Aquaculture Opportunity

KalastaaInc.hasbeeninthelocalFinnishaquacultureindustryfornearlyfourteenyears. It raises salmon and trout for local markets,andhasrecentlynegotiatedadealwithasmallfishprocessing plant that distributes under a major product label in Finland. Although it runs a rather small operation, employing 16 people year-round, Kalastaa believes it could export some surplus and perhapsbrokerfurtherdealswithfishprocessingplantsaroundtheEuropeanUnion.Itdoeswant to maintain ties with the local fresh fish markets, but sales have been steadily decreasing since the sudden market influx of cheaper Scottish salmon. It knows its stock is of higher quality and could be exported abroad quite profitably. Kalastaa has contacted the government and enrolled in small business export initiatives. This has enabled the company to attend aquaculture conferences abroad and offered the opportunity to network, ultimately leading to contact with DanskFisk, a Danish importer.

Certification Troubles

DanskFisk was eager to negotiate a contract for two tonnes of Finnish salmon to distribute to clientele throughout the country. Payment of credit was arranged by a Danish bank. The documents required were a commercial invoice, the insurance policy, a marine bill of lading and a certificateofquality.Kalastaahasarrangedtohaveitsfishinspectedbyanationallyaccredited standards organization. Both parties agree in their contract that Kalastaa will pay freight to Copenhagen and will also insure the shipment. Once the salmon has been delivered, DanskFisk will assume allresponsibility.

The Finnish Food Safety Authority reports to Kalastaa that the fish to be exported is of superior quality, with a fat content of 11 percent. The certificate of quality includes a code for superior quality and states a colour code that is standard to the DSM SalmoFan. Colour coding is a common practice in the fish industry and provides a method of standardization for something as subjective ascolour.Bothinproductionandsales,colouristhemostimportantqualityparameter for salmon. Salmon buyers can request information on the colour of a delivered lot in the form of a number corresponding to a colour number on the SalmoFan. Kalastaa's bank, acting asitsexport advisor, contacts the company to tell it that the letter of credit has fallen though because the certificate of quality is vague and it cannot ascertain whether the shipment has passed its qualitycertification.

Quality Questions

Thedocumentsweredelivereddirectlytothebuyerforpayment.DanskFiskinsistsoninspecting the shipment upon arrival. DanskFisk is not an experienced salmon importer, and usually deals with Spanish bluefish and Irish Arctic char. The importer is not in disagreement that the salmon shipment has passed quality inspection. Upon DanskFisk's inspection, it claims that the fat content of the stock is much higher than claimed in the quality inspection. It rejects the sale and will accept substitute goods, but is claiming damages for loss of profit. Kalastaa management wonders if it needs to rethink its exportingstrategy.

1.Which Incoterm would best represent the terms of sale between Kalastaa and DanskFisk? Remember to put location is this is needed for liability

2.Name the company that is responsible for the following activities and/or charges:

1. Box #1 - Any receiving charges associated with the port inFinland
2. Box # 2 - All transport documents
3. Box # 3 - The export documentation toCopenhagen
4. Box # 4 - Any customs and taxesincurred
5. Box # 5 - Delivery charges to have the salmon transported from Copenhagen to their distribution centre

3.Which type of shipping vessel would be most appropriate for Kalastaa to ship their product to Rotterdam?

4.Explain your choice to question 4.

5.Identify 4 documents and describe the purposes for each of the export documents that Kalastaa needs to provide to secure documentarycredit.

6.How would Kalastaa have benefited from employing a freight forwarder? Name at lease 6 benefits