Countries, such as Japan, import and export visible and invisible items.

Mark scheme

Marking points from the official mark scheme (May/June 2015). The mark or mark type is shown in brackets.

1. [4] (a) Two clear definitions – 1 mark each and one relevant example of visible and invisible item – 1 mark each
2. visible items are items which are tangible/can be touched or seen/primary or secondary production - 1 mark; such as wheat, cars, clothing, oil – 1 mark
3. invisible items are intangible/cannot be touched or seen/tertiary production/services – 1 mark; such as tourism, banking, transport – 1 mark
4. [1] (b)(i) One mark for reduction in the Balance of Payments
5. [3] (b)(ii) Any means of payment × 1 mark and 2 marks for description
6. electronic transfer ( if uses term 'credit transfer 2/3') – fast, computerised transfer of funds between banks in different countries, exchange rates operate automatically
7. bills of exchange – IOUs in which the importer promises to pay the debt at a fixed future date, can be discounted, serves as a guarantee to the exporter
8. letters of credit – letters of undertaking issued by the importer's bank and sent by the importer to the exporter to guarantee payment on production of certain documents such as the bill of lading
9. bank draft/banker's cheque – used when the buyer and seller are not known to each other, regarded as safe as the drawer is the bank itself
10. any other relevant means of payment
11. [2] (b)(iii) Any two insurance risks relating to the consignment of machinery × 1 mark each -
12. goods in transit, fire, aviation insurance, marine insurance, export credit guarantee, damage, marine insurance, theft
13. any other relevant risk
14. N.B. do not accept general business risks or machine breakdown
15. [6] (b)(iv) Level 2 (4-6 marks) Has discussed both using air freight and container ship and has given a reasoned recommendation.
16. (If a candidate has discussed only one option award 4 marks max)
17. The American company could use both means of transport. This implies that the machinery is not too bulky and not too heavy. The choice of transport will therefore depend on other factors. The degree of urgency may be a deciding factor. If the machinery is needed quickly air freight would be the preferred option. Air freight is likely to be more expensive than using a container ship. The machinery is quite expensive so this expense could possibly be justified. Special care would need to be taken if the machinery is fragile and easily damaged. Careful packing would be necessary. It is often claimed that air freight may be more suitable for this type of cargo but there is no reason why fragile goods should not be sent by container ship.
18. The machine could be sent by container ship but it is unlikely to fill a whole container and so may have to wait until other cargo can be found. The container is likely to be packed at a freight forwarder's premises so transhipment can take place by road to the docks, placed on a ship and unloaded without unpacking in Japan. The container offers protection against theft and weather and provides storage for the machinery until it is delivered.
19. I would recommend using air freight if the machinery is required urgently as it can be delivered in a few days.
20. Level 1 (1-3 marks) Has commented on using air freight and/or container ship with/without an opinion.
21. Air freight carries valuable, lightweight cargoes. Container ship carries many kinds of cargo. Goods can be transhipped. Using container ship is cheaper. I recommend using container ship. The machinery is likely to arrive in Japan safely.
22. [4] (c) Any four points × 1 mark each and up to 2 marks for a well-developed point
23. introduce/raise import duties to make imported goods more expensive than home-produced
24. introduce quotas – limits on quantity of a particular product allowed into a country during a certain period of time
25. introduce embargoes on certain products – total ban on the product
26. impose exchange controls to restrict the amount of foreign currency available to purchase imports
27. introduce administrative barriers e.g. more documents, longer procedures to make it more difficult to import goods
28. introduce strict quality control measures so adding to costs of producing the goods
29. any other relevant point
30. allow foreign taxes for import duties
31. Do not allow credit for encouragement of home produced goods by reduction of their taxes etc.