Memorandum
To: Mr. Jones, the CEO
From: Your Name
CC: Other recipients
Subject: Shipping terms to be considered for the contract loss minimization
Dear Mr. Jones,
I am writing to inform you that Okinawa, Ltd., our ink supplier from Japan, has offered for our company a highly expedient deal on the ink. It goes without saying that we should use any beneficial opportunity to provide our business’s stable growth and development. Thus, on the basis of the past experience and the in-depth analysis of the company’s current position, I would like to propose several shipping terms that should be included in the contract in order to minimize the risk of loss for us. My decision is determined by the fact that there is a possibility of the goods’ damage during transportation. That is why shipping terms agreed with the supplier will avoid unnecessary expenditures. According to my review, approximately 1,400 containers are lost or damaged every year in the international shipping industry – however, up to 2,000 containers may be affected, specifically in the Pacific Ocean, due to stormy weather (Sheldrick, 2020).
Thus, three incoterms that I suggest to include are Ex Works (EXW), Free on Board (FOB), and Cost, Insurance & Freight (CIF) as all of them are expedient for the minimization of losses for our company. EXW implies that the maximum responsibility for the goods delivery is put on a seller, while there is a minimum responsibility for a buyer. Under FOB terms, our company will pay for the cargo once it arrived at the port of destination, while Okinawa, Ltd. will bear all risks and costs until the cargo is loaded on board. Finally, under CIF terms, a seller will be responsible for the obtainment of insurance for the cargo while in transit. Therefore, with these terms, our company will minimize the risk of the goods being lost or damaged during transportation
Thank you for your attention. I will be waiting for your feedback concerning my suggestion.
Best regards.
Reference
Sheldrick, A. (2020). Container ship loses nearly 2,000 cargo carriers in Pacific storm. Reuters. Web.