ASSIGNMENT CHAP 2

- If the seller, in accordance with the contract of carriage, has to pay the cost of unloading at the place of destination, the seller must not claim this fee from the buyer, unless othe

GROUP ASSIGNMENT CHAPTER 2

Group 2

Dương Nữ Quỳnh Chi

Võ Thanh Hải

Nguyễn Thục Nghi

Lê Tâm Nhi

Bùi Thị Thu Hoài

Vũ Trần Mỹ Chi Ngô Lan Tường Trần Thị Mỹ Linh

Case 1: ABC Trading Co and DNZ Trading Co

FOB Saigon port: 750,000 USD

CIF Tokyo port: 900,000USD

DAP buyer’s warehouse in Tokyo: 1,000,000USD

Main carriage: 150,000 USD

On carriage: 80,000 USD

Insurance rate: 0.2%

Import duty: 5% based on FOB

1. What the selling price does the buyer choose? Why?

If the Buyer will choose FOB = 750,000

If the Buyer will choose CIF = 900,000

→ We choose CIF Tokyo port 900,000$ because of its low cost and equivalent risk

2. According to the term “DDP buyer’s warehouse in Tokyo”

• The costs that seller has to pay include:

- Exw Price

- Pre-carriage fee

- Loading fee

- Export customs clearance fee

- Export duties

- Document fee

- Main-carriage fee

- Insurance for main-carriage

- Unloading fee

- Import Customs clearance fee

- Import Duties

- On-carriage fee

• The risks that seller has to bear under DDP term:

- DDP places maximum responsibility for the delivery of goods on the seller The sellers bear the costs and risks involved to bring goods, including duties and taxes for import in the country of destination As described below:

- DDP term requires the seller a good administrative system to manage the whole supply chain If not, the supply can stuck in some place and raise the fined cost (Demurrage, Detention fee, ) While the price was dealt with the buyer before

- The seller may be unable to obtain the import license in Tokyo

- If the seller, in accordance with the contract of carriage, has to pay the cost of unloading at the place of destination, the seller must not claim this fee from the buyer, unless otherwise agreed between the two parties

- The seller may not know the import regulations of foreign customs (Tokyo)

- If the seller does not buy insurance, the seller bears risks and costs when the order has problems

- Any Delay/Trouble in on-carriage part will lead to Extra-cost

- The seller is unable to know the changes in Import Customs Duties Rate or Refund

of Tax in foreign country (which can be treated by the buyer)

- Any value added tax (VAT) or other taxes payable upon importation are at the seller 's expense

3. What are main differences between DAP and DDP at buyer’s warehouse in Tokyo?

DAP (Delivered at Place) DDP (Delivered duty paid)

- DAP buyer’s warehouse in Tokyo:

1,000,000 USD

- Import custom clearance must be made

by the importer (buyer)

- All delivery expenses up to the place of

buyer's warehouse in Tokyo were born by

the seller except duty or tax of importing

country

- DDP= DAP+ Import duty+ Import CC fee

- DDP buyer’s warehouse in Tokyo: 1,000,000+ 750,000 x 5% = 1,037,500

- Import custom clearance must be made

by the exporter (seller)

- All delivery expenses up to the doorstep

of buyer’s warehouse in Tokyo were born

by the seller including duty or tax of importing country In DDP terms, insurance has to be arranged by the seller,

as DDP price includes the cost of insurance also

- DDP represents the maximum obligation for the exporter

Case 2: Case 7.1 in book

There are 2 cases in this situation:

Case 1: If the contract between BAT (the buyer) and Tola (the seller of a German

scientific equipment manufacturing firm) include Incoterms in the purchase agreement and specify the CIF (Cost, Insurance and Freight) ), Incoterms must be taken as a standard to solve this problem

Because Tola - a German scientific equipment manufacturing firm declares that the goods are shipped under CIF terms, they have no liability for losses, that is, contractual obligations related to the risk of loss when delivering the machine to the ship at shipping port

The CIF clause specifies the seller's obligations as follows:

- Risk: The seller bears the risk of the road section from the seller's factory until the goods are on deck

- Freight: CIF = FOB + I + F, the seller must bear the freight from the factory to the annual ship deck on the port of departure and also the freight from the port of departure

to the port of destination

- Insurance fee: Seller is responsible for paying insuance costs for goods from the port of departure to the port of destination (meaning the port of loading to the port of discharge) The rest is the responsibility of the buyer

=> So, if the contract has a CIF term, then BAT Inc and St Insurance Guardian was wrong to ask the seller Tola to cover losses Since the cargo is actually loaded onboard and damaged during the main transit, it is in compliance with the CIF terms and therefore, the buyer's insurance company is responsible for damages and must pay $ 350,000 la

Case 2: CIF was not mentioned in the contract:

If CIF was not mentioned in the contract then the transfer of risk will depend on the ROT

- retention of title which was negotiated in the contract

- If BAT (buyer) has not made a payment for the MRI goods to Tola (seller), the goods are still naturally owned of Tola and Tola must have responsibility for this risk even when the goods have reached the final destination, so the St Guardian Insurance recover a premium of $ 350,000 which is reasonable

- If BAT (buyer) has made a payment for the MRI goods to Tola (seller), it means the goods are owned by the buyer, so all the cost of damage will be cover by the buyer St Guardian Insurance is obligated to pay the sum assured of $ 350,000 to the beneficiary