ACIT00718AX Tsholofelo Mokoena

International Trade Law Assignment Two

Part A

i) International Sales Contract- This contract is between ALL-CHEM (PTY) LTD which is to
produce and export three FCL of PVC granules to HIN WAN EXTRUSION SPECIALISTS on
shipping term CIP Hong Kong on 30 days on collection from date of delivery in Hong Kong.

 In the above sales contract it would seem that ALL-CHEM (PTY) LTD has fulfilled its
side of the contract by indeed making sure that a number of three full container
loads of raw PVC left its bounds in Vanderbijlpark to a Durban port to board the ship
and sail to Hong Kong for the buyer’s acceptance. However due to a short strike by
dock workers at the port and heavy storms in Durban where the port of discharge is
situated a delay of three days was the result.

So HIN WAN EXTRUSION SPECIALISTS received in Hong Kong a total of only two of
the three containers that were three days due for receipt, and from those two
containers HIN WAN EXTRUSION SPECIALISTS found that the raw PVC was exposed
to water which compromised the quality of the produce.

ALL-CHEM (PTY) LTD might have not been directly liable for the loss of the one
container due to rough seas on the consignments conveyance on sea to Hong Kong,
However for the remaining two full container loads of raw PVC ALL-CHEM (PTY) LTD
can be held liable for having compromised the quality of the goods. It can be said
that the consignment was poorly packed or insufficient amount of dunnage being
applied to the goods before being packed into the containers, which has resulted in
water entering into the consignment and deteriorating the quality of the
consignment. This bringing much dissatisfaction to Mr Po of HIN WAN EXTRUSION
SPECIALISTS in Hong Kong, who now refuses to pay for the consignment as per what
the agreement had specified, and due to ALL-CHEM (PTY) LTD’s part in faulty goods,
it is ALL-CHEM (PTY) LTD that finds itself at a loss. Losing three full container loads of
raw PVC along with cost to the conveyance of the goods and even the production
and packing.

Contract of Sea carriage- This contract is between ALL-CHEM (PTY) LTD and FLEET FOOT
FORWARDING for the shipping of the consignment from the base of ALL-CHEM (PTY) LTD in
Vanderbijlpark to Hong Kong.

 ALL-CHEM (PTY) LTD’s Shipping coordinator contacted FLEET FOOT FORWARDING to

handle the process of carriage of the consignment from their base in Vanderbijlpark
to the Durban port to depart to Hong Kong. FLEET FOOT FORWARDING managed to
as promised convey the consignment of goods after it being packed at the base and
conveyed to Durban and there forth to its destination in Hong Kong.
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A Dock worker strike happens to partly cause the delay of the consignment shipping,
However FLEET FOOT FORWARDING cannot be liable for the strike as Dock workers
are based at docking stations and are not managed or are the responsibility of
freight forwarding companies. The second delay was due to heavy storms within the
area of Durban and such a force is uncontrollable (force majeure) this too FLEET
FOOT FORWARDING cannot be held accountable for, although it delayed the
consignment by three days causing more frustration to the Hong Kong based buyer.
While on transit however strong gales and harsh water in the South China Sea
resulted in the loss of one container of the three of raw PVC consignment. FLEET
FOOT FORWARDING is not liable for the loss of the one container due to the nature
of the uncontrollable cause; generally this would be covered by the insurance.

It can be said that FLEET FOOT FORWARDING is exposed to very little loss if any as it
has played its part in ensuring the consignment is conveyed all the way to Hong
Kong, Unless it could be that the water that the raw PVC was exposed to was in not
the fault of poor packing but instead leaky or unsealed containers, Which would put
FLEET FOOT FORWARDING at the highest level loss being liable for more than half of
the consignment.

Cargo insurance Contract- This contract is between ALL-CHEM (PTY) LTD and insurance
company in within Johannesburg assembly under the company’s open policy.

 ALL-CHEM (PTY) LTD’s Shipping coordinator has initiated for a contract with an
insurer to cover under warehouse –to-warehouse cargo insurance with Institute
cargo Clauses (B). The decision of the cargo clause was based on the assumption
that consignment was being transported by container and therefore it would be
water tight. Institute Cargo clauses (B) is a medium term cover and therefore is not
comprehensive of shipment challenges or risk such as goods being exposed to water
while of transit due to rough seas. Which is the experienced challenge in the
concerned scenario; consignment of raw PVC was exposed to water due to strong
gales and turbulent water.

ALL-CHEM (PTY) LTD shipping coordinator was in fault as they did not specifically
mention how any exposure to water the raw PVC experiences compromises the final
quality of the processed plastics. This is what Mr Po experienced after two weeks of
receipt of the consignment, expressing his dissatisfaction and refusing to pay as the
goods did not successfully serve the purpose they were intended to, and in turn
means ALL-CHEM (PTY) LTD broadly did not fulfil their part of the sales contract. This
exposes ALL-CHEM (PTY) LTD itself to of non-reimbursement from HIN WAN
EXTRUSION SPECIALISTS as the insurance does not cover the concerned risk so no
claim can be filed towards the insurance on this incidence due to the shipping
coordinator having not stating the adverse sensitivity of the consignment.
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ii) ALL-CHEM (PTY) LTD- As the export ALL-CHEM (PTY) LTD as per the above has been exposed
to so much risk which resulted in the large scale of potential loss, with that the a change of
the incoterm used on this transaction would have minimised the amount of loss or exposure
to loss had the exact situation occurred. ALL-CHEM (PTY) LTD having used the Incoterm FOB
(free on board) which would give ALL-CHEM (PTY) LTD the responsibility of paying freight
and insurance if necessary domestically from the base in Vanderbijlpark to the Durban port
where once goods have passed the rails of the vessel ALL-CHEM (PTY) LTD would no longer
be liable should anything happen to the consignment. Unlike the incoterm used CIF which
held ALL-CHEM (PTY) LTD liable for freight and insurance domestically and all the way to
Hong Kong only transferring the risk then and unfortunately damage was caused prior to the
consignment reaching Hong Kong.

ALL-CHEM (PTY) LTD could also invest in better training their staff in the subject of insurance
and how important is it to disclose any information to the insurer regarding the
consignment, the disclosure of any factor that could expose the consignment further to
damage. ALL-CHEM (PTY) LTD should in the case of employees going against procedure and
independently deciding not to disclose important information such as the sensitivity of the
consignment to the insurer with the aim of reducing the costs of insurance should be
disciplined in order to discourage such behaviours which are costly to ALL-CHEM (PTY) LTD.

ALL-CHEM (PTY) LTD could also ensure that dunnage is applied extensively on highly
sensitive products such as the raw PVC to avoid in the case of rough seas and other natural
disasters occurring that the consignment can truly be water tight, preventing damage and
latent defects as of HIN WAN EXTRUSION SPECIALISTS consignment.

INSURER- The elected insurer could invest in conducting research and diligent vetting of
documents furnished to them upon the request of cover. In this way the insurance company
is able to diligently advice its clients such as ALL-CHEM (PTY) LTD of the possible risks and
determine and advise which insurance cover is more suitable. As in this case Institute Cargo
Clauses (B) was not sufficient as it is only medium cover for a highly sensitive consignment. A
more Comprehensive cover clause should have been used as the Institute Cargo Clauses (A).
This however was expected from the ALL-CHEM (PTY) LTD Shipping coordinator to request
from the Insurer.

FLEET FOOT FORWARDING- In the case that the water having damaged the raw PVC was due
to FLEET FOOT FORWADING’s poor quality of containers which could be leaky. FLEET FOOT
FORWADING could implement some process in their running of freight forwarding such as
container inspection upon every load of goods being loaded onto the containers. FLEET
FOOT FORWADING could also invest in purchasing high grade containers which guarantee a
longer life span and do not wear and tear easily.
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Part B

i) Exporters of manufactured goods-

ii) Exporters of Commodities-
iii) Exporters of Services-