Chapter 5

PERFORMANCE
OF THE
IMPORT –
EXPORT
CONTRACTS
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 Learning Objectives

• Know how to perform an export –

import contract.

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 Contents
• Performance of export
1 contracts

• Performance of import
2 contracts

• Customs formalities
3

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 Procedures to perform export
contracts
1
• Export license application

2
• Initial work related to payment

3
• Goods preparation

4
• Pre-shipment inspection

5
• Customs clearance

6
• Arranging carriage

7
• Cargo insurance

8
• Making delivery

9
• Setting up payment documents

10
• Claims (if any)

11
• Contract liquidation

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 1. Export license application

• Be subject to the government’s import-

export controls in the certain period of
time.
• Rights to conduct the business of import
and export
• Procedures for import and export.

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 2. Initial work related to
payment
❖ Payment is made by L/C
❖ Remind the buyer to open a L/C
❖ Check the L/C
❖ Ask the Issuing bank to amend the L/C (if
any)
❖ Make delivery
❖ Payment is made by CAD
❖ Remind the buyer to open a Trust account
❖ Contact the bank to check payment terms
❖ Make delivery
❖ Payment is made by advance T/T
❖ Remind the buyer to make full payment

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 3. Goods preparation
❖ For exporters be manufacturers
❖ Produce products
❖ Finished products need to be checked in quality,
packing, marking … in order to conform to the
contract
❖ For exporters be import-export traders

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 4. Pre-shipment inspection
❖ Inspection and quarantine will be done at
grassroots level and at border.

- At grassroots level: play a decisive role.

* Inspection: will be done by KCS
* Quarantine: will be done by Plant Protection
Dept. or Veterinary Station, Quarantine – Diagnosis
For Animal Centre

- At border: for re-verification.

❖ Inspection and quarantine can be done by an
independent agency

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 4. Pre-shipment inspection
❖ Procedures for goods checking and inspection:

1
• Application for inspection

2
• Inspection office executes on-site inspection

• Inspection office informs the result and grants

3 temporary certificate to clear Customs (if any)

4
• Cargo hold checking

5
• Supervising goods delivery

6
• Inspection office issues official certificate

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 4. Pre-shipment inspection

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 4. Pre-shipment inspection

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 4. Pre-shipment inspection

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 4. Pre-shipment inspection

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 5. Customs clearance
❖ According to Article 21 of Law on
Customs of Vietnam on customs
formalities a customs declarant shall:

a/ Declare and submit customs declarations;

submit documentary evidence of customs
documents prescribed in Article 24 of this Law;

b/ Send goods and vehicle to proper places for

physical inspection;

c/ Pay taxes and fulfil other financial

obligations in accordance with the laws on
taxes, charges and fees and other
corresponding regulations of law.

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 5. Customs clearance
❖ While conducting customs formalities,
customs authorities and customs officials
shall:

a/ Receive and register customs documents;

b/ Verify customs documents and conduct physical

inspection of goods and vehicle;

c/ Collect taxes and other amounts payable in

accordance with the laws on taxes, charges and
fees and other corresponding regulations of law;

d/ Decide grant of customs clearance for goods,

release of goods and certification of completion of
customs formalities applied to vehicle.

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 5. Customs clearance
A customs document comprises:

a/ A customs declaration or documentary

evidence in substitution;
b/ Relevant documentary evidence.

As the cases maybe, a customs declarant

shall submit sale contract, commercial
invoice, bill of lading, certificate of origin of
goods, import or export permit, notice of
specialized inspection results or exemption
from specialized inspection, and
documentary evidence related to goods as
prescribed by corresponding regulations of
law
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 5. Customs clearance

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 5. Customs clearance

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 6. Arranging carriage

Methods of charter

Voyage Time
Liner
charter charter

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 6. Arranging carriage
❖ Liner:
shipper through his broker or by himself requests
ship-owner to let one part of the ship for charter to
transport the goods from this port to another port
- Ship-owner is also carrier.
- Liner B/L
- Features:
- The goods’ quantity is not much
- Dry goods, packed goods
- Fixed trade routes under uniform rates and
common terms available on the back of printed
B/L.
- Formalities are simple.
- Freight rate is high.
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 6. Arranging carriage
❖ Voyage charter:
the charterer hires the whole vessel or only a
part of the vessel to convey the goods from
one port to some other ports.
Features:
- The goods is often conveyed full of the vessel
(from 90 – 95%).
- The goods are often in mass quantity like grain,
mineral, fertilizer …
- Two parties must negotiate to sign charter-party.
- Bill of lading is Charter party B/L.
- Brokers are often used.
- Freight rate is low, formalities are complicated
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 6. Arranging carriage
❖ Time Charter:
Time charter is that charterers hire vessels for
a specific period of time from the shipowners
to transport the goods or to re-hire the vessels
.Features:
- Ship-owner remains responsible for the
technical operation of the vessel, but
commercial control of the vessel is handled by
the charterer.
- Ship-owner must cover all costs associated
with crewing, maintenance of the vessel and
insurance, but vessel fuel consumption and port
charges will be compensated by the charterer
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 6. Arranging carriage
❖ Time Charter:
Features:
- Time charter party contracts are signed for a
limited period of time without dictating a fixed
route to the charterer. During the charter party
contract period, the charterer could operate the
vessel commercially within allowed routes freely.
- Under a time charter the owner will receive hire
based on the period of the charter or per dead-
weight tonne per month.
After a period of charter, the charterer must
return the vessels in good technical condition at
the stipulated port and time
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 7. Cargo insurance

Choose insurance clauses

• Under CIF or CIP?

• Under D-terms?

Write Insurance request

Pay Insurance premium and obtain Insurance

policy/ certificate

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 7. Cargo insurance

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 8. Making delivery

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 8. Making delivery

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 8. Making delivery

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 8. Making delivery
❖ By air:

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 9. Payment procedures

❖ Prepare the documents as stated in the

contract or in the L/C.
❖ Present full set of documents to the
advising bank within a period of time to
get payment.

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 10. Claims (if any)

❖ Sellers make claims:

✓ In case the buyer breaches the contract, the
seller has a right to claim.
✓ Documents include:
- Letter of complaint.
- Relevant documents: Contract, B/L, Tally sheet,
Report on receipt of cargo, Certificate of short-
landed cargo, Cargo outturn report, Survey
record, Customs inspection report.
❖ Buyers or related offices make claims:
✓ The seller must promptly study the documents
and find solutions.

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 11. Contract liquidation

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 •Performance
of import
2 contracts

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 Procedures to perform import
contracts
1
• Import license application

2
• Initial work related to settlement

3
• Transport arrangement

4
• Cargo insurance

5
• Customs clearance

6
• Taking delivery

7
• Post shipment inspection

8
• Claims (if any)

9
• Payment

10
• Contract liquidation

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 1. Import license application
❖ Regulations on
• the goods for which import or export is
prohibited,
• the goods for which import and export is
subject to issuance of a permit,
• the goods for which import and export is
subject to issuance of a permit by the
ministry managing the specialized industry
…
are stipulated in clauses 5 – 11 of Decree
12/20006/ND-CP

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 2. Initial work related to
settlement
❖ Payment is made by L/C

❖ Payment is made by CAD

❖ Payment is made by advance T/T

❖ Payment is made by Collection or Deferred

T/T

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 3. Transport arrangement

❖ The importer must arrange for carriage

under EXW, FAS, FCA, FOB delivery terms

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 4. Cargo insurance
❖ Under EXW, FCA, FAS, FOB, CFR, CPT
delivery terms, the importer needs to buy
insurance for the goods

✓ Choose a suitable insurance condition

✓ Write Insurance request

✓ Pay Insurance premium and obtain

Insurance policy/ certificate

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 5. Customs clearance

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 6. Taking delivery
❖ Bulk cargo (not full container) or LCL cargo
1. Goods owner pays storage fee and handling charge to get
a warehouse receipt at the port or the ship owner
2. Goods owner submit the warehouse receipt, 03 D/O,
Invoice and Packing list at a shipping agency in the port to
confirm D/O and find the goods’ position
* 01 D/O is kept for recording here
* 02 remaining receipts are sent to the Warehouse
division to make Stock-out slip
3. Warehouse division delivers 02 Stock-out slips for the
goods owner (used for stock-out procedure)
4. The goods are separated to wait for customs check.
5. The goods will be stocked out of the port to the stipulated
place

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 6. Taking delivery
❖ FCL cargo, customs inspect at a separate
warehouse
The goods owner will:
1. make and submit a Request for the goods to be checked at
a separate warehouse with a set of documents for customs
formalities
2. proceed to borrow container at the shipping company
3. Present a set of documents to the shipping agency to get a
Container-out-of-the-yard permission slip
Documents include:
+ 03 D/O with signature of customs officer at Formality
Registration division and stamp “Declaration received”.
+ Handling and transport charge receipt of the shipping
company.
+ Demurrage charge receipt.
+ Approved Letter of borrowing container.
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 6. Taking delivery
❖ Whole ship cargo or cargo in large quantity
After - receiving D/O,
- submitting documents to customs,
- receiving NOR (Notice of readiness),
the goods owner carries out receiving the goods
Before opening the hold, there must be:
- The importer/ goods owner
- Seller’s representative (if the seller has its
representative in the importer’s country)
- Inspection organization
- The ship’s representative, shipping agency
- Customs control and supervision department officer
- The port’s representative
- Insurer (if there is any doubt about damages on the
goods)
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 7. Post shipment delivery
✓ The port/station checks the seal before
discharging the goods out of the means of
transport.

✓ If the goods are not in right position as

stated in B/L or in loss, the port/station will
invite Inspection Company to make Survey
Report.

✓ If the goods transported by sea are in loss

or shortage, there must be a “report on
receipt of cargo” with the port.

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 7. Post shipment delivery
✓ If the goods by sea are in damage, there
must be “report on damage”.
For the importer, he needs to set up a Letter
of Reservation if there is any suspicion about
loss, requires to make a Survey Report if the
goods are in damage, shortage and do not
conform with the contract.

✓ Quarantine Authority must quarantine the

goods if the imported goods are animals or
plants.

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 8. Claims (if any)
❖Claim the seller
Documents for claim include
- Letter of Complaint made by mail, fax or telex. There
must be a letter of confirmation if fax or telex is used.
- Purchase agreement.
- Bill of lading
- Survey report.
Contents of the Letter of complaint include:
- Claimer’s name and address.
- Defendant’s name and address.
- Legal basis of claim (contract number ...)
- Reasons of claim
- Specific demands from the seller

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 8. Claims (if any)
❖Claim the transporter

Documents include:
✓ Letter of complaint and other documents such as:
✓ Contract of transport
✓ Bill of lading
✓ Checking sheet of deliverer and consignee.
✓ Report on receipt of cargo (ROROC)
✓ Certificate of shortlanded cargo (CSC)
✓ Draft survey
✓ Cargo outturn report (COR)
✓ Report on stowage of cargo
✓ Inspection report of customs

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 8. Claims (if any)
❖Claim the issuer

Necessary documents for claim include:

- Original insurance certificate/policy
- Original bill of lading
- Copy of original contract or invoices
- Certificate of quality, quantity
- Letter of complaint in which includes claiming amount.

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 9. Payment

10. Contract liquidation

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 •Customs
formalities
3

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 Customs formalities

• Declare and submit customs

declarations; submit documentary
1 evidence of customs documents

• Inspect export and import goods

2
• Pay export and import taxes

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