CPP Global Sourcing & Import Regulations 2 — Questions and Answers
Question 1: A buyer discovers that a supplier in a free trade agreement (FTA) country is using components sourced from a non-FTA country. What is the primary concern?
- Currency exchange risk
- Rules of origin compliance (Correct answer)
- Supplier financial stability
- Lead time variability
Correct answer: Rules of origin compliance
Rules of origin determine whether goods qualify for preferential FTA tariff rates; using non-qualifying components can disqualify the product.
Question 2: Which U.S. government agency is primarily responsible for enforcing import regulations and collecting customs duties?
- Bureau of Industry and Security (BIS)
- Office of Foreign Assets Control (OFAC)
- U.S. Customs and Border Protection (CBP) (Correct answer)
- International Trade Administration (ITA)
Correct answer: U.S. Customs and Border Protection (CBP)
U.S. Customs and Border Protection (CBP) is the primary agency responsible for enforcing import regulations and collecting duties at the border.
Question 3: What does the term 'landed cost' include when evaluating global sourcing decisions?
- Only the purchase price and freight charges
- Purchase price, freight, insurance, duties, and all delivery costs (Correct answer)
- Only the supplier invoice price
- Purchase price minus any trade discounts
Correct answer: Purchase price, freight, insurance, duties, and all delivery costs
Landed cost includes all costs to deliver goods to the buyer's facility: purchase price, freight, insurance, duties, taxes, and handling fees.
Question 4: A 'bonded warehouse' allows importers to:
- Avoid paying import duties permanently
- Store goods under CBP supervision and defer duty payment until goods enter commerce (Correct answer)
- Expedite customs clearance for high-value shipments
- Consolidate shipments from multiple suppliers duty-free
Correct answer: Store goods under CBP supervision and defer duty payment until goods enter commerce
A bonded warehouse is a secure facility where imported goods can be stored under CBP supervision with duty payment deferred until the goods are released.
Question 5: Which Incoterm transfers maximum risk to the buyer at the earliest point in the shipment?
- DDP (Delivered Duty Paid)
- CIF (Cost, Insurance, and Freight)
- EXW (Ex Works) (Correct answer)
- DAP (Delivered at Place)
Correct answer: EXW (Ex Works)
Under EXW, the seller's only obligation is to make goods available at their premises; the buyer bears all costs and risks from that point forward.
Question 6: What is the purpose of an Importer Security Filing (ISF), commonly called '10+2'?
- To declare import duties owed to CBP
- To provide advance cargo information to CBP before ocean shipment arrives in the U.S. (Correct answer)
- To register as an official U.S. importer of record
- To apply for a preferential tariff rate under an FTA
Correct answer: To provide advance cargo information to CBP before ocean shipment arrives in the U.S.
ISF (10+2) requires importers to submit specific cargo data to CBP at least 24 hours before loading at a foreign port for ocean shipments.
Question 7: When a purchasing professional conducts a total cost analysis for global sourcing, which hidden cost is most commonly underestimated?
- Supplier unit price
- Freight insurance premiums
- Inventory carrying costs due to longer lead times (Correct answer)
- Customs broker fees
Correct answer: Inventory carrying costs due to longer lead times
Longer lead times from global sourcing require higher safety stock levels, significantly increasing inventory carrying costs that are often overlooked.
CPP Global Sourcing & Import Regulations 2
A buyer discovers that a supplier in a free trade agreement (FTA) country is using components sourced from a non-FTA country.
What is the primary concern?