The generalized system of preferences is a framework under which developed countries give preferential tariff treatment to manufactured goods imported from developing countries.
ANS: True
Manufacturing is not permitted on goods brought into a bonded warehouse under any circumstances.
ANS: False
Under the Harmonized Tariff Schedule all countries charge the same duty rate for the importation of the same products.
ANS: False
The HTS utilized in the United States is taken from an international classification scheme administered by the World Customs Organization (WCO).
ANS: True
The general rule-making authority in customs classification and assessment of duties in the U.S. is vested in the International Trade Commission (ITC).
ANS: False
The primary rule of interpretation in determining the appropriate HTS classification number is the essential character rule.
ANS: False
The foreign affairs doctrine states that it is the exclusive domain of the federal government to enact laws regulating international trade.
ANS: True
Ad Valorem duties are based on the weight or quantity of the good being imported.
ANS: False
In order to obtain the duty exemption for off-shore assembly found in Section 9802, exported items must be ready for assembly without further fabrication.
ANS: True
Foreign Trade Zones allow U.S. manufacturers to export goods without being subject to duties.
ANS: False
An importer concerned about a classification issue can get an advanced ruling from the Commissioner of Customs before importing the good.
ANS: True
Without exception, all goods imported into the U.S. must have a country of origin marking on them.
ANS: False
Liquidation of goods by the Customs Service refers to the seizure of goods excluded from importation into the U.S.
ANS: False
Anyone importing unmarked items into the U.S. is subject to civil penalties including an additional 10% ad valorem duty.
ANS: True
15.Because country of origin determinations may vary under different statutes, it is possible for the same good to be considered from Country A for purposes of marking and from Country B for purposes of assessing a duty.
ANS: True
When using the deductive value method of determining dutiable value, an importer may deduct foreign inland freight costs, but only if they are separately invoiced.
ANS: True
In the U.S., the least preferred method of valuation for determining the dutiable value of a good is the computed value method.
ANS: True
U.S. firms that import materials or components that they process or assemble for re-export may obtain refunds of all duties paid on the imported merchandise, less 5 percent to cover customs costs.
ANS: False
The Agreement on Customs Valuation makes the deductive value of a good the internationally preferred means of calculating dutiable value.
ANS: False
U.S. law makes substantial transformation the primary test for determining a goods country of origin.
ANS: True
The primary consequence of the Customs Modernization Act is an increase in the amount of goods being imported into U.S.
ANS: False
The Origin Agreement of GATT has led to an international harmonization in marking requirements for imported goods.
ANS: False
Generally, the value-added method of determining country of origin benefits less- developed countries because of their low cost labor and materials.
ANS: False
NAFTA regulations define a good as being made in a NAFTA country if at least 55% of the labor and component parts of that good were supplied in a NAFTA country.
ANS: True
The legal responsibility for classifying and valuing imported goods falls to the custom broker.
ANS: False
Country specific standards requirements may act as technical barriers to trade.
ANS: True
An eco-label is a voluntary mark awarded by NAFTA countries to producers who can show that their products are significantly less harmful to the environment than similar products.
ANS: False
The European Union’s CE marking on a product indicates that the product has been manufactured in the European Community.
ANS: False
The General Agreement on Trade in Services has increased the international harmonization in health and safety standards.
ANS: False
All U.S. companies are required to obtain a general license before starting export activities.
ANS: False
MULTIPLE CHOICE
All of the following are basic types of laws that regulate the importation of goods except:
Marking requirements
Duty assessment
Country of origin
Standards requirements
ANS: C
All of the following are fundamental factors used by countries to determine the customs duties to be paid for importing goods except:
Country of origin
Classification
Valuation
Markings
ANS: D
The uniform classification system adopted by most countries to classify goods in international trade is:
Harmonized commodity description
Harmonized tariff schedule
Harmonized coding system
Harmonized classification schedule
ANS: B
Foreign goods placed into which of the following are exempt from duties until officially entered into a country’s stream of commerce:
Free trade zone
Bonded warehouse
Free port
A & B only
All of the above
ANS: E
A binding ruling by the Customs Service refers to:
An advanced determination of a goods dutiable status
Imposition of penalties for non-payment of duties
Imposition of penalties for incorrect tariff classification of imported goods
None of the above
ANS: A
Duties assessed on the value of a good are known as:
Ad Valorem duties
Specific duties
Compound duties
Transformation duties
ANS: A
When an importer’s goods do not fit into a neat category within the Harmonized tariff schedule, she should first consult the:
General Rules of Interpretation
International Trade Commission
World Customs Organization
World Trade Organization
ANS: A
Section 9802 of the HTS provides for:
Establishment of free trade zones
Partial duty exemption for technological products
Partial Exemption from tariff duties for items temporarily exported for assembly and then returned to the United States
The establishment of the Court of International Trade
ANS: C
The court that has jurisdiction over any civil matters against the U.S. arising out of Federal laws governing import transactions is the:
Court of Appeals for the Federal Circuit
Supreme Court
S. District Court
International Court of Justice
Court of International Trade
ANS: E
In U.S. v. Haggar Apparel Company, the Supreme Court held that:
Section 9802 of the HTS is unconstitutional
If the Customs Service makes a reasonable interpretation and implementation of an ambiguous statutory provision, it must be given judicial deference
Customs regulations are not entitled to judicial deference because the Court of International Trade is charged to “‘reach the correct decision'” in determining the proper classification of goods
The Court of International Trade is not required to apply the legal framework from Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc
ANS: B
The customs valuation of imported goods is based upon those goods:
Transformed value
Transaction value
Assisted value
Substantial value
ANS: B
The country of origin of an imported good is determined by:
Where a good was grown, mined, produced or manufactured
Whether there has been a substantial transformation of the good in another country
I only
II only
Both I & II
Neither I nor II
ANS: C
Country of origin provides the customs service with information that determines all of the following except:
Qualification for trade preferences under a free trade agreement
Application of antidumping duties
Application of quota restrictions
Rate of duty on an import
Tariff classification
ANS: E
Deductive value is one method of determining the dutiable value of goods in which an importer is allowed to deduct certain costs including all of the following except:
International freight
Duties
Certain commissions
Packing costs
ANS: D
A form of tax relief in which a lawfully collected customs duty is refunded or remitted wholly or in part because of the particular use made of the commodity on which the duty was collected is known as:
Drawback
Setback
Use relief
Rollback
ANS: A
The European Union primarily uses which of the following tests to determine a products country of origin status:
Substantial transformation test
Specified processes test
Roll-up test
Value added test
ANS: D
The Customs Modernization Act changed customs law by:
Shifting the legal responsibility of classifying goods from the Customs Service to customs brokers
Requiring the importer to implement a proper record keeping system
Implementing a new Automated Export System
B & C only
All of the above
ANS: D
The Basel Convention restricts trade in:
Hazardous waste
Nuclear arms
Supercomputers
Agricultural products
ANS: A
A validated license for export will be needed when:
The country of import is on the Country Groups list
The product to be exported is on the Commodity Control list
I only
II only
Both I & II
Neither I nor II
ANS: C
The __________ alerts foreign buyers of goods and documents that diversion contrary to U.S. law is prohibited
Validated license
Destination Control Statement
Shipper’s Export Declaration
Bill of lading
ANS: B
ESSAY QUESTIONS
What are the three fundamental factors used by countries to determine the customs duties to be paid for importing goods? How are these three variables applied in U.S. import law for assessing tariffs?
ANS: Answers will vary.
How do the General Rules of Interpretation provide guidance to an importer and the Customs Service when there is more than one possible tariff selection?
ANS: Answers will vary.
Describe the four alternative methods available to importers for customs valuation purposes.
ANS: Answers will vary.
What legal responsibilities does the Customs Modernization Act place upon the importer of goods? How has the implementation of the Act allowed for goods to be imported more quickly?
ANS: Answers will vary.
Describe and explain the various licenses and documents that the U.S. government requires exporters to obtain before shipping goods to a foreign country.
ANS: Answers will vary.
CHAPTER SEVEN
INTERNATIONAL CONTRACT LAW
TRUE/FALSE
At the international level, the general principles of contract law are harmonized and highly specific.
ANS: False
Traditionally, the Japanese view the contract as the operative tool for ensuring full and complete performance and something that should be honored at any costs to the other party.
ANS: False
Cultural differences may play a significant role in the negotiation and formation of an international contract.
ANS: True
Arbitration is the preferred method of dispute resolution in Japan.
ANS: False
Due to the tremendous similarities among the different legal systems in how the law supports commercial transactions, there are few problems with international sales contracts.
ANS: False
Under English and U.S. common law, a negotiating party has a pre-contractual obligation to act in good faith towards the other party.
ANS: False
Promissory estoppel allows the courts to stop performance of a contract if there is a conflict between a pre-contractual oral promise and the written contract.
ANS: False
Promissory estoppel is available to a party to recover expenses incurred before the making of a promise.
ANS: False
A civil law system is more likely to view comfort instruments as legally enforceable obligations than the common law legal system.
ANS: True
According to the contra proferentem rule, ambiguity in contractual language is construed adversely against the writer or drafter.
ANS: True
Under Dutch law, parties to a negotiation have a pre-contractual obligation to refrain from negotiating with third parties.
ANS: True
German law allows for liability for bad faith negotiation even after the contract has been concluded.
ANS: True
Under the doctrine of culpa in contrahendo, a court has the authority to award reliance damages but not expectancy damages.
ANS: False
The lex mercatoria refers to business customs or trade usage developed by businesspersons throughout the world in order to facilitate business transactions.
ANS: True
Under the civil law system, failure to respond to a letter, request, or other business writing is often regarded as evidence of assent to its terms.
ANS: True
The standard of review that American courts use in interpreting contracts is embedded in the reasonable person approach.
ANS: True
The concept of penal clauses in European contracts is equivalent to the U.S. concept of liquidated damages.
ANS: True
Courts in the U.S. and in the member states of the Council of Europe may void clauses in a contract that set excessive or unreasonably large damages in case of a breach.
ANS: True
The Russian Civil Code places strong emphasis on formalities including the written from, notarial certifications, and in some cases, governmental registration.
ANS: False
Under the Chinese Foreign Economic Contracts Law, oral contracts are enforceable in certain circumstances.
ANS: False
The European Principles hold that contracts need not be in writing and may be proven by any means, including witnesses.
ANS: True
Under common law, a contract is formed when dispatched by the offeree.
ANS: True
The European Principles state that notice for non-performance becomes effective upon dispatch.
ANS: False
A circular or advertisement is generally not construed as a standing offer under the European Principles.
ANS: False
Under the European Principles, the perfect tender rule allows the buyer of non-conforming goods to reject those goods.
ANS: False
The European Principles and CISG allow a buyer of non-conforming goods to unilaterally reduce the price paid for the goods based on the diminution of value due to the non-conformity.
ANS: True
A standard merger clause in a contract will always be enforced under the rules of the European Principles.
ANS: False
Specific performance is a remedy for breach of contract in which the breaching party is required to pay a certain sum of money.
ANS: False
Specific performance is not a remedy for breach of contract under the Uniform Commercial Code unless the suing party can show that the goods are unique.
ANS: True
The UNIDROIT Principles are similar to U.S. law in that they do not assign any pre-contractual liability to parties during negotiations.
ANS: False
MULTIPLE CHOICE
Domestic sales contracts in the U.S. are controlled by the body of law known as:
Convention on the International Sale of Goods
Uniform Commercial Code
Domestic Contract Code
Uniform Contract Code
ANS: B
The almost universal adoption of the International Chamber of Commerce’s Incoterms and Uniform Customs and Practices for Documentary Credits points to the growth of:
International treaty law
Customary international business law
International commercial jurisprudence
Convention driven international business law
ANS: B
The effort to unify international sales law was significantly enhanced by the ratification of:
The ICC’s Incoterms
The ICC’s Uniform Customs and Practices for Documentary Credits
The U.N. Convention on Contracts for the International Sale of Goods
The U.N. Convention on International Sales Contracts
ANS: C
The Courts use which of the following to extend contractual liability to protect someone who reasonably relied upon the belief that the parties would conclude a final agreement:
Guaranty theory
Assurance theory
Reliance theory
Promissory theory
ANS: C
R.G. Group, Inc. v. Bojangles’ of America, Inc. illustrates the concept in American law that:
Recovery of damages under primary estoppel is not a remedy available in U.S. courts
Informal or unwritten agreements are not binding
The statute of frauds requires a contract to be in writing
Contractual liability only becomes vested when the parties move beyond mere negotiations
ANS: D
In the civil law, pre-contractual liability premised on the implied duty of the parties to act in good faith during the negotiations of a contract is known as:
Culpa in contrahendo
Contra proferentem
Contract of honor
Promissory estoppel
ANS: A
In SA Pasquasy v. Cosmair, Inc, the court held that a non-terminating party’s claims for damages are:
Limited to provable and certain, not speculative damages
Limited by its duty to minimize damages
I only
II only
Both I & II
Neither I nor II
ANS: C
Under Dutch law, contract negotiations are divided into three stages. If a party breaks off negotiations during the second or continuing stage, the breaking off party may:
Be liable for full contract damages including expenses and loss of expected profits of the other party
Incur no legal liability
Be liable for out of pocket expenses of the other party
None of the above
ANS: C
Under German law, if a party to a negotiation terminates the negotiation after indicating to the other party that the negotiations will lead to a contract, then:
The terminating party is liable for damages
The terminating party is not liable for damages
The terminating party is not liable for damages if it can provide a commercially reasonable explanation for the termination
None of the above
ANS: C
All of the following are sources of the lex mercotoria except:
Arbitral decisions
Standard form contracts
Rules of international organizations
Uniform laws
All of the above are sources of the lex mercotoria
ANS: E
The concept that says unfair or unconscionable contracts or clauses should not be enforced is known as:
Pacta sunt servanda
Prima facie
Culpa in contrahendo
Abus de droit
ANS: D
The Chinese Foreign Economics Contracts Law sets the statute of limitations for bringing a lawsuit at:
Four years
Five years
Six years
Seven years
ANS: A
Article 1.101 of the Principles of European Contract Law states that the Principles will apply in contract disputes when:
The parties select them as their choice of law
The contract is to be governed by general principles of law or the lex mercatoria
The parties to a dispute are both from European countries
A & B only
All of the above
ANS: D
In the area of acceptance under the Principles of European Contract Law:
A contract is concluded when the acceptance reaches the offeror.
An offeror may revoke an offer after dispatch of an acceptance but before receipt.
I only
II only
Both I & II
Neither I nor II
ANS: A
The principle of Nachfrist Notice, whereby a non-performing party may obtain an extension of the time of performance by giving notice to the other party, is accepted under:
Uniform Commercial Code (UCC)
European Principles
Convention on the International Sale of Goods (CISG)
B & C only
None of the above
ANS: D
Under the European Principles, a written statement that would prove evidence of a contract includes all of the following except:
Telegram
Fax
E-mail
A & B only
All of the above
ANS: E
The European Principles provide a party the right to avoid a contract due to:
Mutual mistake
Unfair advantage
Unfair terms
B & C only
All of the above
ANS: E
The UNIDROIT Principles of International Commercial Contracts are:
Up for adoption as domestic law for international contracts
Only applicable to the commercial sale of goods
Only deal with the mechanics of offer and acceptance
B & C only
None of the above
ANS: E
The Russian Civil Code is characterized by all of the following except:
A sharing of many of the principles and concepts of American contract law
A strong emphasis on formalities including the written from and notarial certifications
The lack of an excuse doctrine for non-performance
The recognition of a preliminary contract
ANS: C
The Chinese Foreign Economic Contracts Law is characterized by all of the following except:
A general adoption of the American concept of liquidated damages
The adoption of the common law’s principle of mitigation
A recognition of force majeure as an excuse for non-performance
An acceptance of oral contracts
ANS: D
ESSAY QUESTIONS
Briefly describe some examples of the trend in the development of a unified body of international business law.
ANS: Answers will vary.
Compare and contrast the U.S. and German approach to pre-contractual liability.
ANS: Answers will vary.
Under Dutch law, contract negotiations are divided into three stages. Discuss each stage and explain how the legal liability of the breaching party changes in each stage.
ANS: Answers will vary.
Describe five sources of the lex mercotoria and provide examples.
ANS: Answers will vary.
Compare and contrast the notions of offer and acceptance in American contract law and the European Principles.
ANS: Answers will vary.
