Chapter 8 Practice Exam

Chapter 8 Practice Exam

Matching Questions

Match the following terms with their definitions:

(1)B.NAFTA

(5)C.Tariff

(3)D.CISG

1.A trade agreement between Mexico, the United States and Canada.

3.An international convention that governs the sale of goods.

5.A duty imposed on imports.

True/False Questions

Circle true or false:

1.TFA problem for many international merchants is that tariffs have been rising for thelast decade.

3.TF“Valuation” is the process by which the Customs Services decides the nature ofgoods being imported into the United States.

5.TFDecisions of the WTO are non-binding recommendations.

Multiple-Choice Questions

7.The Commerce Department alleges that Interlex, a foreign company, is selling palm pilots in the United States for less than the cost of production. The department is charging Interlex with

(a)A NAFTA violation.

(b)Dumping.

(c)An FCPA infraction.

(d)An AECA violation.

(e)A CISG violation.

9.The WTO rules that the nation of Lugubria must lower tariffs on software from the United States from 45percent to 8percent, but Lugubria refuses to comply. What can the United States do?

(a)Nothing, because the WTO’s ruling is only arecommendation.

(b)Appeal to the United Nations.

(c)Appeal to the World Court.

(d)Impose retaliatory tariffs.

(e)File suit in Federal court in the United States.

Short-Answer Questions

11.Jean-François, a French wine exporter, sues Bob Joe, a Texas importer, claiming that Bob Joe owes him $2 million for wine.Jean-François takes the witness stand to describe how the contract was created.Where is the trial taking place?

Answer:In Texas. The question notes that Jean-Francois testified. In French civil trials, the parties are not permitted to testify. Therefore, this trial must have taken place in the U.S.12. The defense will not be successful. They have clearly violated the Foreign Corrupt Practices Act, which outlaws bribing foreign officials to influence decisions such as this one. It makes no difference where the bribe was handed over. United States v. Castle, 925 F.2d 831 (5th Cir. 1991).

13.ETHICS: Hector works in Zoey’s importing firm.Zoey overhears Hector on the phone say, “O.K., 30,000 ski parkas at $80 per parka.You’ve got yourself a deal.Thanks a lot.”When Hector hangs up, Zoey is furious, yelling, “I told you not to make a deal on those Italian ski parkas without my permission!I think I can get a better price elsewhere.”“Relax, Zoey,” replies Hector.“I wanted to lock them in, to be sure we had some in case your deal fell through.It’s just an oral contract, so we can always back out if we need to.”Is that ethical?How far can a company go to protect its interests?Does it matter that another business might make serious financial plans based on the discussion?Apart from the ethics, is Hector’s idea smart?

Answer: It is unethical. Hector should not make a firm commitment, requiring the Italian exporter to tie up 30,000 parkas, if he does not plan to honor it. Not only is this unethical, it is dumb. An oral contract for the sale of goods worth more than $500 is generally not binding in the United States under the Uniform Commercial Code (UCC), but the UCC may not control. Rather, this contract may be governed by the Convention on Contracts for the Sale of Goods (CISG), which does not require such contracts to be written. Where sales of goods are between merchants whose places of business are in different countries and those countries are signatories to the CISG, the CISG will control. Because the question does not inform us whether these businesses/parties are of different countries, or whether the Italian ski parkas are sold by an Italian business (via Italy), we cannot be certain of the application of the CISG.

15.ROLE REVERSAL: Draft an essay or short-answer question that focuses on how a confirmed, irrevocable letter of credit works.

Suggested Answer:Answers will vary.