Ch4. International Trade English — Practical Review and Sample Exam

Series Review: Key Concepts at a Glance

Contract Formation

Offer + Acceptance (on identical terms) = Contract
Counter-offer = Rejection of original offer + New offer

Key terms (3 P's): Price / Payment / Packing & Delivery
Key clauses: Arbitration / Force Majeure / Governing Law / Warranty
CISG: governs most international goods contracts unless opted out

Incoterms 2020 — Quick Matrix

Term    Mode          Seller's main duty         Risk transfer point
EXW     Any           Make available at premises  At seller's premises
FCA     Any           Deliver to carrier          Named place (first carrier)
FAS     Sea only      Alongside vessel            Ship's side at port of loading
FOB     Sea only      Load onto vessel            On board at port of loading
CFR     Sea only      Load + pay freight          On board at port of loading
CIF     Sea only      Load + freight + insurance  On board at port of loading
CPT     Any           Deliver to carrier          First carrier
CIP     Any           Deliver to carrier + insure First carrier
DAP     Any           Deliver to named place      Named destination
DPU     Any           Deliver + unload            Named destination (unloaded)
DDP     Any           Deliver duty paid           Named destination

Letters of Credit — Document Checklist

Standard L/C document package:
☐ Commercial Invoice (matching L/C exactly — amount, description, terms)
☐ Bill of Lading (Clean, On Board, marked "Freight Prepaid" or as specified)
☐ Packing List (quantity, weight, dimensions per package)
☐ Certificate of Origin (preferential or non-preferential as required)
☐ Insurance Certificate or Policy (CIF terms or as specified — at least 110%)
☐ Inspection Certificate (if required by buyer or L/C)
☐ Weight / Quality Certificate (if specified)

Common L/C discrepancies to avoid:
→ Shipment date after L/C latest shipment date
→ Presentation of documents after expiry date
→ Description in invoice differs from L/C
→ Invoice amount exceeds L/C amount
→ B/L not "On Board" (only "Received for Shipment")
→ Insurance amount below 110% of invoice value

Marine Insurance — Coverage Comparison

Condition      Fire  Stranding  Sea water  Theft  All risks
ICC (A) ✓       ✓       ✓           ✓       ✓       ✓
ICC (B) ✓       ✓       ✓           ✓       ✗       ✗
ICC (C) ✓       ✓       ✗           ✗       ✗       ✗

Dispute Resolution Ladder

1. Negotiation        → fastest, cheapest, no third party
2. Mediation          → neutral facilitator; non-binding
3. Arbitration        → binding award; enforceable under New York Convention
4. Litigation         → court judgment; slowest; jurisdiction issues

High-Frequency Trade Terms Glossary

Term	Definition
Advising Bank	Bank that authenticates and forwards the L/C to the seller
AWB	Air Waybill — non-negotiable air freight document
B/L	Bill of Lading — negotiable ocean transport document
C/O	Certificate of Origin
CFS	Container Freight Station — LCL consolidation point
CISG	UN Convention on Contracts for the International Sale of Goods
Consignee	The party to whom cargo is consigned
D/A	Documents against Acceptance — docs released on draft acceptance
D/P	Documents against Payment — docs released on cash payment
Discrepancy	Document that does not comply with L/C conditions
Force majeure	Event beyond a party’s control that excuses performance
Freight collect	Freight paid by the consignee at destination
Freight prepaid	Freight paid by the shipper at origin
ICC	(1) International Chamber of Commerce; (2) Institute Cargo Clauses
Incoterms	ICC rules defining cost/risk division between buyer and seller
L/C	Letter of Credit
Negotiating Bank	Bank that purchases (negotiates) documents from seller
Notify Party	Party to be informed of cargo arrival
Shipper	The party who ships the goods (usually the seller)
T/T	Telegraphic Transfer — wire payment
TEU	Twenty-foot Equivalent Unit (standard container)
UCP 600	ICC rules governing Letters of Credit
Usance	Deferred payment period under a time draft

20-Question Practice Exam

Q1. Under CISG, when does an acceptance become effective?

(A) When the acceptor sends it
(B) When the offeror receives it
(C) When both parties sign it
(D) When a bank confirms it

Q2. Which Incoterms condition requires the seller to pay both freight AND marine insurance?

(A) FOB (B) CFR (C) CIF (D) FCA

Q3. A “Clean Bill of Lading” means:

(A) The goods have been inspected and certified as high quality
(B) The carrier noted no apparent damage or shortage when receiving the goods
(C) All customs formalities have been completed
(D) The shipper paid all freight charges

Q4. Under a Sight L/C, when is payment made?

(A) 30 days after shipment
(B) Upon presentation of conforming documents
(C) When the buyer accepts the draft
(D) At the end of the voyage

Q5. What is a “Discrepancy” in the context of an L/C?

(A) A disagreement between buyer and seller about the contract price
(B) A document that does not comply with the L/C conditions
(C) A shortage in the shipped quantity
(D) A delay in the letter of credit opening

Q6. The acronym UCP 600 refers to:

(A) Uniform Customs and Practice for Documentary Credits
(B) Universal Container Protocol version 600
(C) United Commerce Procedures for International Trade
(D) UN Convention on Procurement, chapter 600

Q7. Which mode of cargo is described as “Full Container Load”?

(A) LCL (B) FCL (C) FAS (D) FCA

Q8. Institute Cargo Clauses (A) provides which level of coverage?

(A) Named perils only
(B) Major perils only
(C) All risks except those explicitly excluded
(D) Comprehensive coverage including war and strikes automatically

Q9. The New York Convention (1958) primarily deals with:

(A) Ocean freight rate regulation
(B) International labour standards
(C) Recognition and enforcement of foreign arbitral awards
(D) Customs tariff harmonisation

Q10. Under an FOB contract, when does risk transfer from seller to buyer?

(A) When the goods leave the seller’s factory
(B) When the goods are placed alongside the vessel
(C) When the goods are loaded on board the vessel at the port of loading
(D) When the vessel arrives at the destination port

Q11. A “Usance L/C at 90 days” means:

(A) The L/C is valid for 90 days from the date of issue
(B) Payment is deferred for 90 days after the bill of exchange is accepted
(C) Goods must be shipped within 90 days
(D) The seller must present documents within 90 days

Q12. What is the role of the “Advising Bank” in an L/C transaction?

(A) It opens the L/C on behalf of the buyer
(B) It authenticates and forwards the L/C to the seller
(C) It guarantees the issuing bank’s payment obligation
(D) It collects payment from the importer

Q13. “Force majeure” in a trade contract typically:

(A) Permanently cancels the contract
(B) Allows a party to breach the contract without liability
(C) Temporarily excuses performance during an unforeseeable event beyond the party’s control
(D) Shifts all costs to the other party

Q14. Which of the following is NOT typically a ground for refusing enforcement of a foreign arbitral award under the New York Convention?

(A) The arbitration agreement was invalid
(B) The award is contrary to public policy of the enforcing state
(C) The award is unfavourable to the losing party on the merits
(D) A party was unable to present its case

Q15. In trade correspondence, “We must hold you responsible for…” is used to:

(A) Acknowledge a past obligation
(B) Lodge a formal claim and assign liability
(C) Request additional documentation
(D) Confirm receipt of goods

Q16. An Air Waybill is different from an Ocean Bill of Lading because:

(A) It covers both sea and air transport
(B) It is negotiable and can be endorsed
(C) It is non-negotiable and is not a document of title
(D) It is issued only by freight forwarders

Q17. Under Incoterms 2020, which term is recommended to replace FOB for containerised cargo?

(A) CPT (B) FCA (C) CIP (D) DAP

Q18. “W/M” in ocean freight refers to:

(A) Warehouse and Management
(B) Width and Measurement
(C) Weight or Measurement — whichever produces higher freight
(D) Whole-modal cargo type

Q19. A buyer receives goods with 50 units damaged. The correct first step is:

(A) File a lawsuit immediately
(B) Refuse all future orders from the seller
(C) Notify the seller promptly and propose negotiation to resolve the claim
(D) Contact the arbitration tribunal directly

Q20. The standard insured value under marine insurance in international trade is typically:

(A) 100% of the invoice value
(B) 110% of the CIF invoice value
(C) 120% of the FOB value
(D) Whatever the seller decides

Answer Key

Q	Answer	Q	Answer
1	B	11	B
2	C	12	B
3	B	13	C
4	B	14	C
5	B	15	B
6	A	16	C
7	B	17	B
8	C	18	C
9	C	19	C
10	C	20	B