Global Sourcing and International Procurement Flashcards

Which Incoterm places the maximum responsibility on the seller, requiring them to deliver goods to the buyer's named destination with all costs and risks covered?

Answer: DDP (Delivered Duty Paid)

DDP (Delivered Duty Paid) requires the seller to bear all costs and risks including import duties, taxes, and delivery to the final destination, making it the term most favorable to the buyer.

When a U.S. company imports goods from a foreign supplier, which government agency is primarily responsible for assessing and collecting import duties?

Answer: U.S. Customs and Border Protection (CBP)

U.S. Customs and Border Protection (CBP) is the federal agency responsible for assessing, collecting, and enforcing import duties and customs regulations at the border.

A Harmonized Tariff Schedule (HTS) code is used in international trade primarily to:

Answer: Classify products for the purpose of assessing import duties

HTS codes are standardized numerical codes used to classify imported goods so that the correct tariff rate can be applied by customs authorities.

Which of the following is the primary purpose of a Letter of Credit (L/C) in international purchasing transactions?

Answer: To guarantee payment to the seller upon presentation of complying documents

A Letter of Credit guarantees the seller payment from the buyer's bank once the seller presents documents proving compliance with the L/C terms, reducing payment risk in international trade.

The total landed cost of an internationally sourced product includes which of the following components?

Answer: Purchase price, freight, insurance, duties, taxes, and other import-related costs

Total landed cost encompasses all costs incurred to bring goods to the buyer's location, including purchase price, international freight, insurance, customs duties, taxes, and handling fees.

A country designated as a 'Most Favored Nation' (MFN) trading partner means that the U.S. will:

Answer: Apply the lowest tariff rates it gives to any other MFN country

MFN status means the U.S. will apply the same (lowest normal) tariff rates to that country's goods as it applies to any other country with MFN status, ensuring non-discriminatory trade treatment.

Which international trade agreement significantly reduced tariffs and trade barriers between the United States, Canada, and Mexico?

Answer: United States-Mexico-Canada Agreement (USMCA)

The USMCA (which replaced NAFTA in 2020) is the trilateral trade agreement governing trade between the U.S., Canada, and Mexico, reducing tariffs and establishing rules of origin requirements.