Supply Chain and Logistics Global Logistics and Trade Compliance 2 — Questions and Answers
Question 1: What is the C-TPAT program?
- Customs Tariff Processing and Trading system
- Customs-Trade Partnership Against Terrorism — a US CBP supply chain security program (Correct answer)
- Container Tracking and Port Access Terminal
- Commercial Transport Passenger and Freight Tax
Correct answer: Customs-Trade Partnership Against Terrorism — a US CBP supply chain security program
C-TPAT is a voluntary US CBP partnership program where businesses adopt supply chain security standards in exchange for expedited customs processing.
Question 2: What is a letter of credit (LC) in international trade?
- A government export subsidy
- A bank-issued payment guarantee that ensures sellers are paid when they meet specified documentary conditions (Correct answer)
- A duty-free import authorization
- A supplier credit check report
Correct answer: A bank-issued payment guarantee that ensures sellers are paid when they meet specified documentary conditions
A letter of credit is a financial instrument issued by a buyer's bank guaranteeing payment to the seller upon presentation of compliant shipping documents.
Question 3: What does the US Customs drawback program allow importers to do?
- Delay duty payment by 90 days
- Recover duties paid on imported goods that are subsequently exported or used in exported products (Correct answer)
- Import goods duty-free under a blanket order
- Reduce assessed duties through a tariff classification appeal
Correct answer: Recover duties paid on imported goods that are subsequently exported or used in exported products
Customs drawback allows businesses to claim refunds of up to 99% of duties paid on imported materials that are later exported.
Question 4: What is INCOTERMS 2020?
- A US customs tariff schedule effective in 2020
- Internationally recognized trade terms published by the ICC that define buyer and seller responsibilities in international transactions (Correct answer)
- A UN framework for anti-dumping measures
- A global shipping container standardization agreement
Correct answer: Internationally recognized trade terms published by the ICC that define buyer and seller responsibilities in international transactions
Incoterms 2020 are 11 standardized ICC rules defining cost, risk, and responsibility split between buyers and sellers in international contracts.
Question 5: What is ocean freight demurrage and detention in international shipping?
- Charges for cargo damaged at sea and associated legal proceedings
- Demurrage is charged for holding containers at the port; detention is charged for holding containers off-port beyond free time (Correct answer)
- Port storage fees and carrier rebooking penalties
- Overage charges for exceeding vessel weight limits
Correct answer: Demurrage is charged for holding containers at the port; detention is charged for holding containers off-port beyond free time
Demurrage applies when containers remain at the port terminal past free days; detention applies when containers are held outside the port at importers' or exporters' facilities.
Question 6: What is a country of origin determination?
- Identifying where a product's trademark is registered
- Establishing the country where a product was manufactured or substantially transformed for customs and trade purposes (Correct answer)
- Verifying where a supplier is headquartered
- Determining which currency to use on an invoice
Correct answer: Establishing the country where a product was manufactured or substantially transformed for customs and trade purposes
Country of origin determines which tariff rates, trade agreements, and import restrictions apply to a specific product entering a country.
Supply Chain and Logistics Global Logistics and Trade Compliance 2
What is the C-TPAT program?