Questions for Chapter 3
1. Why do companies have quality assurance programs?
- Because no manufacturer can produce perfect products all the time.
- Quality is a key issue and customer satisfaction is essential to successful
business.
==> So companies have quality assurance programs to ensure that customers
get what they pay for.
2. Why may conflicts arise in negotiating specifications?
For the manufacturer, the temptation is to be over-optimistic and to agree to
impossible specifications – few things in in business life are riskier. Conflicts
often arise within the exporter’s own team: the marketing manager is eager to
sell brilliant prodcuts, but the production department knows that it cannot make
them.
3. What is the benefit of a well-designed set of specifications?
It protects both the buyer and the seller:
- the buyer is protected against inferior products as it can reject any products
that fail to meet specification;
- the seller can protect its reputation and avoid costs.
4. Which kind of goods needs pre- delivery inspection? Give example.
All kinds of goods need pre-delivery inspection, especially sophisticated items
and capital equipment. This inspection prevents exporter and buyer agreeing an
unrealistically low invoice price in order to avoid customs duties in the buyer’s
country. Such inspection also prevents shipment of patently defective goods.
5. What are the functions of independent inspection?
- Independent inspection reports on the weight, size and most importantly, the
value of the goods.
- It prevents exporter and importer agreeing an unrealistically low invoice price
in order to avoid customs duties in the buyer’s country. Such inspection also
prevents shipment of patently defective goods.
6. What does customs inspection reveal?
Inspection service reports on the weight, sixe and most importantly, the value of
the goods
7. What is the real inspection for goods?
The real inspection for goods means the buyer will open the package to inspect
the goods when it arrives
8. Name quality checks on goods exported for resale
- Inspection by buyer during manufacture
- Inspection by buyer or buyer’s agent before delivery
- Inspection by inspection service
- Inspection by carrier on dispatch
- Open package inspection on arrival at destination
9. How long is the defect liability period?
The defects liability period is negotiable, but for the headphones í likely to be
six months from
- The date of delivery; or
- The date of arrival
10. What are 5 steps in negotiating the Defects Liability Period?
- Inspection: When are the goods inspected? And when can the buyer to reject
them?
- Terms: Warranty or guarantee?
- Definition: What is, and what is not, a defect?
- Timing: How long is the defects liability period? When does it begin? What
about other timings?
- Corrective action: What must the seller do to cure defects?
11. What counts as a patent defect? Give examples.
Defects that are apparent, e.g., wrong items, broken or missing parts, scratches,
etc.
12 . What counts as a latent defect? Give examples.
Defects that only come to light after buyer's acceptance, or hidden defects, e.g.,
structural weakness, failure to operate at high or low temp, high fuel
consumption.
12. What are Implied Warranties?
Assumptions that buyers can make about goods, even if the exporter gives no
express warranty.
13. What are 3 types of Implied Warranties? Give examples
- Implied warranty of conformity with contract: In principle, the Buyer can
reject the goods if they do not conform with the Contract.
- Implied warranty of merchantable quality: The Buyer can reject the goods that
are not of merchantable quality.
- Implied warranty of fitness for intended purpose: If the Exporter knew the
intented purpose, and if the Buyer relied on the Exporter's judgment, the Buyer
can reject the goods that are not suitable for their intented purposes.
15. What is a Product Warranty?
A promise by the exporter to cure defects in his products. There are two parties:
the buyer and the seller.
16. What is a Product Guarantee?
A promise of the guarantor to pay the beneficiary , made out at the request of the
principal. There are three parties: guarantor, principal and beneficiary.
17. What are the similarities and differences between a guarantee and a
warranty?
- Similarites: both making promises
- Differences:
Guarantee Warranty
Parties 3 parties: the principal, 2 parties: buyer and seller
the beneficiary, guarantor
Nature Makes a promise to one Makes a promise about
party at the request of your own performance
another
18. What are the 3 types of defects? Give examples.
- Defective workmanship: a product with defective workmanship is incorrectly
built. Ex: a radio lacks the wires connecting the loudspeaker to the amplifier, nuts
and bolts are inadequately tightened.
- Defective materials: defective materials are materials or parts of a product that
are inferior or somehow incorrect. Ex: tractor wheels that should be galvanize are
simply painted with anti-rust paint, a drive belt made or inferior rubber falls to
pieces after five hours use.
- Defective design: defective design means that a product does not meet
specifications. Ex: a crane on an oil-rig vibrates dangerously in high wind, a
voltmeter that is specified as accurate within 1 millivolt is accurate within only 5
millivolts.
19. What are the common exclusions of defects? Give example.
- Fair wear and tear: the results of normal use.
Ex: the plastic handle on an electric drill is scratched and scuffed after 6 months
use.
- Misuse: seriously incorrect handling by the buyer
Ex: the use of acetone to clean plastic components, failure to check the oil level in
a motor.
20. What is the Defect Liability Period?
The defects liability (or warranty)period is the period during which the exporter is
liable for—and must make good—defects that are apparent on delivery or that
come to light later. The buyer, of course, must prove that the defect was present in
the goods at the date of delivery— often a difficult task. It is important for both
sides in a contract negotiation to understand that a defect is a fault provably
present in the goods on delivery—nothing more. In principle, under most laws,
the exporter is liable only for problems that arise from defects.
21. What are the four timing decisions in Defect Liability Period?
- The starting point of the period (defect liability period).
- The time allowed to the buyer to notify the exporter of a defect. (notification
period).
- The time the exporter has to correct the defect (rectification period).
- The period during which the buyer can begin a legal action (legal action
period).
22. What is “Eternal warranty”? How to avoid problems of an Eternal warranty?
- Eternal warranty is an endlessly renewed liability for defects. The exporter
cannot break the chain of warranty and is involved in endless responsibility for
the goods.
- The problems can be avoided with a cut-off clause such as: the total warranty
period shall in no case exceed 3 years.
23. What are the 5 options for curing defects?
- Repair
- Allow the buyer to repair at exporter's cost
- Replace (part or whole item)
- Reduce the price
- Return the goods and refund the price
24. Which corrective method is least favourable for the seller? Why?
Returning the goods and refunding the price seems to be the least favorable for
the exporter because this can be considered a cancellation of the contract. Often
defective goods are not worth the cost of return shipment to the exporter's
country. That means the deal is a total loss for the exporter.