MANAGEMENT ASSOCIATE ASSESSMENT

Subject Area: INCOTERMS

Date:
Name:
P. No:

Instructions:

i. Total Marks 15 (01 x 15 questions).

ii. Time: 10 minutes
iii. Attempt all questions.

1. At what point does risk transfer from the seller to the buyer if the terms of shipment are
DAP?
A. Once the goods are handed over to the first carrier or forwarder.
B. Once goods are delivered at the destination address.
C. Once goods leave the factory at origin.
D. Once the goods are delivered at Destination Port.

Correct Answer

B. 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.

2. 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 assists in this
risk.
A. A. True
B. B. 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.

3. Which is the only Incoterm that requires the seller to pay customs duty in the destination
country?
A. DAP
B. FOB
C. DDP
MANAGEMENT ASSOCIATE ASSESSMENT
Subject Area: INCOTERMS
Date:
Name:
P. No:
D. CPT

Correct Answer

C. 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.

4. Select all of the charges listed that should be paid by the shipper according to the
INCOTERMS DAP.
A. Export Formalities
B. Foreign Pre Carriage
C. Freight costs to port of discharge
D. Devanning/handling at port of discharge
E. Inland costs to destination terminal for Customs Clearance (Place of delivery on HBL).
F. Terminal handling at place of delivery on HBL.
G. DP Customs Clearance
H. Duties
I. Insurance
J. Delivery to the customer door

Correct Answer(s)

A. Export Formalities

B. Foreign Pre Carriage

C. Freight costs to port of discharge

D. Devanning/handling at port of discharge

E. Inland costs to destination terminal for Customs Clearance (Place of delivery on HBL).

F. Terminal handling at place of delivery on HBL.

J. 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 HBL), Terminal handling at place of delivery on HBL, and Delivery to the customer
door. The charges such as DP Customs Clearance, Duties, and Insurance are not the shipper's
responsibility.

5. Select all of the charges/responsibilities listed that should be paid by the shipper according
to the INCOTERMS EX Works .
MANAGEMENT ASSOCIATE ASSESSMENT
Subject Area: INCOTERMS
Date:
Name:
P. No:
A. Export Formalities
B. Foreign Pre carriage
C. Freight costs to port of discharge
D. Devanning/handling at port of discharge
E. Inland Costs to destination terminal for Customs Clearance (place of delivery on HBL)
F. Terminal Handling at place of delivery on HBL
G. DP Customs Clearance
H. Duties
I. Insurance
J. Delivery to the customer door
K. Make cargo ready at shipper warehouse.

Correct Answer

K. 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.

6. INCOTERMS are regulated by:

A. World Customs Organization
B. International Chamber of Commerce
C. World Trade Organization
D. United Nations

Correct Answer

B. International Chamber of Commerce

Explanation

Incoterms, or International Commercial Terms, are a set of standardized rules that define the
responsibilities and obligations of buyers and sellers in international trade. These rules are
used to determine who is responsible for the costs and risks associated with the
transportation and delivery of goods. The International Chamber of Commerce (ICC) is
responsible for regulating and updating Incoterms. They regularly review and revise the rules
to ensure they reflect the current practices and needs of the global business community. The
ICC is a global organization that promotes international trade and provides a platform for
businesses to collaborate and resolve trade-related issues.

7. Which Incoterm places the maximum obligation on the buyer and minimum obligations on
the seller?
A. DDP
MANAGEMENT ASSOCIATE ASSESSMENT
Subject Area: INCOTERMS
Date:
Name:
P. No:
B. EXW
C. FOB
D. FCA

Correct Answer

B. 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.

8. Which Incoterm places the maximum obligation on the seller and minimum obligations on
the buyer?
A. DDP
B. EXW
C. FOB
D. DAP

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.

9. 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.
A. CPT
B. DAP
C. FCA
D. FOB

Correct Answer

C. FCA
MANAGEMENT ASSOCIATE ASSESSMENT
Subject Area: INCOTERMS
Date:
Name:
P. No:
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.

10. 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.
A. CIF
B. DAP
C. CPT
D. CFR

Correct Answer

D. 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.

11. What are Incoterms?

A. The law relating the international carriage of goods.
B. A set of internationally recognized contract terms that define buyer/seller's
responsibilities when included in international contracts.
C. A shorthand used by the freight industry for indicating whether the buyer or seller pays
for freight costs during the shipment of goods.
D. A set of contract terms indicating where the title to the goods passes in international
shipments.

Correct Answer

B. A set of internationally recognized contract terms that define buyer/seller's

responsibilities when included in international contracts.

Explanation

Incoterms 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, both
parties can have a clear understanding of their obligations and avoid any misunderstandings
or disputes.

12. CIP and CIF both: (Select all that apply)

A. Indicate the seller must pay for the freight to arrival in buyer's country
MANAGEMENT ASSOCIATE ASSESSMENT
Subject Area: INCOTERMS
Date:
Name:
P. No:
B. Assume risk for the international movement of goods is the buyer's not the seller's
C. Can be used for any mode of transportation.
D. 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

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

D. 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.

13. Goods that are taken in charge at Felixstowe, UK, for transport to Karachi, Pakistan, under
the rule "CPT Karachi, Incoterms 2020." The seller will arrange and pay for freight to Karachi,
but risk will pass to the buyer upon delivery of the goods to the carrier at Felixstowe, before
the main carriage.
A. True
B. False

Correct Answer

A. True

Explanation

Under the rule " CPT Karachi, Incoterms 2020," the seller is responsible for arranging and
paying for the freight to Karachi. 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.

14. Select the correct Incoterm 2020 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.
A. DAP
B. DPU
C. DDP
D. CPT

Correct Answer

B. DPU
MANAGEMENT ASSOCIATE ASSESSMENT
Subject Area: INCOTERMS
Date:
Name:
P. No:
Explanation

DPU (Delivered at Place Unloaded) is the correct Incoterm 2020 for the given scenario. In
DPU, 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.

15. Revision in INCOTERMS are undertaken by the governing body.

A. When required & requested by Users
B. Every 5 years
C. Every 10 years
D. Every 15 years

Correct Answer

C.Every 10 years

Since their introduction in 1936, the Incoterms rules are updated every 10 years. The latest
update was carried out in September 2019, following which the ICC released Incoterms
2020.