CES CES Export Pricing & Incoterms 2

Question 1

What does CIF stand for in Incoterms 2020, and which mode of transport does it apply to?

Accepted Answer

Cost, Insurance and Freight — sea and inland waterway only

Answer

CIF (Cost, Insurance and Freight) requires the seller to pay freight and minimum insurance to the named port of destination; it applies only to sea and inland waterway transport.

Question 2

A US exporter quotes a price of $5,000 FCA Chicago. What does this mean?

Accepted Answer

The seller's price covers delivery to the named carrier at Chicago, with risk transferring to the buyer at that point

Answer

FCA Chicago means the seller delivers the goods to the buyer's nominated carrier in Chicago, and risk passes to the buyer from that handover point.

Question 3

What is 'marginal cost pricing' and why might a US exporter use it?

Accepted Answer

Setting export price to cover only variable costs, allowing domestic sales to absorb fixed costs

Answer

Marginal cost pricing sets the export price above variable costs only, since fixed costs are already covered by domestic sales, enabling competitive foreign pricing.

Question 4

Which Incoterms 2020 group (D-terms) requires the seller to bear the risk of transport all the way to the destination?

Accepted Answer

D-terms (DAP, DPU, DDP)

Answer

D-terms (DAP, DPU, DDP) require the seller to deliver goods to the named destination, bearing all risks during the main carriage to that point.

Question 5

What is the 'arm's-length principle' as applied to US export transfer pricing?

Accepted Answer

The IRS standard that transactions between related parties must be priced as if they were between unrelated parties

Answer

The arm's-length principle, enforced by the IRS under Section 482, requires that intercompany prices reflect market-rate prices that unrelated parties would negotiate.

(CES) Certified Export Specialist Practice Test

(CES) Certified Export Specialist Practice Test

CES CES Export Pricing & Incoterms 2