Question 3
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(a)What is a bonded warehouse?
(b)Explain three ways in which a bonded warehouse may be useful in international trade.
(c)List and explain three stock control levels.
Observation
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Comments
(i)A large number of candidates were able to answer question 3(a) very well.
(ii)Candidates performed averagely in question 3(b) and performed well in 3(c)
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(a) Bonded warehouse is a place where goods whose owners have not paid the required duties are kept on till the duties on them are paid.
(b) Usefulness of a bonded warehouse in International trade
(i)It provides the importers with a reasonable time within which he can pay duty on the goods imported;
(ii)The importers can also complete some processing on the goods while in bond;
(iii)Effective check on the goods in-bond can be made by the customs authority so as to ascertain import duties, contraband goods etc;
(iv)It gives the importers an opportunity to arrange for buyers while the goods are in bond;
(v)Safety of goods imported is also guaranteed;
(vi)It frees space at the port for other shipments;
(vii)It helps importers to manage their inventory and cash flow;
(viii)It improves customer service; and
(ix)It ensures quality assurance of products.
(c) Stock control levels
(i)Reorder level: This is the level at which a replacement order is made and this will ensure that the order would have arrived before running out of stock.
(ii)Maximum stock level: This is the level at which stock should not exceed and this will help to prevent overstocking and the cost associated with it.
(iii)Minimum stock level: This is the level below which stock should not fall and this will help to prevent stock-out which leads to production stoppage.
(iv)Average stock level: This is the average stock held by a firm.