Fig. 1 shows containers being examined at a port before a homeware wholesaler imports ceramic mugs for sale to retailers. The goods cost £9600. Table 1 give...
Question 1 Report
Fig. 1 shows containers being examined at a port before a homeware wholesaler imports ceramic mugs for sale to retailers. The goods cost £9600. Table 1 gives two available shipping quotations. The company wants to keep its landed cost low but also needs insurance because the mugs are fragile.
(a) Identify two functions of customs officers at the port shown in Fig. 1. [2]
(b) Calculate the landed cost if the company chooses Port A. [2]
(c) Calculate how much lower the landed cost is if the company chooses Port B instead of Port A. [4]
(d) State two trade documents the wholesaler should receive or use, and give the purpose of each. [4]
(e) Give two reasons why marine insurance is important for this shipment. [4]
Answer Details
(a) Customs officers can inspect goods or containers and check that import rules are followed. They may also collect duty and taxes or prevent prohibited goods entering the country. Any two. [2]
(b) For Port A:
\[£9600+£1250+£180+£90=£11\,120\]
The landed cost is £11 120. [2]
(c) For Port B:
\[£9600+£1080+£220+£160=£11\,060\]
Difference from Port A:
\[£11\,120-£11\,060=£60\]
Port B has a landed cost £60 lower. [4]
(d) Two suitable documents and their purposes are:
- A commercial invoice, showing the goods, price, and seller and buyer details. [2]
- A bill of lading, providing evidence that the carrier has received the goods and stating terms of carriage. [2]
A certificate of origin proves where goods were made; an insurance certificate proves cover for the shipment. [4]
(e) Marine insurance is important because fragile mugs may break while being loaded, transported or unloaded, and insurance can compensate the business. Goods may also be lost through theft, fire, sinking or severe weather. Compensation allows replacement stock to be bought so retailers can continue to be supplied. Any two developed reasons. [4]
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