Palm Oil Plantations is an established exporter of crude palm oil (CPO) and palm oil-related products, with its own palm oil plantations in Country A. For the last 50 years, it has built up a large customer base with a diversified portfolio of customers, primarily from four major countries – B, C, D and E. It has an experienced in-house logistics team, supported by its own fleet of vehicles capable of transporting its products with ease to the nearest port and strong global connections with logistics and insurance providers.
Palm Oil Plantations’ shipments for CPO tend to be in liquid bulk, whereas palm oil-related products can be shipped via containers. Its plantations and factories in Country A are located inland, about 2 hours by road to the nearest port. Within Country A, the political, economic and legal environment is relatively stable, albeit complex. Tonnage is relatively available, with domestic and foreign carrier lines that are suited to carry the products to the four major countries mentioned above. The insurance risks can be covered by both domestic and international cargo insurance companies.
Nonetheless, Country A has not been a signatory to some of the key international conventions relating to the carriage of goods. The factories of the buyers from Countries B, C, D, and E are located at inland points some 300 km from the respective ports of discharge. The following conditions have been noted in the different countries:
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- Country B: It is a modernized country, with the government has invested significantly in developing an educated and skilled workforce, automation and digitization technologies as well as efficient port and transportation infrastructure. Its currency is stable, with unemployment figures below 1%. Most of the global insurance companies and freight forwarders have a presence in this country. The country relies extensively on imports and hence, businesses in this country are very familiar with import formalities and global logistics requirements
- Country C: The political and legal environment is relatively unstable, coupled with challenging economic conditions. It is experiencing an overall GDP deficit. There are also volatile fluctuations in home currency. As a result, buyers from this country can be unreliable in terms of payment. It experiences some of the difficulties experienced in Countries D and E. Despite a challenging political and legal environment, it has been a signatory to and ratifier of many of the key international conventions relating to international trade and carriage of goods.
- Country D: Despite the government’s efforts to modernize the port infrastructure, there is still port congestion where the waiting time of ships varies from 3 to 14 days with inefficiencies and reported safety incidents within the port terminal. Delayed discharge of cargo and demurrage are frequently encountered. In addition, the customs clearance and duties regime can be challenging. There are well-established insurance, logistics, and customs brokerage industries within this country.
- Country E: Its government had invested heavily in building up the country’s overall transport infrastructure, resulting in a fairly efficient inland transportation infrastructure. Its port is well organized and efficient, with the increasing use of automated handling within the port terminal. However, its customs and tax regime can be complex. It is known for frequent strikes and other labor disturbances within the country. In addition, the sea route from Country A to this country experiences stormy weather and tumultuous weather at certain times of the year.
(a) Determine one (1) Incoterm® which is reasonable for both Palm Oil Plantations and the buyer from each country for the (i) crude palm oil and (ii) semi-processed palm oil products. In your analysis, you should discuss both the seller’s and the buyer’s obligations for your recommended Incoterms®, potential risks and mitigation measures and supporting reasons for your recommendations.
(b) Appraise five (5) key differences between the Hague-Visby Rules and the Hamburg Rules in terms of the impact (if any) on the carrier, the seller and/or the buyers. Your analysis should take into account the facts provided in the scenario above, such as the conditions of the country and the types of cargo being shipped. Where appropriate, you should cite the relevant provisions of the rules to support your answer.