5/31/2023

FOREIGN
TRADE
OPERATIONS

PHAN VŨ NGỌC LAN – MDE

International Business Administration
Department
lanpvn@huflit.edu.vn

OVERVIEW OF
FOREIGN
TRADE
OPERATIONS

CHAPTER 1

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IN THIS CHAPTER

Definitions and features

Subjects in Foreign Trade operations

Steps in Foreign Trade transaction

Forms of foreign market joining

Legal framework for international sales contract

1. DEFINITIONS AND
FEATURES
Foreign trade operation: Process of meeting,
negotiating for product trading, signing and
executing international sales contract.
This process can be carried out directly or
indirectly, under regular or specialized
conditions.

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1. DEFINITIONS AND FEATURES

Commercial activities
Purchase and sale of goods
International purchase and sale of goods
Export
Import

Other definitions
(Commercial Law of Vietnam, 2005)

COMMERCIAL
ACTIVITIES
Commercial activities mean activities for the
purpose of generating profits, including: sale
and purchase of goods, provision of services,
investment, commercial promotion and other
activities for the profit purpose.
(Article 3.1)

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PURCHASE AND SALE

OF GOODS
Purchase and sale of goods mean commercial
activities whereby the seller is obliged to
deliver goods, transfer ownership of goods to
the purchaser and receive payment; the
purchaser is obliged to pay to the seller and
receive goods and the ownership thereof as
agreed.
(Article 3.8)

INTERNATIONAL PURCHASE
AND SALE OF GOODS
International purchase and sale of goods
shall be conducted in form of export, import,
temporary import for re-export, temporary export
for re-import and transfer through border-gates.
(Article 27.1)

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EXPORT OF GOODS
Export of goods means the bringing of goods
out of the territory of the Socialist Republic of
Vietnam or into special zones in the
Vietnamese territory, which are regarded as
exclusive customs zones according to the
provisions of law.
(Article 28.1)

EXCLUSIVE CUSTOMS ZONES?

Export processing zone

Bonded warehouse
Tax-suspension warehouse / zone
Exclusive trade and economic zone
…

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EXPORT: PROS AND CONS

For the Governments:
Pros Cons

- Create more jobs - Make countries’

- Spur economic growth resources scarce
- Bring in tax revenues - More dependent on
- Improve the balance of overseas markets
payment - Confront with more
- Improve people’s living trade disputes
standard
- Improve country’s image
- Earn more foreign exchange

EXPORT: PROS AND CONS

For the Companies:
Pros Cons
- Increase sales income - Complicated
- Diversify markets business environment
- Reduce vulnerability to lags in - Fluctuation in
domestic demand exchange rates, prices,
- Extend product life cycle …
- Use idle capacity - Trade barriers …
- Reduce unit costs through
economies of scale
- Sharpen competitiveness
- Broaden contacts
- Understand global markets and
cultures
- Better choice of buyers

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IMPORT OF GOODS
Import of goods means the bringing of goods
into the territory of the Socialist Republic of
Vietnam from foreign countries or special
zones in the Vietnamese territory, which are
regarded as exclusive customs zones
according to the provisions of law.
(Article 28.2)

IMPORT: PROS AND CONS

For the Governments:
Pros Cons

- Full use of country’s - Reduce country’s

comparative advantage
- More modern technology,
managerial experience
- Better competitiveness of
products
foreign exchange
- Local market may be
dominated by foreign
companies

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IMPORT: PROS AND CONS

For the Companies:
Pros Cons

- Better choice of suppliers - Complicated business

- More modern technology and
managerial experience
- Supply of good prices
- Better approach to new
products
environment
- More fluctuations in
exchange rates, prices,
…

OTHERS DEFINITIONS
Temporary import for re-export
Temporary export for re-import
Transfer through border-gates

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TEMPORARY IMPORT OF GOODS

FOR RE-EXPORT

Temporary import of goods for re-export

means the bringing of goods into Vietnam
from foreign countries or special zones
locating in the Vietnamese territory, which
are regarded as exclusive customs zones
according to the provisions of law, with the
completion of the procedures for importing
such goods into Vietnam, then procedures for
exporting the SAME goods out of Vietnam.
(Article 29.1)

TEMPORARY EXPORT OF GOODS

FOR RE-IMPORT

Temporary export of goods for re-import

means the bringing of goods overseas or into
special zones in the Vietnamese territory,
which are regarded as exclusive customs
zones according to the provisions of law, with
the completion of procedures for exporting
such goods out of Vietnam, then procedures
for importing the SAME goods back into
Vietnam. (Article 29.2)

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TRANSFER THROUGH BORDER-

GATES

Transfer of goods through border-gates

means the purchase of goods from a country
or territory for sale to another country or
territory outside the Vietnamese territory
without carrying out the procedures for
importing such goods into Vietnam and the
procedures for exporting such goods out of
Vietnam.
(Article 30)

1. DEFINITIONS AND
FEATURES
Features
Subjects are from different countries.
Modern technology is applied to enhance
speed and reduce distance.
Target: to achieve business goals ($).

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1. DEFINITIONS AND
FEATURES
Barriers in Foreign Trade operations
Difference in cultures and languages.
Difference in business goals.
Tariff and non-tariff barriers.

2. SUBJECTS IN FOREIGN
TRADE OPERATIONS
Subjects in Foreign trade operations
Features of Vietnamese business as a subject
in Foreign trade operations.

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2.1. SUBJECTS IN FOREIGN

TRADE OPERATIONS
Businesses
Countries
Non-government organization (NGOs)
International organizations: WTO, ASEAN,
ITC, ...

2.2. FEATURES OF
VIETNAMESE BUSINESSES
Limit in finance and technology due to small
and medium size.
Unclear and short-term (rather than
longterm) strategy.
Little experience and knowledge in market
economy.

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3. STEPS IN FOREIGN TRADE

TRANSACTION

Enquiry / Inquiry
Offer
Counter-offer
Order
Order Acceptance
Sales Confirmation

SELLER BUYER
Enquiry / Inquiry
Reply to enquiry

Offer (Firm / Free offer)

Counter - offer
Order

Acceptance

Confirmation

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the rules of contract formation

acceptanc contract
offer
e formation

counter- contract
offer
offer formation

Presented by Phan Vu Ngoc

27 5/31/2023
Lan © 2020 Pearson UK

4. FORMS OF FOREIGN
MARKET JOINING
Indirect form: Agency / Intermediaries.
Direct form:
- Common transaction: Import – export
-Special transaction:
+ Counter trade
+ re-export
+ International processing
+ International auction
+ International bidding
+ Commodity exchange
+ Franchising

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4. FORMS OF FOREIGN
MARKET JOINING
Direct form (cont.)
-International tourism
-Exporting with the assistance from foreign
office.
-Overseas branch
-Joint venture
-Transnational companies
-Global companies

5. LEGAL FRAMEWORK FOR

INTERNATIONAL SALES
CONTRACT
International sales contract?
An agreement
between parties from different countries, whereby:
a party (exporter) is obliged to make delivery and
transfer ownership of a certain asset (goods)
to another party (importer) who is obliged to receive the
goods and make payment

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WHAT IS A CONTRACT FOR

INTERNATIONAL SALE OF GOODS?
Seller’s place of business Buyer’s place of business

Buyer’s place of
business

different
nations

place of business: the country where the business is

conducted (Article 10, CISG 1980)
May-23 BY PVNLAN 35

WHAT IS A ACONTRACT FOR

contract for sale
INTERNATIONAL SALE
of goods is OF
GOODS? considered as
“international”
when the parties
concluding the
agreement have
their “place of
business” in
different nations.
(the Vienna
Convention/CISG
May-23
1980) BY PVNLAN 36

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5. LEGAL FRAMEWORK FOR

INTERNATIONAL SALES CONTRACT

International trade treaty/conventions

National laws
International trade practices/trade usages
Other sources (Model contracts & clauses)

5.1. INTERNATIONAL TRADE

TREATY
International legal documents signed by
subjects of international law for the purpose
of governing trade relations incurred among
themselves.

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5.1. INTERNATIONAL TRADE

TREATY
Subjects of International law include:
Independent countries
State-like entities
Entities that can potientially become states
International organizations (bodies): IMF, WB,
WTO,…
...

5.1. INTERNATIONAL TRADE

TREATY
Examples:
General Agreement on Tariffs and Trade (GATT) (1947
- 1994)
General Agreement on Trade in Services (GATS)
(1/1995)
Agreement between the United States of America
and the Socialist Republic of Vietnam on Trade
Relations (BTA) (2000)

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5.1. INTERNATIONAL TRADE

TREATY
Examples:
CISG – Convention on Contract for International Sale
of Goods, United Nations. (1980)
The Hague Rules of 1924 – The International
Convention for Reunification of Certain Rules Relating
to Bill of Lading. (Brussels, 25/8/1924).

CISG – CONVENTION ON CONTRACT

FOR INTERNATIONAL SALE OF
GOODS

Another name: Vienna Convention of 1980 (United

Nations)
As of 30 May 2023, 95 countries have adopted the
convention.
Consists of 101 articles, 4 parts with 5 chapters
Part 1: Sphere of application and general provisions
Part 2: Formation of the Contract
Part 3: Sale of Goods
Part 4: Final Provisions

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CISG – CONVENTION ON CONTRACT

FOR INTERNATIONAL SALE OF
GOODS

Applies to Contracts for International Sale of Goods.

When to apply?
-When the relevant States are the Contracting States
-When the rules of private international law refer to the
law of a Contracting States

MAP OF CISG COUNTRIES IN

2023

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VIETNAM AND CISG

Does Vietnam join CISG?
 18/12/2015, Vietnam becomes
84th member of CISG
1/1/2017, CISG enters into force in
Vietnam

Can Vietnamese exporters apply CISG

into their contract legal regulation?
--> Yes

5. LEGAL FRAMEWORK FOR

INTERNATIONAL SALES CONTRACT

International trade treaty

National laws
International trade practices
Other sources

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5.2. NATIONAL LAWS

Parties may also

choose national
laws to apply to
their international
commercial
contracts.

May-23 BY PVNLAN 47

5.2. NATIONAL LAWS

National Law is understood as foreign law for at
least one of the two parties.
When negotiating, parties have the right to
choose among:
-Law of the Seller’s country;
-Law of the Buyer’s country;
-Law of a third relevant country;
-Law of the place where the contract is signed;
-Law of the place where contractual obligation is
performed;

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5.2. NATIONAL LAWS

1. Vietnam Civil Code 2015
 https://thuvienphapluat.vn/van-
ban/Quyen-dan-su/Bo-luat-dan-su-
2015-296215.aspx
 http://www.wipo.int/wipolex/en/text.jsp?f
ile_id=445413
2. Vietnam Commercial Law 2005
 http://vanbanphapluat.tinphapluat.com/lu
at-thuong-mai/
3. The United States’ Uniform Commercial Code
(UCC)
May-23 BY PVNLAN 49
 https://www.law.cornell.edu/wex/commer
cial_law

7 SYSTEMS OF NATIONAL LAW

Common Law (Anglo-American law)

Civil Law (Romano-Germanic law)
Islamic Law
Indian Law
Chinese Law
African Law
Socialist Law

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COMMON LAW VS CIVIL LAW

Common Law Civil Law
Uncodified (no Codified (comprehensive,
comprehensive compilation continuously updated legal
of legal rules and statutes) codes)

Based on precedent, Based on a framework

(judicial decisions that have established by a
already been made in comprehensive, codified set
similar cases) of laws
Detailed and long contracts Short contracts

Available in the US, Available in France, Europe,

Australia, New Zealand, Central and South America,
Canada, the UK (except for Asia, Eastern Centre, Africa
Scotland)

ISLAMIC LAW
The 2nd most important legal system (beside
Western legal system) in international
business.
Available in Kingdom of Saudi Arabia,
Indonesia, Pakistan, Egypt,…,
Originated from Islam
Cultural problems in doing business with
Islamic countries.

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INDIAN LAW

Affected by Hinduism, Islam, Buddhism and

Common Law (from the UK)
Political and religious instability
Leader in Information Technology
Second biggest population

CHINESE LAW
Great impact in China, Japan, Korea, …
Strongly affected by Confucianism
“Guan-xi” (关系) is the most important
element in business.

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AFRICAN LAW
Affected by both Islam and Catholicism
Based on a variety of customs
Influenced by Civil Law
New economic force of the world

SOCIALIST LAW
Affected by both Common Law and Civil Law
system
Precedents are not considered as legal
sources.
Emerging economy and legal system

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5. LEGAL FRAMEWORK FOR

INTERNATIONAL SALES CONTRACT

International trade treaty

National laws
International trade practices
Other sources

5.3. INTERNATIONAL TRADE PRACTICES

International trade practices: The customs of

act and behavior naturally formed in
international trade and recognized as legal
norms.
 Legal norms: obligatory rules and
standards for relevant individuals and
organizations, issued by authorized
government agency.

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5.3. INTERNATIONAL TRADE

PRACTICES
* Classification (cont.)
Based on the scale of application:
-General practices: recognized and applied widely.
E.g. Incoterms, UCP (Uniform Customs and Practice
for Documentary Credits) (ICC)
-Regional / Local practices: recognized and applied
regionally / locally. E.g. The Revised American
Foreign Trade Definition, 1941.

5. LEGAL FRAMEWORK FOR

INTERNATIONAL SALES CONTRACT

International trade treaty

National laws
International trade practices
Other sources

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5.4. OTHER LEGAL SOURCES

• Unidroit Principles (formally endorsed by

UNCITRAL)
• MODEL CONTRACTS & CLAUSES
• The International Trade Centre offers for free
online its Model Contracts for Small Firms:
Legal Guidance for Doing International
Business. (http://www.intracen.org/model-
contracts-for-small-firms/)
• The ICC offers (for purchase) an array of
model contracts for international transactions,
including an influential model for sales
contracts.
May-23 BY PVNLAN 64

UNIDROIT PRINCIPLES OF
INTERNATIONAL COMMERCIAL
CONTRACTS
(UNIDROIT PICC)
The International Institute for the
Unification of Private Law (UNIDROIT)
is an independent intergovernmental
Organisation in Rome.
Formally endorsed by UNCITRAL
Have a broader scope than the CISG,
which is limited to sales contracts.
Concerned with the validity of the
contract
May-23 BY PVNLAN 65

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UNIDROIT PICC
SCOPE OF APPLICATION: NOT
BINDING
Unlike the CISG, the Unidroit Principles are
not a binding text and will generally only be
applied where chosen by the parties or
through application by an arbitral tribunal
with the authority to do so

May-23 BY PVNLAN 67

THANK YOU FOR YOUR LISTENING

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