Content

1. Trade

2. Sea Transportation

3. Bill of Lading

4. Letter of Credit

5. Customs Clearance

6. Tariff

7. FTA

8. International Transportation

Trade
What is Trade?

A. When dealing with goods or service, consumers want to maximize their satisfaction
on the other hands, suppliers wish to maximize profits. The act of transaction
between consumers and suppliers is called trade

Characteristic of Trade

B. Commerce: The trading transaction make a premise on payment of the price

followed by goods or services.

C. International transfer: Trade assume transaction should be fulfilled across the

frontline of countries and engaged by more than two countries.

D. Different currency: Each country has its own currency and transaction should be
formed international currency in order to minimize the change of exchange rate and
capital risk.

E. Different language and custom: Each country has a different culture, language, and
customs and is likely to cause misunderstanding, conflict, and dispute easily. Thus,
Incoterms and UCP, etc. recommended and applied.

F. Growth of international transportation: Annually, the number of international trade

increases and transportation is one of the fundamental factors in this process.

G. Increased risk of organization: During transport or storage, there are possibilities of

damage and risk of goods including refusal, inability, and collection of payment.

Purpose of Trade

1. Organization
 A. Maximization of profit: Organization able to import cheaper products from foreign
market as well as export product for lucrative business

B. Expansion of market: By expand the range of market from domestic to international,

organization able to reduce surplus production and able to attain better
management.

2. Nation

A. Increase national welfare: Goods and services that can provide convenience and
benefits to the people’s livelihood as more economical products are available.

B. Foreign currency procurement: Foreign currency acquisition is necessary to the

survival of the national economy by exporting domestic goods to other countries.

Type of trade

Division Form of trade

Direction of movement of goods
Form of goods
The subject of trade
Interference of nation
Method of trading
Linkage of import and export
Processing method
Selling method
Regional characteristic
Export, Import
Tangible, Intangible
Private, state
Free, Protection, management, agreement
Direct, Indirect (Intermediary, transit, non-intermediate
trade)
Conceptual, Barter exchange, counter-purchase, industrial
cooperation, countervailing trade, memorandum trade
Consignment processing trade
Consignment sales
East-west, North-south trade

Sea Transportation
What is Shipping industry?

The shipping industry facilitates domestic and global manufacturing and trade via transportation
of commodities and finished products by using ship and act of procure profit.

Liner market Tramp (Non-regular liner) market

High fare, regularity, speed and accuracy
High value of goods
Constant and recognized demand
Liner vessel
Low fare, regularity and speed
Low value and bulk cargo are main goods
such as coal, woods, foods, raw materials
Irregular and unstable demand
Tramp ship, Tramper

What is vessel (ship) and type of vessel?

It is a ship or large boat that hollow container such as a cask, bottle, kettle, and liquid and
container vessel able to load more than 5,000 TEU container. The container ships are getting huge
due to its demand compare with first generation vessel.
* Maersk Mc-Kinney Moller (18,270 TEU) : The largest vessel so far.

* Bulk Carrier: A ship that loads and transports unpackaged cargo such as grain, coal, ores etc.

* Oil carrier: A vessel dedicated to transporting crude oil or petroleum refining products.
Commonly called Tanker. There is a dirty tanker that transports crude oil or heavy oil and a clean
tanker that transports gasoline and diesel. According to the size, it classified Handy/Handymax,
Panamax, Suezmax, Aframax, Capesize, VLCC, ULCC etc.
*Car- Ferry : A ship designed to transport cars and passengers together.

* Lash vessel (Lighters abroad ship) : It is effective to connect domestic waterway transportation
with low water depth and ocean transportation.

*Pure Car Carrier: A ship built for the purpose of loading and transporting automobiles. RO-RO
(Roll-on, Roll Off) method car loading and unloading able to use for this vessel.

Container

It is a transportation tool that makes to attain consistent transportation in all processes such as
packaging, transportation, unloading, and storage of containers and physical distribution. In 1966,
the Sea-Land company initiated to create a standard form which “ Containerization”. International
standardization organizations (ISO) use the term “Freight container and ANSI calls it a cargo
container.

Advantage Disadvantage
Decrease the time of unloading and offloading Require unloading machine, CY and CFS
Cost efficiency Arrange container and inventory system
Increase productivity and expand Not appropriate with some countries due to
transportation market outdated facilities

Container Yard and Freight Station

1. Container Yard also known as CY which is a designated storage area for containers in a
terminal or dry port before loaded or offloaded from a ship

2. Container freight station (CFS) is a distribution facility where import and export shipments
are consolidated and de-consolidated. The LCL (less than a container load) needs to work
stuffing and vanning to change into a full container. Consolidation means, forwarders or
other consigners try to identify the same destination of little pieces of stuff and mix all of
the goods into containers for filling out.

Container cargo transportation form

CY/CY FCL container/ Door to Door service, Single shipper to single consignee
CY/CFS FCL to LCL / Door to Pier, Single shipper to multiple consignee
CFS/CY LCL to FCL/ Pier to Door, Multiple shippers to single consignee
CFS/CFS LCL to LCL/ Pier to Pier, Multiple shippers to Multiple consignee

3. Relationship between speed and price in selection of transportation

Price Speed

Ship Railroad Trucking Airline

Type of container

It is divided into 20’, 40’, 40;HC, 45’ according to the size and distinguish up to material, steel,
aluminum, fiber glass, polypropylene, etc.

Reefe
r

Decent use for transfer refrigerated and frozen goods (-28~26 degree), (About 5% of
cargo volume)
Tank

Suitable for transporting liquids and gases (About 1% of cargo volume)

 Flat
Rack

Wood, Machine, Automobile

Open
top

Machine, Heavy stuff, long cargo

Dry

Standard (About 89% of cargo volume)

Specification of Container

20ft (TEU) 40ft (FEU) 40ft High Cubic 45ft

Length(m) 6 12 12 13.5
Width(m) 2.3 2.3 2.3 2.3
Height(m) 2.3 2.3 2.7 2.7
 CBM (Gross) 33 67 76 85
CBM (Net) about 25 about 55 about 64
Load weight (Ton) 21.7 26.5 26.5 25.5
** Twenty-foot Equivalent Unit (TEU)

** Forty-foot Equivalent Unit (FEU)

Incoterms (refer PPT file)

Bill of lading (B/L)

A bill of lading is a legal document issued by a carrier to a shipper that details the type,
quantity, and destination of the goods being carried. It also serves as a shipment receipt when
the carrier delivers the goods at a predetermined destination. Moreover, B/L utilizes documents as
evidence of the contract of the sea as well as marketable securities, negotiable securities, and
documents of title.

Type of B/L

Classification Term explanation

On board Shipped B/L The bill of lading published after goods on board and the
date of publishing would be the date of ship loading as
well. Under the FOB, CFR, and CIF conditions, this B/L can
be issued.
Received B/L The ship has not yet entered port or anchored in port but
the vessel to be loaded is designated.
B/L issued upon receipt of cargo and prior to shipment. It
was treated as received for shipment so, the bank would
not negotiate with it in the L/C transaction. It is also called
custody B/L or Port B/L.
On board B/L The on-board notation stamped on received B/L which has
the same validity as shipped B/L.
Accident Clean B/L In the section of “remark”, the “Shipped on board in
apparent good order and condition” should be written
which prove that no damage, excess or lack of goods.
Dirty, Foul, In case of damaged or defects, the bank will refuse the
Claused B/L purchase and be required to issue a letter of indemnity
(L/I) in order to negotiate again with the bank as well as
repack goods after check level of damaged or defected.
others Stale B/L 21 days have elapsed from the date of issuance of the
document, the bank decided as stale B/L and would not
accept B/L anymore except “Stale B/L acceptable” notation
provided.
Groupage B/L The document was issued by a shipping company to a
forwarder for consolidation cargo of a forwarder and it is
also called Master B/L. Based on master B/L, forwarder
able to provide house B/L or forwarder’s B/L to the
property owners.
Third party B/L In the trading process, if the third party does not want to
 expose the original exporter, third party B/L is able to
utilize this circumstance.
Switch B/L In intermediary trade, it is used to prevent the importer
from knowing who the exporter is. However, the original
name of the vessel, place of destination, port of loading
can’t be changed.

Issuance method

Straight B/L In the consignee column, write down the name and address of the consignee,
and only those who are named can receive goods. It is impossible to provide
B/L to a third party even if endorsement.
Order B/L It doesn’t need to specify consignee name and able to transfer based on L/C
transaction. Therefore, B/L can be transfer by endorsement.
Sea Waybill This is just cargo receipt with straight name on it. Since it is receipt, it is not a
(SWB) negotiable security and document of title.
Surrender In order to achieve prompt, receive of goods, surrendered B/L can be issued
B/L without original B/L. After fulfilled payment, the consignee can get surrender B/L
to get imported cargo or goods.
Letter of Instead of using SWB or surrender B/L, L/G could be used to take cargo
Guarantee promptly in a short transport section. However, it is complicated to get this
(L/G) document to compare with SWB or surrender B/L and be able to use L/C
transactions.
** In description part of B/L, freight collected indicate E or F incoterms and prepaid is C,
D terms.

Air WayBill (AWB)

In the case of AWB, it has the same function as B/L but has different legal characteristics.
First of all, it is not a securities, non-negotiable, straight method in principle. According to the
international air transport association (IATA) make mandatory to use the same waybill among
airline companies.

Terms of local charges fee

THC Terminal handling charge

CFS Container Freight Station
BAF Bunker Adjustment Factor
CAF Current Adjustment Factor
CRS Cost Recovery Charge
CIS Container Imbalance Sub-charge
CIC Container Imbalance Charge
DO Delivery order
EBS Emergency bunker sub-charge
WFG Wharfage
DCF Document
ECRS Emergence cost recovery charge
Drayage fee
Letter of Credit

It is credit letter from a bank guaranteeing that a buyer’s payment to a seller will be received on
time and for the correct amount. In international dealing, L/C often use due to its security
especially, when it comes to deal with small business and developing countries. Basically, There
are three party in this relationship which are beneficiary, issuing client and, issuing bank.

Reason for using an L/C

In transaction or trade, exporter and importer have an antagonistic view. For instance, an importer
wants to check the quality of products before payment but, an exporter may think payment
should come first before delivering goods. In order to compromise transactions in trade, the
public trustful third party engaged in this relationship for payment which is the bank. By using a
letter of credit, diminished financial discomfort or credit risk and brought convenience and
usefulness in transactions between seller and buyer.

Hence, the exporter get benefit from a bank about the certainty of payment collection that
promotes stability in business trade. The importer can anticipate an exact time of delivery and
eliminate potential credit risk as well.

Document Flow Chart

** In L/C transactions, buyers can control payment, and banks are also able to make a payment
decision.

** In principle, L/C is an irrevocable and consensus of a beneficiary, applicant, and bank required.

Invoice
Required documents for opening Bill of lading (B/L)
L/C Packing List
Insurance (Avoidance of danger)
Certificate of origin (C/O) (get customs benefit)

What is invoice and packing list?

Commercial invoice and packing list are necessary and mandatory for export of goods to file
shipping bill and other necessary documents.
Invoice used for customs declaration that identifies the value and quantity of the shipped
products and should be include country of origin, name or address of the supplier/manufacturer,
business or person who purchase the products, name of place where goods are being shipped,
quantity, unit value, description of the product.

Packing List is information listed on commercial invoice and item or products list should be match
corresponding fields on document such as quantity of unit and name etc.

What is credit and debit note?

Debit note: A document issued by a seller to a buyer to notify them of current debt obligation
which means that seller require to fulfill the payment to buyer.

Credit note: A document issued by a seller to a buyer to notify that credit is being applied to
their account. In other words, buyer notify seller to have a money to give.

What is Free cargo and Nomi cargo?

Free cargo stands for cargo that forwarder take a order from customer or owner of goods by act
of business sales. Nomi cargo means nominated cargo that exporter forwarder nominated another
forwarder or consignee in importer’s country.

Customs clearance
Customs clearance is a necessary procedure before goods can be imported or exported
internationally. If a shipment is cleared, then the shipper will provide documentation confirming
customs duties that are paid and the shipment can be processed. In other words, the process of
declaration of ‘export, import and return’ to the customs office and accepting declaration after
confirmation at the customs office.

1. Import: Goods from foreign countries or goods for which export declaration have been
accepted

2. Export: Exporting domestic goods to foreign countries

3. Return: Imported goods are returned to foreign countries without going through customs
procedures (The goods that arrived in the boned area different from the contents of the
contract, Packaging change, Articles deformed by manufacturing and processing)

4. Prohibited: Book, publications, movies, music, sculptures, etc. can cause disorder of
constitution & Disclosure of government confidential information, classified documents,
counterfeiting of banknotes and bonds

Process

Export customs clearance: In order to export goods, the export declaration should be submitted
to head of customs with product name, specification, quantity and price. After that, if customs
office allows and justified based on regulation of customs law, “Certificate of export” issued.

- Valid after granting a registration number

- Should be on-board within 30 days, Approval of extension required for about 1year extent.
Import customs clearance: Before departure of vessel, before entering port or before arrival at
bonded area, import declaration should be submit to the customs office and officer will justify
based on regulation of custom law to judge available of “Certificate of import”

** Traders can get some benefit by declare export and import due to preferential tax or other tax
refunds and government support based on export performance.

Customs clearance in Vietnam

- Central control

- Hanoi central customs monitoring

- Strong authority and lifetime employment

- Corruption exists and not able to speak or read English, Translation required  time
consumption.

- Electronic customs exists but not practical as original hard copy required to submit 
time consumption.

- Frequent change of regulation customs, ambiguous in Hscode

- No licensed customs agent

- Import declaration, import contract, invoice, B/L, P/L are necessary. H/C, Manufacturing
flow chart and composition chart may require depend on goods.

- Export contract, B/L, invoice, packing list, export declaration, inspection (Agri), C/O, export
admit (if), certificate of quarter (if).

Tariff
A tariff is a tax imposed by a government of a country on the goods and services imported from
another country. Therefore, it is import duties for imported products.

There are two classification of tariff which are Ad valorem duties and specific duties. Basically, ad
valorem duties impose tax based on price of imported goods. On the other hands, specific duties
imposed according to the quantity of goods.

The main 4 factors of tax requisitions defined

1. An object of taxation
 2. Taxpayer

3. A standard of assessment

4. A custom tariff

* When “import clearance delivered”, tariff imposed based on quantity and character of goods

* Taxpayer should be the owner of goods who imported products but also can be consignor and
consignee on commercial invoice

Taxation assessment and standard

- Higher tax among the selective tax options

- Price of products in exporting country

- Based on production cost with similar products

- The tariff exchange rate belonging week follow by the date of import declaration accepted.

- Unexpected variation or change of exchange rate does not affect to taxation once customs
office accepted import declaration.

- Exports are taxed based on FOB prices of goods on commercial invoice, On the other hands,
imports are taxed based on CIF price on commercial invoice.

Hscode

Tax is levied in accordance with the laws at the time of import declaration handed over. Based on
harmonized system code (Hscode) the percentage of taxation would be imposed on imported
goods.

Hscode consists of six digits code with compromise internationally and two or four more digits
can be added depending on import countries. By identifying Hscode, exporters can know export
items being to what categories or class as well as how much taxation would be levied on
products. Besides, the availability, prohibition, and regulation in export or import country
regarding goods can be recognized previously.

In case of countries has signed a free trade agreement (FTA) or participated any trade union such
as TPP etc.
Example of HS code in Vietnam and Korea

Item/sort Hscode VN Hscode KR Tax rate (%)

Standard Prefer VAT VKFTA
Thermos bottle 96170010 961700-1000 45 30 10 20
Plastic bottle 39233020 392330-1000 15 10 10 0
Smartphone 85171200 851712-1090 5 0 10 0
Leader case 42023100 42023110 37.5 25 10 0
Leader bag 420291 420291 37.5 25 10 0
Laptop 84713020 847130 5 0 10 0

Certificate of Origin

A certificate of origin (CO) is an important international trade document that certifies that goods
in a particular export shipment are wholly obtained, produced manufactured or processed in a
particular country. This document widely used in international trade transactions to meet certain
criteria to be considered as originated in a particular country.

In trade, CO required to get preferential treatment or tariff between exporter and importer
depend on FTA or any other union agreement. Without CO, customs do not allow or decline to
apply preferential taxation.

FTA
An arrangement that establishes unimpeded exchange and flow of goods and services between
trading partners, regardless of national border of member countries. Simply, free trade agreement
is a pact between two or more nations to reduce barriers to imports and exports among them.
Goods and services can be bought and sold across international borders with little or no
government tariff, quotas, subsidies or prohibitions. However, FTA do not address labor mobility
across borders, common currencies, uniform standards and other common policies like taxes.

FTA between Korea and Vietnam

In May 2015, Korea and Vietnam conclude a FTA to reduce tariff and encourage a number of
trade. However, there are some minor problems such as difference in Hscode, not accept soft
copy, delay in customs clearance when preferential treatment is applied and request unnecessary
documents.
TPP (CPTPP)

Trans-pacific partnership was a proposed trade agreement between Australia, Brunei, Canada,
Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, Vietnam and United States signed
on 4 February 2016. After US withdrew the signature from TPP in 2017, the remaining countries
negotiated a new trade agreement called Comprehensive and Progressive agreement for trans-
pacific partnership (CPTTP) The original TPP contained measures to lower tariff and barriers to
trade, and attempt to positive economic outcome for all signatories. After participating, TPP has
trade agreement with all members in union does not make agreement for each country like FTA.
It is little bit more complicate compare with FTA as demanded process of participation. First of
all , country should express interest  Announce participation  Approval of existing countries 
Approved. After participated, it has same validity as FTA with multiple countries in members.

International logistics

USA
 1. ALB (America land bridge): East Asia  USA  Europe (Ship, Railroad, combined freight)

2. SLB (Siberia land bridge): Europe  inland transport  East Asia (inland combined transport)

3. AWS (All water service): East Asia  Panama Canal  East USA (Freight) (Fast, high cost)

4. IPI (MBS) (Interor point intermodal): East Asia  USA (Freight, Railroad combined)

5. Reverse IPI (Reverse way)

6. MLB (Mini land bridge): East Asia  USA inland (Freight, Railroad combined)

7. PNW & PSW (Pacific north/southwest): East Asia  USA west coast (Freight)

8. OCP (Overland common point): East Asia  USA inland around Rocky Mountains area

Customs clearance in USA

There is not huge difference compare with standard but should submit manifest within 24 hours
before ship arrival.

Transportation in Central Asia

Central Asia has high potential due to the physical, geographical and demographic characteristics
of the land, but there is a limitation that only inland transportation is possible and this reason
increase the unit price. Moreover, the huge logistics volume exists but complicated customs
clearance, request of unnecessary documents, lack of effective cargo handling and outdated
transportation infrastructure.

There are four main railroad that can transfer goods to the central Asia which are

1. TCR (Trans-China Railway)

2. TSR (Trans-Siberian Railway)

3. TMR (Trans-Manchurian Railway)

4. TMGR (Trans-Mongolian Railway)