final exam subject export – import management discuss the major differences between dap at buyer’s warehouse in tokyo and ddp at buyer’s warehouse in tokyo

Provide examples” Answer Marginal pricing Cost-based pricing is a pricing technique that involves setting a product's price at or slightly above its variable production cost.. Increase S

MINISTRY OF EDUCATION AND TRAINING

UEH UNIVERSITY – COLLEGE OF BUSINESS SCHOOL OF

INTERNATIONAL BUSINESS & MARKETING

FINAL EXAM SUBJECT: EXPORT – IMPORT MANAGEMENT

Student: Lê Anh Hoàng

Student IDr: 31191023326

Class: IBC05 - K45

Hồ Chí Minh, 24 tháng 4 năm 2022

“Q1 Seller agrees to deliver the goods to buyer under the term of DDP at thewarehouse of the buyer in Tokyo, Japan The goods were transported andunloaded at the port and kept at customs shed for inspection and payment ofduties The buyer was notified of the arrival of the merchandise and its location.Before the buyer picked up the goods, the customs shed (including themerchandise in it) was destroyed by fire The buyer claims refund of thepurchase price, stating that buyer did not receive the goods.”

- “Is the seller responsible? Why?”

- “Discuss the major differences between DAP at buyer’s warehouse in Tokyo andDDP at buyer’s warehouse in Tokyo.”

Answer

- “Is the seller responsible? Why?”

Yes The risk is transferred under DDP terms when the goods are cleared and duty paid (but not unloaded) and delivered to the agreed-upon location The products have been unloaded at the port and have not been delivered to the buyer's warehouse in Tokyo, Japan, therefore the seller retains responsibility for the goods.

However, in this case to reduce liability and costs, there are two ways that theseller must do:

1 Previously purchased insurance

Under the rules of DDP, the seller has the option to purchase insurance toprotect their rights, decrease risks, and prevent damage to the seller'sshipment of goods before the risk is transferred to the buyer If the seller haspreviously agreed with the insurer, the seller may be repaid an amountequivalent to the value of the cargo or a portion of the shipment

2 Case of force majeure

If the buyer and seller agreed in the previous sale contract to a force majeuresituation In this instance, the seller's expenditures can be minimized or avoidedentirely, depending on the contract's agreement between the seller and the buyer

- “Discuss the major differences between DAP at buyer’s warehouse in Tokyo and

DDP at buyer’s warehouse in Tokyo.”

Answer

“DAP at buyer’s warehouse”

Import clearance & dutiesBuyer must bear import

duties, import clearancedocuments and necessarycosts for import clearance

“DDP at buyer’s warehouse”

seller must bear importduties, import clearancedocuments and necessarycosts for import clearance

TRANSFER OF RISKS “When the goods are placed at “When the goods cleared and

the buyer's disposal at the duty paid (not unloaded) areagreed destination (not placed at the agreedunloaded and not cleared).” destination.”

Q2 “What is the difference between marginal pricing and cost-based pricing?

Provide examples”

Answer

Marginal pricing Cost-based pricing

is a pricing technique that involves setting a product's price at or slightly above its variable production cost When

Definition

prices are set for a specific length of time, this technique is often employed When a company has a limited amount

of unused production capacity

is a pricing strategy that grounds

a product's cost of creation, manufacture, and delivery on the cost of producing, making, and delivering it A product's pricing is derived by adding a percentage

of the manufacturing cost to the selling price in order to generate

a profit.

that it either wants to use orcan't sell for a better price,this happens.

Raises Profits

Customers that are exceedingly price sensitive will exist Unless a corporation was willing to engage in marginal cost pricing, this group would not buy from it If this is the case, a corporation may be able to benefit from these clients on a part-time basis.

Gain Entry to Markets Marginal cost pricing can be used to gain entrance into a market if a firm is ready to forfeit earnings in the short term However, by doing so, it

is more likely to attract

Advantage

price-sensitive clients, who are more likely to quit if price points rise

Increase Sales of Accessories

If customers are willing to pay a high price for product

accessories or services, using marginal cost pricing to sell a product on a regular basis and

Easy to Calculate Cost-basedpricing systems, such

as cost-plus and break-even, are preferred by businesses because they are simple Simply add a

profit margin to themanufacturing cost, or establish

a price simply based on themanufacturing cost Regardless

of whatever option you choose,production and administrativecosts will be covered

Ensures Profit

Cost-based pricing might aid in maintaining a steady profit margin This is one of the few pricing strategies that guarantees

a profit If you price your goods and services in relation to their production costs, you will generate money regardless of the state of the industry.

Simple for Customers toUnderstand

On occasion, you may need toboost the pricing of your goods

then profiting from future sales and services A price increase

may make sense would irritate most customers,

but if you blame it on growingproduction costs, it will be mucheasier to defend the increasewithout getting mired down inindustry jargon

While cost-based pricing systemsoffer certain advantages, they alsohave some disadvantages Let'stake a closer look at them downbelow

Long-Term Pricing Isn't Not Competition-Aware and

The approach is unsuitable for Cost-based pricing does not take

long-term price setting since it demand or competition

produces prices that do not consideration Companies

reflect a company's fixed be aware of all costs related with

expenses a product's sale Competitors will

Disregards the current make more money if they create

market price the same product for less money

Pricing is set at the bare and sell it for the same price To

minimum using marginal cost be competitive, you'd either have

pricing Any firm that uses this to keep costs low or demand a

system to decide its pricing on higher price

a regular basis may be Results in Different Pricessquandering a significant Compared to the Market

amount of profit that could Cost-based pricing frequently

have been collected if prices yields prices that

Disadvantage were set at or near market rate.

Encourages Customers fromthe Periphery

If a firm uses marginal costpricing frequently and thentries to raise its prices, it maydiscover that it is selling topeople who are particularlyprice sensitive and will desert

it immediately

Costs are the main focus

A firm that uses this pricingapproach on a regular basiswill discover that it needs tokeep prices low in order tomake a profit, which isineffective if the companywants to move into a higher-service, higher-qualitymarket segment

considerably from market rates This might imply that a company

is selling a product at an absurdly high or cheap cost People are willing to pay that much for a product if a competitor is selling it

at a lower price and buyers are willing to pay the higher price If you price much more than the competitors, on the other hand, you will almost likely lose customers You will lose money in either situation Because no company sells its product in a vacuum, it's almost always vital to consider what your competitors are doing.

Could Result in ManufacturingInefficiencies

Cost-based pricing can also result

in inefficient manufacturing and production Because the cost is passed on to the client, expense- based pricing minimizes the need for a company to scrutinize the manufacturing process This means that, rather than optimizing manufacturing

procedures, organizationsimplementing a cost-based

strategy may unintentionally

inflate their processes.

Streamlining supplier and

production costs is an important

way for a company to save costs

and increase revenues

Could Result in Unethical

Practices

On the other side, cost-based

pricing may lead to unethical

production practices If you'retrying to maximize profits based

on production costs, you can find

yourself cutting corners whilekeeping the markup the same

That's why cost-based providers,

like Everlane in the cost-basedpricing example below, must

maintain openness

Example Hoang is the owner of Hoang Hoang Lee is the owner of a

Motorbikes, a private company smartphone manufacturing

In his first year in operation, he company The whole cost ofproduced and sold ten bikes for making a smartphone for him is

$100,000, despite the fact that $1,000 Hoang Lee calculated thethey cost $50,000 to produce selling price by adding 10% of

He proceeded to make and sell the cost to get at $1,100, which is

15 motorbikes for $150,000 in the amount at which consumersthe second year, with a may purchase it ($1,000 + 10% *

yielding a marginal cost of

$5,000 per motorbike

Q3 “Discuss the procedure of L/C at sight Compare the role and responsibility

of banks in documentary collections and letters of credit.”

Answer

1 Definition L/C at Sight

A letter of credit (LC) at sight is one that is due immediately (within five to ten days) when the seller satisfies the letter of credit's terms For vendors who frequently ship to foreign purchasers, this sort of LC is the quickest method of payment.

Procedure

“1 Buyer applies for and opens a the L/C with issuing bank

2 Issuing bank issues the L/C, forwarding it to advising bank

3 Advising bank notifies seller the L/C

4 Seller delivers goods to the buyer Once the terms of L/C have been met

5 Seller forwards documents as stipulated in L/C to advising bank

6 Advising bank will pay for the seller within 5-10 days ( The seller will sign a sight-draft (or not) to demand payment

7 Advising bank forwards documents to issuing bank for review

8 Issuing bank reviews and accepts, issuing bank pays the seller’s bank (advisingbank)

9 Issuing bank forwards documents to buyer Buyer makes payment or his /her account is debited”

2 “Compare the role and responsibility of banks in documentary collections and letters of credit.”

Documentary collections - Remitting bank - Collecting bank

- Receive documents from - Receive documents fromseller remitting bank

- forwards documents to - Presents documents to Buyercollecting bank - Collect money from buyer or

- Advises seller of sign time draft with buyeracceptance or remits payment - Advises remitting bank of

acceptance or remits paymentLetters of credit - Advising/ Confirming bank

- Notifies seller the L/C

stipulated in L/C from seller

issuing bank for review

- Receive money from

Issuing bank

- Pays seller as specified

in the L/C

- Issuing/ Opening bank

- Do registration procedures and open L/C for buyers

- Issues the L/C forwarding it to advising bank

- Reviews and accepts, issuing bank pays the seller’s bank (advising bank)

- Forwards documents to buyer and collect money from

Responsibility Documentary collections

requested by the seller.

- Get the seller's

documents and send them to the buyer

and wrong, legality of the document the goods shipped

might not conform to the goods specified

payment by any bank

- No protection against

order cancellation

- The payment is not

made until after the goods are shipped

buyer-

Letters of credit

- Made when the buyerregisters and opens thepayment of L/C

- Receive documents andcheck, review whether thedocuments are consistentwith the signed contract ornot

- Goods are guaranteed to be delivered in accordance with the contract

- Protect the seller when theorder is canceled Aspayment of LC is the buyer isrequired to open and registerfor payment of LC The buyerand Issuing bank had toenter into a contract andagree on legal arrangements

to protect both the seller andthe buyer

- Quick payment

- Secure payment

Q4 “ABC Trading Co, Vietnam (seller) agrees to sell coffee of 200 tons for XYZCo., Japan (buyer) The contract will be signed from 10 April, 2022 Paymentwill be made by irrevocable L/C at sight Analyze the errors, the missing points

in the sales contract:”

- Pro Forma Invoice

- Certificate of Quality and Quantity

- Packing List - Bill of Lading marked Freight prepaid made out to order of anybank - Certificate of Insurance two copies

- Certificate of Origin form D

6 Delivery: not later than 9 April, 2022

Port of loading: Osaka, Japan

Port of discharge: Saigon, Vietnam

Partial shipment: allowed The buyer will advise the seller the name of vessel not later than five (05) days before shipping date by fax

7 Arbitration: all disputes arising out of this contract or breach thereof which cannot be settled amicably by the parties concerned shall be settled by the Arbitration.

8 Other term: the contract will come into force from 11 April, 2022 The contract ismade in two (02) copies in English.”

Answer

- Missing name of contract, contract number

- Missing contract signing date: Date: 10 April, 2022

- Missing seller’s and buyer’s company, sales representative and purchasing

representative, seller's and buyer's address, and seller's and buyer's phone and fax numbers

- Lack of consent lines of both parties when performing the contract

The missing It is not clear which sample, where the sample is

located, whether it has been sent or not, whether thetwo parties have agreed on the sample or not, lack ofinformation

The errors Ton symbol in the contract is MT, not T, more or less

5% but there must be a specific party to make this decision

Wrong 200 T more or less 5% at the seller’s option or buyer’s

option

Right “200 MT more or less 5% at the buyer’s option.”

Packaging description is missing

4 Price: USD1,500/T

The errors, missing Ton sign in contract is MT, missing port of destination,

missing year of incoterm, missing Total Amount

Right UNIT PRICE: USD 1,500/MT CIF Osaka port,

incoterms 2010TOTAL AMOUNT: 300,000 USD (+/-5%)SAY: United States Dollar three hundred thousand

Delivery terms must be set before payment

5 Delivery: not later than 9 April, 2022 Port of loading: Osaka, Japan

Port of discharge: Saigon, Vietnam

Partial shipment: allowed The buyer will advise the seller the name of vessel not later than five (05) days before shipping date by fax

The errors, missing Missing terms of delivery, time of delivery, Port of

loading and Port of discharge is wrong “The buyeradvise the seller the name of vessel” is wrong

Wrong “not later than 9 April, 2022

Port of loading: Osaka, Japan

Port of discharge: Saigon, VietnamPartial shipment: allowed The buyer will advise theseller the name of vessel not later than five (05) days before shipping date by fax”

Right Time of delivery: not later than 25 april, 2022

Term of delivery: CIF

“Port of loading : Saigon, Vietnam

Port of discharge : Osaka, Japan

Partial shipment: allowed The seller will advise thebuyer the name of vessel not later than five (05) days before shipping date by fax”

6 “Payment: By L/C to be opened not later than 9 April, 2022 The buyer will present following documents:

- Pro Forma Invoice

- Certificate of Quality and Quantity

- Packing List

- Bill of Lading marked Freight prepaid made out to order of any bank

- Certificate of Insurance two copies

- Certificate of Origin form D”