International Commercial Law Assignment Sample
Purposes
The main purpose of this draft memorandum is to reflect the new innovative product namely “Eco-Home’ to reduce the risk of carbon footprints developed by Danowns. The company has been successful in becoming immensely popular in the UK by using this eco-friendly concept. The company also wants to expand their business in the EU and USA. The company has been successful in getting the best award for their innovative eco friendly idea. As it was the first time the company was going to expand their business in the foreign countries, they had to be very careful in implementing proper strategies regarding the expansion of the business in foreign countries. The company thus tends to ensure that the company would not be suffering from any kinds of risks while expanding in the EU and USA. One of the most essential problems regarding business expansion in the EU is the Brexit problem. Thus the company is required to ensure that it would be successful in expanding its business by considering all the legal issues regarding the Brexit situation.
Background
This is very necessary for the Danowns to ensure that they can easily expand their business in foreign countries by coping with the possible risks that can arise due to foreign expansion of the business. The thought “Eco-home” developed by Danowns helped the organisation to get the best award for their best ever eco friendly thought. There are many risks which can arise due to expansion in foreigh countries. Firstly, when evaluating prospective foreign economies, variables like significant poverty or a primarily untrained population are critical. Company also should consider the threat of terrorists, internal divisions, political strife, and anti-foreign sentiments among people, employees, and political figures. Excessive rates of criminality and fraud should also be damaging to the development of the company. Secondly, Impact on trade legislation or a subpar judicial framework might also have an influence on the firm (Kovač, 2020). Poor copyright rules may also expose the goods to imposters and risk in the economic system may limit a company’s capacity to export funds and even get capital. Thirdly, Corruption occurs when a nation’s governing authority abruptly alters its strategy or viewpoint on issues such as exchange controls or international investment.
For instance, in order to safeguard local businesses, a governor may unexpectedly demand particular tariffs or funding in exchange for the company’s ability to import items into their nation. Such methods may have a massive effect on a company’s profitability since they not just harm sales but may also limit the quantity of money a company can generate in that specific country. Notwithstanding this, the increasing amount of trading agreements in place throughout the globe has helped to minimize the effect of economic risk. Nevertheless, companies should be aware of the daily fluctuations in legislation that exist in the international segment and how they might affect a company’s long-term profitability. Danowns might even undertake actions to mitigate much of this danger (Bonell, 2018). Another alternative is to purchase insurance, which may assist safeguard company’s stock assets and mortgages from foreign governmental policies.
The worth of the asset fluctuates owing to currency movements. For instance, if the national currency increases with a different currency, whatever earnings the company generates in that overseas nation would be reduced once converted into their national currency. Since currency values may be impossible to predict, safeguarding the firm from this sort of danger can indeed be tough. There are some of the major aspects that are required to be considered for successful business expansion in foreign countries. Firstly CPI, is needed to be considered, which analyses variations in the prices of common products and commodities purchased or used by the nation’s families. It’s being used to determine a nation’s inflationary pressures, which affects the economy and, as a result, whether costly it would be for the company to engage in a foreign country. Secondly, GDP which the statistic represents the total worth of all finished required items generated or created inside the nation over a certain time frame. GDP is important since it reflects how an industry is operating including its size. Thirdly, PMI, which informs the company how strong a nation’s construction industry, is at any particular point in time (Almuhaidb, 2019). It would also offer the company an indication of the general profitability of firms in a particular region and the possible reasons regarding it.
There are high chances of the company getting sued if the company fails to avoid the litigation risks.
The danger of litigation is indeed the potential of legal proceedings being undertaken as a result of a person’s or company’s acts, inactivity, goods, activities, or any other occurrences. Companies often use some kind of lawsuit risk assessment and administration to determine important areas in which the danger of litigation is significant and, as a result, take necessary actions to mitigate or eradicate such risks. They differ greatly from one government to the next. The expenses of presenting a legal case in court, as well as if not alternative kinds of closure, including a compromise, are more possible, are factors that businesses must evaluate their litigation danger (Zhang, 2018). The expenses of losing the lawsuit in court will need to be balanced versus the possible benefits of prevailing the case. For instance, entrepreneurs are regularly sued by companies claiming to have licenses which have been violated by the release of the goods or service companies are delivering. Customers who are dissatisfied with the business’s activities and goods, interruptions and disconnections, or damage and suffering relating to the firm’s management, personnel, commodities, and services may bring legal action against the firm. The corporation also may face litigation relating to its agreements with these other firms and persons, as well as proprietary information and copyrights used in its goods.
Brexit Situation and its impact
Brexit is a phrase made up of the words Britain and Departure to refer to the UK’s vote to leave the European Union in a referendum on June 23, 2016. (EU). On Dec 24, 2020, the Uk and the EU reached a provisional unfettered agreement, guaranteeing that now the partners can trade items without incurring any tariffs or limitations. Nonetheless, key aspects of a possible cooperation, such as foreign commerce, that represents 80% of Economy, have still to be settled. This avoided a “no-deal” Brexit that would have been terrible for the banking markets of the United Kingdom.
Assuming the conditions of similar departure or after-Brexit arrangement like EEA partnership stipulate differently, the United Kingdom would not be able to bound to the EU Judicial Regulations upon the completion of the departure deal or the completion of the 2 time periods sooner (Loadsman and Douglas, 2018). Hence it is very necessary for the organization to come up with the proper strategies to develop their businesses in EU and USA by coping with the situation of Brexit.
A strong and extensive commercial alliance between both the UK and the EU should serve both parties. The United Kingdom is the 5th largest industry, and the EU seems to be the UK’s biggest market. The UK plan represents the special linkages that are present between the EU and UK economies, enterprises, and individuals. It is a valid contract, which is something the government says will assist both Britain and its EU allies. In developing this proposal, the government paid close attention to the arguments articulated by the EU.
Manufacturing items is seldom produced in a single place, with contemporary technology characterized by highly specialized enterprises and complicated distribution networks that span many nations and work on a merely basis (Hess and Boerner , 2019). That both the United Kingdom and the European Union will also want to guarantee that European industry thrives in an extremely aggressive global economy.
Fortunately, the UK has achieved a post-Brexit commercial agreement with the EU, enabling UK firms to begin trading customs duties. The deal between both the EU and the UK may be found in the “Trade and Cooperation Agreement (TCA)” dated April 2021.
Nevertheless, in order to be eligible, purchased or exported UK products must fulfil the TCA’s precise conditions. Companies must establish that their products originated either in the EU or the UK. To be deemed indigenous, agricultural products must have been cultivated in Britain or European soil. If they came from somewhere else, they must have been significantly modified. Brexit has an influence on business because of the possible financial impacts and personnel concerns. Certain sectors will become more affected than certain competitors, such as banking products, and the factors that deal global would be highly impacted. Companies with major European supplies or customers would be disrupted, while commercial with non-EU countries will be hampered by the lack of employment to the EU’s current free trade agreements and any regulatory delays. Brexit poses a serious danger of rising prices and distribution network delays (Feehily, 2018). Researchers detail eleven ways to mitigate the effect of increased costs and disruptions, as well as address the most frequently asked Brexit production chain issues. This vital international delivery of products assessment also includes constructive tips on reevaluating the business supply chain and developing efficient operational supply of commodities agreements.
Even as the UK leaves the EU, it will have to deal with the challenge of detangling the EU’s election system for parliamentary bodies. Brexit does have an immediate influence on businesses because it changes where the legislation is implemented. The approach will require transforming applicable European laws into English rule, with courts deciding whether or not to recognize prior European legal decisions as frameworks of jurisdiction. Changes to the UK’s legal system may cause problems for businesses as companies try and understand where the changes will affect their operations, particularly contracts and people (Hoekstra, 2019). It is vital that regulators have recourse to appropriate information in order to properly control risks and find opportunities. Hence it is very necessary for the Danowns to consider all the possible influences of Brexit over their business (Hoekstra, 2019). This would be helping them to successfully help the company to introduce and sustain their business in the USA and EU. Thus the company is required to build the strategies in a way that the situation of Brexit would not be able to badly influence the business growth.
Contrast between FOB and CIF contracts
FOB contracts
If a supplier or client is accountable for items that are significantly harmed during shipment, the term “free on board” (FOB) is used. The words “FOB shipping location” or “FOB origin” indicate how the buyer accepts responsibility once the product is delivered. The client is responsible for the cost of the company’s shipping and is responsible if the products are lost or damaged in route. The term FOB target denotes that the seller is responsible for any expected losses until the goods are accomplished. Previously, FOB solely referred to commodities delivered through shipping; however, in the United States, the word has now been broadened to cover all modes of conveyance. Agreements affecting foreign conveyance frequently include shortened trading words that explain things like the location and date of delivery, payments, when the danger of loss switches from either the supplier to the purchaser, and who covers the shipping and security charges (Kupchina et al.2019).
The more frequently firm purchases merchandise, the greater transportation and security charges it will spend, based on the FOB arrangements. When making an inventory order, businesses may incur expenditures such as the price of employing workers to unpack the products and also the expense of renting a warehouse to keep the items. A firm’s stock expenses can be reduced by acquiring larger amounts and lowering the frequency of individual deliveries it receives. Travelling to the point of delivery, putting the items onto the container vessels, transport services, coverage, and discharging and conveying the products from the arriving point to the end destination are all expenditures involved with FOB. Whenever the danger of losses moves from the vendor to the customer, the phrases FOB are used (Yasoda , 2020). They are extremely crucial to parties in global payments, especially for commercial contracts sensitive or theft-prone commodities.
CIF Contracts
CIF is a standard transportation agreement that outlines the costs a seller must pay for insurance, the expenditures, safety, and freight of a buyer’s order while it is being transported. The things are delivered to the client’s specific location in the purchasing contract. Until the goods are transferred to the buyer’s delivery location, the vendor is obliged for just any loss or harm to it. Additionally, the vendor is liable for any customs duties taxes, exportation papers, exams, or reconfiguration fees incurred as a result of the items. Once contents have landed at the buyer’s designated port, the client is liable for only any fees or expenditures involved with unloading and conveying the cargo to its end location. CIF is comparable to transportation and protection paid to (CIP), except that CIF is exclusively utilized for ocean and water shipments, whereas CIP is being used for every method of transportation. When shipping internationally, it’s important to understand that, based on the type of shipping contract, there could be different risk and cost transfer sites between both the client and the supplier. The risk transfer happens in CIF at a different time than the pricing translation. The deal’s precise provisions define whenever the buyer’s duty for the items falls to the buyer. So because the seller pays the consignment, freight, and security expenses until the cargo arrives just at the buyer’s departure port, the cost transfer occurs when the items arrive at the buyer’s port. However, after the products are loaded onto the ship, the risk is shifted from the seller to the buyer.
CIF is a global contract among a purchaser and a vendor wherein the vendor is liable for the payment, coverage, and freight of a marine or waterways cargo. Even though the customer takes custody of the package once it has been placed into the surface vessel, the carrier is liable for any transportation coverage and freight expenses. As a consequence, until the materials are delivered at the purchaser’s delivery point, the vendor is obliged for the shipments’ transportation costs (Economou et al.2021). Charges for shipment, exporting customs checks, tax, and taxation are only a few of these expenses. Inside a FOB transaction, the purchaser is responsible for booking the appropriate space on board with their own expense. One tells the vendor of the ship’s identity, cargo, and port, among other details. The vendor reserves shipment capacity on boarding for the carriage of the items in CIF.
Difference between FOB and CIF
The INCOTERM contracts “FOB (Free on Board)” and “CIF (Cost, Insurance, and Freight)”are 2 of the most often used. Even so the definitions of these words vary by country and are eventually decided by each supplier agreement, FOB traditionally shifts obligation from supplier to buyers whenever the shipment arrives at the seaport or even other facilities specified as the site of origin. A CIF contract requires the supplier to pay all expenses and take obligation till the products arrive at the customer’s preferred port of departure. The terms FOB and CIF are useful since they specify whether the acquirer is responsible for the transportation throughout the delivery (Nyarko, 2019). These clauses are significant because they specify who is liable for coverage, freight rates, and who will be held liable if the products are destroyed during transportation.
FOB better than CIF in case of Danowns
FOB is considered to be the most efficient one for the Danowns because it is much more inexpensive than the CIF. “Free on Board ” means anything until the items are put just on ship, they remain the purchaser’s duty, but once they are carried just on board, they tend to become a purchaser’s obligation. Because the buyer is liable for the transportation of the items until they reach at the vendor’s closest point, the vendors choose the “Free on Board ” pricing. The customer is liable for booking a ship that will transport the items to their ultimate stop in FOB shipment, but the vendor is solely accountable for arranging a vessel in CIF shipping.
Reference list
Journal
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Feehily, R., 2018. Separability in international commercial arbitration; confluence, conflict and the appropriate limitations in the development and application of the doctrine. Arbitration International, 34(3), pp.355-383.
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