REVIEW

FINAL THI: 1 câu lý thuyết + 4 câu bài tập

(chap 6,7,8,11)

Lý thuyết
CHAPTER 6 DELIVERY
1. Which terms should exporter (seller) buy cargo insurance? Explain

Incoterm Group D: Group D (Arrival) illustrates that the seller is obliged to deliver the
products to a specific place or the port of destination.

Incoterm group D consists of DAP, DPU, and DDP as follows:

Incoterm Description

DAP: Delivered At According to the DAP incoterm, the seller is responsible for all
Place charges and risks in transit until the goods reach their
destination, at this point the risk passes to the buyer. Cost and
risk pass from seller to buyer simultaneously at the point the
goods are ready for unloading.

DPU: Delivered at Place According to the DPU incoterm, the seller is responsible for
Unloaded clearing the goods for export and bears all risks and costs
associated with delivering the goods and unloading them at the
named port or place of destination. In addition, the buyer is
responsible for all costs and risks from this point forward,
including clearing the goods for import at the named country of
destination.
 DDP: Delivered Duty According to the DDP incoterm, it places maximum risk and
Paid responsibility on the seller. It requires the seller to be responsible
for clearing the goods for export, bearing all risks and costs
involved in delivering the goods, unloading them at the terminal
at the named port or place of destination, and clearing the goods
for import. and pay, and bring the goods to the destination. Risk
passes to the buyer at the destination, so it should be stated
clearly and precisely.

In conclusion: Under Incoterm group D, the seller should consider purchasing insurance until
the terminal at the named port or place of destination, where the risk will be then passed to the
buyer.

2. Which terms should importer (buyer) buy cargo insurance? Explain

Incoterm Description

EXW: Ex Works According to the Incoterms EXW, the risk or liability for the
goods transfers from the seller to the buyer when the goods are
made available at the named place. That means that if damage
occurs while the goods are being loaded on the buyer’s transport,
the buyer is at risk even if the seller is assisting with the loading.
Therefore, the buyer should buy insurance to cover the risk.

FCA: Free Carrier According to the Incoterms FCA, the seller loads the goods on
the buyer's transport at the seller’s premises, or the seller delivers
them to another named place. The risk and liability transfer is
when goods are loaded on buyer’s transport, or when the goods
are made available at the named place. That means buyers must
bear the risk if damage occurs during transportation. Therefore,
the buyer should buy insurance to cover the risk.
 FOB: Free On Board According to the Incoterms, the seller has fulfilled its obligation
when the goods are loaded on the vessel nominated by the buyer
at the named port of shipment. The risk or liability for the goods
passes from the seller to the buyer when the goods are on board
the vessel, and the buyer bears costs from that point forward. The
seller is responsible for loading the goods on the transport,
whereas the buyer is responsible for everything else necessary to
get the goods to the final destination. In conclusion, the buyer
should buy insurance to cover the risk of damage.

FAS: Free Alongside According to the Incoterms FAS, the seller has fulfilled its
Ship obligation when the goods are ready with the vessel (for example,
a quay or barge) nominated by the buyer at the named port of
shipment. The buyer is responsible for loading the goods on their
own means of transport and everything else necessary to bring the
goods to their final destination. The risk or responsibility for the
goods passes from the seller to the buyer when the goods are on
board the vessel and the buyer bears the cost from that point
forward. Buyers bear the risk for most of the transportation, so
they should purchase insurance to cover the risk.

CPT: Carriage Paid To According to the Incoterms CPT, the seller's responsibility is to
clear the goods for export and deliver the goods to the first carrier
or another person specified by the seller at the place of shipment
(usually a foreign terminal), at which point the risk passes to the
buyer. The seller chooses and pays the international carrier, and is
responsible for loading and unloading the goods at the named
place of destination. Nevertheless, even though the seller routes
the international carrier, the buyer still bears the risk during main
transportation. In conclusion, the buyer should purchase
insurance to cover the risk of damage during transportation.
 CFR: Cost And Freight According to the Incoterms, the seller has fulfilled its obligations
when the goods are delivered and loaded onto the vessel at the
named port of shipment. The risk or responsibility for the goods
passes from the seller to the buyer as soon as the goods are
loaded on board the vessel before shipment takes place, and the
buyer bears the cost from that point forward. Since the buyer is
responsible for the risk and responsibility for most of the
shipping, it is recommended that the buyer purchase insurance to
cover the risk.

In conclusion: Under terms of EXW, FCA, FOB, FAS, CPT, and CFR, the importer should buy
insurance to cover the risk under transportation.

3. Which terms are inappropriate for container goods? Explain

The incoterms CIF, FOB CFR, FAS is not suitable for container goods for several
reasons.

According to CIF, FOB, and CFR, after goods are transported to the CY, or CFS, the
forwarder and shipping line will responsible for the process of documents and of loading
goods onto the vessel, and the buyer bears the risk and liability from that point onward.
Nevertheless, if any damage happens before loading, and during loading goods onto the
vessel, the seller will have to bear the liability although it’s out of the seller’s control.

In addition, according to FAS, if products while waiting for loading onto the vessel be
damaged, the seller also needs to bear the liability though the process is out of the seller’s
control.

As the result, the seller should consider FCA for F term or CPT/CIP for C term for
container goods

4. Advantages and disadvantages between renting and buying. Give examples?

Example: (Advantages of Renting)

Repairing and maintaining heavy-duty work trucks may be expensive, especially as they get
older. When the company rent vehicles from a reliable carrier, they will receive fast maintenance
and repair assistance as part of their rental agreement.

Example: (Disadvantages of Renting)

Many companies use personal trucks for moving stores. They call and deliver goods to several
consumers along a route. (A milk delivery truck, which is now nearly extinct, is a great example
of a moving store.) The renting carrier does not allow to control for the company for
merchandising operations.

Example (Advantages of buying)

Some firms need to ship products requiring unique equipment. For example, cryogenics [liquid
gas] requires a pressurized tank trailer. It is difficult to rent carriers with such equipment.
Therefore, this company should choose buying in this case

Example (Disadvantages of buying)

Some companies buy a truck to transport their products due to its benefits. However, they find it
difficult to avoid empty backhaul. For example, Company A transports their products from Ho
Chi Minh to Ha Noi, in the back route, they can not fill the full vehicles or just fill 1/3 the
capacity of that truck. This is inefficient utilization and increases the cost.

Bài tập
Company B has to make around 80 trips/year to move material in Hai Phong to the factory in
Binh Duong. The company considers 2 options:
+ Buy new truck: $250.000 with 5-year straight-line depreciation
+ Rent 3PL logistics company: $1980/Trip (Trip = 1610 km)
CHAP 8: COST MANAGMENT
 Year 1 Year 2 Year 3 Year 4 Year 5
Supplier X 50 000 10 000 10 000 10 000 15 000
Supplier Y 55 000 10 000 10 000 10 000 15 500
Supplier Z 45 000 12 500 12 500 12 500 18 500

SUPPLIER X
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Year 1 cost 50000 50000
Interest payments associated with year 1 5000 5500 6050 6655 7320,5 30525,5
Year 2 cost 10000 10000
Interest payments associated with year 2 1000 1100 1210 1331 4641
Year 3 cost 10000 10000
Interest payments associated with year 3 1000 1100 1210 3310
Year 4 cost 10000 10000
Interest payments associated with year 4 1000 1100 2100
Year 5 cost 15000 15000
Interest payments associated with year 5 1500 1500
Total 137076,5

SUPPLIER Y
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Year 1 cost 55000 55000
Interest payments associated with year 1 5500 6050 6655 7320,5 8052,55 33578,05
Year 2 cost 10000 10000
Interest payments associated with year 2 1000 1100 1210 1331 4641
Year 3 cost 10000 10000
Interest payments associated with year 3 1000 1100 1210 3310
Year 4 cost 10000 10000
Interest payments associated with year 4 1000 1100 2100
Year 5 cost 15500 15500
Interest payments associated with year 5 1550 1550
Total 145679,05

SUPPLIER Z
Year 1 Year 2 Year 3 Year 4 Year 5 Total
Year 1 cost 45000 45000
Interest payments associated with year 1 4500 4950 5445 5989,5 6588,45 27472,95
Year 2 cost 12500 12500
Interest payments associated with year 2 1250 1375 1512,5 1663,75 5801,25
Year 3 cost 12500 12500
Interest payments associated with year 3 1250 1375 1512,5 4137,5
Year 4 cost 12500 12500
Interest payments associated with year 4 1250 1375 2625
Year 5 cost 18500 18500
Interest payments associated with year 5 1850 1850
Total 142886,7

Compare cost of three supplier. We choose supplier X ( lowest cost)

 Buy new truck Rent 3PL logistics company
Purchasing 250.000 Renting price /trip 1.980
Number of depreciation 5 Number of trips/year 80

Operating cost for buying

Fuel 2.960
Depreciation 50.000
Interest (10%/year) 30.530
Labour 12.000
Total cost/year 95.490 Total renting cost/year 158.400

Initial After 1 year After 2 year After 3 year After 4 year After 5 year After 6 year Note: depreciation 5 years => After 6 year thì phải trừ đi depreciation
Buying 250.000 345.490 440.980 536.470 631.960 727.450 772.940
Renting 0 158.400 316.800 475.200 633.600 792.000 950.400

In conclusion:
The company should make decision depending on the time company want to transport and total trip per year. It can be seen that if company use truck to transport for 3
years, they should choose renting because of its lower cost ($475,200 < $536,470). After the year 4, the company should select the option buying because the cost of buying
new truck begins be lower than that of renting.