Chapter 2

ESSENTIAL
TYPES OF INT’L
TRADE
TRANSACTIONS

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-1

 Learning Objectives

Get basic knowledge of types of int’l

trade transactions as direct/indirect
export/import, barter, counter-trade,
…

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-2

 Contents
Direct transactions

Purchase of int’l goods through intermediaries

Counter trade

Processing

Int’l auction

Int’l bidding

Trading at int’l fairs and exhibitions

Trading in Commodity Exchanges

30/09/2020 Nong
Nong Thi
Thi Nhu
Nhu Mai
Mai – Faculty
Faculty of
of Commerce
Commerce – 0969.769.990
0969.769.990 3-3
 DIRECT TRANSACTIONS
Export

Import

Temporary Import for re-export

Temporary export for re-import

Cross-border transhipment
• (Transfer of goods through border-gates)

30/09/2020
30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-4
 CURRENT REGULATIONS OF VN
IN ORDINARY INT’L SALES
Law on Commerce of Vietnam
2005

Law on Foreign Trade Management

2017

Decision on detailing provisions of a

number of articles of foreign trade
management law No. 69/2018/ND-CP

30/09/2020
30/09/2020 Nong
Nong Thi
Thi Nhu
Nhu Mai
Mai – Faculty
Faculty of
of Commerce
Commerce – 0969.769.990
0969.769.990 3-5
 Characteristics of Direct
transactions
Cross border participation

Foreign currency

Different laws

Transfer of goods/ services

across borders

30/09/2020
30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-6
 Purchase of international goods
through intermediaries

Purchase of international goods through

intermediaries is the mode of transaction
in which two parties buy and sell through
a third party to sign and perform the
contract (Law on Commerce of
Vietnam2005)

30/09/2020
30/09/2020 Nong
Nong Thi
Thi Nhu
Nhu Mai
Mai – Faculty
Faculty of
of Commerce
Commerce – 0969.769.990
0969.769.990 3-7
 Types of purchase goods
through intermediaries
Representation of traders

Commercial brokerage

Purchase and sale of goods by

mandated dealers

Commercial agency

30/09/2020 Nong
Nong Thi
Thi Nhu
Nhu Mai
Mai – Faculty
Faculty of
of Commerce
Commerce – 0969.769.990
0969.769.990 3-8
 Current regulations of Vietnam
for the items having the business registration
inscribed in the permits

open separate accounts at banks for payment

transfer foreign currency (ies) which are capable

of being converted

subject to taxes and other financial obligations

goods under sale and purchase contracts with

foreign traders
Goods be re-exported if they cannot be sold in
Vietnam and tax shall be rebated

30/09/2020
30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-9
 Counter-trade

Countertrade is any commercial

arrangement in which sellers or
exporters are required to accept in
partial or total settlement of their
deliveries, a supply of products from
the importing country.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-10

 Characteristics of Counter-trade

Exporter is also importer

Currency is not a payment tool

Types of commodity are

diversified

30/09/2020
30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-11
 Types of Counter-trade

Compen
sation Barter
trade

Types
Buy of
back Counter- Offset
trade

Switch Counter
trading purchase

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-12

 Advantages of Counter-trade

Transfer of
technology

Alleviating
Other
BoP
benefits
difficulties

Maintenance
Entering new
of stable
market
prices

30/09/2020
30/09/2020 Nong
Nong Thi
Thi Nhu
Nhu Mai
Mai – Faculty
Faculty of
of Commerce
Commerce – 0969.769.990
0969.769.990 3-13
 Disadvantages of Counter-trade

Uncertain value proposition

Time-consuming

Complexity

Higher transaction costs

Logistical issues

Uncertainty on the goods’ value and

quality

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-14

 Measures to ensure the
implementation of Counter-trade

Reciprocal L/C Special account

A third party
Penalty
controls documents

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-15

 Processing of int’l commodities

Processing trade refers to the business activity of

importing all or part of the raw and auxiliary
materials, parts and components, accessories,
and packaging materials from abroad in bond,
and re-exporting the finished products after
processing or assembly by enterprises within the
mainland

With supplied materials

With imported materials

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-16

 Current regulations of VN on int’l
processing

Contracts
• in writing or other forms of
equivalent legal validity
Goods
• all types, except goods
banned from business

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-17

 Current regulations of VN on int’l
processing

Rights and obligations of processees

• to hand over a part or whole of raw materials
and materials for processing.
• to take back all processed products, …
Rights and obligations of processors
• to supply a part or whole of raw materials and
materials for processing.
• To receive processing remunerations and
other reasonable expenses …

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-18

 Current regulations of VN on int’l
processing

Processing remuneration

• Processors may receive processing

remuneration paid in cash or in
processed products, or machinery
and equipment for the processing.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-19

 Characteristics of Processing

Trading object: labour force

Processing: exporting goods

Commodities in processing: labour

intensive

Processors: developing
countries

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-20

 Main forms of Processing

In terms of title to materials

• Processee hands over part or whole of raw
materials and materials, unfinished products for
processing and pay processing remunerations.
• Processee sells materials and then buys
finished products from processor.
• Processee supplies main materials and
processor supplies auxiliary materials.

In terms of processing remuneration

• Target price
• Cost plus contract

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-21

 Main forms of Processing

In terms of processing
relation
• Two-party processing.
• Multi-party processing.
• Processee supplies main materials
and processor supplies auxiliary
materials.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-22

 Main forms of Processing

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-23

 Advantages of Processing

For Processors:
• Create jobs, increase income for labourers.
• Receive new technology and manufacturing
methods.
• Have less or no risks in consuming goods
• Use domestic materials.

For processees:
• Low costs
• Move unfavourable industries to foreign
countries.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-24

 Disdvantages of Processing

For Processors:
• Low labour price
• Out-of-date technology

For processees:
• Low quality products
• Model and trademark can be
stolen
30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-25
 International Auction
Auction of goods means a commercial
activity whereby sellers themselves conduct
or hire auction organizers to conduct public
sales of goods to select purchasers that
offer the highest prices.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-26

 Regulations of VN on
International Auction
Article 185: Auctions of goods
• Definition
• Two modes: upward bidding and downward bidding
Article 186: Auction organizers, goods sellers
• Auction organizers: traders
• Goods sellers: owners of goods
Article 187: Auction participants, auctioneers

Article 188: Auctioning principles

Article 189: Rights of auction organizers

Article 190: Obligations of auction organizers

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-27

 Types of International
Auction
Commercial auction

• the goods are often classified and

sold for traders

Non-commercial auction

• buyers sell the goods as they are to

clear stock

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-28

 Procedures of an
International Auction

Contract
Goods
signing
Preparation examination Auction
and
delivery

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-29

 International Bidding
International bidding is a transparent
procurement method in which bids from
competing contractors, suppliers, or vendors
are invited by openly advertising the scope,
specifications, and terms and conditions of
the proposed contract as well as the criteria
by which the bids will be evaluated

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-30

 Regulations of VN on
International Bidding

Article 214 to
Article 232 in VN
Commercial Law
2005

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-31

 Types of International
Bidding
In terms of bidding scope:
• Open bidding
• Restricted bidding
In terms of quotation form:
• One bid dossier bag
• Two bid dossier bags
In terms of bid opening procedure:
• One period bid
• Two period bid
30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-32
 Types of International
Bidding

In terms of bidder evaluation procedure

• Preselecting bid
• Un-preselecting bid
In terms of bid purposes:
• Purchasing bid
• Service bid
• Management bid

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-33

 Trading at int’l fairs and
exhibitions

Trade fairs and exhibitions are periodically

organized in a specific time and place so that
companies in specific industry can showcase
and demonstrate their latest products and
services, meet industry partners and
customers to sign sale contracts.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-34

 Regulations of Trading at
int’l fairs and exhibitions

Article 129 to
Article 140 in VN
Commercial Law
2005

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-35

 Types of int’l fairs and
exhibitions
In terms of periodicity
• Periodic fairs and exhibitions
• Non-periodic fairs and exhibitions
In terms of industry
• Synthetic fairs and exhibitions
• Specialized fairs and exhibitions
In terms of scope
• International fairs and exhibitions
• National fairs and exhibitions
• Local fairs and exhibitions

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-36

 Trading in Commodity
Exchanges
Commercial activities whereby the parties
agree to purchase and sell a defined quantity
of goods of a defined type through the Goods
Exchange under the standards of the Goods
Exchange, at a price agreed upon at the time
the contract is entered into, and with the time
of goods delivery determined to be a specific
point of time in the future.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-37

 Regulations of Trading at
int’l fairs and exhibitions

Article 63 to Article
73 in VN
Commercial Law
2005

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-38

 Ordinary international
sales
1. How many types of Int’l Trade Transactions?

2. How many types of Ordinary Int’l Sales?

3. According to Vietnam Commercial Law, what

is export?

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-39

 Assignment

1. Distinguish types of Counter-trade.

2. Summary chapter 2.

30/09/2020 Nong Thi Nhu Mai – Faculty of Commerce – 0969.769.990 3-40