Term Paper: Negotiation, Signing the Contract

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[. . .] Transport will be carried out with DHL. DHL is a large company that actually can provide all three of the above (transport, insurance and custom clearance) and can be used as such. However, it is probably best that a separate company is used for each of the operations, so as to spread the risk of non-fulfillment. When signing the transport contract with DHL, we must decide on the type of contract to be used. This means deciding between a Voyage Charter Party, a Time Charter or a Bareboat Charter. Seeing the conditions of our trade operations, the fact that this is the first business deal with the Thai company and the fact that a business relationship was not yet formed, the best contract would probably be a Voyage Charter Party. This basically means that DHL (as the ship owner) agrees to transport the merchandise for the freight paid by the Canadian importer. The DHL website provides several useful facilities which allow the importer to save time in conceiving the documents necessary for the transport.

The cost of the transport, the freight, is determined by DHL using the basic freight for the respective route, to which they can add additional fees, such as price adjustments or liner terms. The price adjustments can come as a result of an increase in the price of fuel or in currency fluctuations, while the liner terms refer to loading and unlading the merchandise. There are several terms here, such as free in and out (all expenses regarding loading and unloading are supported by the importer), alongside or sotto palanco, but in our case, the most appropriate seems to be at ship's rail. The latter means that DHL will deliver the merchandise at ship's rail. Thus, part of the unloading expenses will fall on their behalf.

As for the insurance, P.A.F. Cargo Insurance Services seems to be the best choice. Again, their website eases the work done in completing the different forms and papers. The Canadian importer can choose between three different insurance clauses: A, B and C. The A- clause id the most comprehensive and covers basically all risks of loss or damage to our merchandise, less excluded risks and additional risks we would have to pay for (war and strike most importantly).

From my point-of-view, the A-clause should be use, mainly because of the large distance between Thailand and Canada: problems may appear on the way and it is best to have the most comprehensive insurance clause. Of course, this is more expensive. Additionally, we would have to decide between the different policies that are available: trip policy (which will be available for one trip only), evaluation policy or policy by subscription. Given our singular import case, the former (policy per trip) should best be used.

Finally, the customs formalities are to be dealt with. This implies that our merchandise has already safely been transported into Canada and has been unloaded at ship's rail, as agreed upon in our contract with the shipper (DHL). Thailand and Canada are not currently members of any common zone of free trade agreement, so that import taxes will most likely have to be paid. However, these are hardly likely to be very high, as import taxes are usually imposed upon goods so as to protect the national producers, but Thailand does not seem such a high threat for the tin industry in Canada.

Following the regulations of the World Trade Organization, the value of the merchandise in customs is generally equal to the value of the transaction, that is, to the CIP price in the port of arrival (the export price agreed upon with the Thai partner, to which we add the transport and insurance costs and any additional costs involved with handling, loading and unloading the merchandise).

The customs clearance and proceedings will be handled by BGL Brokerage, which will have to write the customs declaration and all additional documents required (for example, the commercial invoice, the bill of lading, etc.).

As of such, the tins imported from Thailand have entered the Canadian territory and the import operation is complete.

This is the most important chamber of commerce, it provides several publications, including, once every ten years, the updated INCOTERMS, concerning delivery terms and conditions.

The import of tins will most probably be paid in the importer's currency that is in Canadian Dollars. In this sense, from the importer's point-of-view, if the rate of the dollar falls against the Thai Baht, then the importer will find himself at a loss, because he will have to pay more for the import. So, in analyzing price risk, we look at the how the Canadian Dollar appreciates or depreciates itself against the Baht.

Several countries require this, among them the United States, Argentina and Uruguay. [END OF PREVIEW]

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