Question

Use the data in Assignment A1. Produce a TCO to deliver the product to the end destination. Use the following information:

The Shipping costs are $1,000 for a 20’ and $2,000 for a 40’ container

The BAF is $350 for the 20’ and $500 for the 40’

Accessorial fees are 20% of the shipping costs

THC for sending terminal is $300 for the 20’ container and $450 for the 40’ container.

Drayage to and from the port is $150 for the 20’ container and $250 for the 40’ container.

Booking fee is $75

ACE Charge is $70   

Import Brokerage fee is $200 per entry.

Inspection fee for the Hazardous shipment in export country $100 per container

Duties are 4.25% of the value of goods at the port of entry, including insurance.

Marine insurance is 0. 4% of the value of the goods at the port of loading.

THC for the Receiving Terminal is $425 for the 20’ container and $800 for the 40’ container.

Times for movement or information flows:

Booking fee to the packed container moved to the export port is 7 days

Terminal time to load on board is 4 days

Ship sailing time to the port of destination is 26 days

Offloading and customs clearance is 17 days

Delivery time in the country of delivery is 15 days

Delivery charges in the country of delivery are $125 per 20’ container and $200 per 40’ container.

WACC is 15%

The TCO calculations must be done for both the 20’ and 40’ container sizes.  

Then compare the TCO of the two containers sizes at per container and total shipments as spreadsheet calculations with formulas.

You must create the spreadsheet so that anyone can change any of the numbers given above and the answers are visible in the spreadsheet. The sheet will be tested for this aspect.

The TCO must identify the costs to each party of buyer and seller, assuming an Incoterm of CFR (Port of Houston,  Bayport Container Terminal) Incoterms 2010.

For this product move, what would be your choice of Incoterm to maximize the value to your company, increase your profitability and customer service, and minimize your risk?

Answer 1

Pasting the excel sheet calculations. Clearly the 40 inch container looks profitable to both the buyer and seller. But the selection will also depend on the full container load appetite for the buyer.

From the incoterm perspective CFR will work better for both the parties provided they both work in a transparent manner. In the question it is not mentioned this is solved from the buyer or the seller perspective. If the risk is to be shifted to Seller than DAT or DAP works better. If the risk is to be shifted to buyer than FCA or FAS works better.

Size 1	20	Value1	20000			Assume value per inch	1000		WACC	0.15
Size 2	40	Value2	40000						WACC per day	0.994816
									WACC for 69 days	0.69863
		FOR 20	FOR 40	Bearer as per CFR			Days
	Shipping Cost	1000	2000	Seller		Booking Fee	7
	BAF	350	500	Seller		Terminal Time	4
	Accessorial Fee	200	400	Seller		Ship Sail Time	26
	THC Sending	300	450	Seller		Offloading & Custom	17
	Drayage	150	250	Seller		Delivery time	15
	Booking Fee	75	75	Seller
	ACE	70	70	Seller		Total	69
	Import Brokerage	200	200	Buyer
	Inspection Fee	100	100	Buyer
	Marine Insurance	80	160	Buyer
	Duties	853.4	1706.8	Buyer
	THC Receiving	425	800	Buyer
	Delivery Charges	125	200	Buyer
Cost For Seller		2145	3745
Cost For Buyer		1783.4	3166.8
Total Cost		3928.4	6911.8
For Seller after WACC		3070.294	5360.489
For Buyer after WACC		2552.709	4532.87
After WACC		5623.003	9893.359