Krikey Motors currently sells the 40W universal AC/DC motor to SAT for 25 Australian Dollars (AUD) per unit. Order cycle time is 46 days. Terms are listed as DAT, Chicago Tradeport.

Maduro Motor proposes to sell a similar 40W universal AC/DC motor to SAT for 875 Argentine Pesos (ARS) per unit. Order cycle time is 18 days. Terms are listed .

EXPORT/IMPORT PLANNING CASE STUDY Sound-Around Turntables Sound-Around Turntables (SAT) is a regional manufacturer of high-fidelity turntables. It has been in business in Detroit, Michigan since 2008 and has steadily increased sales volume as U.S. sales of vinyl albums re-ignited. Robert Ritchie, CEO for SAT received an order for 2,500 turntables for Best Buy, a national electronics retailer. Production for this order will begin in late March and the customer order must be delivered on June 1. Since SAT builds to order, Ritchie needs to begin ordering parts from his global supply base soon. A critical part is a 40 watt universal AC/DC motor which powers the turntable. An important needed component is the turntable motor that is normally purchased from Krikey Electric. The supplier is located in Sydney, Australia. The product is high quality and SAT has worked with Krikey for 7 years. The company makes monthly deliveries of 500 units and the shipments would begin on November 15. However, the company recently raised its prices citing higher material costs due to exchange rate risks. Last week, Ritchie received a proposal from an Argentinian company that wants to become a supplier to SAT. Maduro Motors would have all units in the order ready at the port of export on March 1 for a single delivery. Ritchie likes the idea of reducing the supplier-to-factory distance. However, he doesn't know much about Maduro or the political environment in Argentina. The Options Krikey Motors currently sells the 40W universal AC/DC motor to SAT for 25 Australian Dollars (AUD) per unit. Order cycle time is 46 days. Terms are listed as DAT, Chicago Tradeport. Maduro Motor proposes to sell a similar 40W universal AC/DC motor to SAT for 875 Argentine Pesos (ARS) per unit. Order cycle time is 18 days. Terms are listed as FAS, Port of Mar del Plata. Price Per Unit ted ean Shipping Cost per unit Krikey 21.5 AUD 5 AUD Maduro 475 ARS 65 ARS Current exchange rates are as follows (per $1 US). Date January 11, 201x Australian Dollar (AUD) 1.402 Argentine Peso (ARS) 39.27 Answer the following questions: 1. Evaluate the selling price and related costs per unit offered by each supplier in US dollars. Maduro Krikey $15.34 Price Per Unit $12.10 Estimated Ocean Shipping Cost per unit $3.566 $1.655 2. a. What costs, responsibilities and risks are assumed by the buyer (SAT) and the seller (Dongguan Electric) under Incoterms 2010, DAT, Chicago Tradeport? b. What costs, responsibilities and risks are assumed by the buyer (SAT) and the seller (Maduro Motor) under Incoterms 2010, FAS, Port of Mar del Plata? a. DAT, Chicago b. FAS, Port of Tradeport Mar del Plata Packaging goods for export and loading the container Factory to port transportation Payment of export duties (if any are due) Loading the container on the ship Paying for the ocean transport (carriage charges) Paying for the insurance on the international voyage Paying destination terminal charges for unloading freight Clearing US Customs (pay import duties & taxes) US transportation to final destination 3. What duties must be paid on the turntable motors and who is responsible for paying these duties? Show all figures in U.S. Dollars. Country of Origin Purchase price Rate of Duty per motor Applied Duty paid per motor Who pays this duty? AU = Australia AR = Argentina Harmonized Tariff Schedule of the United States (2019) Annotated for Statistical Reporting Purpo 85-6 Heading at Subang Sul Article Description Unit of Quantity Rates of Duty Special Genere 8501 18501.10 Electric motors and generators (excluding generating sets): Motors of an output not exceeding 37.5 W: Of under 18.65 W Synchronous valued not over $4 each 8501.10.2000 No. 16.7% Free (A, AU, B, BH, 90% CA CL, CO, D, E ILJO, KR, MA MX, OM, P, PA PE, SG) Free (A, AU, B, BH.35% CA CL, CO, D, E, ILJO, KA, MA MX, OM, P, PA PE, SG) 8501.10.40 Other 20 No. AC DC Brushless Other 140 IN lan 60 30 18501.10.60 Other No. No Of 18.65 W or more but not exceeding 37.5 W 12.8% Free (A, AU, B, BH 35% CA, CL, CO, DE, IL, JO, KR, MA MX, OM, P. PA PE, SG) 20 40 AC No. DC: Brushless No. Other No Other No Universal AC/DC motors of an output exceeding 37.5 W: Exceeding 37.5 W but not exceeding 74.6 W.........No. 80 8501,20 8501.20.2000 3.3% Free A, AUB, BH 35% CA CL.CO.DE IL, JO, KR, MA MX, OM, P, PA PE, SG) 4. Given your responses to Questions 1 thru 3, what is the total known cost per motor that SAT will incur and what other costs will SAT incur? Krikey Maduro Known Costs from Q1 paid by SAT $ $ Additional costs from Q2 that SAT will directly incur (though the case does not provide the actual amounts) $ $ Duties from Q3 paid by SAT Which supplier do you believe will provide the lowest total cost per unit? Krikey Maduro 5. What other costs and factors would you consider during the supplier selection process? 6. Which global supplier would you select? Why? DBXT INCOTERMS 2010 RULES CHART OF RESPONSIBILITY Any Transport Mode Sea/Inland Waterway Transport FOB CFR Any Transport Mode DAT DAP EXW FCA FAS CIF CPT CIP DDP Charges/Fees Ex Works Free Carrier Free Alongside Ship Free On Board Cost & Freight Cost Insurance & Freight Carriage Paid To Carriage Insurance Paid To Delivered at Terminal Delivered at Place Delivered Duty Paid Packaging Buyer or Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading Charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Delivery to Port/ Place Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Export Duty & Taxes Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Origin Terminal Charges Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading on Carriage Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Carriage Charges Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Insurance Seller Seller Destination Terminal Charges Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Delivery to Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Import Duty & Taxes Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller EXPORT/IMPORT PLANNING CASE STUDY Sound-Around Turntables Sound-Around Turntables (SAT) is a regional manufacturer of high-fidelity turntables. It has been in business in Detroit, Michigan since 2008 and has steadily increased sales volume as U.S. sales of vinyl albums re-ignited. Robert Ritchie, CEO for SAT received an order for 2,500 turntables for Best Buy, a national electronics retailer. Production for this order will begin in late March and the customer order must be delivered on June 1. Since SAT builds to order, Ritchie needs to begin ordering parts from his global supply base soon. A critical part is a 40 watt universal AC/DC motor which powers the turntable. An important needed component is the turntable motor that is normally purchased from Krikey Electric. The supplier is located in Sydney, Australia. The product is high quality and SAT has worked with Krikey for 7 years. The company makes monthly deliveries of 500 units and the shipments would begin on November 15. However, the company recently raised its prices citing higher material costs due to exchange rate risks. Last week, Ritchie received a proposal from an Argentinian company that wants to become a supplier to SAT. Maduro Motors would have all units in the order ready at the port of export on March 1 for a single delivery. Ritchie likes the idea of reducing the supplier-to-factory distance. However, he doesn't know much about Maduro or the political environment in Argentina. The Options Krikey Motors currently sells the 40W universal AC/DC motor to SAT for 25 Australian Dollars (AUD) per unit. Order cycle time is 46 days. Terms are listed as DAT, Chicago Tradeport. Maduro Motor proposes to sell a similar 40W universal AC/DC motor to SAT for 875 Argentine Pesos (ARS) per unit. Order cycle time is 18 days. Terms are listed as FAS, Port of Mar del Plata. Price Per Unit ted ean Shipping Cost per unit Krikey 21.5 AUD 5 AUD Maduro 475 ARS 65 ARS Current exchange rates are as follows (per $1 US). Date January 11, 201x Australian Dollar (AUD) 1.402 Argentine Peso (ARS) 39.27 Answer the following questions: 1. Evaluate the selling price and related costs per unit offered by each supplier in US dollars. Maduro Krikey $15.34 Price Per Unit $12.10 Estimated Ocean Shipping Cost per unit $3.566 $1.655 2. a. What costs, responsibilities and risks are assumed by the buyer (SAT) and the seller (Dongguan Electric) under Incoterms 2010, DAT, Chicago Tradeport? b. What costs, responsibilities and risks are assumed by the buyer (SAT) and the seller (Maduro Motor) under Incoterms 2010, FAS, Port of Mar del Plata? a. DAT, Chicago b. FAS, Port of Tradeport Mar del Plata Packaging goods for export and loading the container Factory to port transportation Payment of export duties (if any are due) Loading the container on the ship Paying for the ocean transport (carriage charges) Paying for the insurance on the international voyage Paying destination terminal charges for unloading freight Clearing US Customs (pay import duties & taxes) US transportation to final destination 3. What duties must be paid on the turntable motors and who is responsible for paying these duties? Show all figures in U.S. Dollars. Country of Origin Purchase price Rate of Duty per motor Applied Duty paid per motor Who pays this duty? AU = Australia AR = Argentina Harmonized Tariff Schedule of the United States (2019) Annotated for Statistical Reporting Purpo 85-6 Heading at Subang Sul Article Description Unit of Quantity Rates of Duty Special Genere 8501 18501.10 Electric motors and generators (excluding generating sets): Motors of an output not exceeding 37.5 W: Of under 18.65 W Synchronous valued not over $4 each 8501.10.2000 No. 16.7% Free (A, AU, B, BH, 90% CA CL, CO, D, E ILJO, KR, MA MX, OM, P, PA PE, SG) Free (A, AU, B, BH.35% CA CL, CO, D, E, ILJO, KA, MA MX, OM, P, PA PE, SG) 8501.10.40 Other 20 No. AC DC Brushless Other 140 IN lan 60 30 18501.10.60 Other No. No Of 18.65 W or more but not exceeding 37.5 W 12.8% Free (A, AU, B, BH 35% CA, CL, CO, DE, IL, JO, KR, MA MX, OM, P. PA PE, SG) 20 40 AC No. DC: Brushless No. Other No Other No Universal AC/DC motors of an output exceeding 37.5 W: Exceeding 37.5 W but not exceeding 74.6 W.........No. 80 8501,20 8501.20.2000 3.3% Free A, AUB, BH 35% CA CL.CO.DE IL, JO, KR, MA MX, OM, P, PA PE, SG) 4. Given your responses to Questions 1 thru 3, what is the total known cost per motor that SAT will incur and what other costs will SAT incur? Krikey Maduro Known Costs from Q1 paid by SAT $ $ Additional costs from Q2 that SAT will directly incur (though the case does not provide the actual amounts) $ $ Duties from Q3 paid by SAT Which supplier do you believe will provide the lowest total cost per unit? Krikey Maduro 5. What other costs and factors would you consider during the supplier selection process? 6. Which global supplier would you select? Why? DBXT INCOTERMS 2010 RULES CHART OF RESPONSIBILITY Any Transport Mode Sea/Inland Waterway Transport FOB CFR Any Transport Mode DAT DAP EXW FCA FAS CIF CPT CIP DDP Charges/Fees Ex Works Free Carrier Free Alongside Ship Free On Board Cost & Freight Cost Insurance & Freight Carriage Paid To Carriage Insurance Paid To Delivered at Terminal Delivered at Place Delivered Duty Paid Packaging Buyer or Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading Charges Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Delivery to Port/ Place Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Export Duty & Taxes Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Seller Origin Terminal Charges Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Seller Loading on Carriage Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Seller Buyer Buyer Carriage Charges Buyer Buyer Buyer Seller Seller Seller Seller Seller Seller Seller Insurance Seller Seller Destination Terminal Charges Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Seller Seller Seller Delivery to Destination Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller Seller Import Duty & Taxes Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Buyer Seller