V - True or False and Simple Choice
A. TRADE TERMS
1.
Trade terms in sales contracts (such as FOC, CIF, etc.) describe:
a. the method by which goods are to be manufactured.
b. the place where the buyer is to take delivery.
c. the time when the buyer is to take delivery.
d. All of the above.
e. Both b. and c. above.
2.
Almost all domestic laws allow the parties to a sales contract to define the meaning
of the trade terms (such as FOC, CIF, etc.) that they use in their contract.
3.
The most commonly used private trade terms are the International Chamber of
Commerce’s Incoterms.
4.
If parties to an international sales contract fail to define the meaning of a trade term
within their contract, or fail to state that it is to be interpreted in accordance with a
particular set of rules, than courts will apply their own domestic rules of
interpretation.
5.
It is a common and widely accepted practice for parties adopting a particular set of
rules governing trade terms (such as the Incoterms) to make extensive changes to
those rules so that they better fit the circumstances of their particular transaction.
1. A Note on the Incoterms
6.
The 1990 revisions to the International Chamber of Commerce’s Incoterms were
made to reflect changes in technology and shipping practices that occurred during the
1980s.
7. Which of the following of the Incoterms’ trade term groups requires the buyer to take
delivery of the goods at the seller’s premises?
a. “C” Group.
b. “D” Group.
c. “E” Group.
d. “F” Group.
e. None of the above.
8. Which of the following of the Incoterms’ trade term groups requires the seller to
deliver goods to a carrier?
a. “C” Group.
b. “D” Group.
c. “E” Group.
d. “F” Group.
e. None of the above.
9. Which of the following of the Incoterms’ trade term groups requires the seller to
arrange and pay for carriage, but does not have him assume the risk for loss or damage
once the goods are delivered to the carrier?
a. “C” Group.
b. “D” Group.
c. “E” Group.
d. “F” Group.
e. None of the above.
10. Which of the following of the Incoterms’ trade term groups requires the seller to bear
all costs and risks of bringing the goods to the buyer’s country?
a. “C” Group.
b. “D” Group.
c. “E” Group.
d. “F” Group.
e. None of the above.
11. Which of the following Incoterms applies only to air and rail transport?
a. CFR.
b. CIF.
c. FAS.
d. FCA.
e. FOB.
2. “Free” Terms
12. The word “free” when used in a trade term means that the seller must pay all costs
associated with delivering the goods to the buyer.
3. FOB - Free On Board
13. The FOB trade term as it is defined by the Incoterms applies to both inland carriage
and carriage by sea.
14. The FOB (named port of shipment) trade term requires a seller to deliver goods on
board a vessel that is to be designated by the buyer in a manner customary at the
particular port.
15. The requirement that goods be “on board” in a Free On Board (FOB) trade term (as
the term is used in the Incoterms) means the goods have:
a. been clearly set aside or otherwise identified as the contract goods.
b. crossed the ship’s rail.
c. put within reach of the ship’s lifting tackle.
d. Both a. and b. above.
e. both a. and c. above.
4. FAS - Free Alongside
16. The FAS (port of shipment) trade term requires a seller to deliver goods to a named
port alongside a vessel to be designated by the buyer and in a manner customary to
the particular port.
17. The requirement that goods be “alongside” in Free Alongside Ship (FAS) trade term
(as the term is used in the Incoterms) means the goods have:
a. been clearly set aside or otherwise identified as the contract goods.
b. been put within reach of the ships’ lifting tackle.
c. crossed the ship’s rail.
d. Both a. and b. above.
e. both a. and c. above.
18. Buyer and Seller entered into an FAS (Manila) contract. Buyer designated the SS
Pronto to transport the goods. Due to construction in Manila harbor, the SS Pronto was
unable to tie up alongside a pier and was forced instead to tie up at a buoy in the middle
of the harbor. To take the goods out into the bay and alongside the ship, local lighters
were hired. Who must pay for the lighters?
a. Buyer.
b. The Manila port authority.
c. Seller.
d. SS Pronto.
e. None of the above.
5. CIF - Cost, Insurance, and Freight
19. Which of the following trade terms do buyers prefer to use in an international sales
contract?
a. CFR.
b. CIF.
c. FAS.
d. FCA.
e. FOB.
20. Which of the following trade terms do sellers prefer to use in an international sales
contract?
a. CFR.
b. CIF.
c. FAS.
d. FCA.
e. FOB.
21. The Cost, Insurance, and Freight (CIF) trade term requires the seller to arrange for
the carriage of goods by sea to a port of destination and to turn over to the buyer the
documents necessary to obtain the goods from the carrier or to assert a claim against
an insurer if the goods are lost or damaged.
22. Which of the following documents is the seller required to deliver to the buyer when
their contract contains a Cost, Insurance, and Freight (CIF) trade term?
a. Bill of lading.
b. Insurance policy.
c. Letter of credit.
d. All of the above.
e. Both a. and b. above.
23. A seller is entitled to payment from the buyer under a contract containing a Cost,
Insurance, and Freight (CIF) trade term at the time the goods are received aboard the
carrier.
6. CFR - Cost and Freight
24. A Cost and Freight (CFR) trade term is essentially the same as a Cost, Insurance, and
Freight (CIF) trade term, except that the seller does not have to procure marine
insurance against the risk of loss or damage to the goods during transit.
7. DES - Delivered Ex Ship
25. A Delivered Ex Ship (DES) trade term requires the seller to deliver goods to a buyer
at an agreed port of destination.
26. A seller is entitled to payment from the buyer under a contract containing a Delivered
Ex Ship (DES) trade term only after he delivers the appropriate shipping documents
(e.g., the bill of lading, the invoice, and the insurance contract) to the buyer.
27. Seller entered into a DES (Cabo San Lucas) sales contract for the shipment of a
luxury automobile to Buyer. Seller arranged for shipment of the car on the SS Reluctant.
When the SS Reluctant arrived at Cabo San Lucas, there was no place for it to tie up at a
pier and it employed a lighter to transport the car from the ship to the pier. As the lighter
was moving from the ship to the pier with the car aboard, an unexpected violent squall
came up and the lighter capsized, dumping the car irretrievably into the sea. Who is
responsible for the loss?
a. Buyer.
b. Cabo San Lucas port authority.
c. Seller.
d. SS Relucant.
e. None of the above.
8. FCA - Free Carrier
28. The Free Carrier (FCA) trade term (as that term is used in Incoterms 1990) applies to
both inland carriage and carriage of goods by sea.
29. The Free Carrier (FCA) trade term (as that term is used in Incoterms 1990) replaces
which of the following older terms?
a.
b.
c.
d.
e.
FOB Airport.
Free on Rail (FOR).
Free on Truck (FOT).
All of the above.
None of the above.
9. EXW - Ex Works
30. Under an Ex Works (EXW) contract, a seller is only obliged to deliver goods at his
own place of business.
B. TRANSPORT
31. Customs officials at a port of entry do which of the following tasks?
a. They inspect the goods and their related documents.
b. They collect any import taxes or duties.
c. They certify that the goods comply with the carrier’s bill of lading.
d. All of the above.
e. Both a. and b.
32. Most shipments of goods carried by sea out of major ports are arranged by:
a. buyers.
b. conference lines.
c. freight forwarders.
d. sellers.
e. tramp vessels.
C. INLAND CARRIAGE
33. While freight forwarders commonly arrange and oversee the shipment of goods
abroad, it is common practice for a seller of goods to itself arrange for inland
carriage.
34. The principal international convention governing the transport of goods by rail in
North America is known by which of the following acronyms?
a. CIM.
b. COTIF.
c. CMR.
d. SMGS.
e. None of the above.
35. The consignment note that a carrier issues under the Convention for the International
Carriage of Goods by Road (the CMR Convention) is a negotiable instrument.
36. The consignment note that a carrier issues under the Convention for the International
Carriage of Goods by Road (the CMR Convention) is prima facie evidence of:
a. the condition of the goods when received.
b. the making of a transport contract.
c. the receipt of goods.
d. All of the above.
e.
Both a. and c. above
37. Until a consignee receives goods in accordance with the Convention for the
International Carriage of Goods by Road (the CMR Convention), the consignor (the
person shipping goods) may order the carrier to:
a. change the place for delivery.
b. deliver the goods to a different consignee.
c. stop the movement of the goods while they are in transit.
d. All of the above.
e. None of the above.
38. If goods shipped pursuant to the Convention for the International Carriage of Goods
by Road (the CMR Convention) are lost by one of several carriers, which of the following
will be liable for the loss?
a. The carrier in possession at the time of the loss.
b. The first carrier listed in the shipping documents.
c. The last carrier listed in the shipping documents.
d. Any of the above.
e. None of the above as the consignor is required to purchase insurance or assume
the risk for loss.
39. According to the Convention for the International Carriage of Goods by Road (the
CMR Convention), a carrier’s liability limit is 8.33 Special Drawing Rights per
kilogram so long as the consignment note states that carriage is governed by the
CMR.
40. In order for a consignor to seek reimbursement from a carrier for goods shipped
under a consignment note governed by the Convention for the International Carriage of
Goods by Road (the CMR Convention), the consignor must notify the carrier of his claim:
a. within 7 days of delivery to assert a claim for loss or damage.
b. within 7 days of delivery to make a claim for losses resulting from delay.
c. within 14 days of delivery to assert a claim for loss or damage.
d. within 14 days of delivery to make a claim for losses resulting from delay.
e. None of the above.
41. According to the Convention Concerning International Carriage by Rail (the COTIF
Convention), a carrier’s liability limit is 8.33 Special Drawing Rights per kilogram so
long as the consignment note states that carriage is governed by the COTIF
Convention.
D. CARRIAGE OF GOODS BY SEA
1. Common Carriage
42. A vessel that accepts goods for transport from more than one person is known as a
common carrier.
43. A vessel that accepts goods for transport from more than one person is known as a
charterparty.
44. A conference line is an association of seagoing carriers which have joined together to
offer common freight rates over scheduled routes.
45. An “independent line” is a seagoing carrier with its own rate schedule that does not
operate on established routes.
46. A “tramp vessel” is a seagoing carrier with its own rate schedule that operates on
established routes.
47. In most countries, the tariffs of ocean carriers are not regulated, and both conference
and independent lines will commonly offer regular shippers substantial rebates.
2. The Bill of Lading
48. A bill of lading is an instrument issued by an ocean carrier to a shipper with whom
the carrier has entered into a contract for the carriage of goods.
49. A bill of lading is:
a. a document of title.
b. a receipt for goods issued by a carrier.
c. evidence of a contract of carriage.
d. All of the above.
e. Both b. and c. above.
a.
Receipt for Goods
50. Whoever is rightfully in possession of a bill of lading is entitled to possess, use, and
dispose of the goods that the bill represents.
51. A bill of lading describes the goods, including their quantity and their condition, at
the time they are received by an oceangoing carrier.
52. If necessary, a carrier is required to open packages to ensure that their contents agree
with the description on the bill of lading.
53. Bills of lading that certify that the goods have been properly loaded on board a vessel
are known as “clean” bills of lading.
54. Shipper consigns widgets to Carrier for shipment and Carrier issues a bill of lading to
Shipper. The bill of lading states that 1,000 widgets were received by Carrier when in
reality 1,005 were received. Shipper subsequently negotiates the bill of lading to
Consignee, who in turn negotiates it to the bank that is the maker of a letter of credit.
Which of the following may introduce evidence in a court proceeding against the carrier
to prove that 1,005 widgets were shipped?
a. Bank.
b. Consignee.
c. Shipper.
d. Any of the above.
e. None of the above.
55. When a discrepancy is noted on the face of a bill of lading, it is called a “claused”
bill of lading.
56. A bill of lading which has a notation made at the time the goods were loaded that
indicates some discrepancy concerning the goods loaded is known as a:
a. canceled bill.
b. claused bill.
c. clean bill.
d. dirty bill.
e. false bill.
57. A bill of lading which has a notation on its face made several days after the goods
were loaded and which indicates that part of the goods were lost after they were loaded is
known as a:
a. canceled bill.
b. claused bill.
c. clean bill.
d. dirty bill.
e. false bill.
b. Contract of Carriage
58. Once a bill of lading has been negotiated, it becomes conclusive evidence of the
terms of the contract of carriage between the shipper and the carrier.
c.
Document of Title
59. A bill of lading issued by an ocean carrier to a named consignee that is intended to be
nonnegotiable is called a/an:
a. bearer bill of lading.
b. order bill of lading.
c. straight bill of lading.
d. transferable bill of lading.
e. None of the above.
60. A person who receives a properly negotiated order bill of lading having paid full
value, in good faith, and without notice of any defect, is a holder in due course of that
bill.
61. A person who acquires a bill of lading in good faith, without any notice of any
defects, and who pays valuable consideration for it, takes the bill free from the
issuer’s “equities” or “personal defenses.”
62. An endorser of a bill of lading transfers all of his contractual rights associated with
the bill to the endorsee.
3. Carrier’s Duties Under a Bill of Lading
63. A carrier’s obligation to use “due diligence” in making its ship seaworthy when
transporting goods under a bill of lading is strictly enforced by most courts.
4. Carrier’s Immunities
64. Carriers who issue a proper bill of lading are exempt from liability from damages
that arise from:
a. acts of war.
b. negligence of the master in the navigation of the ship.
c. quarantine restrictions.
d. All of the above.
e. None of the above.
5. Liability Limits
65. The liability limits set by the International Convention for the Unification of Certain
Rules of Law Relating to Bills of Lading of 1924 (The Hague Rules) are:
a. 30 Poincar francs per kilo of the gross weight of the goods lost or damaged.
b. 100 pounds sterling per package.
c. 500 pounds sterling per unit when shipped in “customary freight units.”
d. 10,000 Poincar francs per package.
e. None of the above.
66. The liability limits set by the International Convention for the Unification of Certain
Rules of Law Relating to Bills of Lading of 1924 (The Hague Rules) do not apply if:
a. the carrier acted recklessly and with knowledge that damage would probably
result.
b. the carrier acted with intent to cause damage.
c. the parties agreed to higher amounts.
d. Any of the above.
e. None of the above.
67. Which of the following is a “customary freight unit” as that term is used in the
International Convention for the Unification of Certain Rules of Law Relating to Bills of
Lading of 1924 (The Hague Rules)?
a. The container used for shipping all of the packages described in the bill of
lading.
b. The largest package described in the bill of lading.
c. The smallest package described in the bill of lading.
d. The unit used to calculate shipping charges.
e. None of the above.
6. Time Limitations
68. A claim for loss or damage to goods shipped under a bill of lading issued by an ocean
carrier must be instituted according to the International Convention for the
Unification of Certain Rules of Law Relating to Bills of Lading of 1924 (The Hague
Rules) within 7 days after they were to have been delivered.
7. Third Party Rights (Himalaya Clauses)
69. A “Himalaya clause” extends the liability limits set by the International Convention
for the Unification of Certain Rules of Law Relating to Bills of Lading of 1924 (The
Hague Rules) and the Protocol of 1968 (The Hague-Visby Rules) to parties who help
in the transport of the goods (such as stevedores) who are normally not covered by
those rules.
70. Himalaya clauses are generally regarded as valid in most countries, with the
exception of the United States.
E. CHARTERPARTIES
71. A charterparty is a contract for the hire of an entire ship for a particular voyage or a
set period of time.
72. The International Convention for the Unification of Certain Rules of Law Relating to
Bills of Lading of 1924 (The Hague Rules) and the Protocol of 1968 (The HagueVisby Rules) only apply to charterparties if a bill of lading issued by the ship owner
comes into the hands of a third party.
1. Voyage Charterparties
73. Under a voyage charterparty, the owner agrees to provide the ship at a named port at
a specified time and to carry the goods to the contract destination.
74. Under a voyage charterparty, the charterer engages the use of a vessel for a stated
period of time and promises to pay “hire” monthly.
2. Time Charterparties
75. The charterer of a time charterparty promises to:
a. provide a full cargo.
b. provide a ship at a named port at a specified time.
c. only direct the vessel to safe ports.
d. All of the above.
e. Both a. and c. above.
3. Charterparties and Bills of Lading
76. Charterer hires a ship from Owner under a charterparty. The ship’s crew issues a bill
of lading to Charterer for goods received on board. The bill of lading specifically refers
to and incorporates the terms of the charterparty. Charterer then negotiates the bill of
lading to Consignee. Which of the following persons are governed by the terms of the
charterparty?
a. Charterer.
b. Consignee.
c. Owners.
d. All of the above.
e.
Both a. and c. above.
F. MARITIME LIENS
77. A lien is a charge or claim against property that exists to satisfy some debt or
obligation.
78. The main purpose of maritime liens is to ensure that a vessel can adequately obtain
credit to properly outfit itself for a voyage.
79. In civil law countries, a vessel is regarded as a juridical person separate and apart
from its owner, which may be arrested and sold to pay a person foreclosing on a
maritime lien.
80. In order for a person to obtain a maritime lien on a vessel, he must be in possession
of the vessel.
81. A maritime lien:
a. attaches to the res (i.e., the vessel or cargo) and travels with it.
b. is a charge or claim against a vessel or its cargo.
c. may be secret.
d. All of the above.
e. Both a. and b. above.
82. In common law countries, before a vessel may be arrested as part of a proceeding to
foreclose on a maritime lien, the owner of the vessel must be notified.
83. In civil law countries, a vessel that has been seized as part of a proceeding to
foreclose on a maritime lien will be released upon the owner making an appearance
in court and furnishing security in lieu of the vessel.
84. Which of the following maritime liens has the highest priority (i.e., which one will be
paid off first) among multiple maritime lien claims according to the 1926 International
Convention for the Unification of Certain Rules Relating to Maritime Liens and
Mortgages (the Brussels Convention)?
a. Repairs, supplies, and necessaries.
b. Salvage and general average.
c. Seamen’s wages.
d. Ship mortgages.
e. Tort claims.
G. MARITIME INSURANCE
85. A “special cargo policy” is a maritime insurance policy that provides coverage for all
the cargo of a covered exporter during a particular time period.
1. Perils
86. Maritime insurance policies commonly cover losses from:
a. barratry.
b. jettison.
c.
d.
e.
piracy.
All of the above.
Both a. and b. above.
87. A “constructive loss clause” in a maritime insurance policy usually will treat a loss as
being a “total loss” if:
a. actual loss exceeds one-half the value of the cargo.
b. any unit of the cargo is entirely lost.
c. the cost of recovery exceeds the cargo’s value.
d. All of the above.
e. Either a. or c. above
2. Average Clauses
88. A “Free from Particular Average” (FPA) policy is the most comprehensive of
maritime insurance policies.
89. A “franchise clause” in a “With Average” (WA) maritime insurance policy provides
that payment will only be made if the loss exceeds a specified minimum amount (the
“franchise” amount).
90. A “General Average” maritime insurance policy provides protection to the individual
whose goods had to be sacrificed in order to save a vessel or the other cargo on the
vessel.
91. A person seeking to claim a General Average contribution from other parties (who
do not have a General Average maritime insurance) must show that:
a. he was not responsible for causing the danger.
b. his loss was incurred to benefit everyone.
c. his sacrificed goods were of lesser value than any other goods aboard the vessel.
d. All of the above.
e. Both a. and b. above.
H. CARRIAGE OF GOODS BY AIR
92. An “air waybill” is a negotiable instrument.
93. An “air waybill” is a document of title.
94. The Convention for the Unification of Certain Rules Relating to International
Carriage by Air of 1929 (the Warsaw Convention) limits the air carrier’s liability for
lost or damaged goods to 17 Special Drawing Rights per kilogram.
95. According to the Convention for the Unification of Certain Rules Relating to
International Carriage by Air of 1929 (the Warsaw Convention), the consignor of
goods to an air carrier has the burden of proving that the carrier failed to take “all
necessary measures” to avoid loss, damage, or delay in order to obtain compensation
from the carrier.