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GBA: International Trade and Supply Chain Management

GBA · Work through your exam, one topic at a time.

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International Trade and Supply Chain Management

What this domain tests

International Trade and Supply Chain Management tests Incoterms accuracy, customs mechanics, and whether you can trace cost, risk and title correctly through a cross-border flow.

Core rules and concepts

  • Incoterms 2020, eleven rules. Any mode: EXW, FCA, CPT, CIP, DAP, DPU, DDP. Sea and inland waterway only: FAS, FOB, CFR, CIF.
  • Risk versus cost - under CIF and CFR the seller pays main carriage to the destination port, but risk passes when goods are loaded on board. Cost and risk transfer at different points.
  • Insurance - CIF and CIP require the seller to provide cover at 110% of contract value. CIF requires Institute Cargo Clauses (C) at minimum; CIP requires ICC (A), the wider cover.
  • DAP versus DPU - DPU requires the seller to unload at destination; DAP does not. DDP adds import clearance and duties.
  • Containers - FCA is preferred over FOB because the seller hands goods to the carrier before loading on a vessel.
  • Customs - HS classification drives duty; WTO valuation uses transaction value; rules of origin determine preferential treatment, with cumulation available in regimes such as RCEP.
  • Payment and documents - letters of credit under UCP 600, documentary collections, open account; sanctions and dual-use export controls overlay all of it.

Worked example

A Vietnamese furniture exporter sells to a German buyer on 'CIF Hamburg, Incoterms 2020'. The container is damaged in a North Sea storm. Risk: it passed to the buyer when the goods were on board in Ho Chi Minh City, so the loss is the buyer's. Remedy: the seller must tender a policy or certificate covering at least 110% of the contract price, normally ICC (C), assigned to the buyer, who claims on the policy. Had the term been DAP Hamburg, the seller would bear transit risk and need its own cover; DPU would also require the seller to unload. The point is that CIF does not mean the seller carries risk to Hamburg - candidates routinely lose marks here.

Traps that cost marks

  • Using FOB or CIF for air or container freight.
  • Assuming DDP means the seller permanently absorbs VAT; recoverability varies by jurisdiction.
  • Mixing Incoterms with payment terms - they govern neither title nor payment.
  • Classifying goods without checking HS chapter and section notes.
  • Confusing origin with place of shipment.