Le Anh Hoang-31191023326-IBC05 PDF

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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

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“Q1. Seller agrees to deliver the goods to buyer under the term of DDP at the warehouse of the buyer in Tokyo, Japan. The goods were transported and unloaded at the port and kept at customs shed for inspection and payment of duties. The buyer was notified of the arrival of the merchandise and its location. Before the buyer picked up the goods, the customs shed (including the merchandise in it) was destroyed by fire. The buyer claims refund of the purchase 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 and DDP 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 the seller must do: 1. Previously purchased insurance. Under the rules of DDP, the seller has the option to purchase insurance to protect their rights, decrease risks, and prevent damage to the seller's shipment of goods before the risk is transferred to the buyer. If the seller has previously agreed with the insurer, the seller may be repaid an amount equivalent 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 majeure situation. In this instance, the seller's expenditures can be minimized or avoided entirely, depending on the contract's agreement between the seller and the buyer.

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- “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” “DDP at buyer’s warehouse” Import clearance & duties Buyer must bear import duties, seller must bear import duties, import clearance documents import clearance documents and necessary costs for import and necessary costs for import clearance TRANSFER OF RISKS

clearance

“When the goods are placed at “When the goods cleared and the buyer's disposal at the duty paid (not unloaded) are agreed

destination

(not placed

unloaded and not cleared).”

at

the

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 is a pricing strategy that grounds involves setting a product's a product's cost of creation, price at or slightly above its manufacture, and delivery on the variable production cost. When cost of producing, making, and Definition

prices are set for a specific delivering it. A product's pricing length of time, this technique is is derived by adding a percentage often

employed.

When

a of the manufacturing cost to the

company has a limited amount selling price in order to generate a of unused production capacity profit.

agreed

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that it either wants to use or can't sell for a better price, this happens. Raises Profits

Easy to Calculate

Customers that are exceedingly

Cost-based pricing systems, such

price sensitive will exist.

as cost-plus and break-even, are

Unless a corporation was

preferred by businesses because

willing to engage in marginal

they are simple. Simply add a

cost pricing, this group would

profit

not buy from it. If this is the

manufacturing cost, or establish a

case, a corporation may be able price

Advantage

margin simply

to

based

the on

the

to benefit from these clients on

manufacturing cost. Regardless of

a part-time basis.

whatever option you choose,

Gain Entry to Markets

production

Marginal cost pricing can be

costs will be covered.

used to gain entrance into a

Ensures Profit

market if a firm is ready to

Cost-based pricing might aid in

forfeit earnings in the short

maintaining

term. However, by doing so, it

margin. This is one of the few

is more likely to attract

pricing strategies that guarantees

price-sensitive clients, who are

a profit. If you price your goods

more likely to quit if price

and services in relation to their

points rise.

production

Increase Sales of Accessories

generate money regardless of the

and

a

administrative

steady

costs,

profit

you

will

If customers are willing to pay state of the industry. a

high

price

for

product Simple

for

Customers

to

accessories or services, using

Understand

marginal cost pricing to sell a

On occasion, you may need to

product on a regular basis and boost the pricing of your goods

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then profiting from future sales and services. A price increase may make sense.

would irritate most customers, but if you blame it on growing production costs, it will be much easier to defend the increase without getting mired down in industry jargon. While cost-based pricing systems offer certain advantages, they also have some disadvantages. Let's take a closer look at them down below.

Long-Term

Pricing

Isn't Not

Possible

Competition-Aware and

Demand-Aware

The approach is unsuitable for Cost-based pricing does not take long-term price setting since it demand

or

competition

into

produces prices that do not consideration. Companies must reflect

a

company's

expenses. Disregards

fixed be aware of all costs related with a product's sale. Competitors will

the

current make more money if they create the same product for less money

market price

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

squandering

basis a

may

be Results

in

Different

Prices

significant Compared to the Market

amount of profit that could Cost-based have been collected if prices yields

pricing

prices

frequently

that

differ

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Disadvantage were set at or near market rate.

considerably from market rates. This might imply that a company

Encourages Customers from is selling a product at an absurdly high or cheap cost. People are the Periphery If a firm uses marginal cost pricing frequently and then tries to raise its prices, it may discover that it is selling to people who are particularly price sensitive and will desert it

A firm that uses this pricing approach on a regular basis will discover that it needs to keep prices low in order to profit,

which

is

ineffective if the company wants

to

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,

move

higher-service, market segment.

into

will almost likely lose

customers. You will lose money

Costs are the main focus.

a

product if a competitor is selling

you

immediately.

make

willing to pay that much for a

a

higher-quality

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 Manufacturing Inefficiencies 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, implementing

organizations a

cost-based

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strategy

may

inflate

unintentionally

their

Streamlining

processes. 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're trying to maximize profits based on production costs, you can find yourself cutting corners while keeping the markup the same. That's why cost-based providers, like Everlane in the cost-based pricing 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 of produced and sold ten bikes for making a smartphone for him is $100,000, despite the fact that $1,000. Hoang Lee calculated the they 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 consumers the

second

year,

with

a may purchase it. ($1,000 + 10% *

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manufacturing cost of $75,000. $1,000) First, we figure out how much the entire cost has changed. That increased from $50,000 to $75,000 in this example, a $25,000 difference

increase. in

The

increment

numbers from 10 to 15 is then calculated and multiplied by 5. The difference in total price ($25,000) is then divided by the change in quantity (5), 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.

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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 (advising bank) 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.” ROLE Documentary collections

Seller bank

Buyer bank

- Remitting bank

- Collecting bank

- Receive documents from

- Receive documents from

seller

remitting bank

- forwards documents to

- Presents documents to Buyer

collecting bank

- Collect money from buyer or

- Advises seller of

sign time draft with buyer

acceptance or remits payment

- Advises remitting bank of acceptance or remits payment

Letters of credit

- Advising/ Confirming bank

- Issuing/ Opening bank

- Notifies seller the L/C

- Do registration procedures

- Receive documents as

and open L/C for buyers

stipulated in L/C from seller

- Issues the L/C forwarding it

- Forwards documents to

to advising bank

issuing bank for review

- Reviews and accepts, issuing

- Receive money from

bank pays the seller’s bank

Issuing bank

(advising bank)

- Pays seller as specified in

- Forwards documents to

the L/C.

buyer and collect money from

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buyer -

Documentary collections

Responsibility

Letters of credit

- Only collect money when - Made when the buyer requested by the seller. -

Get

the

registers and opens the

seller's payment of L/C.

documents and send them - Receive documents and to the buyer

check, review whether the

- Do not check the right documents are consistent and wrong, legality of the with the signed contract or document.

the

goods not.

shipped might not conform - Goods are guaranteed to to the goods specified

be delivered in accordance

- No guaranty of payment with the contract by any bank.

- Protect the seller when

- No protection against the order is canceled. As payment of LC is the buyer order cancellation. - The payment is not made is required to open and until after the goods are register for payment of LC. shipped.

The buyer and Issuing bank had to enter into a contract and

agree

arrangements

on to

legal protect

both the seller and the buyer. - Quick payment.

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- Secure payment

Q4. “ABC Trading Co, Vietnam (seller) agrees to sell coffee of 200 tons for XYZ Co., Japan (buyer). The contract will be signed from 10 April, 2022. Payment will be made by irrevocable L/C at sight. Analyze the errors, the missing points in the sales contract:” “1. Commodity: Coffee 2. Quality: as sample 3. Quantity: 200 T more or less 5% at the seller’s option or buyer’s option 4. Price: USD1,500/T 5. 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 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 is made in two (02) copies in English.” Answer “The errors, the missing points in the sales contract:”

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- 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 1. Commodity: Coffee The missing

The description is not detailed enough

Wrong

Coffee

Right

Vietnam Robusta Coffee

2. Quality: as sample

The missing

It is not clear which sample, where the sample is located, whether it has been sent or not, whether the two parties have agreed on the sample or not, lack of information

Wrong

as sample

Right

According to the sample that both parties agreed on (Sample NoXXXX)

3. Quantity: 200 T more or less 5% at the seller’s option or buyer’s option

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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

Wrong

USD1,500/T

Right

UNIT PRICE: USD 1,500/MT CIF Osaka port, incoterms 2010 TOTAL 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

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The errors, missing

Missing terms of delivery, time of delivery, Port of loading and Port of discharge is wrong. “The buyer advise the seller the name of vessel” is wrong

Wrong

“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”

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 the buyer 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”

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The errors, missing

Information about payment terms is missing, Issuing bank and Notifying bank is missing, Lack of time to present documents and payment time, Missing documents, the buyer will present is wrong, how ma...