Read Chapter 4 and 5, then answer the following 8 questions. Chapter 5 You receive a fax transmittal from Japanese buyers you met in New York. They indicate that they want to order 5,000 down bed pillows. The pillows must contain no less than 85 percent cluster prime white goose down. To make the transportation as cost-effective as possible, they want pricing for a full ocean container. Before placing the order, they want to discuss the details of the sale. Their fax indicates that although the buyers prefer to pay for the pillows on open account terms, they will consider your suggestions for payment options. Also they are unwilling to purchase against the documents unless they can first inspect the pillows on their arrival in Japan. They want this right of inspection to find out if the quality is what they ordered and to look for possible freight damage. They feel strongly about this issue and insist on these conditions, unless you can provide them with adequate protection. In addition, they want to consider the cost of alternative shipping arrangements before deciding whether to handle these themselves. 1. Prepare a pro forma invoice giving your buyer several options for shipping the pillows. Consider how to pack and transport them to the closest or best seaport. What facilities are available for handling containerized cargo or for multimodal transport in your region? Using Incoterms, present a breakdown of the shipping alter- natives and costs involved in the transaction. Contact a freight forwarder and inquire as to what services it can provide. Can the freight forwarder assist you in obtaining the information you need to prepare your pro forma invoice? 2. In determining your export price, what other factors must you consider in addition to freight costs? Do you consider additional communication expenses, port fees, trade show expense, forwarder fees, sales agents, and clerical expenses? Discuss your export pricing with your marketing team and decide on your pricing strategy. 3. Prepare a letter to accompany the pro forma invoice explaining why payment by “cash against documents” is fair to both parties. What can you propose to address the buyers’ concerns that the goods shipped will conform to their quality specifications? How will the goods be protected from marine risks? Your company is expecting a shipment of 10,000 T-shirts from a company in Pakistan. You recently received a call from a nearby bank that it was in possession of a negotiable bill of lading aboard the ship Jhelum and documents from Pakistan covering a shipment of T-shirts, and that they were awaiting your payment. However, you are concerned. The Pakistani company made the initial contact with your firm via the Internet, locating you through one of several trade directories in which you are listed. The prices quoted for shirts are considerably less than what you currently pay or are able to pay for a comparable quality. You begin to do some research. You find the company’s site on the Internet, with pictures of its mill and textile products. Several days after you make enquiries through the U.S. Commercial Service, you receive an e-mail from its office in Karachi indicating that one of its staff officers was unable to locate the mill, but thought that the company “was currently exporting from Pakistan.” Recently you have been hearing of many international business scams. You are worried about what might really be in the ocean container and wonder if you should purchase the documents from the bank or refuse them just in case. You look at the documents and see that the bill of lading is dated one day later than the date for shipment called for in the contract. You are getting cold feet, and think you might want out. (1) Do you think, under the circumstances, that it is ethical to refuse the documents based on a minor technicality? Why or why not? Do you believe you have enough information to make a fair decision? What are your options? (2) Now assume that you contacted the ocean carrier and they said that they do not have a ship named Jhelum currently in the fleet. Does this change your decision? (3) If this is a fraudulent scheme, how could it be perpetrated on an unsuspecting buyer? Chapter 4 Bende had a contract to sell boots to the government of Ghana for $158,500. Bende promised to deliver the boots “as soon as possible.” Bende then contracted with Kiffe, who agreed to make the boots in Korea and to deliver them in Ghana within sixty to ninety days at a price of $95,000. The contract contained no force majeure clause. Kiffe knew that Bende was going to resell the boots. Kiffe failed to deliver the boots on the agreed date because a train carrying the boots had derailed in Nebraska. Bende brought this action against Kiffe for breach of contract. Bende and Sons, Inc. v. Crown Recreation and Kiffe Products, 548 F. Supp. 1018 (E.D.N.Y. 1982). (a) Kiffe claimed that the contract had been rendered commercially impracticable and that performance was excused. Do you agree? Why or why not? Was the train wreck foreseeable or unforeseeable? (b) If Bende would have incurred an additional $18,815 in freight charges and miscellaneous costs had the breach not occurred, what would be its measure of damages? Is Bende entitled to lost profits? How are damages measured in a case such as this? The professor said “please answer both essay questions (and all parts thereof) fully and completely, by carefully considering all of the facts, by clearly addressing and stating all of the legal issues, by identifying all of the relevant law, and by demonstrating your critical thinking and legal analyses.” International Business Law Questions (1) Proforma Invoice Ship to: 6756, Chang Street, Tokyo P.O.BOX 6708 Japan Contact person: Jing Yong Phone: 0690060 Delivered under: Info track Shipping services, Japan No. item Description Country of origin Net weight/kg HS Code Qty (pieces) Unit price, USD (for customs purposes only) Total price, USD (for customs purposes only) 1. Quality down bed pillows Model no. 6789HB United States, New York 5.55kg DBP 78 5,000 $7.51 $37,550 Total price, USD $37,550 Shipping cost (five weeks to deliver) Total shipping cost to Japan Shipping cost per unit = $4.01 Total shipping cost= $20,050 Insurance cost, USD: $2,000 Total invoice value, USD $59,600 Or Air transportation cost (three to four days to deliver) Total shipping cost to Japan Shipping cost per unit = $8.01 Total shipping cost= $40,050 Insurance cost, USD: $2,800 Total invoice value, USD $80,400 Gross Weight, kg (total): 27,750kg Signed by: Hanks Toms Shipping the bed down pillows will benefit from the considerable shipping costs and access to various facilities to handle the containerized cargo from New York to Japan. Some of the facilities available from the shipping company include proper container management services, quality warehousing, vendor managed inventory, quality inspection services, and effective transportation management programs. The pillows will be handled well to avoid any potential damages to the products and loss of the products. The logistics firm to be employed has the required qualifications and specialized warehousing programs to handle the bed down pillows well. It is useful to get the proforma invoice with the breakdown of the shipping alternatives and costs involved in the transactions. The alternatives shipping and transportation of the goods will give the buyer an option to assess the best transportation alternative. The proforma invoice provides comprehensive information and breakdown of the costs which is useful in helping the buyers make informed decisions about whether to purchase the products. (2) In the determination of the export prices, there are various factors I would consider including freight costs. They include the costs of travel to the markets, international communication expenses, port fees, sales agents costs, compliance with international standards costs, export financing changes, promotional costs, and product liability insurance. Other costs include packaging and labeling costs, modifications and credit checking costs. The marketing team will examine all the costs associated with the export processes and use it to assign prices to the products. Cost plus pricing strategy will be used as the main pricing strategy for the products. It will help to pass on the burden of exporting costs to the final consumers. (3) Letter 16/11/2016 Bedding Company Marketing and Logistics Department P.O. Box 997420, New York, U.S New York, NY 96697-5460 Re: INQUIRY OF THE SHIPPING OF BED DOWN PILLOWS Find the enclosed proforma with the payments and the alternatives shipping methods and their costs about the inquiry made 15/11/2016. The payment by cash against document is fair as it will allow us to process the shipping process immediately. The money will help in covering other miscellaneous expenses involved in preparation for the order and transportation of the products. The model number in the pro forma and the description clearly indicates that the bed down pillows are of high quality aligns with the international standards. We will ensure all shipped pillows meet your quality specifications. The shipping company has quality containers that are specialized in the transportation of the bed pillows. The products will be protected from all marine risks included theft, damages, and potential loss. It is also recommendable to pay for insurance costs for regular communication on the progress of the shipping to your location. Sincerely, Hanks Toms Ethical Considerations (1) Under the circumstances, I think it is unethical to refuse the documents of the bank based on a minor technicality. It is because it would only be a minor error of entry that led to the discrepancies in the dates of shipping and the information on the bill of landing. I believe I have the adequate information to make a fair decision about the potential purchase. It is because the U.S commercial service noted that the company might have been currently exporting from Pakistan. However, I still have options to contact the company and shipping companies to confirm the information. Thus, I will make inquiries from the different stakeholders involved in the exporting of products from Pakistan. Such alternatives will help me in making informed decisions about the making exports from the company, in Pakistan. (2) If I contacted the ocean career and they confirmed that they do not have a ship called Jhelum, I would change my decision about purchasing the documents from the bank. The information will confirm by suspicions about the credibility of the seller of the products. It is because the online seller of the textiles had used fake information to convince me to purchase the products. Thus, it is necessary to confirm with the ocean carrier about the credulity of the fleet name and the potential fraudulent associated with the purchase. Cross border shipping requires proper research to understand the potential fraud in the international online business. (3) If this were a fraudulent scheme, it would be perpetrated on unsuspecting buyer through the manipulation of ship names and fake bill of landing. It is always important for the buyers to observe all the facts and details listed on the bill of landing to determine it matches with the date of shipment. If the buyers are not keen on the details, the online sellers will send fake email notifications with fake documents including the date of shipment, ship name, and credible phone communication. Such information would persuade the non-careful buyers to pay for the products even if they have not seen the actual credible documents and bill of landing. Chapter Four (a) The train wrecks are unforeseeable as there are few incidents of train wrecks annually. Thus, the court will probably forgive the nonperformance of Kiffe in the contract. However, Kiffe should have agreed on a force majeure clause in the sales contract with Bende. Section 2-615 of the U.C.C, it is one of the exceptions indicated in the common law about excusing a breach of sales contract due to the doctrine of commercial impracticality and impossibility. The doctrine is useful in explaining the guidelines that parties to a contract might claim protection. The concept of impossibility for performance was identified in the late nineteenth century as a key excuse for a party’s failure to perform. However, the courts have used this doctrine narrowly because of the recognition of legal aspects and the recognition of the contract laws and risks associated with performing the contract. The impossibility usually excuses a party’s performance when there is a significant subject preventing the performance of the contract. In spite of all, financial problems do not fall under the subjects that could be used to excuse performance of the contractual obligations. In the case of Kiffe, the doctrine of commercial impracticality could apply well as the derailment of the train was unforeseeable. The defenses of commercial impracticality rely on whether the events were unexpected, the risks were unexpected, and whether the events made performance impracticable. In the case of Kiffe, the impracticality factor was clear as it was impossible for him to deliver the products as agreed. The derailment of the train ferrying the shoes was unexpected, and thus, the court would excuse him from the performance of the contract obligations. CISG guides the contract between the seller and the government of Ghana. (b) The evaluation of damages relates to the loss of profits of $63,500 and incidental damages of $18,815 resulting from the freight charges and miscellaneous costs if the breach of contract had happened. Thus, the overall claim would be $82,315. Based on the CISG article 74, Bende is entitled to be paid the lost profits. However, Bende will be required to proof the loss of profits, and the incidental damages were foreseeable at the moment the contract was completed. ~~~For this or similar assignment papers~~~
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