Question 2

Part (I):

You are to research and learn a new INCOTERM, Free Alongside Ship (FAS), by referring to the latest INCOTERMS 2020 Rules (ICC).

Required:

Explain the point of technical delivery for FAS.

Does the seller has any obligation to contract for carriage (i.e. on behalf of the buyer)?

Does the seller needs to arrange a contract of insurance (i.e. on behalf of the buyer)?

(4 marks)

Part (II) Version 2:

First Nations Trading (Vancouver Canada) is importing CAD 110,000 of lithium ion batteries from Yongtai International (China). The port of shipment is Fuzhou, China. The incoterm agreed by the two companies is CFR (Port of B.C., Canada). The following are the costs associated with the shipment:

Price of lithium ion batteries = CAD 110,000

Delivery charges to port at Fuzhou = CAD 900

Delivery charges from Port of B.C. to traders warehouse in Vancouver = CAD 800

Fuzhou port levy = CAD 500

Fuzhou loading charges = CAD 600

Import custom duties = CAD 700

Freight charges = CAD 2,000

Insurance = CAD 1,100

Import licensing fee for batteries= CAD 300

(CAD: Canadian Dollar)

b) Calculate the CAD amount Yongtai International will quote First Nations Trading for the above order based on CFR. Assume the exporter will mark-up the invoice price to earn a profit of CAD 3,000 in this transaction. (You must clearly list each relevant cost item and show all workings to be awarded full marks. Marks will be deducted for irrelevant costs.)

c) A fire started in the vessels engine room when it was sailing along the Sea of Japan. As a result, all the batteries were damaged.

Required:

Explain technical delivery.

Identify the point damage was done to the batteries i.e.

before or after technical delivery.

Interpret who is responsible for the loss.

d) Which incoterm (if we compare Ex-Works versus CFR) should First Nations Trading choose, if First Nations Trading wants the cheapest quotation (i.e. cost reduction perspective in terms of dollars and cents)? Explain.