Seneca 2022 Inc. has been breeding cows and goats locally in Cannington Ontario. The breeding serves two purposes. The success of the company for the past 15 years is based upon creating diary products and breeding of the cows and goats. The more recent venture dealt with the large surplus of dairy product that was produced. Partnering with a diary processing plant Seneca 2022 Inc locally successfully produced a major top seller; 10-pound Gouda waxed cheese wheel (known as the Wheel). The partner suggested that they export the excess production of the Wheel to Sweden, under a major product label. Their partner has suggested that they produce the Wheels in Cannington and package, label with the British company brand. that can distribute it in the United Kingdom. Your partner knows the Wheel is of higher quality then is sold in the UK, and could be exported abroad quite profitably. Seneca 2022 has contacted the Canadian government and enrolled in small business export initiatives. This has enabled the company to attend dairy product conferences abroad and offered the opportunity to network, ultimately leading to contact with Drammen Food (UK) a UK wholesaler

Drommen Food UK, (Drommen) was eager to negotiate a contract for two tonnes of Wheel to distribute to clientele throughout the country. Drommen preferred method of payment is a Letter of Credit. The documents required were a commercial invoice, the insurance policy, a marine bill of lading, copy of the Food export certificate and an original certificate pertain to the shipment and a certificate of quality. Drommen has arranged to have the shipment inspected by a nationally accredited standards organization. Both parties agreed in their contract that Seneca 2022, will pay freight to port Flexistowe and will also insure the shipment.

The Canadian Food Inspection Agency (CFIA) reports that the Wheel to be exported is of superior quality. Seneca 2022 are required to obtain a Health Certificate for export of dairy product and a Food export certificate. Seneca 2022 had a Health certificate and a Food export certificate sample completed form obtained on the internet.

Buyers can view the authenticity of the certificates though a Canadian government website.

Seneca 2022 submitted all of the requested documentation to its local bank, which was acting as the advising bank for the Letter of Credit. The documents were forwarded to the issuing bank in UK, but rejected because the certificate of quality was vague, and it could not ascertain whether the shipment had passed its quality certification.

Quality Questions

Although Seneca 2022 attempted to get the Health Certificate for export of dairy product and a Food export certificate. amended, it was unable to get the document changed. So, the Letter of Credit expired, and payment was not released. At Seneca 2022 request, the documents were then sent directly to the buyer for payment. Drommen then insists on inspecting the shipment upon arrival. Drommen is not an experienced importer, and usually deals with European Union companies. The importer is not in disagreement that the shipment has passed quality inspection. Upon Drommen inspection, it claims that the fat content of the stock is much higher than claimed in the quality inspection. It rejects the sale and will indicate that it accepts substitute goods but is claiming damages for loss of profit. Seneca 2022 management wonders if it needs to rethink its exporting strategy. 

1.Describe the purposes for each of the export documents that Seneca 2023 needs to provide to secure documentary credit.

2.Would Seneca 2023 have benefited from employing a freight forwarder? Explain

Answer rating: 100% (QA)

1 The export documents that Seneca 2022 needs to provide to secure documentary credit serve different purposes in the export process These documents include a Commercial Invoice The commercial invoice ... View the full answer