You are the new purchasing manager for Trillium Equipment Ltd. (TEL). You have been in the position for 4 months and are currently feeling uneasy about goods procured overseas.

You have done a quick review on items purchased from China. There are no formal quotations and the items have been purchased through a Canadian agent. The items are purchased on a "delivered duty- paid" basis (DDP - Incoterms). You figured this is the usual practice when buying from overseas.

Matters got worse last week when you discovered that a casting supplied by the Canadian agent, Green Ltd., is now 3 months overdue. You decided that you would conduct a 'spot check' and call unannounced on the agent who is supplying the casting.

They were embarrassed by having to disclose that they were purchasing the casting from a Chinese foundry and they, in turn, were sub-contracting the machining of the casting to a Chinese sub- contractor!

You insisted on a full set of quality control plans. These were delivered to your office today - all in Chinese language.

You are still waiting for a definite delivery date. Meantime, your company is paying delinquent charges of 1% a week on a contract for an off-shore oil development company. Their contract is worth $2M. The casting has a value of $150,000. There is no damages provision in the contract with Green Ltd.

You had a brief meeting with the engineering director and quality manager of CWEL. You were pleasantly surprised when both said that in principle they have nothing against buying from overseas. You have agreed to produce a report at tomorrow's management meeting. You will need to address the following issues:

What do you need to do immediately to obtain delivery of the casting?

What are the potential issues with using a purchasing agent?

How would you re-design the procurement process for overseas sourcing?

What are the issues with using DDP for TEL?

What Incoterms would you recommend for future purchases from China?