Loyal Textile Mills Ltd.

Project Description:

Having experienced firsthand the many product shortages Canadians endured during the COVID-19 pandemic, you decided to start your own business and began researching opportunities for importing healthcare-related products. You registered a company name, Canadian Healthcare Imports, and rented 1,000 square feet of warehouse space at 299 Doon Valley Drive in Kitchener, Ontario.

During your online research, you contacted Loyal Textile Mills Ltd., a large manufacturer of PPE, textiles, and garments headquartered in Chennai, India. Your initial inquiry drew a response from the Manager of International Sales for Loyal Textile Mills, Mr. Balakrishnan, who advised they were not shipping PPE products to Canada because of domestic regulatory issues but hoped to do so in the near future. However, Loyal Textile manufactured other healthcare garments, including medical scrubs and doctor's coats that you felt could be successful as imports (See Appendix A).

During your online conversations with Mr. Balakrishnan, he mentioned that Loyal Textile would be very interested in selling its garment line in Canada since they hoped to secure permission from the Indian government to export their proprietary PPE products within the next twelve months. Mr. Balakrishnan felt it would be easier to sell their PPE products in Canada if you could first establish their line of healthcare garments in the Canadian market while they waited for regulatory approval. Once Loyal Textile Mills received permission to export PPE products, Mr. Balakrishnan suggested they would be open to discussing a licensing arrangement with you for the Canadian market.

As a further incentive, Mr. Balakrishnan offered to ship your first garment order without any advance payment or deposit, stating Loyal Textile Mills would wait for payment until 30 days after you sold their products in Canada. The company would protect its receivable and only require that you arrange and be responsible for delivering the shipment to Canada.

These were very favorable terms, and you expressed your agreement to Mr. Balakrishnan subject to signing a sales contract that you would prepare and forward within the next two weeks. Now that you had secured a supplier, you concentrated your efforts on finding Canadian customers for Loyal Textile's line of healthcare garments.

Over the next few days, you were able to convince a large Ontario hospital buying group to place an order for medical garments with a 50% deposit upfront to secure their order. Two weeks later, you placed your first order with Loyal Textile Mills Ltd., consisting of 1,000 scrub tops (250 each of four colors), 1,000 pairs of scrub pants (250 each of four colors), and 500 doctor's coats (250 short-sleeved coats and 250 long-sleeved coats). Scrub tops are packed 20 per box, scrub pants are packed 10 per box, and doctor's coats are packed 5 per box.

One week later, the local sales representative for your freight forwarder, OMG Logistics, advised they were picking up your order at Loyal Textiles' plant in Venkateswarapuram, India. Your order would be consolidated into an ocean container and shipped overland to the port of Chennai. Your shipment was booked on the Evergreen vessel Ever Given, which departed Yantian, China, on March 8^th en route to Halifax, Canada. The Ever Given was scheduled to arrive in Chennai on March 14^th and depart on March 16^th.

The average sailing time from Chennai to Halifax was approximately 35 days, but the sales representative promised to provide regular updates on the vessel's progress and the estimated arrival time in Halifax. Although almost 40% of ocean shipments were routinely late, your sales representative said he had a good feeling about this voyage and was sure it would be smooth sailing all the way!

Question:-

What is the most appropriate Incoterm for you to select (as the buyer) in this scenario? (5 points) Explain your answer. (5 points) (5 + 5 = 10 points total for this question).