BFA603 International Trade: Analyzing Gray's Easter Egg Order Dispute

This report analyzes a dispute arising from an international trade transaction involving Grays' in Tasmania ordering chocolate Easter eggs from Specialist Goods in Adelaide, who in turn contracted with Swiss manufacturer Innisbruck. The order was complicated by packaging delays from China, leading to split shipments and late delivery. The report identifies key issues such as the freight company's increased costs, Grays' rejection of the delivery due to lateness and damage, and claims for deposit returns and lost profits. It examines the applicability of Incoterms 2010, including EXW, FCA, CPT, DAT, and FOB, to determine the responsibilities and liabilities of each party. The report provides recommendations for remedies available to each party, including Grays, Specialist Goods, Innisbruck and the freight company. It also offers criticism of the parties' actions, such as the absence of a written contract and poor communication, and provides advice for better risk management and contract practices. This document is available on Desklib, a platform offering study tools for students.

International Trade
regulation and practice
4/15/2019
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Grays’ in Launceston, Tasmania ordered 900 chocolate Easter eggs in special packaging from
Specialist Goods in Adelaide at the price of A$15 to be reached one week before Easter. A
deposit of 50% was made for this. Specialist Goods then placed the order to Swiss chocolate
manufacturer Innisbruck under Incoterms CIP 2010 Adelaide for the manufacture of these eggs.
A deposit of 30% was made for the manufacture of these and delivery was to be at the end of
March (Advanced on Trade, 2014). The packaging of these eggs by Innisbruck was
manufactured in Fuzhou, China and the order for extra packaging was placed under FOB
Shanghai which was expected to be received in early February (AIT – Worldwide Logistics,
2012). The packaging to be received by Innisbruck was delayed in delivery and the company
decided to split the order into two – the first of 500 eggs to be manufactured with the available
packaging and to be shipped as soon as the manufacturing was done and the second order of 400
eggs to be manufactured and then shipped when the packaging was received from China
(Akarca, 2011). The shipment of 500 eggs arrived in Adelaide and the freight forwarding
company hired by Specialist Goods decided to store the shipment and combine it with the second
part of shipment received. This was the standard practice for deliveries in Tasmania. The delay
in delivery led to Specialist Goods to order the freight company to deliver the shipment but air
when the second order arrived. This total order was delivered but not until after April 19 as
opposed to the delivery date being before April 15 (IContainers, 2018). Further, one package of
eggs was damaged because it was mistakenly left at the tarmac in the Melbourne airport. This
delay in delivery of Easter eggs and spoilage of one package of eggs led to various
consequences. The issues which need to be addressed in this report are mentioned in brief below:
 The freight company’s demand of three times the actual freight for immediate shipment
by air (IncotermsExplained.com, 2015).
 Grays’ rejection of the delivery due to the order being late and because one package was
damaged in transit.
 Grays’ claiming the return of its deposit for the damages it suffered, the delivery not
received and for the loss of profit which it would have earned had the eggs being
delivered on time.
 Specialist Goods’ return of the deposit which it had paid to Innisbruck for the
manufacture of Easter eggs (International Forwarding Association, 2015).

For the purpose of this report, references can be made to Incoterms or the International
Commercial Terms that explain the tasks, rules and responsibilities associated with the
international transportation of goods. These terms are rules and regulations for the shipment and
delivery of goods with reference to an agreement and are given by the International Chamber of
Commerce for the purpose of communication with all the parties involved in a sale transaction.
These are commonly used terms, rules and guidelines for international transactions of a
commercial nature and are encouraged by governments, trade associations, and courts of law.
Incoterms, however, are not government laws (Mo, 2016). Rather these are government rules for
clarification of any disputes arising in relation to delivery, shipment, payment and bearing of risk
in case of default of fulfillment of agreements and contracts. These rules are accepted by
governments and trade practitioners worldwide and help to remove any disputes arising at the
time of delivery as well as after delivery (Noah, 2016). The Incoterms were first issued by the
International Chamber of Commerce in 1923 and published in 1936. The current terms were
issued in 2010 and officially published in 2011. The International Chamber of Commerce have
begun revisions of these to be issued in 2020.
However, it should be remembered that Incoterms do not define terms and conditions of a
service contractand do not determine ownership of goods. These rules do not contain
specifications regarding protecting parties from losses and are only concerned with the delivery
of goods. Furthermore, loading of products in containers is not included in Incoterms.
The Incoterms and the guidelines to be followed under them which apply to the case of Grays’
and Easter eggs are discussed in brief below:
 EXW – Ex Works
 The seller is responsible for goods available at the named place of delivery. (It is
the responsibility of Specialist Goods to deliver the Easter eggs to Tasmania.
Similarly, responsibility of Innisbruck to deliver the packaging of eggs to
Adelaide.) (Robinson, 2016)
 The maximum obligation is of the buyer and minimum of the seller. (Grays’ has
more obligation than Specialist Goods for the delivery of the eggs. In case of
packaging, on the other hand, Specialist Goods is obligated.)

 The risk of bringing goods to the final destination is incurred by the buyer. (The
risk of delivery of eggs is of Grays’ and of packaging is of Specialist goods.)
 FCA – Free Carrier
 The seller is responsible for clearing the goods for export. (Innisbruck is
responsible for clearing the packaging for export from China to Australia.)
 CPT – Carriage Paid To
 The seller pays for the freight charges when the goods have to be delivered to the
buyer. (Specialist Goods will be accountable for covering the freight cost,
including the air freight cost, to Tasmania.)
 DAT – Delivered at Terminal
 The seller is responsible for bearing risks of loss to goods till the delivery terminal
(Searates, 2010). (In this case, the loss of damaged package of eggs at the tarmac
of the airport will be borne by Specialist Goods and not Grays’.)
 FOB – Free On Board
 The seller bears all costs and risks up till the point the goods are loaded to the
vessel. (Innisbruck is responsible for payment of costs and bearing risks till the
packaging material is on board the vessel for export.)
 The buyer pays the cost of freight from the place of arrival till the place of final
delivery. (Specialist goods is responsible for payment of freight charges for
delivery of packaging material to Adelaide. Similarly, the freight charges for
delivery of Easter eggs to Tasmania will be borne by Grays’.)
The recommendations in case of the issues mentioned in the beginning of the essay are being
discussed below:
 Remedies available for Grays’ for the return of deposit paid to Specialist
Goods
Under EXW, the maximum responsibility of delivery of goods is of the buyer.
The seller is responsible for bearing all costs and risks till the time of delivery of
goods (Trade Finance Global, 2017). In this case, however, the goods were not
delivered and an advance deposit of 50% of the total amount had been made by

Grays’ to Specialist Goods. According to me, there should be a refund of either
the total deposit made by Grays or at least some part of it should be refunded. It
was the responsibility of Specialist Goods to deliver the Easter eggs to the place
of delivery and failure to do so should result in remedies being made available to
the concerned party. Specialist goods should be allowed to claim a part of the
deposit which was made by Grays in exchange of eggs which had already been
manufactured by them and packaging which had already been ordered by them
from Innisbruck.
 Remedies available to Grays’ for the loss of profits due to non-delivery of
goods within the stipulated time
Grays entered into a sales agreement with Specialist Goods for the delivery of 900
Easter eggs by the week of April 15 i.e. one week in advance of Easter. But
Specialist Goods failed to deliver these on time due to which Grays had to suffer a
loss of revenue and profit which it otherwise would have earned. According to
me, there is no remedy available to the party. It is not the responsibility of
Specialist Goods to ensure that the company earns revenue and makes profit. In
case of non-delivery of Easter eggs, Grays should have made alternative
arrangements to increase their revenue during that period of time if goods to be
sold were not delivered. Specialist goods should be held accountable for goods
not delivered and in that case, the advance deposit made should be returned as
explained above but no remedy will be available for loss of profit to Grays (Trade
Finance Global, 2015).
 Remedies available to the freight forwarding company for its increased
freight cost
As per Tasmanian standards, the freight forwarding companies consolidate the
delivery of two or more consignments to be delivered to the same company. The
freight forwarding company stored the consignment with 500 Easter eggs which
were packaged and delivered early and within the promised time period to
combine with the 400 eggs delivered later (Burnett & Bath, 2009). Specialist
Goods ordered the freight forwarding company to deliver the consignment by air
as soon as possible. This led to the company claiming three times the freight

originally agreed upon. According to me, the company should be compensated the
amount incurred by them for air delivery of the consignment. Late shipment of the
eggs was the result of lack of proper management by Specialist Goods but its
brunt should not be borne by the freight company. According to Incoterm CPT
(Carriage Paid To), the seller is responsible for payment of freight charges till the
goods are delivered to the buyer. The freight company can claim compensation
from Specialist Goods.
 Remedies available to Specialist Goods for the return of deposit paid to
Innisbruck
Specialist Goods had deposited 30% of the total order amount as way of advance
payment to Innisbruck for production of 900 Easter eggs. Innisbruck had ordered
packaging for the eggs from China. But there was delay of shipment of packaging
and thus, delay in delivery of eggs to Specialist Goods. Under FOB (Free on
Board), the seller bears all costs and risks till the goods are loaded on to the vessel
of shipment. After that, the responsibility of the goods is of the buyer.
Accordingly, Innisbruck is responsible for bearing the cost of the delay in
delivery of eggs. Therefore, the deposit made by Specialist Eggs must be returned
to them to compensate for the delay which led to Grays rejecting the final delivery
and their loss of profit. If not the entire deposit, then at least a part of it must be
returned to Specialist Goods.
Criticism of the acts of various participants
 Absence of a written contract in between all the parties stating the action to be taken in
case of non-delivery of the products agreed upon.
 Lack of a proper judgement on the part of Innisbruck. They accepted the order for
production of 900 Easter eggs without realizing that they might be short on packaging.
 Lack of a proper system of communication between all the parties to decide the course of
action in case of late delivery of eggs.
 The storage of consignment of 500 eggs received in due time by the freight forwarding
company in order to wait for the remaining eggs to consolidate the entire order.

 Lack of care and check in terms of management of eggs due to which there was spoilage
of a package at the airport.
Advise for all the participants
 A formal contract should exist between all the participants stating the terms and
conditions of delivery and what is to be done on case of breach of contract.
 Better practices by freight forwarding companies and delivery of consignment as and
when received.
 Better risk management by all the parties. Proper modules to be developed by all parties
as to what is to be done in case of delays of delivery.
 Proper communication between all parties relating to orders and their fulfillment.

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