This assessment item relates to learning outcomes 5-12 as stated in the course profile and addresses

| March 29, 2017

Question
ASSESSMENT ITEM 2

Due date: Sunday 29 September 2012 at 3:00pm

Weighting: 50%

Length: Approximately 3000 no included references

Objectives

This assessment item relates to learning outcomes 5-12 as stated in the course profile and addresses material covered in modules 5-10 (weeks 6-12) of the course. Answer all questions.

Please also note that:

· Additional readings relevant to the assignments may be made available to students via the library’s Course Resources Online system. If so, students will be advised on this on the Moodle-based course website which all students should access on a regular basis.

· While each assignment counts for 50% of the total assessment for this course, for ease of grading, each is allocated a total of 100 marks. Your notional aggregate score out of 100 marks will then be scaled back to a mark/score out of 50 for each of the two assignments.

Question 1 20 Marks

In August 2011, Northwest Mining Ltd, a west Australian firm entered into a contract – subject to Australian law – with PhilOre Co, a Philippine iron ore processing firm for three 25,000 tonne shipments of first grade 63.5% iron ore at US $120 per tonne ($3 million per shipment) from Port Hedland in the first weeks of December 2011, April and July 2012 respectively. Under the contract, there was also a $1 million per instalment shipping charge. Each $4 million instalment charge was payable a month in advance by PhilOre setting up an irrevocable letter of credit with Northwest’s Perth bank; Northwest requiring four weeks between payment and the earliest possible date for shipment. Northwest’s own scientific unit was to issue a certificate of 63.5% purity for each shipment. Under the contract each instalment was to be delivered to a nominated Philippine port by Northwest’s single bulk iron ore carrier, the MV Rustie. However, subsequent contract execution didn’t conform to the hopeful expectations of either party.

Regarding the first shipment:

· Due to internal delays and errors by PhilOre’s own bank, Banco de Moodie, it was 10 days late with the letter of credit. This cost Northwest $10,000 in extra bank costs. It relied on this as an excuse to delay shipment by 14 days to cover up its own 10 day delay in shipment, caused by plant failure. And due to that plant failure, Northwest could only ship 20,000 tonnes. PhilOre bought the 5,000 tonne deficit through the China Beijing Metal Exchange (CBMX) at $200 a tonne plus a $100 per tonne shipping charge from PhilOre’s Chinese subsidiary SinOre, although Northwest – through its own Taiwanese contacts – had offered and was able to arrange a substitute, equivalent delivery within a further fourteen days at no extra cost or inconvenience to PhilOre.

The ‘fickle finger of fate’ was equally unkind to the second shipment:

· Owing to a highly unseasonal tropical cyclone, loading at Port Hedland was delayed by four days and the ship’s departure was delayed a further three days due to an equally unexpected, illegal strike of the Shipping Pilots Union (SPU) in protest at the use of a low paid ‘foreign’ Filipino crew on the Australian registered MV Rustie.

· Because of a ship loading error by Northwest, one-half or one compartment of the MV Rustiewas loaded with 12,500 tonnes of second grade 58% iron ore. Fortuitously, PhilOre discovered this before unloading at Port Cebu. By mutual agreement, the MV Rustiedischarged the second grade ore at another nearby Philippine port, returning with 12,500 tonnes of first grade 63.5% iron ore. This delayed total delivery to Port Cebu by 14 days which cost PhilOre an extra $250,000 in port handling and transport fees and a further $100,000 in rescheduling iron ore plant processing. But in fact, the conforming 12,500 tonne component was of exceptional over-compliant 66.5% purity. This saved PhilOre $500,000 in processing/manufacturing costs and it was able to sell the resultant super grade metal bar output for an extra $1 million on the London Metals Exchange (LMX) spot market.

Required:

(a) Outline and discuss each party’s likely legal rights and liabilities in relation to the above detailed first and second shipment contract deviations as governed by Australian law, assuming CISG applies. (15 marks)

(b) Would PhilOre be entitled to terminate the remainder of the contract – the July 2012 instalment – and if so what consequences would follow? (5 marks)

Question 2 20 Marks

As a variation of the facts outlined in Question 1 above, assume that Northwest and PhilOre entered into a contract, subject to Australian law, for a single December 2011 iron ore shipment of 25,000 tonnes for US $4 million, on the same advance payment terms. A 63.5% certificate of purity was to be separately issued by a highly reputable independent company, Hedland Ore Testing (HOT). PhilOre’s bank, Banco de Moodie,was similarly 10 days late in delivering the requisite irrevocable letter of credit. Due to collusive fraud between HOT and a Port Hedland stevedoring firm, HOT issued a false 63.5% purity certificate for PhilOre’s single iron ore shipment of only 58% purity. And due to collusive fraud between two Banco de Moodieofficers and their cousin PhilOre’s CFO Gloria Macaroyo, a false letter of credit and related documents were delivered to Northwest’s Perth bank – the Mercantile Bank of Australia Ltd (MBA). But diligent, well-connected MBA officers, with assistance from the Commercial Fraud Division of the WA Police, quickly uncovered both frauds and immediately thereafter advised the two firms of their findings.

Required:

(a) In the factual matrix outlined of two separate but concurrent fraudulent transactions, how might Northwest and PhilOre best cooperate for their mutual benefit? (5 marks)

(b) Conveniently further assuming in sequence (i) issuance only of the false purity certificate, and (ii) issuance only of the false letter of credit and related documents, what would be the respective innocent party’s legal rights? (15 marks)

Question 3 20 Marks

Informed and enlightened by the adverse factual matrix outlined in Question 1 above, Northwest Mining Ltd wishes to enter into new iron ore sale and delivery arrangements with another large Philippine iron ore processing firm, SamarOre, and seeks your further advice on optimally reconfiguring its contractual sale and shipping arrangements with a view to minimising or entirely avoiding the application of Australian law. In particular, Northwest proposes to:

· Re-register the MV Rustiein Liberia, as a ‘flag of convenience’ ship, and contract with a Singaporean company to provide an experienced multi-lingual mainland Chinese crew including the captain and other officers.

· Transfer ownership of the MV Rustieto a Singaporean subsidiary, Northwest SingCo (NWSC), and enter into individual charter-party arrangements with NWSC for each voyage.

· Expressly make the iron ore and shipping contracts subject to Philippine law, exclude the operation of CISG, Incoterms and all shipping conventions, ensure all documentation is electronic and have it dealt with, as far as possible, between the two firm’s agents and their bank’s branches in Singapore.

· In the shipping contract, entirely exclude or minimise liability of Northwest and NWSC to SamarOre for (i) the MV Rustienot being sea worthy, (ii) negligent navigation and management of the MV Rustieby the contracted-out Chinese crew, and (iii) sea water or storm damage to the iron ore cargo due to the bulk carrier’s top deck being faulty or improperly secured, or ballast leakage and contamination.

Required:

Advise Northwest of the extent to which its proposed scheme would have the desired effect of minimising the Australian law’s application to its new contractual and shipping arrangements and restructure and modify its (potential) legal duties and liabilities to SamarOre.

Question 4 20 Marks

Revisit the factual scenario outlined above in Question 5, first assignment. The Philippine sugar industry is undergoing a long-termlarge scalemodernisation and expansion process, making it very attractive to CuttySark Ltd (CSL). Thai manufacturers, with lower costs than CSL largelydominate the import market by default due to a lack of interest by other manufacturers. WhereasCSL, a well-established medium sized firm with exports worldwide,has a superior range of plant and equipment, i.e. withlower operational costs, higher output and longer life.Also, due to the Government’s five yearindustry loan program, purchasers are likely to be less price-sensitive in the short term. But in order to minimise political risk, enjoy lower production costs and benefit from the expertise, industry knowledge and networks of leading local Philippine engineering firms, CSL wishes to explore the merits and viability of licencing/transferring production to a CSL-majority owned Philippine joint venture variant. CSL has secured numerous complex patents in Australia for its cutting-edge plant and equipment and attaches prime importance to ongoing protection of its intellectual property rights (IPRs). Assume that it is difficult (but not impossible) to satisfactorily enforce foreign IPRs in both Thailand and the Philippines.

Required:

Advise CuttySark Ltd as to the merits and viability of setting up a licencing/manufacturing presence in the Philippines as detailed above, taking the IPR risk into account, compared with the present proposed export sales strategy.

Question 5 20 Marks

There is an extensive mango industry in both Australia and the Philippines. As mangoes are grown in differing, complementary seasons in these countries, they would benefit from supporting mutual free trade in mangoes. But despite ongoing efforts especially by the Philippine Government, there has been little free trade, especially in fresh mangoes, between Australia and the Philippines.

Required:

Outline and appraise the GATT/WTO, bilateral and regional free trade agreement (AANZFTA), and WTO sanitary and phyto-sanitary (SPS) Agreement sourced rules which govern the Australia-Philippine mango trade and consider whether Australia can rely on strict SPS-quarantine rules to discourage imports.

Assessment Criteria

Fail

You will have shown evidence of the following:

· the written expression is poor and difficult to understand

· the answer is poorly organised

· referencing is generally inadequate

· lack of familiarity with the legislation and its application

· failure to identify and address the issues in the question

· reasoning and application demonstrated is poor.

Pass

You will have:

· made a conscientious attempt to address the topic and/or answer the question

· shown evidence of having done the required reading and of having understood the reading

· presented a reasonable argument to back up your conclusions

· demonstrated a reasonable level of spelling and grammatical usage

· used referencing but this may need improvement

· issues that may need to be identified and addressed in more depth.

Credit

You will have:

· addressed the topic and/or answered the question directly

· presented soundly based arguments and backed these up with reasons

· gone beyond description to analysis of key issues

· used the English language well

· shown evidence of reading widely

· demonstrated understanding of the reading

· used referencing that is satisfactory.

Distinction

You will have:

· met the above criteria for a credit

· demonstrated the attainment of a high degree of understanding of the concepts of the course

· demonstrated deep insight into the application of knowledge and skills acquired to complex theoretical and practical situations

· used referencing correctly

· made reference to all appropriate legislation.

High Distinction

You will have:

· met the above criteria for a distinction

· demonstrated the attainment of an outstanding level of achievement regarding the objectives of this course

· demonstrated an interesting and/or original approach/idea/argument

· demonstrated mastery of the relevant referencing system

· ensured conclusions are backed by well-reasoned arguments demonstrating a detailed insight and analysis of issues

ensured references are made to the appropriate legislation for particular issues.

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