Please see Chapter 11 International Business Class 11 Business Studies below. These important questions with solutions have been prepared based on the latest examination guidelines and syllabus issued by CBSE, NCERT, and KVS. We have provided Class 11 Business Studies Questions and answers for all chapters in your NCERT Book for Class 11 Business Studies. These solved problems for International Business in Class 11 Business Studies will help you to score more marks in upcoming examinations.
Exam Questions Chapter 11 International Business Class 11 Business Studies
Very Short Answer Type Questions
Question. Name the term when two businesses mutually agree to share each other trade secrets and technology?
Answer : There is mutual exchange of knowledge, technology and/or patents between the firms which is known as cross-licensing
Question. Whose objective was to reconstruct the war defeated and under develop countries?
Answer : The International Bank for Reconstruction and Development (IBRD), commonly known as World Bank, was result of the Bretton Woods Conference. The main objectives were to aid the task of reconstruction of the war-affected economies of Europe and assist in the development of the underdeveloped nations of the world.
Question. What is a shipping bill?
Answer : Shipping bill is the main document on the basis of which the customs office gives the permission for export.
Question. XYZ Co. (USA) acquires another Co. R. Ltd. situated at Geneva by investing100% in its equity. What will be the R. Ltd. Co. called?
Answer : R ltd will be called wholly owned subsidiary of XYZ Co. Wholly owned subsidiary is an entry mode of international business is preferred by companies which want to exercise full control over their overseas operations.
Question. Name the document containing guarantee of a bank to honour drafts drawn on it by an exporter’s bank
Answer : A letter of credit is a guarantee issued by the importer’s bank that it will honour payment up to a certain amount of export bills to the bank of the exporter
Short Answer Type Questions
Question. It is not just a sale of trademark for a fee; also it abides the purchaser to follow strictly the rules of serving. Which mode of entry is this? Discuss any two limitations of it.
Answer : Licensing is a contractual arrangement in which one firm grants access to its patents, trade secrets or technology to another firm in a foreign country for a fee called royalty. There is mutual exchange of knowledge, technology and/or patents between the firms which is known as cross-licensing. Franchising applies to service business. Franchisers usually set strict rules and regulations as to how the franchisees should operate while running their business
Limitations:
• There is a danger that the licensee can start marketing an identical product under a slightly different brand name
• If not maintained properly, trade secrets can get divulged to others in the foreign markets
• Conflicts over maintenance of accounts, payment of royalty and non-adherence to norms relating to production of quality products
Question. Write note on Bill of lading, Bills of entry, Shipping advice.
Answer : Bill of Lading: It is a detailed list of a ship’s cargo in the form of a receipt given by the master of the ship to the person consigning the goods.
Bill of Entry: declaration by an importer or exporter of the exact nature, precise quantity and value of goods that have been landed or being shipped out. It is prepared by a qualified custom clerk or broker, it is examined by the custom authorities for its accuracy and conformity with the tariff and regulation.
Shipping advice: It is a commercial document which is issued by the exporter, who is the beneficiary of the letter of credit, in order to give shipment details to the importer who is the applicant of the letter of credit.
Question. State the reasons to have international business?
Answer :
• Countries cannot produce equally well or cheaply all that they need. This is because of the unequal distribution of natural resources among them or differences in their productivity levels
• Labour productivity and production costs differ among nations due to various socio-economic, geographical and political reasons
• Principle of territorial division of labour is applicable at the international level too. Most developing countries which are labour abundant, for instance, specialise in producing and exporting garments
• Firms too engage in international business to import what is available at lower prices in other countries, and export goods to other countries where they can fetch better prices for their products.
Question. List the formalities involved in getting an export license
Answer : Pre-requisites for getting an export licence:
1. Opening a bank account in any bank authorised by the Reserve Bank of India
2. Obtaining Import Export Code (IEC) number from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority. For obtaining the IEC number, a firm has to apply to the Director General for Foreign Trade (DGFT) with documents such as exporter/importer profile, bank receipt for requisite fee, certificate from the banker on the prescribed form, two copies of photographs attested by the banker, details of the non-resident interest and declaration about the applicant’s non association with caution listed firms
3. Registering with appropriate export promotion council.
4. Registering with Export Credit and Guarantee Corporation (ECGC) in order to safeguard against risks of non payments
5. It is obligatory for every exporter to get registered with the appropriate export promotion council
6. Registration with the ECGC is necessary in order to protect overseas payments from political and commercial risks
Question. List the codal formalities to obtain IEC No.
Answer : For obtaining the IEC number, a firm has to apply to the Director General for Foreign Trade (DGFT) with documents such as
1. exporter/importer profile
2. bank receipt for requisite fee
3. certificate from the banker on the prescribed form
4. two copies of photographs attested by the banker
5. details of the non-resident interest
6. declaration about the applicant’s non-association with caution listed firms
Long Answer Type Questions
Question. What is WTO. Write its objectives and Functions?
Answer : One of the key achievements of GATT negotiations was the decision to set up a permanent institution for looking after the promotion of free and fair trade amongst nations. The GATT was transformed into World Trade Organization (WTO) with effect from 1 January 1995. Headquarters of the WTO are situated at Geneva, Switzerland. It governs trade not only in goods, but also in services and intellectual property rights. The WTO is a permanent organisation created by an international treaty ratified by the governments and legislatures of member states. It is, moreover, a member-driven rule-based organisation in the sense that all the decisions are taken by the member governments on the basis of a general consensus. India is a founding member of WTO
| Objectives | Functions |
| • To ensure reduction of tariffs and other trade barriers imposed by different countries; | • Encouraging its member countries to come forward to WTO in mitigating their grievances |
| • To engage in such activities which improve the standards of living, create employment, increase income and effective demand and facilitate higher production and trade; | • Laying down a commonly accepted code of conduct with a view to reducing trade barriers, including tariffs and eliminating discriminations in international trade relations |
| • To facilitate the optimal use of the world’s resources for sustainable development | • Acting as a dispute settlement body |
| • To promote an integrated, more viable and durable trading system. | • Ensuring that all rules regulations prescribed in the Act are duly followed |
| • Holding consultations to bring better understanding and cooperation in global economic policy making | |
| • Supervising on a regular basis the operations of the revised Agreements and Ministerial declarations relating to goods, services and Trade Related Intellectual Property Rights (TRIPS) |
Question. ABS Garment Company has received an order to export 2000 men’s trouser to XYZ Imports Ltd. located in Australia. Discuss the procedure that abs would need to go through for executing the export order.
Answer : ABS should follow the export procedure given below:
Export Procedure
1. Receipt of enquiry and sending quotations
• Exporters can be informed of such an enquiry even by way of advertisement in the press put in by the importer.
• The exporter sends a reply to the enquiry in the form of a quotation referred to as proforma invoice.
• The proforma invoice contains information about the price at which the exporter is ready to sell the goods and also provides information about the quality, grade, size, weight, mode of delivery, type of packing and payment terms
2. Receipt of order or indent
• Export price and other terms and conditions acceptable, it places an order for the goods to be despatched.
• This order, also known as indent, contains a description of the goods ordered, prices to &&be paid, delivery terms, packing and marking details and delivery instructions
3. Assessing the importer’s creditworthiness and securing a guarantee for payments
• Exporter makes enquiry about the creditworthiness of the importer
• To minimise such risks, most exporters demand a letter of credit from the importer.
• A letter of credit is a guarantee issued by the importer’s bank that it will honour payment up to a certain amount of export bills to the bank of the exporter
4. Obtaining export licence
• Export of goods in India is subject to custom laws which demand that the export firm must have an export licence before it proceeds with exports
• Pre-requisites for getting an export licence:
o Opening a bank account in any bank authorised by the Reserve Bank of India
o Obtaining Import Export Code (IEC) number from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority.
o Registering with appropriate export promotion council.
o Registering with Export Credit and Guarantee Corporation (ECGC) in order to safeguard against risks of non payments
• For obtaining the IEC number, a firm has to apply to the Director General for Foreign Trade (DGFT) with documents such as exporter/importer profile, bank receipt for requisite fee, certificate from the banker on the prescribed form, two copies of photographs attested by the banker, details of the non-resident interest and declaration about the applicant’s non association with caution listed firms.
• It is obligatory for every exporter to get registered with the appropriate export promotion council
• Registration with the ECGC is necessary in order to protect overseas payments from political and commercial risks
5. Obtaining pre-shipment finance
• Exporter approaches his banker for obtaining pre-shipment finance to undertake export production.
• Pre-shipment finance is the finance that the exporter needs for procuring raw materials and other components, processing and packing of goods and transportation of goods to the port of shipment.
6. Production or procurement of goods
• Exporter proceeds to get the goods ready as per the specifications of the importer.
Either the firm itself goes in for producing the goods or else it buys from the market
7. Pre-shipment Inspection
• Compulsory inspection of certain products by a competent agency as designated by the government
• The government has passed Export Quality Control and Inspection Act, 1963 for this purpose and has authorised some agencies to act as inspection agencies
• The pre-shipment inspection report is required to be submitted along with other export documents at the time of exports
• Inspection is not compulsory in case the goods are being exported by star trading houses, trading houses, export houses, industrial units setup in export processing zones/special economic zones (EPZs/SEZs) and 100 per cent export oriented units (EOUs
8. Excise clearance
• Excise duty is payable on the materials used in manufacturing goods. The exporter, therefore, has to apply to the concerned Excise Commissioner in the region with an invoice. If the Excise Commissioner is satisfied, he may issue the excise Clearance
• The refund of excise duty is known as duty drawback.
• This scheme of duty drawback is presently administered by the Directorate of Drawback under the Ministry of Finance which is responsible for fixing the rates of drawback for different products
9. Obtaining certificate of origin
• For availing trade concessions and other benefits, the importer may ask the exporter to send a certificate of origin.
• The certificate of origin acts as a proof that the goods have actually been manufactured in the country from where the export is taking place.
• This certificate can be obtained from the trade consulate located in the exporter’s country
10. Reservation of shipping space
• The exporting firm applies to the shipping company for provision of shipping space.
• It has to specify the types of goods to be exported, probable date of shipment and the port of destination.
• On acceptance of application for shipping, the shipping company issues a shipping order
11. Packing and forwarding
• The goods are then properly packed and marked with necessary details such as name and address of the importer, gross and net weight, port of shipment and destination, country of origin, etc.
• The exporter then makes necessary arrangement for transportation of goods to the port.
• On loading goods into the railway wagon, the railway authorities issue a ‘railway receipt’ which serves as a title to the goods.
• The exporter endorses the railway receipt in favour of his agent to enable him to take delivery of goods at the port of shipment
12. Insurance of goods
• Goods are insured with an insurance company y to protect against the risks of loss or damage of the goods due to the perils of the sea during the transit
13. Customs clearance
• The goods must be cleared from the customs before these can be loaded on the ship.
• For obtaining customs clearance, the exporter prepares the shipping bill.
• Shipping bill is the main document on the basis of which the customs office gives the permission for export
• Five copies of the shipping bill along with the following documents are then submitted to the Customs Appraiser at the Customs House:
o Export Contract or Export Order
o Letter of Credit
o Commercial Invoice
o Certificate of Origin
o Certificate of Inspection
o Marine Insurance Policy
• After submission of these documents, the Superintendent of the concerned port trust is approached for obtaining the carting order. Carting order is the instruction to the staff at the gate of the port to permit the entry of the cargo inside the dock
14. Obtaining mates receipt
• A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth, date of shipment, descripton of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc.
• The port superintendent, on receipt of port dues, hands over the mate’s receipt to the C&F agent.
15. Payment of freight and issuance of bill of lading
• The C&F agent surrenders the mates receipt to the shipping company for computation of freight.
• After receipt of the freight, the shipping company issues a bill of lading which serves as an evidence that the shipping company has accepted the goods for carrying to the designated destination.
• In the case the goods are being sent by air, this document is referred to as airway bill.
16. Preparation of invoice
• The invoice states the quantity of goods sent and the amount to be paid by the importer. The C&F agent gets it duly attested by the customs.
17. Securing payment
• The importer needs various documents to claim the title of goods on their arrival at his/her country and getting them customs cleared.
• The documents that are needed in this connection include certified copy of invoice, bill of lading, packing list, insurance policy, certificate of origin and letter of credit
• Submission of the relevant documents to the bank for the purpose of getting the payment from the bank is called ‘negotiation of the documents’
• On receiving the bill of exchange, the importer releases the payment in case of sight draft or accepts the usance draft for making payment on maturity of the bill of exchange. The exporter’s bank receives the payment through the importer’s bank and is credited to the exporter’s account
• The exporter can get immediate payment from his/ her bank on the submission of documents by signing a letter of indemnity
• Having received the payment for exports, the exporter needs to get a bank certificate of payment
Question. What is IMF? Write its objective and functions
Answer : The major idea underlying the setting up of the IMF is to evolve an orderly international monetary system, i.e., facilitating system of international payments and adjustments in exchange rates among national currencies
| Objectives | Functions |
| • To promote international monetary cooperation through a permanent institution, | • Acting as a short-term credit institution |
| • To facilitate expansion of balanced growth of international trade and to contribute promotion and maintenance of high level of employmet | • Providing machinery for the orderly adjustment of exchange rates |
| • To promote exchange stability with a view to maintain orderly exchange arrangements among member countries | • Acting as a reservoir of the currencies of all the member countries |
| • To assist in the establishment of a multilateral system of payments in respect of current transactions between members. | • Acting as a lending institution of foreign currency and current transaction |
| • Determining the value of a country’s currency and altering it | |
| • Providing machinery for international consultations |
Question. Identify the documents highlighted in the following statements:
(i) This document is issued by the commanding officer of the ship to the exporter after cargo is loaded on the ship.
(ii) This document is prepared by shipping company to acknowledge the receipt of goods on ship and gives an undertaking to carry them to port of destination.
(iii) This document is the most appropriate and secure method of payment to settle international transactions.
(iv)On the basis of this document, customs office grants permission for the export.
(v) This document in prepared by the importer and it shows the details of goods imported
(vi)On the basis of this document imported goods are unloaded from the carrier. (import manifest)
Answer :
(i) This document is issued by the commanding officer of the ship to the exporter after cargo is loaded on the ship: Mate’s Receipt. A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth, date of shipment, descripton of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc.
(ii) This document is prepared by shipping company to acknowledge the receipt of goods on ship and gives an undertaking to carry them to port of destination: Bill of lading. After receipt of the freight, the shipping company issues a bill of lading which serves as an evidence that the shipping company has accepted the goods for carrying to the designated destination
(iii) This document is the most appropriate and secure method of payment to settle international transactions: Bill of exchange. On receiving the bill of exchange, the importer releases the payment in case of sight draft or accepts the usance draft for making payment on maturity of the bill of exchange.
The exporter’s bank receives the payment through the importer’s bank and is credited to the exporter’s account. The exporter can get immediate payment from his/ her bank on the submission of documents by signing a letter of indemnity
(iv)On the basis of this document, customs office grants permission for the export: Shipping bill is the main document on the basis of which the customs office gives the permission for export
(v) This document in prepared by the importer and it shows the details of goods imported: The import order contains information about the price, quantity size, grade and quality of goods ordered and the instructions relating to packing, shipping, ports of shipment and destination, delivery schedule, insurance and mode of payment
(vi)On the basis of this document imported goods are unloaded from the carrier: import manifest. He provides the document called import general manifest. Import general manifest is a document that contains the details of the imported goods