Assignment #1(Q&A)
1. List 3 risks in a logistic system for international trade (1 point), and explain what can a
member do to reduce each of the listed risks in international trade (1 point).
Customs and Regulatory Compliance Risk: Potential delays, fines, or
confiscation of goods due to non-compliance with the import/export regulations
and requirements of the countries engaged in international trade. To reduce this
risk, it is crucial to ensure accurate and comprehensive documentation, provide
training to logistics staff on country-specific regulations, and utilize the services
of experienced customs brokers.
Supply Chain Disruption Risk: Unexpected events like natural disasters,
geopolitical issues, or transportation problems, leading to delays in the
transportation of goods and potential damage to customer relationships. To
reduce this risk, they can diversify suppliers, conduct risk assessments with
contingency planning, and implement real-time tracking technologies for
enhanced visibility.
Currency Exchange Rate Risk: Exchange rate fluctuations can impact the
cost of goods, affecting profitability and budgeting in international trade
transactions due to differences in the currencies of importing and exporting
countries. To reduce this risk, they can use forward contracts, negotiating
contracts in local currencies, and continuously monitoring economic conditions
and currency trends to anticipate and address potential currency risks.
2. For the following three incoterms’ 2020, name the party that bears the COST for the
listed stages of a shipment: buyer (B) or seller (S). (2 points)
EXW Seller’s
Door
FCA Seller’s
Door
CIP Destination
City
Ocean freight charges B B S
Provide a commercial invoice S S S
Obtain an export permit B S S
Select a carrier and make a booking B B S
Local cartage at origin B S S
