You are the new export manager for a mid-size manufacturer of sports socks in Tuscaloosa. The company, Decathlon, makes socks in a variety of styles and sizes in cotton blends under its own label. It also does private label business for major sports labels like Nike and Adidas. Decathlon sells nationwide and has just started an export department to find overseas customers. You received an email inquiry from a potential distributor in Cologne, Germany. The company owner met you at a sporting goods trade show in Anaheim, CA last month. In the email, the owner wants to be your exclusive distributor for Western Europe and asked for a CIP quote on a 40 foot container to Rotterdam, Netherlands, the cheapest & closest port to its warehouse facility in Cologne. He would prefer 90 day payment terms, but since this is your first inquiry from the German company, you might want to consider more conservative or secure payment terms. Through your shipping department and freight forwarder you have received the following information. A 40 foot container holds 30,000 dozen pair and ocean freight will be $1,500. The unit price at your factory is $10.00 per dozen pair. Inland freight, handling, and loading on vessel at the U.S. port of Mobile is $500. Insurance is calculated $0.52 for every $100 of the total Cost + Freight (CPT). The import tariff is assessed at 2.5% of the CIP value of your product. (Round up to nearest dollar.) There is a VAT tax of 10 % assessed on the total CIP value plus tariff amount. It will cost $ 431 to get the container loaded on a train and sent from Rotterdam to the distributors warehouse in Cologne.

Your assignment: 1. Prepare a worksheet (not a pro forma invoice) titled Logistics Cost Analysis. What is the price per dozen pair at the following three points in the transit of the goods: FCA Mobile, b) CIP Rotterdam, and c) Distributors warehouse in Cologne Note: Not looking for the per individual sock price. Theyre sold by the dozen pair, so divide by 30,000.

2. Prepare a complete pro-forma invoice on a separate page. Show the charges so that the distributor can see the FCA Tuscaloosa, FCA Mobile, CPT Rotterdam, and CIP Cologne price terms. Refer to the examples provided in class and make sure that your pro forma includes all of the required fields.

3. Prepare a response letter from Decathlons export manager to the prospective distributor. He wants to be an exclusive distributor for Western Europe with 90 day payment terms. You, the seller arent ok with these conditions. In your response can you suggest payment terms and a territory that fit your risk-averse company? Would you consider different terms in the future? Feel free to make up the German companys name. There is no template for this letter, but you wont receive credit for Dear Dieter Heres your quote. They specifically want to see a CIP Rotterdam quote in your letter. Note: this is NOT the same as the cost to get the product all the way to Cologne.

4. At the bottom of the cost analysis page, do some basic math: Calculate the percentincrease. How much higher in price on a percentage basis is a dozen pair FCA Tuscaloosa versus the price for a dozen pair delivered to the Cologne warehouse? What Incoterm is used to quote to Cologne? Reminder: Do NOT use the standard invoice that comes with Excel it will NOT work for this exercise.