SUBMITTED BY:

Sweta Prasad

INTERNATIONAL BUSINESSLAW
Final Exam

1. Which course of action should Lopez Romero undertake? Explain the causal framework?
According to me, there are 4 courses of action that can be taken up by Lopez Romero. Import the cotton yarns, knit them in bonded warehouse and then export the undergarment fabric with a mixture of 65% cotton and 35% synthetic fiber to Kuwait merchants Import the cotton yarns, knit them in bonded warehouse and then export 100% cotton fabric to Kuwait merchants Follow the above two procedures with the help of agents and sell themselves in Kuwait market Just export the synthetic fibre that they are currently manufacturing to the Kuwait merchants

The above given alternatives can be well evaluated as follows and the final conclusion can be set accordingly. Reasons for rejecting Importing cotton yarns: a. Since importing of cotton yarns include setting up of bonded warehouses in Seville or Kuwait, it would cost them much more of the production cost than the normal synthetic fibre. The cost of production for one unit of fibre is $ 0.6, whereas that of cotton would be $1.0. since its a hikeof 40% cost, Mr Lopez should see whether the cost can be recovered. Also, the Philipinos in Kuwait is a new market segment for the Spanish company. Hence, its quite unpredictable about the Spanish undergarments demand. Also, if in this scenario, it introduces a new product line in the new market, it will become a very risky affair. b. Also, if the company sells a mix of cotton and fibre, then the selling price in Kuwait would be higher and this company would not get a cost advantage in this market. Also, maybe the customers that they are targeting might be lost due to high prices of the undergarments and night wears. c. Looking at the financial conditions of the company, it would be very difficult for the company to get loans for the cotton yarns. Also maintaining two manufacturing units would take a lot of toll of money.

Reasons for rejecting agents as selling of the products:

a. Agents are more risky affair as the ownership of the consignments would not pass on to them. Hence, if any damage happens to the goods, the company would be liable to the damage. b. Also the three promotional activities that has been thought by the company such as party selling, taking one hotel room is not a good option. The reasons being that party selling would add up a lot of additional cost to the product and form a layer of extra price. Hence for small goods such as undergarments, it would be unviable. Similarly, taking ahotel room and selling is illegal in most countries and also not a good option for long term selling of the product. It can be seen as viable for some months, but continuing the same is not practical. Hence, based on these, it can be analysed that selling through agents is not an effective means.

Reasons for selecting merchants and selling synthetic fibres: a. Since, agents are not a good option, selling to merchants would be more risk-aversive and would involve better selling as the merchants would know the Kuwait market better than the company, which is very new to this market. b. Selling only synthetic fibres would be more cost effective and suit the needs of Filipinos in Kuwait. Also,it is a well tested product and there is minimum risk involved.

Hence based on the above given analysis, option 4 seems the most viable and least risk taking. The company should sell only synthetic fibres to the merchants in Kuwait.

2. Building on your above answer, outline the contents and conditions of the associated offer? Contents of the offer:
WWWWH format:

Who :
The contract is between the company Lopez Romero y Hermanos, Spain who is the seller and the buyer Shamaqat Garments, Kuwait City

What

The contract includes the transaction of own produced 100% synthetic fibre led undergarments and night wears from Lopez Romero y Hermanos, Spain.

Where:
The delivery includes transferring of goods from Sevilla Airport, Spain to Kuwait City Airport, Kuwait Airport Freight cargo under Airport ICC. This is due to the fact that the goods are light weight and Hence would be delivered through volume based transport means

When:
The delivery is scheduled on May 2005 with a margin of 2 days plus or minus.

How:
Payment as Letter of credit (irrevocable) and issued by the bank San Marco, Spain. The payment mode will be in USD Incoterms that would be followed is CIP, Kuwait city (version 2010).

5000 pieces of undergarments (small, black, mid waist) of 4 USD per piece 6000 pieces of night wear of 10 USD each A total of 11,000 pieces of worth 80,000 USD total

3. Draft your offer in the free hand style

The parties to the present contract, Lopez Romero y Hermanos, Spain, hereafter called the supplier, and Shamaqat Garments, Kuwait City, hereafter referred to the buyer, desires to sell its produced 100% synthetic fibre led undergarments and night wears in Kuwait City through Shamaqat Garments. Similarly, Shamaqat Garments, Kuwait is interested in buying the goods produced by the seller at a much cheaper price than the domestic market. The following paragraphs outline the conditions of the present. All and any other conditions not expressly mentioned therein will be governed by the dispositions of the United Nations Convention for the International Sales of Goods adopted on April 11th, 1980 in Vienna, as well as the Exim laws governed by both the countries of the traded parties i.e Spain and Kuwait.

The supplier agrees to deliver its own produced 100% synthetic fibre undergarments and night wears to the Kuwait City airport on May 2005 (+/- 2 days of delivery) through air freight cargo according to the enquiry posted with 5000 pieces of undergarments (small, black, mid waist) of 4 USD per piece and 6000 pieces of night wear of 10 USD each The Buyer agrees to take delivery and to pay 80,000 USD through Letter of Credit (irrevocable and confirmed by issuing bank San Marco Bank, Spain) upon delivery of the merchandise, wherein the potential risk of loss of or damage to the goods, together with additional costs occurring from thereon are transferred from the seller to the buyer at the point of delivery, in accordance with 2000 CIP Incoterms. The price for the present transaction is 4 USD for undergarments, 10 USD for night wears and a total of 80,000 USD (CIP Kuwait City, Version 2000 Airport ICC publication Nxxx (with a price margin of +/- 5 % margin). Acceptance in writing by the signatures hereunder of the present on or before the date 21st December, 2004 will render these terms and conditions definitive and binding to the parties hereof. The Supplier Lopez Romero y Hermanos Date: 16/11/2004 The Buyer Shamaqat Garments, Kuwait Date :

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