1. Electronics for You (EFY) is a national retailer of home and small business electronics. Because many of its products are made in Asia, its headquarters and main warehouse are on the West Coast of the United States. Most shipments are made FOB by container on cargo vessels. Once the merchandise is in the West Coast warehouse, EFY distributes it to its western regional stores in its own trucks. EFY uses contract carriers for distribution to 3 other regional warehouses. From the regional warehouses, it uses common carriers to deliver shipments to individual stores. Besides acquiring electronics for sale in its own stores, EFY serves as a distributor of foreign manufactured electronics to small electronics dealers in smaller cities. EFY receives electronics on consignment from foreign manufacturers, sells the products, and arranges to transport them by common carrier to independent dealers. In addition to its sales of electronics, EFY provides repair services. It provides post-warranty repair services to retail customers and warranty repair service for national brands. The retail repairs are made on-site at local stores. The warranty repair services are provided at two regional repair centers. One is on the East Coast; the other is on the West Coast. EFY must determine what ocean cargo and inland marine loss exposures it has and what ocean and inland marine coverages will best insure them.
2. What are EFY's ocean marine and inland marine loss exposures?
3. Identify the inland marine and ocean marine coverage EFY should purchase to cover the identified exposures.
4. Explain whether an independent electronics dealer would want its terms of sale with EFY for electronics goods to state that shipments are FOB Point of Origin or FOB Destination.
5. Explain why EFY might purchase inland marine insurance on goods in transit even though common and contract carriers may be held responsible for any damage or loss of goods when they transport them.