Chapter 1: Transportation in

International Trade

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Outline
I.

Concept of international transport

1.
2.
3.

II.

Definition
Characteristics
Effects

Transport right/liability
1.
2.

Definition
Dividing of transport responsibility in
international sales contracts
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I. Concept of International transport

1. Definition
International transport is a process in which
goods are moved among different countries.
2. Characteristics
Carrying process is conducted among two or
many different countries
Departure and arrival points must be in different
countries
Relationships, which arising from carrying
process, must be regulated by international law
scale.
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I. Concept of International transport

3. Effects of international transport
Promote the development of international
trade: The amount of goods that circulate
between two countries is in direct
proportion to the product of economic
potentialities of the two countries, and is in
inverse ratio to distance between them
(St. William)
Q = P1 x P2 / L
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I. Concept of International transport

3. Effects of international transport
Expand of goods and market structures in
international trade:
Goods structure: high value, small quantity => any
kinds of goods
Market mechanism: near, neighbor, favorable markets
=> any markets

Improve the international balance of payments

Serving function
Trading function
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II. Transport right/liability

1. Definition
Transport right/liability is the right and
obligation of organizing of carrying
process and directly making payment to
the carrier.
2. Dividing of transport right/liability in
international sales contracts
2.1. Basis to divide of transport
responsibility: Incoterms
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II. Dividing of transport right/liability in

international sales contracts
2.2. How to divide: 2 ways
Incoterms 2000: 3 groups
Group 1: transport responsibility belongs to importers (EXW,
FCA)
Group 2: transport responsibility belongs to exporters (DDU,
DDP, CIP, CPT)
Group 3: transport responsibility belongs to both of importer and
exporters (FAS, FOB, CFR, CIF, DES, DEQ)
Incoterms 2000: 4 groups (base on main transport section)
Group E: EXW
Group F: FCA, FAS, FOB
Group C: CPT, CIP, CFR, CIF
Group D: DDU, DDP, DES, DEQ
Special term: DAF
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II. Dividing of transport right/liability in

international sales contracts

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Incoterms 2010
Base on main transport stage:
Group E: EXW
Group F: FCA, FOB, FAS
Group C: CIP, CPT, CIF, CFR
Group D: DDP, DAT, DAP

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Incoterms 2010

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II. Dividing of transport right/liability in

international sales contracts
2.3. Benefits of getting transport right/liability in
international trade
Gaining initiative in carriage of goods,
negotiation and signing contracts
Utilizing national merchant fleets and other
transportation means
Improving the national balance of payment
Promoting the development of other sectors:
freight forwarding, broker, consolidation
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II. Dividing of transport right/liability in

international sales contracts
2.4. Cases that should not get the transport right/liability
Assuming that prices in shipping market sharply increase
in comparison with the time of signing sales contract.
Predicting that it will be hard to charter vessels
Calculating that the difference between the CIF/CFR
price (export price) and the FOB price that offered by
foreign importer (or the difference between the CIF/CFR
(import price) that offered by foreign exporter and the
FOB price) is not enough to compensate freight and/or
insurance premium that we have to pay.
Dividing of transport right/liability is assigned by
international law or practices.
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II. Dividing of transport right/liability in

international sales contracts
2.5. Summary
In 11 terms of Incoterms 2010, there are 4 terms in
which goods must be transported by sea or inland
waterway: FAS, FOB, CFR, CIF. In the rest terms, goods
can be carried by all modes of transport.
Transport right belongs to exporters if they sell goods by
CIF, CFR, CIP, CPT, DDU, DDP prices
Transport right belongs to importers if they buy goods by
EXW, FAS, FOB, FCA prices
Exporters will get transport responsibility when they sell
the goods at the places that nearest to consuming sites.
And importers will get one when they buy the goods at
the places that nearest to producing locations.
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