Shipping

In this module, we will investigate the practicalities of shipping products from the seller to the buyer in export transactions. This requires exploring the role of INCOTERMS, eleven default "international commercial terms" set by the International Chamber of Commerce. Each INCOTERM defines the obligations of the buyer and seller for: (a) carrying the goods, (b) bearing the risk of damage while the goods are in transit, and (c) complying with licenses, duties and other formalities associated with exporting and exporting goods, among other matters. We will also examine the logistics and legal liabilities of transporting goods by sea or air. 

To prepare, please download and complete the assigned reading for this module. 

Demonstrate class engagement by submitting evidence of (a) pre-reading and (b) post-class reflection in relation to any five modules of the course. 

The class is on 17 January 2025 (intensive class). 

To help you come to grips with the different INCOTERMS, here are two explanatory videos -- the first, simple; the second, more detailed -- on the 2020 INCOTERMS. 

To consolidate your understanding of the INCOTERMS, we will play an export-import game. Toys will be placed on a table indicating (a) the seller's warehouse, (b) the road or rail transport to or from the port terminal, (c) the shipping port, and (d) the buyer's place of business. 

The professor will give you a role (buyer or seller) and an INCOTERM 2020. For the purposes of the game, the Seller is based in Tokyo and will use the Yokohama Port; the Buyer is based in New York and will use the New Jersey Port. 

Using the toys, indicate your role in transporting the goods, insuring the goods (where you bear the relevant risk), and any formalities you need to comply with to allow the goods to cross borders.

If you get it right, you can win a prize! 

First, your client wants to order 10 Ball-Bots to be delivered to New York in preparation for the tennis tournaments in the US during the North American hard court swing in February and March. Your client agrees to the deal of a fixed lease of Y200,000 per month per unit. (Both parties agree to forego the Y50,000 service charge since the Ball-Bots will be used for fewer than three months).

• JSportAI KK says that, as a start-up, it does not have capacity to ship the Ball-Bots to the United States, but it can pack and transport them to Yokohama port. At Yokohama Port, stevedores will stow the packed Ball-Bots into a consolidated shipping container and use cranes to load the shipping containers onto the ship.

• Under Japanese law, officials from the Technology Agency in Tokyo must inspect any robotic technology and approve them for export. The Technology Agency does not have a branch office in Yokohama and does not dispatch its inspectors there.

• Only robots that might have military capabilities will not be approved for export -- this is not an issue for the Ball-Bots. However, if any robot is damaged and needs to be re-assembled, it must be re-inspected. 

What is the SAFEST AND MOST COST-EFFECTIVE INCOTERM for the client to request given JSport AI's logistical limitations? 

Second, your client's inhouse shipping expert tells you that 10,000 Ball-Bots will fit into a third of a shipping container. The shipping expert also provides you with the following quotes for getting the Ball-Bots from the Yokohama Warehouse to DigiAdvance Co in New York:

• Tokyo Business Chamber of Commerce = Y5,000 for Japanese Certificate of Origin

• Yokohama Road Transport Co= Y6,500 from warehouse to Yokohama Port

• Tokyo Customs Brokers Co = Y5,000 for all electronic export clearance services (and an extra Y5,000 for all import clearances in foreign countries not including actual customs duties)

• Yokohama Port Authority = Y20,000 for handling charges of 1/3rd shipping container

• Ship Shape Sea Lines Co = Y170,000 charge for carriage of 1/3rd container

• Up and Away Airlines Co = Y230,000 charge for cushioned Unit Load Device #3 (equivalent of 1/3rd shipping container

• New Jersey Terminal Authority = Y30,000 for handling charges of 1/3rd shipping container

• NY Trucks Co = Y30,000 for delivery from New Jersey Terminal to DigiAdvance (Y5,000 extra for unloading)

• Costless Insurance = Y130,000 for shipping or airfreight from Yokohama to New Jersey with an extra Y20,000 to cover any damage at Yokohama Port, an extra Y30,000 to cover any damage at NJ Terminal, and an extra Y10,000 to cover any damage from NJ Terminal to DigiAdvance.

• Temple Freight Forwarders International = 10% commission on all global export-import services including transportation, insurance and customs clearances 

Calculate much should DigiAdvance factor into the overall cost of the transaction to cover, not just the lease agreement, but also the relevant transport costs, import-export formalities and insurance (to cover all risks of damage) if the terms of delivery were: 

• ExW (JSportAI's Warehouse, Incoterms 2020)?

• FCA (Yokohama Depot outside Yokohama Port, Incoterms 2020)?

• FAS (Yokohama Port, Incoterms 2020)?

• FOB (Yokohama Port, Incoterms 2020)?

• CFR (New Jersey Terminal, Incoterms 2020)?

• CIF (New Jersey Terminal, Incoterms 2020)?

• CPT (New Jersey Terminal, Incoterms 2020)?

• CIP (New Jersey Terminal, Incoterms 2020)?

• DAP (DigiAdvance, Incoterms 2020)?

• DPU (DigiAdvance, Incoterms 2020)?

• DDP (DigiAdvance, Incoterms 2020)?

Third, identify all the contractual options for transporting the Ball-Bots from Japan to any other country where the client might want to use the Ball-Bots for tennis tournaments. Explain to the client:  

• Which types of transportation contracts would be UNSUITABLE for the Ball-Bots and which industries, instead, would typically use them.

• Which types of transportation contracts would be SUITABLE for the Ball-Bots and, among these, which would be most appropriate if the client wanted SECURE international payment using its New York, Sydney or Singaporean bank as a go-between.

Fourth, if the client wanted to use Ship Shape Lines Pty Ltd as the main carrier, identify the --

• the logistical steps;

• the necessary documents and procedures; and

• the costs

-- involved in transporting the Ball-Bots factory from Japan. Who is responsible for (a) arranging and (b) paying for each step?

How would your advice differ if your client wanted to use Up and Away Airlines Pty Ltd as its main carrier?

Regardless of Incoterm, what liability does (a) Ship Shape Lines Pty Ltd or (b) Up and Away Airlines Pty Ltd have for any damage to the Ball-Bots products while in either carrier's charge?