Incoterms Assessment

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| By Gawaine Ward
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Gawaine Ward
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  • 1/14 Questions

    Incoterms are regulated by:

    • U S Customs
    • International Chamber of Commerce
    • World Trade Organization
    • United Nations
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Business Quizzes & Trivia
About This Quiz

The 'Incoterms Assessment' quiz tests knowledge on international commercial terms (Incoterms) crucial for global trade. It assesses understanding of risk transfer, responsibilities in shipping arrangements, and customs duties across different Incoterms like DAP, EXW, and DDP, aligning with ICC regulations.

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  • 2. 

    At what point does risk transfer from the seller to the buyer if the terms of shipment are DAP(destination address)?

    • Once the goods are handed over to the first carrier or forwarder.

    • Once goods are delivered at the destination address.

    • Once goods leave the factory at origin.

    Correct Answer
    A. Once goods are delivered at the destination address.
    Explanation
    The risk transfers from the seller to the buyer once the goods are delivered at the destination address. This means that the seller is responsible for any loss or damage to the goods until they reach the buyer's specified location. Once the goods have been successfully delivered, the buyer assumes the risk and becomes responsible for any further issues or damages.

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  • 3. 

    Which is the only Incoterm that requires the seller to pay customs duty in the destination country? 

    • DAP

    • FOB

    • DDP

    Correct Answer
    A. DDP
    Explanation
    DDP stands for Delivered Duty Paid. This Incoterm requires the seller to bear all costs and risks associated with delivering the goods to the agreed-upon destination, including paying customs duty in the destination country. Therefore, DDP is the only Incoterm that requires the seller to pay customs duty in the destination country.

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  • 4. 

    Which Incoterm places the maximum obligation on the seller and minimum obligations on the buyer?

    • DDP

    • EXW

    • FOB

    Correct Answer
    A. DDP
    Explanation
    DDP (Delivered Duty Paid) places the maximum obligation on the seller and minimum obligations on the buyer. Under DDP, the seller is responsible for delivering the goods to the buyer's chosen destination and paying all costs and taxes associated with the delivery. The seller bears all the risks until the goods are delivered. On the other hand, the buyer's obligations are minimal, mainly consisting of accepting the goods and paying for them. Therefore, DDP is the correct answer as it clearly reflects the maximum obligation on the seller and minimum obligations on the buyer.

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  • 5. 

    Which Incoterm places the maximum obligation on the buyer and minimum obligations on the seller?

    • DDP

    • EXW

    • FOB

    Correct Answer
    A. EXW
    Explanation
    EXW (Ex Works) places the maximum obligation on the buyer and minimum obligations on the seller. Under EXW, the seller is only responsible for making the goods available at their own premises, while the buyer is responsible for all other aspects of the shipment, including transportation, customs clearance, and any associated costs and risks. This term is commonly used when the buyer has a higher level of expertise and resources to handle the logistics of the shipment, and the seller wants to minimize their responsibilities and costs.

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  • 6. 

    What are Incoterms 2010?

    • The law relating the international carriage of goods.

    • A set of internationally recognized contract terms that define buyer/seller's responsibilities when included in international contracts.

    • A shorthand used by the freight industry for indicating whether the buyer or seller pays for freight costs during the shipment of goods.

    • A set of contract terms indicating where the title to the goods passes in international shipments.

    Correct Answer
    A. A set of internationally recognized contract terms that define buyer/seller's responsibilities when included in international contracts.
    Explanation
    Incoterms 2010 are a set of internationally recognized contract terms that define the responsibilities of the buyer and seller in international contracts. These terms provide a standardized framework for determining who is responsible for various aspects of the shipment, such as transportation costs, insurance, and risk of loss. By using Incoterms 2010, both parties can have a clear understanding of their obligations and avoid any misunderstandings or disputes.

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  • 7. 

    Goods that are taken in charge at Felixstowe, UK, for transport to Long Beach, California, under the rule "CIP Long Beach, CA, Incoterms 2010."  The seller will arrange and pay for freight to Long Beach, but risk will pass to the buyer upon delivery of the goods to the carrier at Felixstowe, before the main carriage.

    • True

    • False

    Correct Answer
    A. True
    Explanation
    Under the rule "CIP Long Beach, CA, Incoterms 2010," the seller is responsible for arranging and paying for the freight to Long Beach. However, the risk of the goods passes to the buyer upon delivery to the carrier at Felixstowe. This means that once the goods are handed over to the carrier, any damage or loss that may occur during the main carriage will be the buyer's responsibility. Therefore, the statement "True" is correct.

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  • 8. 

    Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is NOT included.

    • CIF

    • DAP

    • CPT

    • CFR

    Correct Answer
    A. CFR
    Explanation
    CFR stands for Cost and Freight. It means that the seller is responsible for paying the costs and freight to bring the goods to the port of destination. However, once the goods are loaded on the vessel, the risk is transferred to the buyer. Insurance for the goods is not included in this arrangement.

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  • 9. 

    Select the correct Incoterm 2010 for the following: The seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all the risks up to the point that the goods are unloaded at the terminal.

    • DAP

    • DAT

    • DDP

    Correct Answer
    A. DAT
    Explanation
    DAT (Delivered at Terminal) is the correct Incoterm 2010 for the given scenario. In DAT, the seller is responsible for delivering the goods to the named terminal, covering the costs of transportation to that terminal. The seller also bears the risks until the goods are unloaded at the terminal. However, the seller is not responsible for import clearance costs, which are the buyer's responsibility.

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  • 10. 

    When the Incoterm is Ex Works, the buyer's nominated freight forwarder must arrange for the loading of the goods into the truck at the factory.  In practice, the seller assts in this risk.  

    • True

    • False

    Correct Answer
    A. True
    Explanation
    When the Incoterm is Ex Works, it means that the seller is only responsible for making the goods available at their own premises. The buyer's nominated freight forwarder is responsible for arranging the transportation and loading of the goods onto the truck at the seller's factory. However, in practice, the seller may assist in this process to ensure that the goods are loaded properly and to mitigate any risks associated with the loading process. Therefore, the statement "the buyer's nominated freight forwarder must arrange for the loading of the goods into the truck at the factory" is true.

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  • 11. 

    Select all of the charges/responsibilities listed that should be paid by the shipper according to the INCOTERMS EX Works .

    • Export Formalities

    • Foreign Pre carriage

    • Freight costs to port of discharge

    • Devanning/handling at port of discharge

    • Inland Costs(IPI)to destination terminal for Customs Clearance(place of delivery on HBOL)

    • Terminal Handling at place of delivery on HBOL

    • U S Customs Clearance

    • Duties

    • Insurance

    • Delivery to the customer door

    • Make cargo ready at shipper warehouse.

    Correct Answer
    A. Make cargo ready at shipper warehouse.
    Explanation
    According to the INCOTERMS EX Works, the shipper is responsible for making the cargo ready at their own warehouse. This means that the shipper is responsible for preparing the goods for transportation, such as packaging and labeling, and ensuring that the cargo is ready for pickup by the buyer or their carrier. The other charges/responsibilities listed, such as export formalities, freight costs, handling at the port of discharge, customs clearance, duties, insurance, and delivery to the customer door, are not the responsibility of the shipper under the EX Works terms.

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  • 12. 

    The seller delivers goods, cleared for export, to the buyer-designated carrier at a named location. This is used for any mode of transport. The seller must load goods onto the buyer's carrier

    • CPT

    • DAP

    • FCA

    Correct Answer
    A. FCA
    Explanation
    FCA stands for Free Carrier. In this Incoterm, the seller is responsible for delivering the goods to the buyer-designated carrier at a named location. The goods are considered delivered once they are loaded onto the buyer's carrier. This term can be used for any mode of transport, making it flexible for different types of shipments.

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  • 13. 

    CIP and CIF both: (Select all that apply)

    • Indicate the seller must pay for the freight to arrival in buyer's country

    • Assume risk for the international movement of goods is the buyer's not the seller's

    • Can be used for any mode of transportation

    • Indicate the seller must buy cargo insurance in the name of the buyer

    Correct Answer(s)
    A. Indicate the seller must pay for the freight to arrival in buyer's country
    A. Assume risk for the international movement of goods is the buyer's not the seller's
    A. Indicate the seller must buy cargo insurance in the name of the buyer
    Explanation
    Both CIP (Carriage and Insurance Paid to) and CIF (Cost, Insurance, and Freight) terms indicate that the seller is responsible for paying the freight charges until the goods arrive in the buyer's country. They also both assign the risk for the international movement of goods to the buyer, not the seller. Additionally, both terms require the seller to purchase cargo insurance in the name of the buyer. These terms can be used for any mode of transportation.

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  • 14. 

    Select all of the charges listed that should be paid by the shipper according to the INCOTERMS DAP- Consignee.

    • Export Formalities

    • Foreign Pre Carriage

    • Freight costs to port of discharge

    • Devanning/handling at port of discharge

    • Inland costs(IPI) to destination terminal for Customs Clearance(Place of delivery on HBOL).

    • Terminal handling at place of delivery on HBOL.

    • U S Customs Clearance

    • Duties

    • Insurance

    • Delivery to the customer door

    Correct Answer(s)
    A. Export Formalities
    A. Foreign Pre Carriage
    A. Freight costs to port of discharge
    A. Devanning/handling at port of discharge
    A. Inland costs(IPI) to destination terminal for Customs Clearance(Place of delivery on HBOL).
    A. Terminal handling at place of delivery on HBOL.
    A. Delivery to the customer door
    Explanation
    According to the INCOTERMS DAP- Consignee, the shipper is responsible for paying Export Formalities, Foreign Pre Carriage, Freight costs to port of discharge, Devanning/handling at port of discharge, Inland costs(IPI) to destination terminal for Customs Clearance(Place of delivery on HBOL), Terminal handling at place of delivery on HBOL, and Delivery to the customer door. The charges such as U S Customs Clearance, Duties, and Insurance are not the shipper's responsibility.

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Quiz Review Timeline (Updated): Mar 21, 2023 +

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  • Current Version
  • Mar 21, 2023
    Quiz Edited by
    ProProfs Editorial Team
  • Apr 12, 2013
    Quiz Created by
    Gawaine Ward

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