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CaseStudy 1 AChineseimportandexportcompanyconcludedaSalesContractwithaHollandfirmonAugust5 2000 sellingabatchofcertaincommodity ThecontractwasbasedonCIFRotterdamatUSD2500permetricton TheChinesecompanydeliveredthegoodsincompliancewiththecontractandobtainedaclean on boardBillofLading Duringtransportation however 100metrictonsofthegoodsgotlostbecauseofroughsea Uponarrivalofthegoods thepriceofthecontractedgoodswentdownquickly Thebuyerrefusedtotakedeliveryofthegoodsandeffectpaymentandclaimeddamagesfromtheseller Howwouldyoudealwiththiscase Itwasnotrightforthebuyernottotakedeliveryofthegoods Inthiscase thecontractconcludedbetweenthesellerandthebuyerwasonCIFterms accordingtowhich theseller sresponsibilitiesendedwhenheloadedthegoodsonboardtheshipandpaidthefreightandinsurancepremium theriskseparationwasthesideoftheship thatistosay therisksweretransferredtothebuyerortheotherpartiesconcernedafterthesellerputthegoodsonboardtheship Sincethedocumentspresentedbythesellerwererightandproper thesellercoulddirectlygetpaidfromtheIssuingBankoftheL C However partofthegoodsgotlostbecauseofroughsea Doesthismeanthatthebuyersufferedloss No Itisdefinitelynotthecasebecausethereareothertwosub contractsexistingonCIFterms I PandBillofLading Inthiscasethebuyercouldclaimdamageswiththeinsurancecompany buthehadtotakedeliveryofthegoods Obviously theactualreasonforthebuyer srefusaltoacceptthegoodsinthiscasewasthatthepricesofthegoodsweregoingdown Thisis certainly unjustified 2 AChinesetradingcompanyEconcludedatransactioninsteelwithaHongKongcompanyWonthebasisofFOBChinaPort CompanyWimmediatelyresoldthesteeltoCompanyHinLiberiaonthetermsofCFRLiberia TheL CfromWrequiredthepricetermstobeFOBChinaPortandthegoodstobedirectlydeliveredtoLiberia TheL Calsorequired FreightPrepaid tobeindicatedonBillofLading WhydidCompanyWperformso Whatshouldwedoaboutit InthiscasethecontractwasconcludedbetweenCompanyEandCompanyWonFOBterm accordingtowhichtheseller CompanyE endedhisresponsibilitieswhenhedeliveredthegoodsonboardtheshipattheportofshipment Hedidnotneedtopayfortransportationofthegoodsortheinsurancepremium Therefore itwasnotrightforWtoaskEtopaythefreightandindicate FreightRepaid ontheBillofLading ThereasonwhyWaskedEtodothatmightbethathewantedtotransferthefreightchargestoE However inpracticaldealings foreigntradecompaniesoftencomeacrosssuchsituations especiallywhenacontractisconcludedwithanagent whowantstoresellsthegoods Inthiscase EmightcomplywithW srequest buthehadtoindicatethatthefreightshouldbebornebyW SupposeyouareanexporterandyourbusinessplaceisinChina judgeifthefollowingstatementsarecorrectornotandgiveyourreasons Offer1000balesofCottonPieceGoodsatUSD150perbaleFOBNewYorkFOBChinesePort FOBShanghai SupposeyouareanexporterandyourbusinessplaceisinChina 2 Weacceptyourofferfor500papercasesofChineseBlackTeaatUSD400percaseCIFShanghai CIFPortofDestination CIFNewYork SupposeyouareanexporterandyourbusinessplaceisinChina 3 YourorderforBitterApricotKernelsatUSD15perkiloCPTLiverpoolhasalreadybeendelivered SupposeyouareanexporterandyourbusinessplaceisinChina 4 WeappreciateyourquotationforD D RaincoatsatUSD100perdozenCIPGuangzhou butthepriceisratherhigh CIPPlaceofDestination CIPSanFrancisco CIPmaybeusedirrespectiveofthemodeoftransportincludingmultimodaltransport CarriageandInsurancePaidto SupposeyouareanexporterandyourbusinessplaceisinChina 5 Yourcounter offerforFairyBrandLeatherShoesatCAND50perpairCFRC2Vancouverhasbeenwellreceived SupposeyouareanexporterandyourbusinessplaceisinChina 6 Weshallexecuteassoonaspossibleyourorderfor1000setsofFlyingFishTypewritersatUSD30persetFCABeijing SupposeyouareanexporterandyourbusinessplaceisinChina 7 Weconfirmhavingsoldtoyou2000dozenPillowCasesatEuro50perdozenFOBMarseilles FOBPortofShipment FOBGuangzhou SupposeyouareanexporterandyourbusinessplaceisinChina 8 ReferringtoyourenquiryofJuly15 wequoteasfollows SharpVacuumCleaner500setsUSD120persetDESGuangzhou DESPortofDestination DESNewYork DeliveredExShip SupposeyouareanexporterandyourbusinessplaceisinChina 9 WeofferChineseTinPlateDDPShanghai ReplyhereJuly10th DDPPlaceofDestination DDPMoscow DeliveredDutyPaid SupposeyouareanexporterandyourbusinessplaceisinChina 10 OurSalesConfirmationNo 9405for1000SewingMachinesatUSD45CIFHongKongisbeingairmailedtoday TrueofFalse Pricetermsaremainlyappliedtodeterminethepricesofcommoditiesininternationaltrade FalsePriceterms ortradeterms ordeliverytermsareusedtoindicatethedifferentliabilities costandrisksofthesellerandthebuyer 2 Warsaw OxfordRulesclearlyexplainthethirteenkindsoftradetermsincurrentuse FalseWarsaw OxfordRulesspecializeinexplainingCIFcontracts 3 Asanexporter youconcludedadealwithanAmericanonbasisofEXW thenyourtransactionriskisreducedtheminimumdegree True TheEXWtermsrepresenttheminimumobligationbornebytheseller whileDDPtermsrepresentthemaximumobligation ExWorks 4 AccordingtotheinterpretationoftheRevisedAmericanForeignTradeDefinition FASissuitableforallkindsoftransportation True 5 OnCIPterms thesellermustpaythefreightrateandinsurancepremiumaswellasbearalltherisksuntilthegoodshavearrivedatthedestination FalseOnCIPterms theseller sresponsibilitiesendwhenhehandsoverthegoodstothecarrierattheplaceofshipment althoughhehastopaythefreightrateandinsurancepremium 6 DESmeansthatthesellermustdeliverthegoodstothebuyeratthedestinationonhisownchargesandathisownrisks TrueDeliveredExShip 7 IfyouhavesignedacontractwithaJapanesebuyeronthebasisofFOBST youmustberesponsibleforstowingandtrimmingthegoodsatyourownexpense True VariationsofFOBare 1 FOBLinerTerms2 FOBUnderTackle3 FOBStowed4 FOBTrimmed5 FOBStowedandTrimmed 8 CFRLandedindicatesthatthesellermustguarantee

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