Incoterms MCQs for CDCS Exam
Section 1: General Knowledge of Incoterms (20 MCQs)
Q1: What is the primary purpose of Incoterms?
A) To determine currency exchange rates
B) To define seller and buyer responsibilities for delivery, cost, and risk
C) To regulate tariffs
D) To standardize insurance policies
Answer: B
Explanation: Incoterms clarify who is responsible for delivery, risk, and cost, reducing disputes in international trade.
Q2: Which organization publishes Incoterms?
A) WTO
B) ICC (International Chamber of Commerce)
C) UNCTAD
D) IMF
Answer: B
Explanation: ICC sets global standards; Incoterms 2020 is the latest edition.
Q3: Which Incoterm places minimum responsibility on the
seller?
A) EXW
B) DDP
C) CIF
D) DAP
Answer: A
Explanation: EXW (“Ex Works”) requires the seller only to make goods
available at their premises.
Q4: Which Incoterm is only suitable for sea and inland
waterway transport?
A) FOB
B) DAP
C) DDP
D) CIP
Answer: A
Explanation: Sea-specific terms include FOB, CFR, and CIF; DAP/DDP are
multimodal.
Q5: Which Incoterm requires the seller to pay for transport,
insurance, and duties at the destination?
A) CIF
B) DDP
C) EXW
D) FOB
Answer: B
Explanation: DDP (“Delivered Duty Paid”) maximizes seller
responsibility.
Q6: Which Incoterm is suitable for any mode of transport?
A) FOB
B) FAS
C) DAP
D) CFR
Answer: C
Q7: EXW is commonly used when the buyer wants:
A) Minimal responsibility
B) Maximum control of logistics
C) Seller to arrange freight
D) Seller to clear customs
Answer: B
Q8: CIF stands for:
A) Cost, Insurance, Freight
B) Customs, Import, Freight
C) Cost, Import, Forwarding
D) Cargo, Insurance, Freight
Answer: A
Q9: In CIF, who arranges insurance?
A) Buyer
B) Seller
C) Freight Forwarder
D) Bank
Answer: B
Q10: Which Incoterm requires the seller to deliver goods alongside
the ship at the port?
A) FOB
B) FAS
C) CFR
D) DAP
Answer: B
Explanation: FAS (“Free Alongside Ship”) places goods at the quay; buyer
assumes risk once alongside.
Q11: Which Incoterm transfers risk at the seller’s warehouse?
A) EXW
B) FOB
C) CIF
D) DAP
Answer: A
Q12: Which Incoterm allows the buyer to control export
documentation?
A) EXW
B) DDP
C) CIF
D) FOB
Answer: A
Q13: Which Incoterm is most suitable for heavy machinery
shipped by sea with insurance handled by the seller?
A) FOB
B) CIF
C) EXW
D) DAP
Answer: B
Q14: In DAP, the seller delivers goods:
A) On board the ship
B) At a named place in the buyer’s country
C) At the seller’s warehouse
D) At the port of loading
Answer: B
Q15: The latest Incoterms edition is:
A) 2010
B) 2015
C) 2020
D) 2022
Answer: C
Q16: Incoterms are legally binding only if:
A) Automatically applied in all contracts
B) Referenced explicitly in the contract of sale
C) Used in banking documents
D) Published in local law
Answer: B
Q17: Which Incoterm is often used with Letters of Credit
to simplify banking compliance?
A) EXW
B) CIF
C) DDP
D) DAP
Answer: B
Q18: Which Incoterm explicitly requires the seller to arrange
export customs clearance?
A) EXW
B) FOB
C) CIF
D) DDP
Answer: D
Q19: Which Incoterm places maximum risk on the buyer?
A) EXW
B) DDP
C) CIF
D) FOB
Answer: A
Q20: INCOTERMS help avoid disputes because they
standardize:
A) Shipping routes
B) Responsibilities for delivery, cost, and risk
C) Pricing formulas
D) Customs duties
Answer: B
Section
2: Risk Transfer (20 MCQs)
Q21: In FOB terms, when does risk transfer from seller to
buyer?
A) When goods leave the seller’s warehouse
B) When goods are delivered onboard the vessel
C) When goods reach the buyer’s warehouse
D) When customs duties are paid
Answer: B
Explanation: FOB (“Free on Board”) transfers risk once the goods are
on board the vessel at the port of shipment.
Q22: Under CIF, who bears the risk during sea transit?
A) Seller
B) Buyer
C) Freight Forwarder
D) Insurance Company
Answer: B
Explanation: The seller arranges insurance, but risk passes to the
buyer once goods are onboard.
Q23: Which Incoterm transfers risk at the named place of
destination?
A) EXW
B) DDP
C) DAP
D) FOB
Answer: C
Explanation: DAP (“Delivered at Place”) transfers risk upon delivery
to the agreed destination.
Q24: In EXW, who assumes risk during transport to the port of
export?
A) Seller
B) Buyer
C) Shipping Line
D) Bank
Answer: B
Explanation: EXW places all transport risk on the buyer, even
before export customs.
Q25: Which Incoterm requires the seller to bear risk until
goods reach the port of destination?
A) CIF
B) CFR
C) DDP
D) FOB
Answer: C
Explanation: DDP ensures seller is responsible for all costs and
risks until delivery at the destination.
Q26: In CFR terms, who bears risk after loading?
A) Seller
B) Buyer
C) Carrier
D) Freight Forwarder
Answer: B
Explanation: CFR (“Cost and Freight”) covers transport cost to
destination, but risk passes once goods are onboard.
Q27: FAS risk passes when:
A) Goods are on board
B) Goods are alongside the ship at the port of shipment
C) Goods are delivered to buyer’s warehouse
D) Customs duties are paid
Answer: B
Q28: In CIF, insurance covers:
A) Only inland transit at origin
B) Marine transit risk only
C) Both origin and destination inland transit
D) Buyer’s warehouse risk
Answer: B
Q29: Which Incoterm places risk on the seller until goods are
unloaded at the buyer’s premises?
A) DDP
B) DAP
C) CIF
D) EXW
Answer: A
Q30: In FOB, if goods are damaged at the port before loading,
who bears the risk?
A) Seller
B) Buyer
C) Carrier
D) Insurance Company
Answer: A
Explanation: FOB risk transfers only when goods are on board, so
seller bears risk until loading.
Q31: Which Incoterm allows buyer to insure goods after
shipment?
A) CIF
B) CFR
C) EXW
D) DDP
Answer: B
Q32: Under DAP, risk passes:
A) At seller’s warehouse
B) During shipment
C) Upon delivery to named destination
D) At port of loading
Answer: C
Q33: Which Incoterm is most suitable when buyer wants maximum
control over insurance?
A) CIF
B) CIP
C) EXW
D) DDP
Answer: C
Q34: In CIP, risk transfers:
A) When goods leave warehouse
B) When goods are handed to first carrier
C) Upon arrival at destination
D) When insurance is purchased
Answer: B
Q35: Who bears risk under CFR during loading delays caused by
port congestion?
A) Seller
B) Buyer
C) Carrier
D) Insurance Company
Answer: A
Q36: In DDP, if goods are damaged in transit, who is liable?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q37: Under EXW, if damage occurs during loading at the seller’s
premises, who is responsible?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Q38: FOB vs CIF difference in risk:
A) FOB – risk passes at destination; CIF – risk passes at warehouse
B) FOB – risk passes onboard; CIF – risk passes onboard but seller arranges
insurance
C) FOB – risk passes at warehouse; CIF – risk passes at destination
D) Both are identical
Answer: B
Q39: In CFR, if the seller fails to book a vessel on time, who
bears the risk of delay?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q40: EXW is high-risk for buyer because:
A) Buyer controls all transport and insurance
B) Seller clears customs
C) Seller delivers at destination
D) Insurance is included
Answer: A
Section
3: Cost & Freight Responsibilities (20 MCQs)
Q41: In CIF terms, the seller is responsible for:
A) Only cost of goods
B) Cost of goods + freight + insurance to destination port
C) Cost of goods + export customs duties only
D) Import duties at buyer’s country
Answer: B
Explanation: CIF (“Cost, Insurance, Freight”) includes freight and
marine insurance, but the buyer assumes risk once goods are onboard.
Q42: Under DDP, who pays import duties and taxes?
A) Buyer
B) Seller
C) Freight Forwarder
D) Bank
Answer: B
Q43: In CFR, who pays freight to destination port?
A) Buyer
B) Seller
C) Carrier
D) Bank
Answer: B
Q44: EXW cost responsibility:
A) Seller covers everything
B) Buyer covers all transport, insurance, and duties
C) Seller covers transport to port only
D) Buyer only pays customs
Answer: B
Q45: In CIP, the seller must:
A) Deliver goods and pay insurance to named destination
B) Deliver goods at warehouse only
C) Pay customs only
D) None of the above
Answer: A
Q46: Under FOB, who pays loading onto the vessel?
A) Seller
B) Buyer
C) Carrier
D) Insurance Company
Answer: A
Q47: FAS requires the seller to:
A) Deliver goods alongside the ship
B) Pay freight to destination
C) Clear import customs
D) Provide insurance
Answer: A
Q48: Under DAP, the buyer is responsible for:
A) Import duties and taxes
B) Freight
C) Seller’s warehouse costs
D) Loading at origin
Answer: A
Q49: Who pays insurance under CIF?
A) Seller
B) Buyer
C) Carrier
D) Both seller and buyer
Answer: A
Q50: Under CFR, if the buyer wants extra insurance beyond
minimum coverage, who pays?
A) Seller
B) Buyer
C) Carrier
D) Insurance company
Answer: B
Q51: DDP vs DAP difference in costs:
A) DDP – seller pays duties; DAP – buyer pays duties
B) DDP – buyer pays duties; DAP – seller pays duties
C) Both same
D) Only risk differs
Answer: A
Q52: EXW is cost-effective for the seller because:
A) Seller handles all export formalities
B) Buyer takes responsibility for all costs and risks
C) Seller pays freight
D) Seller pays import duties
Answer: B
Q53: In FOB, who pays export customs clearance?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q54: CIF requires the seller to insure goods for:
A) Full market value
B) 110% of invoice value
C) Minimal coverage only
D) Only for inland transit
Answer: B
Explanation: ICC recommends 110% coverage of CIF value.
Q55: Under DAP, who is responsible for unloading at destination?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Q56: CIP vs CIF difference:
A) CIP includes insurance for multimodal transport; CIF only for sea
B) CIF covers inland transport; CIP does not
C) Both identical
D) CIP is only for EXW shipments
Answer: A
Q57: Under CFR, if freight charges increase after contract, who
pays?
A) Buyer
B) Seller
C) Carrier
D) Bank
Answer: B
Q58: EXW may cause hidden costs for the buyer, such as:
A) Inland freight at origin
B) Export customs
C) Port handling charges
D) All of the above
Answer: D
Q59: In DDP, if customs duties are underpaid, who is liable?
A) Seller
B) Buyer
C) Carrier
D) Insurance Company
Answer: A
Q60: Which Incoterm allows the buyer to control all transport
and insurance arrangements?
A) EXW
B) CIF
C) DDP
D) DAP
Answer: A
Section
4: Trade Finance Applications (20 MCQs)
Q61: When using a Letter of Credit, which Incoterm is
commonly preferred?
A) EXW
B) CIF
C) DDP
D) DAP
Answer: B
Explanation: CIF aligns with LCs because shipping documents,
insurance, and freight costs are clearly defined, facilitating bank
compliance.
Q62: In a CIF shipment under LC, which document is essential for
the bank?
A) Bill of Lading
B) Seller’s warehouse receipt
C) Invoice only
D) Purchase order
Answer: A
Q63: Under DDP, which document is critical for customs
clearance at destination?
A) Insurance certificate
B) Import declaration
C) Bill of Lading
D) Packing list
Answer: B
Q64: Which Incoterm may cause documentary discrepancies
in LC if incorrectly applied?
A) EXW
B) CIF
C) FOB
D) All of the above
Answer: D
Explanation: Misalignment between contracted Incoterm and LC
documents often leads to discrepancies and payment delays.
Q65: In FOB, which document proves delivery onto the vessel?
A) Bill of Lading
B) Cargo receipt
C) Packing list
D) Insurance certificate
Answer: A
Q66: Under CIP, the seller must provide:
A) Insurance certificate to the buyer
B) Freight forwarding invoice
C) Letter of Credit
D) Bank guarantee
Answer: A
Q67: If an LC specifies DDP, the seller must:
A) Include all taxes and duties in the invoice
B) Let the buyer clear customs
C) Pay only freight
D) None of the above
Answer: A
Q68: In LC transactions, using EXW can be risky for the buyer
because:
A) The bank may reject documents
B) Buyer bears export clearance responsibility
C) Freight costs may be unpredictable
D) All of the above
Answer: D
Q69: Which Incoterm ensures seller compliance with shipping
documents in LC?
A) CIF
B) EXW
C) DAP
D) FAS
Answer: A
Q70: If a buyer wants insurance coverage handled by
themselves, which Incoterm is best?
A) EXW
B) CIF
C) CIP
D) DDP
Answer: A
Q71: In CIF under LC, the bank checks:
A) Bill of Lading, insurance, commercial invoice
B) Seller’s warehouse receipt
C) Buyer’s internal records
D) None
Answer: A
Q72: Under DAP, who is responsible for presenting import
documents to customs?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Q73: LC discrepancies often occur when:
A) Incoterm in LC differs from sales contract
B) Insurance certificate missing or incorrect
C) Bill of Lading not properly endorsed
D) All of the above
Answer: D
Q74: In FOB under LC, if the bill of lading is late, who
may face payment delays?
A) Seller
B) Buyer
C) Bank
D) All parties
Answer: D
Q75: For CIF, the insurance certificate must indicate:
A) Value covered (typically 110%)
B) Destination port
C) Seller’s name
D) All of the above
Answer: D
Q76: Using DDP in LC requires:
A) Bank acceptance that seller handles import duties
B) Buyer to pay freight
C) Carrier to insure goods
D) Seller to load goods only
Answer: A
Q77: In EXW LC transactions, which cost is NOT included by
seller?
A) Inland freight
B) Export customs
C) Shipping insurance
D) All of the above
Answer: D
Q78: Which Incoterm simplifies documentary compliance for
export-oriented LCs?
A) CIF
B) EXW
C) DDP
D) FAS
Answer: A
Q79: In CIF LC, the insurance document must be:
A) Original or copy acceptable to the bank
B) Optional
C) For inland transport only
D) Issued by buyer
Answer: A
Q80: Which Incoterm can cause LC rejection if the bank
expects the seller to handle duties but EXW is applied?
A) EXW
B) DDP
C) CIF
D) DAP
Answer: A
Section
5: Case Studies & Problem-Solving (20 MCQs)
Q81: A Bangladeshi exporter ships garments to Germany under EXW
Dhaka. Buyer arranges pickup and export clearance. During transport, goods
are damaged at Chittagong port. Who bears the risk?
A) Exporter
B) Buyer
C) Carrier
D) Insurance company
Answer: B
Explanation: EXW places maximum responsibility on the buyer,
including export and transit risk.
Q82: A shipment under FOB Mumbai is loaded onto the
vessel. During transit, goods are damaged by storm. Who bears the loss?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Explanation: FOB risk passes to the buyer once goods are on board,
regardless of who arranged insurance.
Q83: Seller ships machinery under CIF Rotterdam. Insurance
certificate only covers 50% of invoice value. Buyer claims loss. Who is
at fault?
A) Seller
B) Buyer
C) Carrier
D) Insurance Company
Answer: A
Explanation: Seller must provide adequate insurance coverage
(typically 110% of invoice) under CIF.
Q84: Buyer wants goods delivered under DAP but refuses to pay
import duties. Seller has already paid freight. Who bears risk until goods
reach buyer?
A) Seller
B) Buyer
C) Carrier
D) Customs
Answer: A
Explanation: DAP risk remains with seller until goods are delivered,
but buyer is responsible for import duties, which may affect legal
responsibility if not clarified.
Q85: Goods shipped under FAS Shanghai are lost while
still alongside the ship. Who bears the risk?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Explanation: In FAS, risk passes once goods are alongside the vessel.
Q86: An EXW shipment is delayed at origin because the buyer has
not arranged pickup. Who incurs cost?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Q87: A CIF LC shipment arrives late due to carrier delay. Buyer
refuses payment. What is correct?
A) Buyer must pay if documents comply
B) Seller bears responsibility for delay
C) Bank rejects payment automatically
D) Carrier reimburses
Answer: A
Explanation: Banks honor LCs if documents comply, regardless of
delivery delay, unless contract specifies penalties.
Q88: Seller ships goods under CIP, but insurance certificate is
missing. Buyer claims loss. Who is liable?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q89: Under DDP, goods are damaged in transit by customs
handling. Who bears the loss?
A) Seller
B) Buyer
C) Carrier
D) Insurance company
Answer: A
Q90: Buyer uses EXW but delays customs clearance at origin,
leading to demurrage charges. Who pays?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Q91: Goods shipped under FOB are insured by seller. Damage
occurs during transit. Who claims from insurance?
A) Buyer
B) Seller
C) Carrier
D) Bank
Answer: B
Explanation: Seller arranged insurance; the insurance policy is in
seller’s name unless otherwise agreed.
Q92: A shipment under CIF is missing LC-compliant insurance.
Bank rejects documents. Who is at fault?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q93: Buyer insists on EXW, but seller is responsible for export
license under local law. Who bears compliance risk?
A) Seller
B) Buyer
C) Both
D) Carrier
Answer: A
Q94: Goods shipped DAP arrive at buyer’s warehouse. Buyer
refuses to unload. Who bears risk?
A) Seller
B) Buyer
C) Carrier
D) Insurance
Answer: B
Q95: Seller ships under FOB, but bill of lading is incorrect.
Bank refuses LC payment. Who is responsible?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q96: Goods under CFR are damaged during handling at destination
port. Who bears cost of damage?
A) Buyer
B) Seller
C) Carrier
D) Bank
Answer: A
Explanation: CFR transfers risk once goods are onboard at origin port,
so buyer bears transit risk.
Q97: Under DDP, seller ships goods, but import duties increase
after shipment. Who pays extra?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: A
Q98: Buyer requests CIF but asks seller to cover inland freight
at origin. Who is responsible for these costs?
A) Seller
B) Buyer
C) Carrier
D) Insurance company
Answer: B
Q99: Shipment under CIP is delayed due to carrier. Buyer suffers
losses. Who bears risk?
A) Buyer
B) Seller
C) Carrier
D) Insurance
Answer: A
Explanation: CIP transfers risk once goods handed to first carrier,
so delay by carrier does not shift risk to seller.
Q100: EXW shipment is lost during transit from seller’s warehouse
to port. Who bears the loss?
A) Seller
B) Buyer
C) Carrier
D) Bank
Answer: B
Key Takeaways for CDCS Candidates
-
Understand risk vs cost transfer: Know exactly when responsibility passes from seller to buyer.
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Focus on LCs & Incoterms links: Document compliance is crucial for LC payment.
-
Practice with scenarios: Real-world cases help remember which party bears cost or risk.
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Revision tip: Break MCQs into sections: General, Risk, Cost, Finance, Cases.
