Table of Contents

Section-I: Long Answer 

Overview of the Project 

Key Assumptions. 

Implementation of Ideal Incoterm Rules. 

Seller/ Exporter Obligations. 

Customer/ Importer Obligations. 

Section - II. 

Case Study 1. 

Case Study 2.

References.

International Trade and Logistics - Section 1

Overview of The Project

This project is mainly based on ABC Company, which has developed a product that can be usually prepared with the importer, which is the United States, while on the other hand, the exporter for the product is Costa Rica. This fact cannot be shorn off that scenario doesn’t specifically represent the questions of one firm; instead, it is a clear explication of both importer and exporters who were not sure about the implications of incoterms in the specific domains of sale or purchases.

Thus, the project aims to explore and improve the financial situation and transactions at the international levels. It is significant to note that ABC Company will purchase the products from US manufacturers for shipment, and there will be the designation of the US port as the determined place for a purchase order. Besides that, ABC Company for the importing products includes the intimations of arrangement making with their customs broker to pick the products from US port for the final implications of delivery and thus providing facilitation to the customers.

Key Assumptions

In the preparation of this international transaction, there are several key assumptions that have been made for this project.

  • First of all, it is assumed that for the procurement of ideal incoterm for this transaction, Delivery Duty Unpaid will be considerable.
  • It is assumed that the US would handle the costing implications of transport as the port of the United States has been majorly used in this transaction.
  • Besides that, responsibility for the assurance of fresh products will also be ensured by the US.
  • As far as costs overloading is concerned, it is assumed that Costa Rica would handle them for all of the merchandise.
  • Moreover, the implications of importing insurance and relative duties will also be handled by Costa Rica.
  • It is expected that developed scenarios will be cost-effective for Costa-Rica, and thus there will be a generation of confidence promotion in receiving the shipment of timely manners.
  • Thus, the assumption has also been made that good conditions, as per the interest conditions of the US, will also be improved.

Implementation of Ideal Incoterm Rules

It is significant that ideal incoterm rules which will are regarded to be considered or the procurement of transaction in an ideal manner includes the delivery duty unpaid. In order to employ the intimations of delivery duty unpaid, it is significant to note that it is one of the international trading terminologies that usually indicate the seller and buyer’s responsibilities (Huuhka, 2019). In this regard, it is included in sellers’ responsibilities to take a guarantee for reaching the destination with the clarification of all the expenses with the identification of assumptions about the risks which are usually procured during transport. DDU incoterm is considered reliable for short-termed delivery, and unlike that of DDP, allocation of responsibilities is not on the seller for cost delivery. It is significant that the requirement of the consignee to take the responsibilities of costing implications and, most often, physical delivery as well (Abiodun Jacob, 2018).

Thus, the rationale for the provision of DDU can be procured because, by the follow up of this domain, additional costs that are existent for delivery assurance are taken up by the seller when they are agreed upon the ahead of time. In order to implicate the terms of DDU, in this case, study, there is a requirement of goods delivery with the insinuations of agreed-upon destination in Costa Rica. It is significant that the purchasing country will be thus regarded to be responsible for the rest of all the implications, which are regarded to be crucial as the further delivery intimations and other terms will be laid out much ahead of time (Tradefinanceglobal, 2019).

It is significant that incoterm based on DDU won’t be used in the form of contracts as it is no more available in the form of incoterm rules (Schaefer, 2017). Here a few of the obligations which are imparted on the US and Costa Rica by the implementation of DDU, at both importer and exporters are as follows:

Sr. No

Seller/ Exporter Obligations

Customer/ Importer Obligations

1

Provision of goods to the buyers

Payments Procurements

2

Documentation and Licenses

Authorization, formalities and licenses

3

Insurance procurement and Shipping Implications

Insurance procurement and Shipping Implications

4

Delivery Intimations

Receiving the delivery

5

Risks Transfer

Risks Transfer

Usually, the issues are developed due to cost implications, and thus, responsibilities in this regard for both importer and exporter are imparted in a distinct manner. It is significant that the seller is required to make payment for the destination country, labor costs and prices for transportation. Besides that, expenses which are usually imparted for insurance are included in both buyers and suppliers as well.

International Trade and Logistics - Section 2

International Trade and Logistics - Case Study 1

(a) The new product faces many issues when it is required to introduce it. It is necessary to analyze all the costs which are required to produce a product. These costs are depending upon various activities. Some of the activities in which the product’s cost depends on are: the manufacturing cost, finance cost and also distribution cost are required to be calculated. The result of the calculation defines what the profit is set to the new product. In this respect, there need a meeting to discuss what the profit is set. These are some of the department who involve in the meeting: manufacturing, marketing, finance and the logistic departments. In the meeting, they have discussed the cost of the order and also the carrying cost in inventory control. There is a tradeoff between the storing costs and transportation cost (Murphy, 2015).

All these calculations help the production company to estimate how much to order; therefore, only the required number of things can be ordered. These calculations also help the company to decide how much to produce, which will help the production company to produce only the required amount. This will also help the company, which produces the new product to estimate the exact time of the production. Therefore, all the mentioned departments conduct a meeting and discuss the issues that affect the new product cost. The role of the logistics department in the production of the new product is very important. This department works with other departments such as storage, transporting, inventory, material handling and many more to help them in different issues. The logistics department helps them to provide many solutions to overcome the issues in the way of the new product. Therefore, it is cleared that the logistics department is very crucial in the production of the new product (Industrystar, 2019).

(b) The role of the logistics department in the production of the new product is essential because it must control the storage of the new product. The main duty of the logistics department is to control the flow of the services related to the new product and its information from the production house to the consumption point. This flow can be forward or reverse. Therefore, it is necessary for the logistics department that should be well aware of the new product. This department should be aware of that what type of nature of the new product, what is the size of the new arrival product, what conditions are required to store this new product and also the physical characteristic of the new product. The logistics department also manage the issues related to the production demand, production quality and also the time planned for the production (Lander, 2019).

The logistics department keeps these issues in mind before making any strategy related to the goods’ transportation, which will help to deliver and received the product in time. It is observed that more cost and time are required for the company if the logistics department has not enough details about the product. For example, in the provided case study, the demand reduced to one million cans per week instead of the three million cans. This is due to the insufficient detail of the logistics department. In the given scenario, if the logistics department is well aware of the details related to the product, the results are better than the actual situation. Therefore, the logistics department must be cognizant of all the detail related to the new product an well as the changes of the plan related to the new product, which will help the company to achieve more profitability (Lander, 2019).

International Trade and Logistics - Case Study 2

(a) If the UK leaves both the customs union and the single market, then it has very bad consequences. The Just in Time system needs to work smoothly, and the customs union and the single market help it to work smoothly. Due to this, the JIT works effectively in the many areas of the UK and Europe. If the UK leaves the customs union and the single market; therefore, the JIT system in the UK could not work smoothly. An owner of the Japanese firm stated that in the custom delay of fifteen minutes, his company would require an additional £850,000 and also will require at least 18 months to build a new set up for the delivery if the UK leaves the customs union. The company delivers about two million components in a day, and the minor delay in the process will lead the company so back (CARLSON, 2019).

The Honda company stated that it requires 350 trucks every day to be delivered. If the UK leaves the customs union and the single market, then Honda’s supply chain would be cut off. Honda company manager of the government affair stated that the customs union is the only way that provides a frictionless or smooth border supply. He more said that it creates a great challenge to the JIT system to run smoothly in the UK, if the UK leaves the customs union and the single market. It will create challenges for the JIT to run in the future at the same pace if the UK leaves both the customs union and the single market. The worst consequence of it, many of the European companies’ supply chains will cut off in the UK, and this will produce the worst challenge of the government of Europe to better handle this situation (Bailey, 2018).

(b) Most of the impact of the Brexit is on the businesses and the supply chain or logistics chain related industries. The main impact od Brexit is related to the UK and Europe’s warehousing. Brexit chooses the location for its warehouses on the base of the strategy related to customer service. Brexit is confused about the decision of the strategy of the location of their warehouses. He is confused that the infrastructure of the warehouse and the location of these warehouses will fulfill the need of his organization. The barriers in the way of the trade, such as tariff and the customs duties are depending on the material of the manufacturers and assemble of the product. There are many businesses. Some of them are small, and some of them are big, and the supplier base mustn't accept the new taxes to achieve a stable price for the product (KPMG, 2018).

Therefore, it required the Brexit to review all the strategies related to the supply chain process and control every issue of the supply chain through better planning. It is also necessary for Brexit to review the whole logistics chain process and check where the changes are required. If the Brexit does not review its strategy related to the supply chain management, then it will get a chance to the companies to shift of the process which they use before the Brexit services because if they feel that the previous process are better than the Brexit and provide better direction which will help to reduce the supply chain risk. Therefore. There are many issues in the strategy of the Brexit, which creates problems for the supply chain for many organizations, and Brexit must want to review its enterprise system (Deloitte, 2018).

References for International Trade and Logistics

Abiodun Jacob, O. (2018). elivery of Goods to Carriers in International Sales: An Examination of What It Purported to Be in Nigeria. Business Law Review, 39(2),.

Bailey, D. (2018). Could Brexit spell the end for “just-in-time” production? Retrieved from prospectmagazine: https://www.prospectmagazine.co.uk/economics-and-finance/could-brexit-spell-the-end-for-just-in-time-production

CARLSON, R. (2019, 06 10). Just-In-Time (JIT) Inventory Management. Retrieved from thebalancesmb: https://www.thebalancesmb.com/just-in-time-jit-inventory-management-393301

Deloitte. (2018). The impact of Brexit on your supply chain. Retrieved from deloitte: https://www2.deloitte.com/nl/nl/pages/tax/solutions/the-impact-of-brexit-on-your-supply-chain.html

Huuhka, H. (2019). EFFECTIVE USE OF INCOTERMS IN THE CASE COMPANY. Retrieved from https://www.theseus.fi/bitstream/handle/10024/160438/Henni_Huuhka.pdf.pdf?sequence=1

Industrystar. (2019). 5 Reasons to Include Your Logistics Strategy During Product Development. Retrieved from industrystar: https://www.industrystar.com/blog/2019/01/5-reasons-include-logistics-product-development/

KPMG. (2018). How will Brexit impact my supply. Retrieved from kpmg: https://home.kpmg/xx/en/home/insights/2018/10/how-will-brexit-impact-my-supply-chain-and-warehouses.html

Lander, S. (2019). A Relationship Between Logistics & Marketing. Retrieved from smallbusiness: https://smallbusiness.chron.com/relationship-between-logistics-marketing-74261.html

Murphy, J. V. (2015). Logistics Plays Key Role In Success of New Product Introductions. Retrieved from supplychainbrain: https://www.supplychainbrain.com/articles/831-logistics-plays-key-role-in-success-of-new-product-introductions

Schaefer, T. J. (2017). Incoterms® use in buyer-seller relationships: a mixed methods study. Retrieved from https://irl.umsl.edu/cgi/viewcontent.cgi?referer=https://scholar.google.com/&httpsredir=1&article=1666&context=dissertation

Tradefinanceglobal. (2019). What is the DDU Incoterm®? Retrieved from Tradefinanceglobal: https://www.tradefinanceglobal.com/freight-forwarding/incoterms/ddu-incoterm-delivery-duty-unpaid/

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