC
Rules of Conciliation---all of then depend, ultimately, on the goodwill and
cooperation of the parties. A final and enforceable decision can generally be obtained
only by recourse to the courts or by arbitration. As arbitral awards are not subject to
appeal, they are much more likely to be final than the judgments of courts of first
instance. Although arbitral awards may be subject to challenges, the grounds of
challenge available against arbitral awards are limited.
Arbitral award enjoy much greater international recognition than judgments of
national courts. About 120 countries have signed The 1958 United National
Convention on the Recognition and Enforcement of Foreign Arbitral Awards, known
as The New York Convention. The Convention facilitates enforcement of awards in
all contracting states. There are several other multilateral and bilateral arbitration
conventions that may also help enforcement.
Arbitration is also noted for its neutrality. In arbitral proceedings, parties can place
themselves on an equal footing in five key respects: (1) place of arbitration; (2)
language used; (3) procedures or rules of law applied; (4) nationality; (5) legal
Arbitration may take place in any country, in any language and with arbitrators of any
nationality. With this flexibility, it is generally possible to structure a neutral
procedure offering no undue advantage to any party.
Judicial systems do not allow the parties to a dispute to choose their own judges. In
contract, arbitration offers the parties the unique opportunity to designate persons of
their choice as arbitrators, providing they are independent. This enables the parties to
have their disputes resolved by people who have specialized competence in the
Arbitration is faster and less expensive than litigation in the courts. Although a
complex international dispute may sometimes take a great deal of time and money to
resolve, even by arbitration, the limited scope for challenge against arbitral awards, as
compared with court judgments, offers a clear advantage. Above all, it helps to ensure
that the parties will not subsequently be entangled in a prolonged and costly series of
appeals. Furthermore, arbitration offers the parties the flexibility to set up proceedings
that can be conducted as quickly and economically as the circumstances allow.
1. What advantages does arbitration enjoy as a means of settling disputes according
to the passage?
2. What is The New York Convention, what role does it play in the development of
3. According to the article, what factors have helped ensure the impartiality of
Letter of Credit Transaction
There may be some uncertainty under L/C payment. Exporters can never totally
control the payment process. Documents which are required to be presented under an
L/C are frequently prepared by other people, and may not meet the strict compliance
standards required by the banking community for payment. Sometimes banks which
have not properly ensured they will be adequately reimbursed by their customer, have
very narrowly applied L/C principles to deny payment. They have been regularly
upheld by courts on grounds that the seller has not strictly complied with the terms of
To maximize the chance for payment under an L/C, a seller/beneficiary must know
the rules of the game. The rules are codified in a publication sponsored by the
International Chamber of Commerce (ICC), known as the Uniform Customs and
Practice for Documentary Credits. The latest version of the rules is ICC Publication
No. 600, 2006 Revision (the UCP 600).
The rules in the UCP 600 are drafted by and for the banking community. One of the
major purposes is to protect the banks from liability in L/C transactions. The banks
are providing a service---the financing of the transaction---and they expect to be
protected from getting involved in disputes between the parties as to the terms of the
sales contract. For this reason, “the independence principle” is a very important
concept in L/C transactions. This means that the L/C, and the documents required
under the L/C for payment, is completely independent from the underlying transaction
between the buyer and the seller.
The bank is not concerned with whether the contract between the buyer and the seller
is being performed according to its terms. The bank’s only concern is whether the
documents presented by the seller conform to the documents required under the L/C,
and whether the documents are presented within the required time periods. The bank
employees who examine documents presented under the L/C are essentially clerks.
Their job is not to make judgment calls, but simply to see if the documents presented
by the seller/beneficiary comply strictly with the documents required by the L/C. It is
therefore very important to assist clients in understanding the rules, because a lack of
knowledge will only work to their detriment.
1. Why is it difficult for the seller to have total control on L/C?
2. What institution sets the rules governing letter of credit and what is the name of
3. What is the bank concerned with in letter of credit transactions?
Ocean Bill of Lading
Ocean freight is the most widely used form of transportation in international trade. It
still has the attraction of being a cheap mode of transport for delivering large
quantities of goods over long distances.
The ocean bill of lading is an extremely important document that serves three
purposes. It is a cargo receipt issued by the shipping company to the shipper; it is also
a document of title of the goods; finally, it forms the evidence of a contract by the
shipping company to carry the goods from the port of shipment to the port of
The exporter obtains the bill of lading from the shipping company and completes it
himself or gets his freight forwarder to do it. It is then returned to the shipping
company. Bills of lading are usually made out in sets, which consist a number of
originals (usually three) and a number of copies.
The originals are signed by the shipping company and therefore become the
negotiable title to the goods that the bill of lading covers. Each original is negotiable,
but once one has been negotiated the others are void.
When the goods are loading on board the vessel, the shipping company checks the
details on the bill and hands it to the exporter. As soon as the bill of lading is received
by an exporter, he must arrange it to be sent to his customer. The exporter can mail the
bill to the customer---either direct or through a bank, depending on the method of
If the handling over of the bill of lading is linked with a term of payment, it is
important that all originals are kept together. When payment is arranged under a
documentary credit, the terms of credit usually state that the bill of lading must be
clean, shipped, in order and blank endorsed. This means that the goods must be in
apparent good order, be loaded on board the stated vessel and that the bill gives title to
any bearer. Great care must be taken to see that this legal document is made out in the
1. What are the three purposes that an ocean bill of lading serves?
2. Once an original copy of bill of lading has been negotiated, what will happen to
3. Please briefly describe the process of using the bill of lading.
4. What kind of bill of lading is generally required by the bank for negotiation?
Principles of Insurance
It is important that insured should have a basic understanding of some of the
underpinning principles of insurance generally, and particularly their implications to
The principle of insurable interest is a vital one to all forms of insurance. In order to
take out a policy the policy holder must have an insurable interest in the insured
matter. In the case of cargo insurance this means that they must benefit from the safe
arrival of the goods or be prejudiced by their loss. Without such a principle it would
be possible for any individual to take out an insurance policy on any eventuality they
could think of. It is also necessary to prove insurable interest in order to make a claim
against a policy and this can pose a problem if the claim is actually made by a
Most insurance is based on the fact that the insurers promise to indemnity the insured.
That is, they promise to put them back into the situation they were in before the loss.
It is obviously not a principle of life insurance. In practice the indemnity on cargo
insurance policies is expressed as an amount of money, the insured value of the goods.
Utmost good faith
Once again this is a principle which applies to all forms of insurance. The insurers are
almost totally dependent on the insured to disclose any relevant information regarding
the insured risks.
In the event that loss or damage occurs due to an insured risk then a claim will be
made on the insurance company. If we assume that the claim is successful then the
insured will regard the matter as closed. However, if nothing else happens but we
have a carrier, who may well be liable for the loss or damage, who has apparently
avoided any liability. It is the principle of subrogation which avoids this, in that it
allows the insurance company to take action against liable carriers in the name of the
insured. The exporter, or the importer, must maintain any rights of action against
carriers, by avoiding giving clean receipts and advising loss or damages as soon as
possible, but these rights are subrogated to the insurance company once the claim has
been paid. It is very fair to the insured in that the claim must be paid first. The
insurance company cannot make a claim on the carrier and only pay the insured if the
action against the carrier is successful. The insured will have a valid claim
irrespective of the carrier’s liability. Also, in the unlikely event that the insurers
actually receive more in their claim on the carrier than they have paid to the insured,
then the insured receives the difference.
It is perfectly reasonable for insurance companies to prefer that claims are made for
loss or damage due to risks which are actually covered by the policy. In fact many
claims fail simply because the cause of the loss is not an insured risk. When a loss
occurs it is often the result of not one clear event but of a series of events which,
cumulatively, lead to a loss. What the insurers must do is to establish the actual cause
of the loss, what they describe as the “active, efficient cause”, that is the proximate
1. What is meant by “insurable interest” in the case of cargo insurance?
2. How is the amount of indemnity calculated on cargo insurance policies?
3. Why is it important to establish the proximate clause?
It is clear that a scheme of non-levy of duties and taxes is more attractive to an
exporter than a scheme of initial levy and subsequent refund, as the first type of
arrangement reduces his financing costs. However, schemes of non-levy of duties and
taxes have their limitations, and for a large number of manufactured products the
scheme of duty drawback is likely to be more appropriate.
Bonded warehouses are not a new phenomenon. They have existed for over a century
as part of the national customs arrangements of many countries. Their advantage is
mainly that they make it possible for an importer to postpone paying customs duties.
An importer receiving a consignment of merchandise by sea or air may either clear
the goods for home consumption by carrying out the necessary import formalities and
paying the duty chargeable, or have the goods delivered to a bonded warehouse
officially recognized by the customs. After the goods are warehoused, they may either
be reexported from the country within a prescribed period of time or cleared for home
consumption, in one or more lots, after the appropriate import duty has been paid.
This arrangement enables an importer to order his goods in economic quantities but at
the same time pay the import duty, which forms part of his material cost, only when
he needs the goods for sale or for use in his factory, and only on the quantities he
needs at a particular time. The boned warehousing arrangement is particularly useful
for materials that are charged at a high level of import duty, such as tobacco for the
manufacture of cigarettes, where the duty may exceed the value of the material.
If a company is planning to install a new plant, it can avoid paying import duty on
each of the separate shipment of machinery and components for the plant by placing
the individual deliveries in a bonded warehouse. The various lots may be cleared from
the boned warehouse when the company is in a position to begin erecting the entire
The bonded warehousing scheme may also be useful for a manufacturer who needs to
make quick delivery to a number of markets in an area. For example, if special types
of ball bearings manufactured by a Scandinavian producer are stocked in a boned
warehouse in Colombo, they can be stipulated at short notice to buyers in Srilanka as
well as to importers in neighboring countries, since time for the long transport journey
from Scandinavia is save.
Bonded warehouses may be set up by official agencies such as the port authorities or
even by private companies. In either case, the customs authorities of the country have
to officially recognize them as authorized bonded warehouses for storing
non-duty-paid goods. Before granting such authorization, the customs authorities
assure that the premises are suitable and secure for the purpose, and that procedures
for entering material (on which duty had not been paid) into the warehouse, storing
them and removing them from the warehouse are satisfactory.
Bonded warehouses are generally established at port towns, but inland bonded
warehouses far from the ports are also sometimes set up. Bonded warehouses may be
established wherever there is a demand for bonded storage of imported materials.
When bonded warehouses are away from the customs ports, it is necessary to institute
suitable customs supervision over the transport of the imported materials on which
duty has not been paid from the place of import to the inland warehouse.
1. State the benefit the bonded warehouse brings about to an importer or an exporter.
2. How does the customs supervise and control the bonded warehouse?
The simplest method of documentary payment is a draft accompanied by certain
documents, called a documentary collection. In this case, the exporter, after having
shipped the merchandise, forwards the draft along with the required documents to his
bank. The required documents include a commercial invoice and sometimes a
consular invoice as well, an insurance certificate, a certificate of origin, and a bill of
lading in negotiable form. The bill of lading is a contract between the shipper and a
transportation company in which the latter agrees to transport the goods under
specified conditions which limit its liability. It is the shipper’s receipt for the goods as
well as proof that the goods have been or will be shipped. An order bill of lading
consigns the goods to the order of a named party (usually the exporter) and is
negotiable. Ownership can be transferred by endorsing the bill on the reverse side.
Therefore, it can serve as collateral for loans.
The negotiable bill of lading is the most important document for documentary
collection because it gives its holder title to the merchandise in question. Having
received the required documents, the bank notifies the importer who then accepts the
draft and receives the bill of lading in return. In this way, the exporter is sure that the
importer will not get title to the goods until he has accepted the draft.
Documentary collection is not foolproof because drafts are not always accepted and
paid. If the draft is refused by the importer, the exporter still has the problem of either
repatriating the goods or selling them somewhere else, probably at a loss. If the draft
is not paid, the exporter is left with a bad debt.
1. What are the required documents for documentary collection according to the
2. Why is B/L important for documentary collection according to this passage?
3. Why is documentary collection not always foolproof?
Complains and Claims
On execution of a sales contract, both parties to the contract must strictly perform
their respective obligations. If one of the parties breaches the contract, the other may
run into trouble, or suffer great losses. In this case, the affected party is entitled to
request the defaulter to make up his losses according to the relevant provisions under
the contract. Such request the affected party makes for compensation is called “claim”,
and that the party responsible for the losses or damage takes measures to deal with the
claim one way or another is called “settlement of claim”.
Claim is a common occurrence in foreign trade practice, but it does not mean that it
will happen in every transaction. However, the affected party, in consideration of the
good relation with the other party, or the loss incurred being minor one, sometimes
does not lodge a claim against the suppliers, but rather requests him to make sure that
such things will not happen again. This is known as “complaint” rather than a claim.
In international sales transaction, most claims are filed by the buyer against the seller
such as the seller’s failure to deliver the goods, late delivery or shipment of the goods,
short weight, the goods’ inconformity with the contract stipulation (including
“shipping the inferior for the contracted quality goods”), incomplete documentation
and damages caused by improper packing, etc. However, there are times when the
seller files claims against the buyer. This may occur when the buyer refuses or delays
opening an L/C, delays sending a vessel to carry the goods under FOB terms or
refuses to take delivery of the goods, and so on.
Generally speaking, the parties involved in a claim will first try to settle a claim
through friendly negotiation, and avoid arbitration or litigation. The following points
must be kept in mind when filing a claim.
First, generally all sales contracts stipulate a period for either party to file a claim,
then that party must do it within the time limit. The party responsible for the claim
should take immediate action to make investigations, send prompt reply to the
affected party and solve the problem in accordance with the international trade usages
Second, the affected should give a clear description of the loss or damage he has
incurred, and also tells the reason why the other party should be responsible for the
loss or damage. It is more convincing if the affected party can provide the relevant
evidences, a certificate of inspection, for example, to support his claim or request.
Third, despite that dealing with a claim is no pleasant matter, we should be calm and
reasonable in an attitude when negotiating for a settlement. Being rude and emotional
does not help to resolve a dispute.
1. What are the differences between the claims and complaints?
2. What should be noted when filing a claim?
IX. Practice in the given situation.
The exercises in this part of the whole sixteen chapters form an international trade
process involving a series of consistent and coherent activities from setting a company
to settling disputes. For each chapter, you and your partner(s) are to work together to
accomplish a task relating to international trade activities. After finishing all the
exercises, you will experience processes from the preparation for pushing sales, the
negotiation of a contract to the implementation of the contract, and thus get a general
view of the import and export operating procedures in the real business world.
Task One: set up your own exporting/importing company
A sets up an exporting company in China, providing the basic information about the
company including scale of operation and line of businesses, preparing samples and
materials such as brochures, catalogues and price list. He can also design a company
webpage to help introduce his company. B establishes his company in a foreign
country or identifies his corresponding line of business.
Task Two: talk about trade forms
A is selling the products on behalf of the exporting company in China. B, on behalf of
the foreign company, learns about the products of A’s company through Internet, and
finds a wide market of a product in his country. Therefore, he has come to discuss the
possibility of signing a sole agency agreement with A on this product for a period of
three years. He says that his company is experienced in the business of this kind and
enjoys good relationship with many wholesalers and retailers in this line. He wants to
expand this business in the years to come. A thinks that the annual turnover of the
foreign company is not large enough, and since there are also other clients who are
importing the products in large quantities, there is no need to entrust a sole agent in
that country at present. At last, both A and B agree to do business in direct trade form
of importation and exportation.
Task Three: establish business relationship
Both A and B express the willingness of establishing business relationship with each
other. They get to know the business regulations of the two countries and the common
practices of the other company. B obtains materials like brochures, catalogues and
price list from A, and visits the plants, or/and showrooms, or/and sample rooms if
necessary. Considering the application of trade terms and the responsibilities each
party wants to bear, they decide to adopt the CIF/CIP term.
Task Four: negotiate description of commodities
A and B make clear about the commodities they want to import/export and discuss
about the quality of the commodities, the quantity they want to deal, and the packing
needed. They reach an agreement of the way of showing quality, ways and systems of
measurement, and types of packing. In order to avoid disputes, a more or less clause
and a quality tolerance clause are also be negotiated.
Task Five: discuss transport and shipment clause
A and B are discussing the best mode of transport for the consignment. According to
the actual situation, they decide to adopt sea transport. B requests that the goods arrive
at the port of destination before XXX so that they can sell/use the goods in time.
Because there is no direct liner available, and the quantity is relatively large, at last,
they agree to allow partial shipment and transshipment through Hong Kong. The time
of shipment is fixed by creating a link between the time of shipment and the deadline
by which the relevant L/C must reach the seller. Details about shipping advice and
partial shipment such as terms of shipments, lots and quantity or weight are also
Task Six: choose insurance coverage
Both A and B agree that the insurance be effected by the seller, but they have different
opinions about the insurance coverage and insured amount. Group A proposes to
cover WPA for 110% of the invoice value, while Group B thinks that War Risk shall
also be covered and the insured amount should be 130% of the in voice value. They
all express their own reasons. At last, the two parties reach the agreement of covering
WPA and War Risk for 110% of the in voice value, and the additional premium for the
extraneous coverage is for the B’s account.
Task Seven: fix the price
A and B are discussing the price terms. A quotes a CIF price to the port of destination,
but B thinks that the price is on the high side and ask for a sweeping reduction. A
sticks to his price but agrees to allow a quantity discount. At last, the two groups reach
an agreement of a commission and discount-included unit price.
Task Eight: decide the term of payment
A and B come to the discussion of terms of payment. A wants payment to be made by
confirmed and irrevocable letter of credit, payable against shipping documents, while
Group B prefers D/A or D/P. Both parties have reasonable explanations about their
choice. B reasons that D/A or D/P is usual international practice. A explains to him
why he insists on L/C payment and finally succeed in proceeding him to accept it. At
last, they decide the payment to be made by confirmed and irrevocable letter of credit,
60 days after sight.
Task Nine: discuss inspection, claim, force majeure and arbitration clause.
A and B agree to inspect the goods in the exporting country and reinspect the goods in
importing country. They specify the scope of force majeure events, consequences,
time limit of notice to the other party, certificates and the agencies who issue them in
the force majeure clause, and the arbitration agency, location for arbitration, number
of arbitrators and their selections, cost of the arbitration and the scope of arbitration in
the arbitration clause. A claim clause and penalty clause are also discussed. Then they
go over the other terms and conditions of the contract to see if they agree on all the
terms and decide to sign the contract.
Task Ten: check and amend L/C
The L/C reaches A’s company in time. A knows that it is necessary to check up the L/C with the
contract carefully. When he checks the L/C, he finds that all the clauses are all right except the
shipment date. So A advises B to make amendment accordingly. B asks C, a clerk of the opening
bank, to make amendment notification. About a week later, A receives the amendment notification
from the advising bank. A then presents the amendment notification to the advising bank for
confirming. Then everything is right. Make a dialogue about the above-mentioned process.
Task Eleven: make the goods inspected
Before delivery, A applies for the inspection of quality, quantity and packing to C in
order to obtain relevant certificates. C goes through the procedures for inspection and
issue relevant certificates without delaying the prescribed time for shipment. After
arrival, B registers import commodities with C located at the port of discharge,
completes application forms, submit relevant documents, and applies to the same
authorities for a further inspection.
Task Twelve: discuss advancing shipment.
The sales contract stipulated that shipment is to be effected 40 days after the seller
receives the L/C”. And the selling season for the goods is before the Christmas. But
the L/C reached the seller on Nov.1st. Now B is requiring A to advance shipment and
make shipment from stock so that they can catch the selling season. A checks with C,
the production manager, and C tells him that the products are to be made to A’s
specifications, so it’s impossible to supply from stock. But they can make the goods
ready before Nov. 12th. At last, A agrees to try his best to effect the shipment before
Task Thirteen: take out insurance
E, a manager of PICC is explaining to A the coverage of insurance, including the
practice and exceptions. At last, A decides to take out insurance with PICC. The
following expressions may be of help.
the insurance with the PICC
against WPA and War Risk
insured amount is …% of the invoice value
extra premium….for the buyer’s account
the coverage is limited to 60 days upon discharge of the goods from the vessel.
lodge a claim with PICC’s agent within 60 days after the arrival of the goods
the claim is supported by survey report
Task Fourteen: get to know customs entries and tariff
G is asking A something about customs entries and tariff, including when to submit
the papers to the customs, whether he can submit the papers in advance, documents
needed, bonded goods, drawback system and so on. A explains them one by one.
Task Fifteen: prepare and discuss documents for negotiation
A and F, a green hand in international business, are preparing documents for
negotiation under L/C. A explains the types of documents required, and the role,
limitation and likely problems of each document. At last, all documents are made out
according to the L/C. The next thing to do is to send the documents to the negotiating
bank tomorrow for negotiation.
Task Sixteen: settle the dispute
After arrival of the goods, B finds that some of the goods are broken, and he thinks
that the loss is due to improper packaging. B lodges a claim with A for the damage of
the goods and proposes to be compensated by 3% of the total value plus inspection
fee. A also has shipping documents to prove that the goods were received by the
carrier in perfect condition. He has inspection certificate of packaging, too. But
because the loss incurred being minor one, and in order to maintain good relationship,
A agrees to compensate 1,000 US dollars to cover the inspection fee.
I. Translate the Following English Words into Chinese. (20’)
1 bill of exchange 2 sight draft 3 irrevocable L/C 4 penalty 5 money of payment 6 negotiating
bank 7usance L/C 8 award 9 commercial invoice 10 packing list
II. Translate the Following Chinese Words into English. (15’)
1 佣金 2 单价 3 承兑 4 贴现 5 受益人 6 检验 7 独立代理 8 支票 9 进口许可证 10 保险单
11 背书 12 补偿贸易 13 汇付 14 索赔 15 贸易术语
III. Write down the Full Name of the Following Abbreviations and the Translation.（10’）
1 D/P 2 M/T 3 D/D 4 CIF 5 B/L
IV. Decide whether the following statements are true or false by writing “T” for true and “F”
for false in the bracket besides each statement. (10’)
1. Should cargo be damaged or lost during transit, the carrier bears no responsibility whether or
not the damage or loss is due to the carrier’s negligence.
2. When negotiating a sales contract, the exporter should choose the currency that is likely to
3. The exporter should make sure that the shipping or air freight space is available before he
agrees to a certain delivery date.
4. Arbitration can be used to settle criminal cased as well as civil cases.
5. Precise and fully descriptions of the quality and quantity of goods help to avoid
misunderstanding or dispute.
6. For the trade form of distribution, the principal set the retail price, retain title and controls the
7. In bidding, the price of goods or service is quoted by the seller.
8. Countertrade includes all of the different forms of the exchange of goods for goods.
9. In a draft, the drawer and payer is usually the seller and the drawee and payee is usually the
10. A transferable credit can be transferred by the original (first) beneficiary to several other
(second) beneficiaries for more than once.
V. Fill the blanks with the proper words or phrases learned. (20’)
1. H________________ is the currency that is reliable and stable and stable and more in
2. C________ sales are between an exporter and an importer whereby the importer does not
become outright owner of the goods.
3. B_________ evidences that the goods have been received on board the carrier and that the
shipper is under the contract to carry out the transportation agreement.
4. C_________ bank (frequently, the advising bank) is requested to add its own commitment to
he letter of credit.
5. A d___________ is an unconditional written order addressed by one person to another and
signed by the person giving it, requiring the person to whom it is addressed to pay at sigh or
at a fixed or determinable future time the sum of money clearly specified to, or to the order of,
a specified person, or to bearer.
6. C____________ draft is the one to which no other documents are attached.
7. I __________ means the act of the drawer in filling up the draft with particular including the
name of drawee (or payer), the amount payable, the date and place of payment and the name
of the payee, etc.
8. A _________is required for a usance draft. It means if a usance draft is presented, the drawee
takes up his responsibility by accepting the draft for payment at a fixed future date through
putting the word “accepted”, his signature and the date of acceptance on the face of the draft.
9. If the holder of a usance draft wants to get money before payment, the draft can be
d__________ through a discounting bank at the prevailing discount rate.
10. C__________ is a special type of draft, it is a sight draft and the payer is a bank. That is an
unconditional order addressed by the drawer, requiring the bank to pay the sum of money to
11. M_________ refers to the transfer made between banks by mail, with the advantage of low
charges and disadvantage of slowness.
12. O_________ bank is the bank located in the importer’s country that opens the letter of credit
on behalf of the importer.
13. An advising bank is requested to add its own commitment to the letter of credit. In this case,
it is called c____________ bank
14. An u____________ L/C means that the L/C doesn’t have any payment guarantee by a bank
in the exporter’s country.
15. D________________ is a certain percent of price reduction, a special favor given by the
exporter to the importer.
16. The s____________ L/C means payment is immediately make to the beneficiary on
presentation of the stipulated documents and on condition that all terms of the credit have
been complied with.
17. D__________ means documents can only be handed over the buyer when he has paid the
amount on the draft.
18. A b_________ is the party in whose favor the letter of credit is issued, and who is entitled to
receive the payment, that is, the exporter.
19. Documentary c___________ is a method by which the exporter authorizes the bank to collect
money from the importer.
20. P__________ means the holder of the draft presents the draft to the drawee (or payer) asking
the latter either to pay or to accept the bill.
VI. Fill in each of the following blanks with an appropriate word. (15’)
devalued stable valuable rise interest suffer traded performed standard decline
Money is a medium of exchange and is being _1______ for countless commodities. It is highly
desirable that the value of money should remain____2____ over the years; otherwise its functions
cannot be ___3____ properly. This is particularly true of its use as a __4_____ for deferred
payments. For example, if money falls in value over the years, a person borrowing money is made
better off because the money with which the debits repaid later is less___5____ than the money
borrowed. The person from whom the money was borrowed receives back the ___6____ currency
and has therefore lost on the transaction. To overcome this __7_____ in the value of money,
interest rates ___8___ in such times, so that those who lend money receive in _9____ some of the
capital losses they are inevitably going to ___10_____ when repayment time comes.
VII. Answer the Following Questions. (10’)
1. What are the differences between agent and distribution?
2. What is the main advantage of a letter of credit for the seller and the buyer?
I. Translate the Following English Words into Chinese. (20’)
1 time draft 2 confirmed L/C 3 tariff 4 money of account 5 promissory note 6
commercial draft 7 advising bank 8 Force Majeure 9 certificate of origin 10 combined
II. Translate the Following Chinese Words into English. (15’)
1 折扣 2 背书 3 跟单托收 4 汇付 5 经销 6 单价 7 索赔 8 商业发票 9 保险凭证 10 汇率
11 检验证书 12 贴现 13 承兑 14 装箱单 15 不可撤销信用证
III. Write down the Full Name of the Following Abbreviations and the Translation. (10’）
1 D/A T/T 3D/D 4 FOB 5 L/C
IV. Decide whether the following statements are true or false by writing “T” for true and “F”
for false in the bracket besides each statement. (10’)
1. According to the standard international practice, if an L/C does not indicate whether it is
revocable or irrevocable, it should be deemed to be revocable.
2. When an L/C expressly indicates that it is a transferable one, it means that such an L/C must
3. In international trade, the party that has failed to implement the contract may choose not to
carry out his contract obligations if he has paid the required penalty.
4. When the departure term (EXW) is used, the commodity is generally inspected at the factory
or warehouse where the delivery is made.
5. When negotiating a sales contract, the exporter should choose the currency that is likely to
6. It is the importer’s responsibility to arrange shipment under FOB terms.
7. The exporter should make sure that the shipping or air freight space is available before he
agrees to a certain delivery date.
8. For the trade form of agent, the principal set the retail price, retain title and controls the
9. The essence of consignment trading is that goods exported on the consignment remain the
title to the exporter.
10. Generally speaking, under FOB in Incoterms 2000, it is the seller’s responsibility to apply for
the export license and pay the export duty.
V. Fill the blanks with the proper words or phrases learned. (20’)
1. C________________ refers to the money received by an agent for his intermediary service.
2. S________________ is the currency that is not readily convertible to gold, or into other
currencies which are more in demand, and that is unstable in value.
3. B_________ is the party in whose favor the letter of credit is issued, and who is entitled to
receive the payment, that is, the exporter.
4. An a_________ is the party who applies for the opening of a letter of credit, that is, the
5. A c_________ is the person or company to whom merchandise is to be delivered.
6. Under separate cover, we are airmailing you a copy of our catalogue with detailed
7. Draft is a negotiable money instrument. If the draft is transferred for value rather than as a
gift negotiation takes effect only when the e___________ is made.
8. D ____________ draft is the one that can be honored only when certain other documents
have been attached to
9. P__________ means the holder of the draft presents the draft to the drawee (or payer) asking
the latter either to pay or to accept the bill.
10. An effective e_____________ must be on the back of the draft itself and consists of a
signature, or plus the name of the endorsee and related comments by the owner of the draft
11. When a draft is duly presented for acceptance or payment but the acceptance or payment is
refused, the draft is said to be d_____________.
12. T_________ means the transfer made by telecommunication system such as telex or
telegraph. It is faster than M/T, but more expensive.
13. A _________ bank is the bank located in the exporter’s country who informs the exporter
that a letter of credit has been opened in his favor and transfers the L/C to the exporter. It is
usually the correspondent of the issuing banking.
14. An i____________ L/C is the one that cannot be modified or rescinded by the opening bank
without express permission of all parties, including the exporter, importer, and intermediary
15. The T (U) ____________ L/C implies that the seller is paid in a specified number of days
after the presentation of the stipulated documents.
16. The buyer will purchase regularly from a foreign supplier. Then the r_________ L/C may be
17. Documentary c___________ is a method by which the exporter authorizes the bank to collect
money from the importer.
18. D____________ means that the title documents will be handed over to the buyer once the
buyer has accepted the usance draft drawn by the seller.
19. C________ sales are between an exporter and an importer whereby the importer does not
become outright owner of the goods.
20. B_________ evidences that the goods have been received on board the carrier and that the
shipper is under the contract to carry out the transportation agreement.
VI. Fill in each of the following blanks with an appropriate word. (15’)
purchase inspected so to otherwise negotiating upon rule under out
Since there is, as a __1_____, an inspection clause in a business contract, the exporter is ___2___
obligation to observe the contract stipulation and carry ___3_____ inspection of the export goods
as required; _____4______ he cannot get payment form the negotiation bank.
Careful and proper inspection is indispensable__5______ ensure the quality of the goods that the
buyer wants to ____6____ both at home and especially form a foreign supplier. It is the accepted
practice of the exporter to have the goods __7______before shipment, ___8____ that the seller
can obtain the certificate of quality, quantity or weight and, thereby, _____9___ with the bank for
payment __10______ presentation of the shipping documents, of which such certificates are the
VII. Answer the Following Questions. (10’)
1. What are the same points and differences between CFR and CIF?
2. Why is documentary L/C commonly used as a term of payment in international trade?