Logistics Case Assignment
Today your company (ACME Products INC.) received a notice that the U.S. Department of Justice would like to discuss your recent importation of six machine tools that your company had fabricated for it in Turkey. The machine design combines an additive manufacturing capability to a precision milling machine and will be used in the production of fuel cells. While the notice received from the Department of Justice was vague regarding specifically what they were looking for, they did ask what the total value of the procurement contract was and if ACME exported any technology. The ACME lawyers are trying to figure out if the company is in trouble and management has tasked you with providing a report on anything that could be perceived as going wrong and to also provide recommendations to preventing future problems. The department that ordered the machines told the ACME lawyers that since ACME received the machines as imports under shipping term DDP (INCO) they could not be in violation of export controls.
As you investigate you find out:
Your engineers realized that by adding an additive manufacturing capability to a numerically controlled milling machine they would profoundly improve the quality of key fabricated fuel cell components that ACME was producing. They had spoken with engineers worldwide in the hunt for the proper equipment. Ultimately, they concluded that they needed to design the equipment themselves and they worked with key component manufacturers in designing the machine.
When it came time to produce the machines the ACME procurement department selected a precision tool company that they had used in the past that is in Bursa, Turkey. The company has an excellent reputation for delivering on time and on budget.
In the field of additive manufacturing, they will partner with companies worldwide when specific technologies are required.
A contract, written in English and Turkish between the manufacturer and ACME was signed for $50 million. It specified that 20% of the payment by ACME was to be made to the company upon contract award, 50% was to be paid when fabrication of the machines was complete in Turkey, and 30% was to be paid when the six machines were delivered, set up and accepted at destination.
Two technicians from the company in Turkey, set up the machines at the ACME facility in the United States. When the machines were tested after set-up both parties agreed that there was a problem with the programming. The Turkish company conferred with its partners and revised the software successfully within three weeks. ACME then accepted the machines.
ACME had sent one person to Bursa, Turkey for a week to inspect the 3-D Printers after they had been assembled. It cost the company $3,500 in airfare + $2,000 in per-diem + $1,000 in local travel + seven days’ pay. It took 12 hours to travel each way.
One of the machines, after acceptance, was sent to ACME’s subsidiary in Brazil.
ACME did receive an invoice from a software company in Malaysia that stated that they were owed money for correcting the software problem. ACME sent the invoice to the company in Turkey and the company informed them they would take care of the invoice.
Overall, the department that ordered the machines is very pleased with their performance.
Assignment:
Provide your answers in short bullets:
1) List five general legal concepts that you think could have been violated. For each concept:
Describe the issue
Describe the general legal concept governing that activity that could have been violated
What prudent and cost-effective actions could have been taken to prevent a possible reoccurrence of this issue?
2) List three contractual errors that were made and how could they have been avoided? For each concept:
Describe the issue
Describe the possible harm or risk created as a result of the issue
What prudent and cost-effective actions should have been taken instead?
