A food processing company in Melbourne imports rice in bags from Vietnam to do labelling then resell to its domestic customers. The agreed Incoterm is CFR Melbourne (Incoterms 2020) and the quoted price is USD 1650/ton (called the L/C value). The company wishes to import 100 tons. The product will be shipped in containers with each container holding 20 tons. The Australian Customs impose the import tariff of 20% of the L/C value which the company needs to pay. Other additional costs that the distributor needs to take into account are as follows: Transporting from Melbourne Port to the companys warehouse in Dandenong: AUD 500 per truck (each truck can carry 20 tons of cargo). The current exchange rate is: 1 USD = 1.39 AUD. The estimated insurance cost for this shipment is 1% of the L/C value

Question 2: Through market research, the company realises that their current break-even price is 5% higher than that of their main competitor. In order to sell at a more competitive price, the company wants to explore the possibility of importing using FOB Ho Chi Minh term. In this case, the quoted FOB Ho Chi Minh price is USD1500/ton (called the L/C value), the quoted seafreight from a shipping line is USD950/container, import tariff is 20% of the L/C value, insurance cost is 1% of the L/C value and all other data remain the same. Do you think importing using this alternative will derive a break-even price which is more competitive? Explain your answer with calculations.