1. Case Study
Documentary Collection
The domestic manufacturer/exporter has constituted a contract of international sale of
goods with a buyer domiciled in Mexico.
The contracting parties have agreed upon a deferred payment at 60 days, and have
chosen the D/A form of the documentary collection as a method of payment.
The delivery term:
CIF Veracruz INCOTERMS 2000
The value of the goods:
USD 1.000.000,The time of payment:
60 days after the date of “on board” stamp
Principal place of business of the buyer and his bank is to be found in Mexico City;
Please explain the process or making this business deal, by defining:
1. Actors involved and their roles;
2. The risks involved;
3. The time of financing;
Questions:
1. What documents should be used for payment?
2. What is the earliest date to let the bill of exchange discount?
3. What type of bill of exchange should be issued in terms of drawer, drawee, and
applicable law? How would you define the maturity of B/E? Would you charge an
interest?
4. The interest rate/year for the discount is 0,3%.
5. According to the 2nd question please calculate the amount of money the exporter
might get, when:
the documents will arrive in…………..5 days after the loading;
the documents will arrive with the ship in……….40 days after loading.
2. Case Study
Documentary Credit UCP 600
A company domiciled in Germany has contracted for an import deal with a foreign
non-EU supplier.
As a method of payment the parties have agreed upon an irrevocable, confirmed
deferred payment documentary credit, payable at 90 days after the loading time.
All charges and fees are to be paid by the principal/applicant.
The exporter does not want to get interest for the time of deferred payment.
The period of transportation-time:
The value of the goods:
30 days;
EUR 800.000,-
The banking charges and fees are the followings:
The fee of issuing of the L/C 0,3 % of the amount of the sale;
Checking the document at the issuing bank: 0,2 % of the amount of the sale;
Checking the document at the confirming bank: 0,2 % of the amount of the sale;
Fee of advising: 0,05 % of the amount of the sale;
Fee of confirmation: 0,1 % of the amount of the sale;
Please explain the process or making this business deal, by defining:
1. Actors involved and their roles;
2. The risks involved;
3. The time of financing;
Questions:
1. Who are the players in the L/C deal and what are their legal relationships?
2. Please calculate the charges to be paid by the principal!
3. Please calculate the lost profit if the interest rate 2,5% on average in the country
of the exporter!
4. The importer will be able to get credit from the bank of his own for 3,5% interest
rates in exchange for the warehouse warrant to be pledged, and therefore the
buyer can pay by pure money transfer which costs min. EUR 100, but 0,2 % of the
amount to be transferred. How would you decide?
3. Case Study
Calculation of insurance charges, and fees
A domestic company has contracted with an importer located in Brazil.
The Ex Works price:
USD 600.000,The additional costs (costs of documents etc.) USD 12.500,The profit-margin of the exporter:
12,5%
The costs of transportation as to CIF:
USD 15.500,The insurance fee:
0,8 %
The calculated profit-margin of the importer: 18%
Please explain the process or making this business deal, by defining:
1. Actors involved and their roles;
2. The risks involved;
3. The time of financing;
Questions:
1. Who are the following persons in the insurance?
o Proposer:
o Contracting party:
o Assured:
2. To whose benefit the insurance policy should be issued? Please argue!
3. How high is the financial interest? What are the elements of financial interests?
4. At what time would you transfer the insurance policy? Please argue? How would
you transfer?
5. What is the general practice relating to the type of coverage in CIF? What are the
exceptions from the coverage?
6. During the transportation by sea the goods have suffered USD 150.000 loss (2
days after leaving the loading port). The buyer has not yet paid for the goods.
What kind of risks can you face? How would you solve this problem?
7. Please calculate the CIF price!
8. Please calculate the domestic retail (customer) price, if the duty to be imposed is
5% and the V.A.T. 8%.
4. Case Study
Break-even point analyze for an import deal
Your company as a wholesaler intends to import the goods according to the following
conditions of purchase:
The type of goods:
Standard packing:
Packaging:
Quantity:
Price:
frozen green peas;
1 kg plastic bags labeled;
18.500 kgs/1 container;
74.000 kgs;
Ex Works USD 14.000/container;
The following data are to be considered to solve the case:
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The price of the goods of almost the same sort offered by the competitors is
between USD 1,65-1,95;
The duty to be imposed on the goods is 10%;
The commission fee of the agent is USD 0,03/ Packing unit;
The profit-margin of the wholesaler is 15%;
The advertising costs paid by the wholesaler: USD 10.000,The “contracting-overhead” relating to the concrete deal: USD 2.000,The price-margin of the retailer is 25%;
The VAT in the country of use (destination) is 8%;
A freight forwarder will be asked to organize the transportation.
Transportation costs from the place of factory to Karachi:
CFR Karachi: USD 2.039/1 container, which involves:
 USD 204,- Fix costs;
 USD 1.835,- Variable Costs, which are decreasing by 15% by each
new container loaded;
The following method is to be used:
C(f)= q* [P(g)* C(v)]
C(f)
Q
P(g)
C(v)
= Fix Costs
= Quantity
=Price of goods
= Variable Costs
Please calculate the break-even price!
Please take into accounts all measures to be taken!
Please explain the process or making this business deal, by defining:
1. Actors involved and their roles;
2. The risks involved;
3. The time of financing;
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Documentary Collection Case study