ST.

AUGUSTINE UNIVESITY OF TANZANIA

FACULTY OF BUSINESS ADMINSTRATION

DEPARTMENT OF PROCUREMENT AND SUPPLY CHAIN MANAGEMENT

PROGRAM : BACHELOR OF SCIENCE IN PROCUREMENT AND

SUPPLY CHAIN MANAGEMENT
COURSE NAME : GLOBAL SOURCING AND PROCUREMENT
COURSE CODE : SC 321
SUBMITTED TO : MR MANDA
SUBMITTED BY : GROUP NO; 7 & 17 stream 2
SUBMISSION DATE : 29th April 2023

GROUP MEMBERS
NO NAMES REG : NO SIGNATURE

1. MASU, KACHEGE BSCP 83333

2. TIMOTH, MUSA BSCP 82798
3. JEKAP , IBRAHIM BCSP 83430
4. MANGA, GODFREY BSCP 82417
5. MASHAKA,MARCELINA BSCP 82306
6. KIMATH ,IRENE BSCP 81845
7. KIBOGA,TERESIA BSCP 82436
8. SOLO ,ESTER BSCP 83861
9. MWAMBEPO HARUNI O BSCP 82453
10. MWENZEGULE AMANI JONAS BSCP 82437
11. ESSAU HAPPINESS BSCP 82576
12. MPUGA MWAJABU S BSCP 82052
13. MWANG'ODA CRELIA T BSCP 82738
14. SALEHE BAHATI ABDALALAHAMAN BSCP 82607
15. AMONI EVELINA VICENT BSCP 82607
16. CHENGULA LIGHTNESS METHOD BSCP 82054
17. KIPFUMU MELCHIZEDEK BENEDICT BSCP 82067
1. A) what do you understand by the term Incoterms?
Incoterm are the set of rules established by international chamber of commerce (ICC),
covering the terms that are commonly used in international trade contract. So as to reduce the
risk and uncertainty of international trade contract such as damage ,lost or even not delivered
a all when goods across international borders . Also this rules are recognized b buyers and
sellers in the whole world as used to define the responsibility and duties of the buyers and
sellers in the contract of carriage of goods from its origin to destination place (Medvedev,
2010).
Example of these Incoterms are; Ex works(EXW), Carriage Insurance paid to (CIP), Cost and
Freight (CFR), Free on Board (FOB), Free Carrier (FCA), Delivered Duty Paid (DDP) and
Cost Insurance and Freight (CIF) .
B) What are the roles of Incoterms in Global sourcing and Procurement at least 5 roles.
Provides the clear sharing of expenses between parties during transportation, the
international rules established by international chamber of commerce enhance the distribution
and sharing of cost such as custom charges, insurance charges, import or export tax and
storage charges between buyer and seller during when goods are being transported from its
origin to the place of destination.
To reduce risk dispute or disagreement, since incoterms define the responsibility and duties
each party that is seller and buyer and everyone knows his duties and go alone to what she or
he is required to fulfil and not otherwise this situation help to prevent confusion that may arise
between buyer and seller during international. For example in the case of not delivered of
goods the incoterm used will state the responsibility of each parties and transfer the Rick form
on part to another.
Determine risk regarding goods delivered from seller to buyer, for example ex work
incoterm and seller's obligation is to provide goods according to the terms of the contract at
his premises ready to be collected by the buyer while other obligations remain to the buyers.
It is used to regular and ensure proper management of international procurement
contacts which involves selling and buying of goods from abroad to the local country by
improving the efficiency and effective transportation processes when goods are moved across
international borders. For example when Tanzanian government tend to purchase goods such
as Furniture from China the incoterm are the rules which used to regulate and manage the
performance of such purchasing contract.
It determine the mode of transport to be used in transportation of goods across the
borders due to the fact that some incoterm due to its nature are being used in a specified
mode of transportation for example there are incoterm which is specifically used in marine
transportation such as Free on Board and others are suitable in air mode of transportation like
Cost and Freight so that the selection of incoterm to be used it in international trade contract it
identify the mode of transportation for the movement of goods across international borders.
C) Describe five weaknesses of Incoterms in Global sourcing and Procurement (5 points
with real examples)
Buyers and sellers will have different preferences when using them; For example seller's
may choose CIF because they understand their shipments in a better way than buyers. The
buyers in contrast may prefer FOB for the same reason. So this becomes difficulty to
negotiate and agree on the best way of incoterm to be used and that will favor among them in
terms of costs, duties and responsibilities.
Difficulty in Resolving Damage disputes due to rule inapplicability; There are several
circumstances when using an inapplicable rule creates a strange conflicts of trade assumptions
and renders disputes resolution more difficulty. For example, One scenario is the
aforementioned FOB, this time used for any non-water movement. This misuse is very
common due to FOB's superficial similarity to the antiquated UCC rule which is
unfortunately called "FOB". Where by the modern incoterm rule " FOB" is a water only rule
that specifies a transfer of risks once placed on board a water vessel.
Damage by the party not responsible for the goods; This can result from several
misapplication of Incoterms rules. For example, when using EXW for heavy cargo. Since
EXW entails handling the goods on the seller's premises but, risk transfers prior to handling
the goods, either the buyer operates heavy equipment on the seller's premises or the seller
loads goods for which the seller has no risk or responsibility. This means any damages caused
by the seller loading the goods is now a dispute.
Liability from export compliance failure; All Incoterms, requires a seller to supply
documentation for export and thereby set the expectation of goods sold for export. For
example FCA requires that the documentation about the origin of goods and any relevant
documents for export be made available to the buyer. This is not only serves to ease the
transfer of information, but also sets the expectations in the seller that the buyer must be
vetted along with the ultimate destination of the goods against compliance with export law.
They only cover the obligations in terms of delivery of the goods; They therefore give no
clear indication of payment terms, guarantees and liability of the seller or buyer in the event
of damage to or loss of the goods. Therefore, these aspects must be included elsewhere in the
sales contract.
Generally; Though there are a lot of weaknesses of Incoterms but still Incoterms is very
important in Global sourcing and procurement during international trade. Therefore, in order
to overcome this dilemmas a Global Trade Management (GTM) helps you by telling the right
incoterms according to the products transported and the country of destination. In this way
you effectively control the risks of your operation and your exchange with your partners.
D) Discuss four groups of Incoterms (2020) in Global sourcing and Procurement
Incoterms were developed and published by the International Chambers of Commerce (ICC)
in 2009. Incoterms are the internationally identifiable acronyms used to establish the precise
nature of the relationship between seller and buyer in any commercial transaction. These
phrases are an efficient way of communicating the specific responsibilities assigned to each
party wherever a transaction involves the transportation of goods. For example, incoterms
outline who is obliged to cover the cost of each part of the international journey, who is
responsible for the shipment at each part of the international journey, and who must ensure
the goods are insured. Incoterms also determine what documentation is required for the
transaction.
What are the types of incoterms?
Currently, there are 11 different incoterms. Each type is divided into four groups: E, F, C and
D. These categories are determined by the delivery location and who is responsible for
covering the cost of each part of the journey. The groups are then split into sub-categories
which refer to various scenarios. When choosing an incoterm, buyers and sellers should
thoroughly review each incoterm and decide which set of terms best suit them and their
shipment.
Incoterms Group E – EXW (Ex Works)
Ex Works places most of the responsibility onto the buyer. The seller ensures the goods are at
the seller’s premises or another named location where the buyer loads and clears the goods for
export.
Incoterms Group F
In this group, the seller is responsible for delivering the goods to the buyer’s pre-agreed
method of transportation. After this, the buyer takes responsibility for all the costs and risks.
There are a couple of sub-groups in the F category of incoterms, including:
i. Free Carrier (FCA): This is similar to Ex Works. The seller delivers goods either to
the carrier, a nominated person at the seller’s premises, or another named location.
The point at which any risks are passed onto the buyer must be clearly stated.
 ii. Alongside Ship (FAS): FAS is when the seller delivers goods alongside a vessel
nominated by the buyer. The responsibility lies with the buyer once the goods are
alongside the vessel.
iii. on Board (FOB): FOB is when the seller delivers goods on-board a vessel nominated
by the buyer. The responsibility lies with the buyer once the goods are on-board the
vessel. Both FAS and FOB are incoterms used for waterway shipments.
Incoterms Group C
In this group, the seller bears responsibility for all costs to the destination port. Once the
goods are loaded onto the transport, the risks are transferred to the buyer. Group C incoterms
include:
i. Cost and Freight (CFR): CFR is similar to FOB. The difference is that the seller must
pay for the costs and freight to deliver goods to their destination.
ii. Insurance and Freight (CIF): CIF is similar to CFR. The difference is that the seller
arranges insurance cover against the buyer’s risk of loss or damage. Both of these
terms relate to waterway shipments.
iii. Paid To (CPT): In this case, the seller is responsible for arranging the transportation of
the goods to a named destination, but not for insuring them.
iv. and Insurance Paid To (CIP): This is similar to CPT, except the seller is also
responsible for insuring the goods.
Incoterms Group D
These terms relate to the destination of goods:
i. Delivered at Terminal (DAT): DAT is when the seller delivers the goods to a named
place of destination, once the goods have been unloaded. The seller has full
responsibility for the goods up until the named place of destination.
ii. at Place (DAP): DAP is when the seller delivers the goods ready for unloading at the
named place of destination. The seller has full responsibility for the goods up to the
named place of destination.
iii. Duty Paid (DDP): This is for when the seller is responsible for all costs and risks
relating to the delivery of goods to the buyer’s named place of destination. This
includes clearing goods for export and import, paying any duty and carrying out
customs formalities.
Question 2(a) Use examples discuss the roles of the following key players involved in
Global sourcing and Procurement.

i. A supplier or exporter, is a person or business that provides a product or service to

another entity. The role of a supplier in a business is to provide high-quality products
from a manufacturer at a good price to a distributor or retailer for resale. An example
of a supplier could be Samsung Electronics, a multinational electronics company
based in South Korea that manufactures and supplies various electronic products such
as smartphones, TVs, and home appliances to retailers and distributors worldwide.
ii. Importers or buyer, responsible for sourcing and purchasing the goods from
suppliers and Managing relationships: Importers or buyers foster good relationships
with suppliers, which is important for ensuring reliable supply chains in the long run.
They may also work with suppliers to improve product quality or develop new
products.
iii. Commercial banks, it's role is financing: Commercial banks provide financing in the
form of loans, lines of credit or overdraft facilities to fund the procurement of goods
by businesses. For example, letters of credit to help diminish these risks and allow
transactions to go smoothly for buyers and sellers worldwide.
iv. Clearing and forwarding agents are crucial in ensuring that global sourcing and
procurement operations run smoothly and efficiently. They help to reduce costs,
minimize risk and ensure that goods are delivered on time and in good condition.
Clearing and forwarding agents play an important role in ensuring smooth shipment
and clearance of cargo. Their responsibilities include timely documentation,
submission of appropriate paperwork to authorities and related subsidiary activities
such as arranging specialized labour and transport to help clear goods. For example
Negotiation and Documentation: Clearing and forwarding agents help negotiate the
terms of shipping and transport contracts, ensuring that their clients receive the best
possible rates for transportation services. They also ensure that all documentation is
accurate and complete, reducing the risk of delays and additional costs.
v. Insurance companies provide a critical layer of protection for businesses engaged in
global sourcing and procurement. They ensure that risks and liabilities are minimized,
ultimately improving the efficiency and safety of the overall process. requirements in
global sourcing and procurement help to protect suppliers and agencies from potential
future losses, Also insurance companies undertakes to provide a guarantee of
 compensation for specified losses such as damages, accident in goods and services etc.
the company takes these risks in return for the payment of a specified premium. For
example Cargo insurance: This type of insurance protects the value of goods as they
are being transported from one location to another. It covers various risks such as
theft, loss, damage, and other related perils
vi. Ports and customs departments play a critical role in global sourcing and
procurement by facilitating trade, collecting fees, enforcing regulations, and providing
information to buyers and sellers. For example information about documentation,
customs procedures and fees.
vii. Shipping companies. One major role of shipping companies is to ensure the safe and
timely delivery of goods. This includes taking into account factors such as weather,
customs clearance, and possible transportation disruptions. For example By
coordinating logistics and shipping schedules, shipping companies help ensure that
goods arrive on time, which is crucial in today's
viii. Embassies play an important role in global sourcing and procurement by promoting
trade and investment between countries. for example Providing information:
Embassies can provide valuable information about local markets, including regulatory
requirements, market conditions, and potential suppliers. Also Facilitating trade:
Embassies can facilitate trade by connecting buyers with suppliers, providing
introductions to relevant contacts and organizations, and assisting with contract
negotiations.
ix. Trade blocks in east Africa. Facilitation of trade blocks such as the East African
Community (EAC) and the Common Market for Eastern and Southern Africa
(COMESA), facilitate trade by reducing trade barriers such as tariffs, customs
procedures, and other non-tariff barriers. For example Through the elimination of
trade barriers, trade blocks make it easier for businesses in the region to access new
markets and trade with each other
Question 2. (b) What do you understand by the term regional integration?

Economic integration, or regional integration, is an agreement among nations to reduce or

eliminate trade barriers and agree on fiscal policies. The European Union, for example,
represents a complete economic integration. Strict nationalists may oppose economic
integration due to concerns over a loss of sovereignty. Economic integration aims to reduce
cost for both consumer and producers and to increase trade between the countries involved in
the agreement (Sylvanus 2018).

Economic integration is beneficial in many ways, as it allows countries to specialize and trade
without government interference, which can benefit all economies. It results in a reduction of
costs and ultimately an increase in overall wealth. Examples of regional integration are EAC,
SADEC, ECOWAS, AU, EU, NAFTA, APEC, and COMESA.

There are also types of economic integration

a) Bilateral trade is the exchange of goods between two nations promoting trade and
investment. The two countries will reduce or eliminate tariffs, import quotas, export restraints,
and other trade barriers to encourage trade and investment, for example Korea and United
States, Tanzania and Zambia.

b) Multilateral trade agreement occurs between three or more nations, and they are treated
equally, and no one gets a most favored nation status. The aim is to standardize commerce
regulations, encourage exports and imports, reduced tariffs, and quotas between member
countries. For example SADEC,UN, ECOWAS, COMESA,EAC.
C: Use examples, explain the benefits and Disadvantages of the regional economic
integration in the global sourcing and procurement. Support with 7 points

A: Benefits of Economic Integration

1. It encourages coordination of fiscal and monetary policies, leading to lower

manufacturing and selling costs, improved movement of capital, labor, products, increased
industrial output, and more employment.

2. Trade costs are reduced, and goods and services are more widely available, which leads
to a more efficient economy. An efficient economy distributes capital, goods, and services
into the areas that demand them the most. For instance in SADEC and AU cost that reduced is
customs charges between member countries during importation and exportation of goods and
services.

3. The movement of employees is liberalized under economic integration as well. Normally,

employees would need to deal with visas and immigration policies in order to work in another
country. However, with economic integration, employees can move freely, and it leads to
greater market expansion and technology sharing, which ultimately benefits all economies.
For example during the construction of Standard Gauge and TAZARA labour mobility were
highly encouraged.

4. Promote Unity, the Middle East and North Africa (MENA) countries strive to achieve
green growth, efficiency, and diversification. The collaboration will enable these least
economically integrated countries to generate employment, attract more investment for the
water and energy sector, and recover from the COVID-19 pandemic.

5. Economic integration is beneficial in many ways, as it allows countries to specialize and

trade without government interference, which can benefit all economies. It results in a
reduction of costs and ultimately an increase in overall wealth.

6. Increase productivity, Russia and Belarus decided to establish a unified energy market for
oil, gas, and electricity to address the unwarranted western sanctions on both economies. In
addition, the leaders of the two countries intend to strengthen global economic integration by
reducing business barriers and assisting one another.

7. Lastly, political cooperation is encouraged, and there are fewer political conflicts.
Political conflicts usually end with economic losses stemming from trade wars or even
military wars breaking out, resulting in extreme costs for all combatants. Foristance in EAC,
member countries protect each other and solve disputes peacefully.

B: Disadvantages of Economic Integration

1. Trade diversions may deflect small countries’ economies and land and contribute to
member countries.

2. Developing countries become dependent on more developed nations, thus becoming

depressed regions.

3. Member nations must follow trade regulations and monetary and fiscal policies set by non-
member nations.

4. Increased competition may harm high-cost producers.

5. Can lead to a political disturbance and rivalry between two nations.

6. Lack of adequate complementary policies and institutions may lead to inefficient outcomes.
For instance, policy barriers at the border may offset the gains transport infrastructure
cooperation.

7. Countries may have different preferences on priorities for regional integration, depending
on their connectivity gaps, economic geography, or preferences for sovereignty in specific
areas.
 REFERENCES

Antoni Estevadeordal & Caroline Freund & Emanuel Ornelas, (2008). "Does Regionalism
Affect Trade Liberalization Toward Nonmembers?,"

Bergami, R. (2012). Incoterms 2010. The newest revision of delivery terms. Acta Universitis
Bohemiae Meridionalis , 15(2), 33-40.

Chang, Yuan-Ching & Polachek, Solomon W. & Robst, John,( 2004). "Conflict and trade:
the relationship between geographic distance and international interactions,"

Coetzee, J. (2013). The interplay between Incoterms and the CISG.JL and com; 32, 1. Public
procurement act of (PPA)2011. https://vakilsearch.com/blog/what-type-of-
contract-is-a-consulting-agreement/

Denis Medvedev, (2010). "Preferential trade agreements and their role in world trade,"

Longo, Robert & Sekkat, Khalid, (2004). "Economic Obstacles to Expanding Intra-African
Trade.

Raquel Fernandez, (1997). "Returns to Regionalism: An Evaluation of Non-Traditional

Gains from RTAs,"

Sylvanus Kwaku Afesorgbor, (2018). "Economic diplomacy in Africa: the impact of regional
integration versus bilateral diplomacy on bilateral trade