A calculation and breakdown of the sterling equivalent cost of each quote. Please state any assumptions clearly.

THE PRICE PER ITEM AND THE CURRENCY OF PAYMENT

Sweden

SEK 6850

2,000 tonnes x 6850 = SEK 13,700,000 In this price is including insurance goods to Manchester. So the company does not have to pay anything. With the current exchange rate: : SEK 10.479

= 1,307,376.658
U.S.A US$995

2,000 tonnes x 995 = US$ 1,990,000 As the incoterm used (CIF Dover) only includes the insurance to Dover, the company has to pay the insurance to Manchester: 1,2% x $1,990,000 = $23,880 Collections charges: $1,990,000 x 0.25% = $4,975 TOTAL COST= 1,990,000 + 23,880 + 4,975 = $ 2,018,855 With the current exchange rate: : US$ 1.588

= 1,271,319.27

Portugal

EUR 725

2,000 tonnes x 725 = 1, 450,000 As the incoterm used does not include the insurance, it must be paid by company:
1,2% x 1,450,000 = 17,400 Credit charges: 1, 450,000 x 0.75% = 10,875

TOTAL COST= 1, 450,000 +17,400+ 10,875 = 1, 478,275

With the current exchange rate: : Euro 1.156

= 1, 278,784.602

o A list of the risks and responsibilities associated with each quote, and any additional risks that you believe may be relevant.

SWEDENS QUOTATION
THE METHOD OF PAYMENT
Open Account- settlement 1 month after shipment. This method is very beneficial to the company because it pays after receiving the goods, and if the company sees them and do not combine their state would not pay. The exporter is taking a risk because he may not receive payment or lose the property. There is not risk to the importer. It is the best method of payment for him.

TRANSPORTATION RESPONSIBILITIES
The incoterm used is CIP (Carriage and Insurance Paid to) Manchester. The seller is responsible for all costs, including transportation and insurance, until the goods to the named destination point. Although insurance has hired the vendor, the beneficiary of the insurance is the buyer. The importer has to: Take on all risks of loss or damage to the goods from the time that it is handed over to the first carrier within the country of origin. Pay all costs relating to the goods from the time they have been delivered to the carrier in the country of origin.

USS QUOTATION
THE METHOD OF PAYMENT
Documents against acceptance (D/A) - payable 2 month after the shipment. Under D/A the importer (company) obtains the Documents of Title (and hence the goods) after he accepts a bill of exchange which matures in 60 days. At the end of the 60 days the company may refuse to pay. This method is more harmful to the exporter. Some risks and responsibilities for the importer: Incurs two separate legal liabilities: A) on a commercial contract for the supply of goods B) on the Bill of Exchange. When he accepts it, he is liable for payment upon maturity of the Bill. The importer faces the risk of paying for goods of sub-standard quality. In such a circumstance, it would take some time to get refunds from the exporter. It could also happen that the exporter refuses to make refunds, leading the importer to lengthy legal proceedings. Dishonoring an accepted draft is a legal liability and may ruin business reputation.

 TRANSPORTATION RESPONSIBILITIES
The incoterm used is CIF (Cost, Insurance and Freight) Dover. The price includes the goods placed in the port of destination with paid freight and insurance covered. The seller contracts for insurance and pays the insurance premium. The company has to: Assume the risk of loss or damage that may occur to the goods in the country of origin from the time that has been loaded on the ship. Pay all costs relating to the goods from the time they have been delivered until his arrival at the port of destination, as well as unloading costs.

Portugals quotation
THE METHOD OF PAYMENT Confirmed Letter of Credit payment 3 months after shipment The Confirmed Letter of Credit is a special type of L/c in which another bank apart from the issuing bank has added its guarantee. Although, the cost of confirming by two banks makes it costlier, this type of L/c is more beneficial for the beneficiary as it doubles the guarantee. A confirmed letter of credit is typically used when the issuing bank of the letter of credit may have questionable creditworthiness and the seller seeks to get a second guarantee to assure payment. The importer (company) applies for the Letter of Credit in favour of the exporter and he knows that the exporter will not receive the payment until he submits the Documents of Title but when the company receives the goods, they may be in poor condition or may not be exactly what was agreed. Some risks and responsibilities associated whit this method of payment are: The company has costs of opening a credit. Irrevocable Credits may not be amended without the agreement of all parties. Payment will still be effected if the documents are correct even if the goods are not. A letter of Credit assures correct documents bur not necessarily correct goods. Late delivery where a latest shipment date is not stated.

TRANSPORTATION RESPONSIBILITIES
The incoterm used is CFR (Cost and Freight) Lisbon. Seller must pay the costs and freight to bring the goods to the port of destination. The risk is transferred to the buyer once the goods are loaded on the vessel, in the country of origin. However, Insurance for the goods is NOT included, nor their unloading, nor any import taxes.

Therefore, the company has to:

Take on all risks of loss or damage to the goods from the time when there was delivered. Pay all costs relating to the goods from the time they have been delivered, as well as all duties, taxes and other official charges, enforceable by the importation of the goods. Pay the insurance of goods.
In addition, all budgets prices are for the current exchange rate. But the company does not have to pay now if not within a month, two or three and the Exchange rate may move unexpectedly adversely affecting the value of quotations. Between the date of submitting the bid and the date you must pay, the exchange rate may turn and what appeared to be a profitable contract into a loss.

A recommendation of the quote you would like to accept and the reasons for you justification.

Worst of all incoterms is offered by Portugal, it does not include insurance the goods and it provides transportation only to Lisbon. Therefore, the company would have to take care of transportation from Lisbon to Manchester. However, the other two methods include the transport of the goods until somewhere in England. Furthermore, the method of payment of Portugal is the worst all from the standpoint of the importer, as he has to pay before seeing the goods. The decision to pay the exporter is based entirely on whether the documents presented to the bank is correct to the terms and conditions of the letter of credit and does not take into account the conditions under which the goods arrive at the destination. Therefore, although the Portugal quotation is cheaper than that offered by Sweden, either of other them is preferable. Among the budget of Sweden and the USA if you look at: The method of payment is better offered Swede, Open Account, as the importer pays after receiving the goods. But the USs method of payment (Document against acceptance) is not bad because although the importer given his word that he will pay, payment is made after receiving the goods. If you look at the incoterms used in both cases are very similar. The CIP is a little better for the importer because it means lower transportation costs and responsibilities, but also has greater risks than the CIF. Considering the price is cheaper USs quotation, 1,271,319.27 (including collection charges and the cost of insurance) opposite 1,307,376.658 for Sweden. It is necessary to add that if the company purchases the USA has more time to pay, two months instead of one. As the company does not have a good financial situation, the later in paying better. Because it can only get 10% of income due now, that is, 500,000. Therefore I think the best deal is offered by USA.

Your recommendations as to what arrangements should be made in future, particular if successful with the Russian contract, if there are similar requirements to importer materials from overseas.

If the company wants to import materials from overseas, it should try to negotiate that payment be made in pounds, that is, in the domestic currency and avoid the risk of movements in the exchange rate. Another option for Douglas, if the foreign company not agree payment in is trying to get a higher revenue in the beginning, for example, 50%. So Douglas would have liquidity and could convert into the foreign currency at todays exchange rate and it no longer matters what happens to the exchange rate. The best method of payment for importer is Open Account because the exporter sends the goods direct to the importer and he pays at an agreed late date. Thus, the importer can see the goods before paying. If the foreign company refuses this, Douglas could try to agree a Collection: Documents against Acceptance. That way the importer is able to collect the goods and then pay too. About shipping terms, the company should try to negotiate the incoterm DDU (Deliver Duty Unpaid): the seller is responsible for delivery and all costs in getting the goods to the buyers premises. Also assume all costs and risks associated with the delivery of goods to the named place. Or DDP (Delivered Duty Paid): the same obligations in DDU, plus duties, taxes and import charges. This is the best shipping term to the importer.