Chapter 2 International Trade Terms I. Multiple choices II. True or false statements 1 B T 2 C T 3 A F 4 C F 5 C T 6 D F 7 A F 8 B F 9 C F 10 D T III. Explain the following terms 1. shipment contract
Shipment contract is a contract using an Incoterm which indicates that the delivery happens at the time or before the time of shipment. 2. symbolic delivery
Symbolic delivery is a delivery situation in which when the seller delivers the buyer does not physically receive the goods. This kind of delivery is proved by the submission of transport document by the seller to the buyer.
3. arrival contract
Arrival contract means a contract using an Incoterm which indicates that the delivery happens when the goods arrive at the destination. 4. actual delivery
Actual delivery refers to a delivery situation in which when the seller delivers the buyer does physically receive the goods. IV. Short questions
1. Who pays for loading for shipment under FOB ? The seller.
2. Who pays for unloading under CIF? The buyer.
3. Compare and contrast FOB, CFR and CIF?
Similarities: a. The seller's risk will be transferred to the buyer when the goods are loaded on board, b. The seller is responsible for export customs formalities while the buyer is responsible for import customs formalities, c. The buyer is responsible for unloading the goods at the port of destination, d. All three terms can only be used for waterway transportation.
Differences: a. FOB requires the buyer to arrange and pay for the ocean transportation; CFR requires the seller to arrange and pay for the ocean transportation; CIF requires the seller to arrange and pay for the ocean transportation and insurance against the buyer's risk.
4. What are the two types of trade terms concerning the transfer of risks?
Shipment contract terms vs. arrival contract terms. Under shipment contract terms the seller's risk will be transferred to the buyer before the goods depart from the place/port of shipment. Under arrival contract terms the seller will bear the risk of the goods until the goods arrive at the destination. 5. What are the differences and similarities between CPT and CFR?
Major similarities: a. The seller should contract and pay for the major carriage. b. The seller is not taking the risk of loss of or damage to the goods during the transportation.
Difference: a. CPT is applicable to any kind of transportation mode while CFR is only used for waterway transport, b. Under CPT the seller's risk will be transferred to the buyer when the goods are handed over to the first carrier nominated by the seller. Under CFR the seller's risk will be transferred when the goods are loaded on board the vessel.
6. What are the differences and similarities between CIP and CIF?
Major similarities: a. The seller should contract and pay for the major carriage. b. The seller is not taking the risk of loss of or damage to the goods during the transportation, c. The seller must obtain insurance against the buyer's risk.
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Difference: a. CPT is applicable to any kind of transportation mode while CFR is only used for seaway or inland waterway transport, b. Under CPT the seller's risk will be transferred to the buyer when the goods are handed over to the first carrier nominated by the seller. Under CFR the seller's risk will be transferred when the goods are loaded on board the vessel.
7. If you trade with an American, is the sales contract subject to Incoterms without any doubt? What should you do?
No. The Revised American Foreign Trade Definitions 1941 is still in use, especially in the North American area. It has different interpretation about some trade terms. The traders should clarify the choice of rules before any further discussion.
8. What are the most commonly used trade terms? FOB, CFR & CIF.
9. Who is responsible for carrying out customs formalities for exports under an FOB contract?
The seller. According to Incoterms 2010, except EXW and DDP these two terms, all the other eleven terms require the seller to handle the export customs formalities, while the buyer the import customs formalities. 10. If a Chinese trader signs an FOB Hamburg contract, is he exporting or importing?
Importing. FOB should be used with a \Chinese trader's perspective, he is importing. V. Case studies
1. An FOB contract stipulated \March 201 l, the seller contacted the buyer for shipment details. The buyer faxed \port for loading on 21 March. The vessel will depart on 22 March.\The seller sent the goods to the port accordingly. However the nominated vessel did not turn up and the goods had to be stored in the warehouse at the port. On the night of 21 March a fire happened in the warehouse area and part of the goods was damaged. When the vessel arrived two days later the seller and the buyer had an argument about the settlement of the loss. The seller required the buyer to bear the loss caused by the fire, but the buyer believed that the vessel arrived within the shipment period and the loss occurred before the seller delivered the goods therefore the seller should bear the loss. Please provide your solution.
析：1)首先案例中提到货物发生了损失是由于货物存放在码头仓库期间发生火灾造成的。2)卖方之所以会把货物存放在码头仓库是因为买方指定的船只在约定时间没有出现。3)Incoterms 2010有规定，买方有向卖方提供准确、及时的装船通知的义务，如果买方没有履行该义务而导致了货物受损，即使双方没有完成交货，买方也要承担相关损失。
答案：买方应该承担损失。
答题切入点：1)分析货物受损原因。2)根据《2010年国际贸易术语解释通则》买方在提供装运通知方面的义务。3)解释提供装运通知与完成交货风险转移之间的关系。
2. A contract to sell grain used a CFR term. The grain was officially certified as Grade One at the time of being delivered on board at the port of shipment. After making the shipment, the seller gave the buyer timely notice. However, due to the long voyage, some grain went bad. At the destination, the grain could only be sold as \
析：1)货物在装运港已经“officially certified as Grade One'’，这就说明货物的质量是合格的，而且是经官方确认的。2)文中提到“due to long voyage\这说明货物变质的原因是由于运输时间长。
答案：No。
答题切入点：a．货物变质的原因．b．CFR术语下风险转移的情况。
3. Under a CIF contract, the goods had been loaded on board the vessel according to the terms of the contract. Then the vessel departed. An hour later, the vessel struck a rock and sank. The next day the seller's bank presented the shipping documents, insurance policy and invoices to the buyer, and demanded payment. (1) Knowing that he will not receive the goods, should the buyer pay? (2) Which party would have to take the loss?
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析：本题的关键疑问在于买方明知货物已全部损失，不可能再收到货物，是否还应支付货款。这是考察对“symbolic delivery”这个概念的理解。在CIF术语下，卖方交货时买方并没有真正收到货物，卖方的交货是通过货交承运人并获得相关单据(尤其是物权凭证)来实现的。而相应的，买方必须接受交货，也就是买方必须接受卖方提供的相应单据并履行相关支付的义务。
(1)答案：Yes． 答题切入点：1)卖方履行其义务的情况；2)CIF术语对双方交货、领受货物的规定；3)解释“symbolic delivery”在这里的应用。
(2)答案：The buyer．
答题切入点：CIF术语下风险转移的情况。由于本章主要讨论贸易术语的应用，关注的主要是买、卖双方。如果答案是保险公司，则要求说明损失的风险首先是由买方承担的，在风险属于保险公司承保范围内的情况下，保险公司会对买方进行部分或全部的赔偿。
4. A Shanghai company signed a CIF contract to sell Christmas goods to a British company. The USD1 million contract stipulated, \If the carriage is late, the buyer can cancel the purchase, and get the refund for the payment. \was made. Unfortunately, due to mechanical problems, the vessel arrived at the destination a few hours late. The buyer refused to accept the goods. As a result, the goods had to be sold on the spot, and the seller lost USD700 000. Comment on this case.
析：卖方受损的原因是货物达到目的港的时间晚于合同规定的时间，因此买方拒收货物。从表面上看，似乎问题就是出在卖方违约上，但如果仔细分析就会发现，该合同本身的内容就存在自相矛盾的问题。合同用的是CIF术语，卖方在货装上船时风险就转移。卖方既不承担运输途中的风险，也不保证货物是否能抵达目的港。CIF合同本质上是一个“shipment contract”。但加上一条保证到岸时间的条款后，合同的性质发生了变化：它变成了一个“arrival contract”。也就是说，在货物按时抵达目的港之前的一切风险都由卖方承担，否则卖方就是违约。
答题切入点：1)CIF术语对双方风险及义务的划分，点出“shipment contract”这一概念；2)解释“arrival date”clause对合同性质的改变。
5. A Chinese company finalized a transaction with a German company under CIF price and L/C payment. Both sales contract and L/C received stipulated that transshipment was not allowed. The Chinese company made the shipment on a direct vessel within the validity period of the L/C and negotiated the payment with a direct Bill of Lading successfully. After departing from the Chinese port, in order to take another shipment, the shipping company unloaded the goods from the original vessel and reloaded them onto another. Due to the delay and the poor condition of the second vessel, the goods arrived 2 months later than the expected time. The German company suffered and claimed compensation from the Chinese company with the reason that the Chinese side cheated them with a direct B/L. The Chinese company believed that since they signed the contract under a \到岸价\Chinese side compensated. Comment on this case.
析：1)卖方按照合同规定履行了各项义务，造成货物到港延误的原因是船公司擅自改变运输安排，卖方对此并不知情。2)卖方把CIF理解成“到岸价格”存在错误，混淆了承担风险与承担费用的区别。如果把CIF理解成“到岸价格”，那么CIF就变成了一个到岸合同术语(arrival contract term)了，而实际上它应该是个装运合同术语(shipment contract term)。3)因此，卖方在此情况下不应进行赔偿，而是应该协助买方向船方进行索赔。
答题切入点：1)分析买方受损的真正原因及责任方：2)解释卖方错误赔偿的原因；3)给出本案例正确的处理方法，尤其是卖方应该如何应对买方的要求。
Chapter 3 Export Price I. Multiple choices II. True or false statements 1 B F 2 D T 3
3 D F 4 A F 5 C F 6 D T 7 A T 8 B F 9 D F 10 B F
III. Explain the following terms 1. inquiry
An inquiry is the act of a potential client asking for information from the counterpart to his intention in buying or selling a certain commodity. 2. offer
An offer is a sufficiently definite proposal addressed to one or more specific persons for concluding a contract, necessarily indicating the intention of the offeror to be bound in case of acceptance. 3. counteroffer
A counteroffer is a reply to an offer which contains additions, limitations or other modifications. 4. acceptance
An acceptance is a statement made by or other conduct of the offeree indicating assent to an offer. IV. Short questions
1. What are the four components of the standard form of a price? A code of currency, a number, a unit and a trade term.
2. While making pricing decision, what major factors should be considered?
When a seller is setting his export prices, the major factors he has to consider include cost, anticipated profit, capability of his target market, terms of payment, competition and relationship between the exporter and the importer.
3. What are the differences and similarities between commission and discount?
Similarities: Both commission and discount are used as incentive to promote transactions.
Differences: a. Commission payment is an add-up on top of the original price, while discount a reduction; b. Commission mainly applies to transactions which involve middleperson or agent. Discount can be used without particular prerequisites. 4. When will an offer be terminated?
An offer will be terminated when: a. it is legally terminated (being withdrawn or revoked); b. it is not accepted by the offeree within the validity period or a reasonable period of time; c. it is rejected by the offeree; and d. some uncontrollable events happen, preventing the offeror from fulfilling his obligations. 5. What are the possible modifications a counteroffer may make to an offer?
If a reply to an offer makes modifications in the following aspects, the reply will be considered as a counteroffer: ~_ price and payment; b. quality and quantity of goods; c. place and time of delivery; d. extent of one party's liability to the other; e. settlement of dispute. V. Case studies
1. Under the price of USD25.5/dozen CFR Rotterdam BB Company signed a contract to sell 1 000 dozens of T-shirt. The T-shirt was purchased from factory by RMB135/dozen. BB Company calculated 3 % of its product purchasing price as its overhead costs. The local transport and customs formalities took RMB2 500 and the container ocean freight was USD1 500. If the bank exchange rate was 1USD/6.5RMB, what would be the export profit margin for this deal? And what about its export cost for foreign exchange? export profit margin: 9.26% ; export cost for foreign exchange : 5. 897
Export profit margin=[ Export revenue ( FOB ) - Export cost ( FOB )]/ Export revenue (FOB)
Export Cost for Foreign Exchange =[Export Cost in Local Currency]/[ Export Revenue in Foreign Currency] 2. The price quoted by a Shanghai exporter was \Liverpool\revised FOB price including 2% commission. The freight for Shanghai-Liverpool was USD200 per M/T. To keep the export revenue constant, what would FOBC2% price be? FOBC2% Shanghai USD1 020. 41/M/T FOBC% = FOB/( 1 - Commission)
3. AC Company offered to sell goods at \ The importer requested a revised
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quote for CFRC5 %. The premium rate for insurance was 1.05 % and mark-up for insurance was 10%. To get the same export revenue, what would AC's new offer be? CFRC5% New York USD104. 5/case I = CIF x 110% x R
CFRC% = CFR/( 1 - Commission)
4. DD Company offered to sell goods at \of the value\was USD50 per M/T, and the premium rates for \get the same export revenue, what FOB price should the exporter offer? FOB Guangzhou USD1 923.6/M/T I =CIF x 110% x R
CIF = FOB + Freight + Insurance
5. The price quoted by an exporter was \quote for CIF Auckland. If the freight was USD50 per case, 110% of the value was to be insured, and the premium rate for insurance was 0. 8%, what would the new price be? CIF Auckland USD504. 44/case CIF = CFR/( 1 - 110% x R) CFR = FOB + Freight
6. X Company signed a contract to export two machines at an initial price (P0) of USD5 million each. At the time of setting P0, the material price index (M0 ) was 110, the wage index (W0 ) was 120. The contract contained a price revision clause that allowed the final price to be set on delivery.
At the time of delivery, the material price index (M) was 112, and the wage index (W) became 125. If the following ratios remained constant:
A (the management fee and profit as a percentage of the price) = 15% B (the material cost as a percentage of the price) =30% C (the wage cost as a percentage of the price) = 55 % What is the final price (P) ? USD5.14 million
P = P0. ( A + B. M/M0 + C. W/W0 )
7. On Nov. 20th, Lee Co. offered to sell goods to Dee Inc. at USD500 per case CIF London, \here 11/27. \the bid, the market price went over USD500. On Nov. 25th, Dee cabled an unconditional acceptance of Lee's initial offer. Could Lee reject Dee's acceptance?
析：1)11月22日Dee Inc．的回复对价格进行了更改，因此这是一个还盘。当Dee Inc．对报盘进行还盘，原来的报盘就自动中止了。在这个前提下，Lee Co．可以采取任何行动而不须顾虑先前的报价。2)尽管Dee Inc．在原报盘的有效期内又发出了一个无条件接受报盘的回复，但由于之前他们已经进行了还盘，所以此时的接受无效。
答案：Yes．
答题切入点：1)还盘的定义；2)报盘中止的因素。
8. X offered to sell goods to Y, \Two days later, Y cabled back, \ Two more days later, X received Y's L/C requiring immediate shipment. At this time, the market price of the goods went up by 20%. What options did X have to deal with Y?
析：1)Y在两天后的回复中虽然声明接受报盘，但同时要求“shipment immediately”，这是对原报盘的船期“shipment within 2 months”进行了修改，因此构成了一个还盘，原报盘则被中止。2)在这个前提下，再来考虑x都有哪些选择以及哪个是最可能或最好的。
答题切入点：1)还盘的定义；2)报盘中止的因素；3)X可能有的各项选择；4)X最可能选择的做法
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