Part 3- Incoterms

1. The incoterm which is presently used in this case is DDP (Delivered Duty Paid) as here
the maximum obligation is of seller, the buyers pays him the invoice amount which
include all transportation costs and custom costs when shipment arrives at the door. Also,
here seller is responsible for arranging the carriage and delivering of products at buyer’s
door.

2. The two types of transfer that takes place while dealing with Incoterms are- Transfer of
cost and transfer of risk/ownership between the seller and the buyer (here- Megaexp
Enterprises Inc.).
Transfer of cost- It includes all the cost except cost of document. Sales and purchase
contracts should clearly specify which costs on transfer of goods needs to be borne by
seller and buyer.
Transfer of risk/ownership- It includes the risk of damage/loss of goods which needs to
be borne by seller and after a point it gets transfer to the buyer. In this case where DDP
Incoterm is implemented so here sellers buyers all the cost and risk till he transfers the
goods at Megaexp Enterprises Inc. door.

3. Based on the present freight movement, I will suggest my boss to examine DAP
(Delivered at Place) incoterm as it is similar to DDP (current incoterm) where again the
maximum obligation lies with the seller and he bears all the cost for export along with the
risk of damage/loss of goods till the time the goods are not delivered at buyer’s premises.
But the only difference here is that here buyer (Megaexp Enterprises Inc.) will have to
pay the cost related to import clearance.

In this case I will also include freight forwarder as they make sure that the goods and data
related to the goods which are traded internationally- move from the point of destination
(seller’s end) to the point of arrival (buyer’s end) at the right place; at right time; in safe
and good condition and at most economic cost. Not only this freight forwarder will take
care of all the transportation and regulatory documents related to international trade.

4. In order to deliver the product to customer in 10 days, I will recommend air freight mode
as the goods weight 100 Kg which can easily be transport by air freight. Also, if we want
to get this shipment by marine mode then it will take long. So we can directly opt for air
freight from Beijing to Toronto which is safe and fastest mode and will take total transit
time of 15 hours 26 minutes to get the goods transfer from Beijing cityBeijing
Nanyuan AirportLester B Pearson International Airport Toronto.

The incoterm that I want to corporate for this international trade movement will be DDP
(Delivered Duty Paid) because the major responsibility lies with the seller for the cost
 and he bears the risk of damage till the goods reaches named place of destination at
buyer’s disposal. Also, it is the responsibility of seller to get the custom clearance, pay
duties and taxes.

5. For future negotiations I will suggest CIP (Carriage and Insurance Paid To) incoterm to
my boss. As in CIP sellers delivers the good to the agreed place as agreed by the buyer
where the transfer of the ownership takes place, but he bears the cost including the main
carriage cost till the named place of destination except import cost which is to be bear by
buyer. In this case the seller is also responsible for providing the minimum insurance
coverage for any loss/damage of the goods till the time the goods are not delivered to the
destination as agreed by seller and the buyer. So in my opinion CIP incoterm can be
considered for future negotiation with the suppliers.

References:

Ciffa.(2015).International transportation and trade program. Toronto, Ontario: Canadian

International Freight Forwarders Association Inc.

Kelly. (2016). Best Way to Get From Beijing to Tianjin Port/Cruise Terminal Transportation.
China Highlights. Retrieved from http://www.chinahighlights.com/beijing/beijing-to-tianjin-
port-transport.htm

SeaRates LP (2017). Retrieved from https://www.searates.com/reference/portdistance/?

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3&shipment=4&wagon=FW&product=0&weight=100&volume=1&weight_unit=KG&volume_
unit=CBM&container=undefined&mode=&