Freya is interested in exporting recycled laptops. She attended a trade fair to find out about the commercial opportunities and risks experienced by exporters.

Mark scheme

Marking points from the official mark scheme (May/June 2023). The mark or mark type is shown in brackets.

1. [2] Goods or services or products sold/in exchange for money (1) to other countries/abroad/internationally/outside the country (1)
2. [3] Yes - Reach a larger market (1) with many potential customers (1) Freya should be able to purchase the laptops at a good/cheap price (1) especially if bought in bulk (1) consumers will be attracted if she sells cheaply (1) increasing demand (1) increased revenue/increased sales (1) especially if no competition (1) if she sells at a high price/mark-up (1) enable her to have a profit/healthy profit margin (1) consumers prefer to buy recycled goods (1) to help the environment/be sustainable/ethical (1) so there will be less pollution (1) less landfill (1) reducing greenhouse gases (1)
3. [3] No – there will be many costs involved (1) the costs of sourcing and buying laptops (1) the warehouse rented space to keep the laptops (1) need to pay staff to clean/polish the laptops (1) then the transport costs of exporting (1) could leave Freya with not much return on her investment (1) Many risks involved in exporting (1) e.g. transport difficulties/non-payment (1) The recycled laptops may be prone to breakages/not work well/seen as lower quality (1) affect her reputation (1) may not be able to sell/less demand/lose sales (1)
4. [4] The laptops can be inspected by the customs authorities (1) to see if there any illegal material in her consignment (1)
5. [4] Customs duties/tariffs/taxes have to be paid to the customs authority (1) increasing Freya's costs (1)
6. [4] Could charge a low/high duty rate (1) with Freya less or more duties (1)
7. [4] Freya will have to prepare necessary paperwork (1) e.g. bill of lading/export licence (1) this may slow down trade (1)
8. [4] Customs authorities will check the number/amount of laptops being imported (1) making sure that that it is within quota limits (1) if not, Freya will not be able to export (1)
9. [4] Customs authorities may impose embargo (1) banning entry of goods (1)
10. [4] Customs authorities may advise Freya of export risks (1) which may affect whether she decides to export or not (1)
11. [4] Check export license (1) to see if the laptops are approved into a country (1)
12. [4] May impose trade restrictions/trade barriers (1) limiting Freya's ability to export (1)
13. [6] Insurance is a way of spreading risk among a large number of people who contribute to a common pool or fund.
14. [6] Insurance risks for exporters include loss of or damage to goods in transit, non-payment for your goods or services, the cost of returning to your premises any goods that a buyer abroad refuses to accept, political or economic instability in the buyer's country, a new customer's credit worthiness and currency fluctuations
15. [6] Exporters, such as Freya, may suffer financial loss - if her laptops are damaged or stolen during transportation from the port of dispatch to the point of destination
16. [6] Freya's laptops are in danger of being lost/damaged at sea, insurance reduces this risk as it can be covered by marine insurance
17. [6] To protect from loss, Freya may have to take an insurance policy to protect her from physical damage to the goods – here is the importance of marine Insurance, if she ships her laptops by sea she will be compensated if her goods are damaged or stolen
18. [6] Banks will also insist for insurance coverage to protect their financial interests
19. [6] Insurance is required even on commercial considerations as once goods are damaged, importer may not accept the bill of exchange and not make payment. This will result in Freya losing money and also any profits she thought she would gain
20. [6] Evaluation: As a new exporter, Freya needs to be aware of the greater difficulties she faces compared to selling in her own country. Recycled laptops can be easily damaged or stolen. One might say that as they are recycled, they are not worth much compared to a new laptop. However, if she wants to survive with this new business venture, it is essential that she takes out appropriate export insurance to cover any losses. It will give her confidence to export the laptops.