INTERNATIONAL TRADE TRANSACTION

Lecturer: Dr.Vu Thi Hanh (SBS, Belgium)

Email: vuhanhftu@gmail.com
Phone: 0914676782
 INTERNATIONAL TRADE CONTRACT

- Concept

International trade contract is a legally binding agreement between two or more parties having the
headquarters located from different countries, whereby the exporter has the obligation to transfer
the ownership of a certain property called as a good; the importer has the obligation to receive that
good and to fulfill payment.
CHARACTERISTICS

- The headquarters of both parties are located in different countries.

- The delivery and receipt of goods is across international borders.

- Payment is made in at least one foreign currency in respect to one or both parties.
 EFFECTIVENESS CONDITIONS OF AN INTERNATIONAL TRADE CONTRACT
Decree No 69 gives the guidelines for the law on Foreign Trade Management
dated 15/05/2018
- Subjects of a contract are legally eligible.

- Objectives of a contract are legally eligible.

- Contents of a contract are legally eligible.

- contract is legally eligible.
STRUCTURE OF AN INTERNATIONAL TRADE CONTRACT
 COMMODITY

- Name + trade name + science name

Anti-inflammatory drug Hydrocortison
Arabica /Robusta/Coffee
Arabica coffee/ Robusta coffee
- Name + nameplace of production
French wine/ Dalat wine
- Name + Name of the manufacturer
Refrigerator Samsung
- Name + main specification of a good
Black steel pipe, 38.1*1.5mm, Vietnamese white rice exports with 5% of broken
- Name + function of a good
Skin care drug collagen
- Name + HS code of a good
Hydrovane Compressor, HS 8414804900
 QUALITY

- By sample
- By standard
- By specification
- By brand name
- By technical document
- By content
- By natural weight
- By pre-inspection
- By status quo
- By description
- Regularly used criteria
 BY SAMPLE

A sale in which the buyer sees one of the products being sold, and buy a number of them on
The condition that they are of the same quality as that one.

Usually a sale by sample is implied when a sample is shown and both parties intend that the goods
should be of the same kind and quality as the sample is.
 BY SAMPLE

• Quality of goods must be as counter sample which is marked with signatures of both sides.

• Quality of goods must be correspond/according to sample.

Sample and counter sample

 BY STANDARD

Standards are regulations on quality assessment, production methods, processing, packing, goods
inspection by a competent authority.

Coffee Buon Me Thuot, season 2004, first class grade TCVN 4193:2001
 BY SPECIFICATION

Specifications are the technical parameters relating to goods such as power, size, weight ... These
specifications reflect the quality of the goods.

Container cold 40’RH (origin) by international standards, 80% second-hand quality:

Gross size: D: 12.192 m x R: 2.438 m x C: 2.891 m outer dimenson
Net Size : D: 11.763 m x R: 2.298 m x C: 2.562 m inner dinmension
Maximum gross weight : 30.450 kg
Shell weight : 4.500 kg
Weight of goods : 26.950 kg
Volume : 64m3
Volume : 3 phase ( 380 V – 460 V )
Cold degree: ± 180C.
Air-conditioning: CARRIER / THERMOKING/MITSU/DAIKIN
Capacity : 7,5 HP.
Gas cold: R.134a.
 BY BRANDNAME

Brand name is the symbol, drawings, letters to distinguish the goods of this manufacturer with the
other manufacturer.
 BY TECHNICAL DOCUMENT

Technical documentation shows the technical specifications of the goods including operating
manuals
, installation assembly drawing.

The quality is pursuant to the technical

document herein as attached which has
been approved by the buyer and is an
integral part of this contract.
 BY CONTENT

A stipulation of one component in a good as percentage:

Content of useful substance:
Vietnamese white rice, long grain, crop winter-spring 2015,
Minimum (%)
5% broken
Content of useless substance:
Broken (3/4 of whole grain): max 5%
Maximum (%)
Moisture: Max 14%
Damaged kernels (3/4 of whole grain): max 6%
Red and red streaked kernels: max 1%
Yellow kernels: max 0.5%
Foreign matters: max 0.5%
Immature kernels: max 10 grains/kg
Milling degree: Well milled & double polished
 BY NATURAL WEIGHT

Natural weight measures the weight of a unit of good which is applied for grain merchandise.

Cacaonut Vietnam: 1800-2000 grain/kg

 BY INSPECTED AND APPROVED

Sales as inspected and approved means the buyer after having inspected and agreed a nominated
good will pay for that good.
 AS ARRIVE SALE

As is sale/ arrive sale.

Case application:
• The seller dominates the market
• Auction sale
• To arrive sale
 BY DESCRIPTION

We state the characteristics of a good on its shape, color, size and usage.
 BY REGULARLY USED CRITERIA

FAQ (Fair Average Quality)

GMQ (Good Merchantable Quality)
 QUANTITY

- Unit of quantity measurement

- Method of quantity identification

- Method of quantity stipulation

- Place of quantity identification

 UNITS OF MEASUREMENT

- Piece, box, carton, unit, package…

- Metric system: KG, MT
- British-American system: LT: long ton, ST: short ton
MT, LT, ST
+ Cubit: inch, foot, yard, mile
+ Rood: square inch, square yard
+ Tonnage: gallon
+ Volume: long ton, short ton, pound
 METHOD OF QUANTITY STIPULATION

- Specific stipulation method

- Stipulation method with tolerance

+ About
+ Approximately
+ More or less 10%, plus/minus 10% 1000MT
+ From 900 MT to 1100 MT
 METHOD OF QUANTITY IDENTIFICATION

- Gross weight

- Net weight

Net weight = Gross weight – Tare weight

- Theoretical weight

- Commercial weight

100 + Wc
Gc = Ga X

100 + Wa
 METHOD OF QUANTITY IDENTIFICATION

A sale contract of 120MT cotton with the moisture of 10%. If the buyer receives the goods, the
degree of moisture content goes up to 15%, then how much tons of goods the buyer will pay for?

Gc = 120 x (110 : 115) = 114.78 MT

 METHOD OF QUANTITY IDENTIFICATION

A sale contract stipulates an amount of 330 MT +10% sheep wool with 10% degree
of moisture content. At the time of contract performance, the actual degree of
moisture goes up to 15% and the market price tends to decrease.
Question: how many tons of goods should the exporter deliver to maximize their
benefit?
Ga = Gc * (100 + Wa/ 100+ Wc)
= 330 * (100 + 15/ 100 + 10)
= 379,5 MT
 PLACE OF QUANTITY IDENTIFICATION

- At loading port
+ For EXW => thường là loading port nma vì Incoterm k phải luật nên vẫn hoàn toàn có thể check
quantity identification tại discharging port

- At discharging port
 PRICE

- Pricing currency

- Price identification

- Method of price stipulation

 PRICE CURRENCY

- Exporting country

- Importing country

- Third country
 PRICE STIPULATION (thỏa thuận về giá)

- Unit price

- Total price

- A price links with an international commercial term: giá thường phải gắn với incoterm để dễ hiểu
đây là giá gì, đã bao gồm chi phí gì. VD nếu là EXW thì là giá tại xưởng, chưa gồm delivery,…)
 PRICE STIPULATION

Unit price: 280USD/MT FOB Hai Phong port, Vietnam, Incoterms 2020.
Total price: 280,000USD.
 METHOD OF PRICE IDENTIFICATION

- Fixed price: Là giá cả được quy định vào lúc ký kết hợp đồng và không được sửa đổi nếu không có sự thỏa thuận
khác

- Revisable price: Là giá có thể chỉnh lại (flexible price) là giá đã được xác định trong lúc ký kết hợp đồng, nhưng có
thể được xem xét lại sau này, vào lúc giao hàng,…

- Deferred price: Là giá cả không được xác định ngay khi ký kết hợp đồng mua bán, mà được xác định trong quá
trình thực hiện hợp đồng. Giá quy định sau có thể là giá cố định hoặc giá linh hoạt.

- Sliding scale price: Là giá cả được tính toán dứt khoát vào lúc thực hiện hợp đồng trên cơ sở giá cả quy định ban
đầu, có đề cập tới những biến động về chi phí sản xuất trong thời ký thực hiện hợp đồng. h
 SLIDING SCALE PRICE

P1: final price for payment (giá cuối cùng, giá dùng để thanh toán)
Po M1 S1
Po: primary price stipulated at the date of contract conclusion (giá cơ sở
P1= (a + b +c )
khi kí hợp đồng)
100 Mo So a+ b+ c= 100%
a, b, c are percentage of price composition
-a: % of fixed price
-b: % of flexible price
-c: % of labor cost
Mo and M1: cost of materials, stipulated at the time of contract
conclusion and the time of contract performance. (giá nguyên vật liệu ở
thời điểm xác định giá cuối cùng + thời điểm kí hợp đồng)
So và S1: labor cost identified at the time of contract conclusion and
performance. (giá nhân công…)
 SHIPMENT/DELIVERY

- Shipment period

- Place of shipment

- Shipment advice

- Other stipulation
 DELIVERY PERIOD STIPULATION

- identified shipment period

+ At a specific date
Good delivery is made on 25th October, 2015
+ At the last date of shipment
Shipment is made on 25th October, 2015 at the latest
+ At a certain period
Shipment is made in one month from 1st October to 31st October 2015
+ In a certain period of time at the buyer’s option
Shipment is made in one month from 1st October to 31st October 2015 at the Seller’s option
 DELIVERY PERIOD STIPULATION

- Prompt, immediately, ASAP

 DELIVERY PERIOD STIPULATION

Time of shipment: 15/10/2020

- Place of shipment:
+ Loading port: Hai Phong, Vietnam
+ Destination port: Japan

15/10/2020, Where is the goods placed upon the following terms:

a. FOB Hai Phong port, Incoterms 2020
b. CFR Japan port, Incoterms 2020
c. DAP Japan port, Incoterms 2020
d. DDP buyer’s warehouse, Incoterms 2020
 SHIPMENT ADVICE

- Before delivery

- After delivery
- Name of goods
- Name of the vessels
- Good specification
- Container code
- Ship code
- ETD: estimated of departure/ETA: estimated time of arrival
 FURTHER STIPULATION ON DELIVERY

- Partial shipment, total shipment is allowed or not allowed

- Transshipment is allowed or not allowed

- Stale document is allowed or not allowed

- Third party document is allowed or not allowed

- House bill of lading
 PAYMENT

- Currency of payment

- Time of payment

- Methods of payment

- Payment documents
 PAYMENT CURRENCY

- Currency of exporting country

- Currency of importing country

- Currency of the third country

 PAYMENT PERIOD

- Advance payment

- At sight payment

- Deferred payment
 MODES OF PAYMENT

- Remittance/ telegraphic transfer

- Collection

- Letter of credit
 TELEGRAPHIC TRANSFER OF MONEY

Remittance refers to a bank (the remitting bank), on the request of its customer (the remitter),
transfers a certain sum of money to its overseas branch or correspondent bank (the paying bank)
instructing it to pay a named person domiciled in that country.

-Mail transfer: Remittance by airmail

-Telegraphic transfer: Remittance by cable/telex/SWIFT

 TELEGRAPHIC TRANSFER OF MONEY

- The remitter: the person who requests his bank to remit funds to a beneficiary in a foreign country.

- Remitting bank: the bank transferring funds at the request of a remitter to its correspondent or its
branch in another country and instructing the latter to pay a certain amount of money to a
beneficiary.

- paying bank: the bank entrusted by the remitting bank to pay a certain amount of money to a
beneficiary named in the remittance advice.

- The payee: a person who is addressed to receive the remittance

 TELEGRAPHIC TRANSFER OF MONEY
-

Step 1: The exporter delivers goods and

commodity documents to the importer.

4 Step 2: The importer issues payment order

Remitting bank 4 Exporter’s bank for the remitting bank then this bank
transfer an amount of money to the account
2
of the exporter.
3 2
Step 3: After checking all valid documents,
the remitting bank authorized by the
1 importer will transfer an amount of money
ImImporter Exporter to the exporter with a debit slip (a small
written form used to deposit funds into an
accounts).

Step 4: Exporter’s bank pays for the

exporter by crediting the exporter’s account
with the above sum .
 COLLECTION

Collection means the handling by banks of documents, in accordance with instructions received, in

order to: Obtain payment and/or acceptance; or deliver documents against payment and/or against

acceptance; or deliver documents on other terms and conditions.

- To minimize risk of the exporter because only when the importer has accomplished to pay or
accepted to pay, he will be delivered the documents to receive goods.

- Collecting banks supports both parties in checking documents and payment order.

- Fee is relatively low.

• Clean bill collection

• Documentary collection:
- D/A: document against acceptance
- D/P: document against payment
 CLASSIFICATIONS OF COLLECTION

- Clean collection means collection of financial documents (bill of exchange) not accompanied by
commercial documents.
-
33 Step 1ab: The exporter delivers goods and
Collecting bank Agent bank shipping documents to the importer.

Step 2: The exporter issues a B/E then

4 sends it to an agent bank.
2

1a Step 3: B/E may be accepted by the

ỏImporter ExporterNg importer then transferred to the collecting
bank.
21b

Step 4: The collecting bank sends B/E and

request the importer to pay.
 CLASSIFICATIONS OF COLLECTION

- Documentary collection means collection of:

+ Financial documents (draft or bill of exchange) accompanied by
shipping documents

+ Shipping documents not accompanied by financial documents.

 DOCUMENT AGAINST ACCEPTANCE (D/A)

3
Collecting bank Agent bank -
Step 1: The exporter delivers the goods to
4 2 the importer.
4 2
Step 2: The exporter issues bill of exchange
1 and shipping documents and send them to
NImpoImporter ExporterNg an agent bank to request for payment.

Step 3: Through the collecting bank, B/E is

accepted for payment by the importer.

Step 4: The collecting bank sends B/E to

the importer to ask for payment.
 DOCUMENT AGAINST PAYMENT (D/P)

3
Collecting bank Agent bank
-
Step 1: The exporter delivers goods to the
4 2
4 importer.
2

Step 2: The importer pays under the B/E

1
ImporImporter Exporter
drawn by the exporter.

Step 3: Accepted B/E is delivered to the

collecting bank.

Step 4: The collecting bank delivers B/E to

the importer for payment request.
 LETTER OF CREDIT

A documentary credit is any arrangement, however named or described, whereby a bank (the issuing
bank) acting at the request and on the instructions of a customer (the applicant) or on its own behalf:

1. is to make a payment to or to the order of a third party (the beneficiary), or is to accept and pay
bills of exchange drawn by the beneficiary;

2. authorizes another bank to effect such payment or to accept and pay such bills of exchange;

3. authorizes another bank to negotiate, against stipulated documents, provided that the terms and
conditions of the credit are complied with.
 CHARACTERISTICS

The issuing bank takes the first responsibility to pay, independent of whether the applicant is
bankrupt or is in default or not, provided the documents presented are in compliance with the terms
and conditions of the credit;

L/C is a transaction of documents (article 4);

L/C is independent on trade contract (article 3).

- Advantages
The seller is assured that payment will be made by a party independent of the buyer so long as the
terms and conditions of the credit are complied with;

The buyer is assured that payment will be made to the seller only after the bank has received the
ownership of documents called for in the credit.
 PARTIES AND THEIR RELATIONSHIP

- applicant: an importer who requests his bank to issue a credit in favor of the exporter;

- issuing bank or opening bank: the bank which issues a letter of credit at the request of an applicant;
(article 9a )

- beneficiary of L/C: the exporter in whose favor the credit is issued;

- advising bank or notifying bank( transmitting bank): correspondent bank or branch of the issuing bank to
whom the letter of credit is routed for transmission to the beneficiary; (article 7)

- paying bank or drawee bank, paying bank agent: a bank who is authorized by the issuing bank to pay the
beneficiary;

- accepting bank: a bank accepting the draft under the credit;

- negotiating bank: a bank that purchases the documents under the credit; (article 10 and 14)
 PARTIES AND THEIR RELATIONSHIP

- confirming bank: a bank, usually the advising bank, which adds its undertaking to those
of the issuing bank and assumes liability under the credit; (article 9b, c, d)

- reimbursing bank: the bank from which the nominated paying bank, accepting bank or
any negotiating bank that has made a payment, may obtain reimbursement; (article 19)

- transferring bank;
- transferor of L/C;
- transferee of L/C.
- Liabilities and responsibilities of banks under L/C (article 13, 15, 16, 17, 18)
STEPS FOR L/C IMPLEMENTATION
• Collateral asset:
• Certificate of land use right
 STEPS FOR L/C IMPLEMENTATION
1. The importer sends payment acceptance to the exporter.
2. The importer sends L/C opening request to the issuing bank.
3. The issuing bank after checking the credibility of the importer starts to open a letter of credit for the
beneficiary and also request a bank to notify the letter of credit.
4. The notifying bank submits L/C to the exporter.
5. The exporter starts to deliver the goods at the port of export. The forwarder prepares shipping documents
including Bill of Lading which reflects the title of goods.
6. The title of export documents (commercial invoice, B/L, insurance policy…) has sent to the notifying bank
by the exporter. If the exporter agrees, he will send the deferred payment bill of exchange to the importer
or otherwise he will send the at sight B/E.
7. The notifying bank sends documents to the issuing bank.
8. If the importer agrees to pay at sight, the issuing bank will transfer the title of the commodity documents to
the importer or otherwise, If the deferred payment L/C is issued, the issuing bank accordingly accepts the
deferred draft.
9. The importer receives the title of the commodity document.
10. The importer presents the documents to the custom for receiving the commodity
11. The issuing bank pays for the negotiating bank (notifying bank)
 PAYMENT DOCUMENT

• UCP 600: Uniform Custom and Practice for Documentary Credits: a

set of rules on the issuance and the use of letters of credit
• ISBP 2013: International Standard Banking Practice enables to apply
banking practices under UCP 600 to various trade documents, e.g.,
invoice, transport documents, certificate of origin.
 PAYMENT DOCUMENT

- Bill of Exchange

- Commercial Invoice

- Bill of Lading

- Insurance Policy/Insurance Certificate

- Certificate of quality

- Certificate of quantity and weight

- Packing List

- Specification
 PACKING

- Quality requirements of package

+ General stipulation

+ Specific stipulation

* Packaging material

* Package shape

* Package size

* Package structure

* Package belt
 WARRANTY

- Means a guarantee or promise which provides assurance by the Seller that specific facts or

conditions are true or will happen. The Buyer should detect the disability of goods within the

warranty period.

- Warranty period

- Warranty problems

- Rights and obligations of parties

 WARRANTY PROBLEMS

- Scope of warranty
- Seller’s obligation
- The absence of guarantee
- Warranty period is 12 months from the date of delivery or until the machine produces 1 million products subject to either comes first
- The Seller warrants that the equipment supplied:
+ be brand-new
+ be free from defects Warranty period is 12 months from the date of delivery or until the machine produces 1 million products
subject to either comes first
- The Seller warrants that the equipment supplied:
+ be brand-new
+ be free from defects
+ be as per the attached technical description
Within the warranty period, the Seller warrants the normal operation
Under the guarantee period, the Buyer shall inform the Seller of all the defects in writing. Upon the receipt of the notice, the Seller shall
work out the time to repair or make good all defects, the Seller shall inform the Buyer the time needed to make good the defects, the
duration for repairing or replacing the Goods is to be less than 2 months from the receipt of the notice. All the arising costs for repairing the
Goods are for the Seller’s account.
+ be as per the attached technical description
- Within the warranty period, the Seller warrants the normal operation
- Under the guarantee period, the Buyer shall inform the Seller of all the defects in writing. Upon the receipt of the notice, the Seller shall
work out the time to repair or make good all defects, the Seller shall inform the Buyer the time needed to make good the defects, the
duration for repairing or replacing the Goods is to be less than 2 months from the receipt of the notice. All the arising costs for repairing the
Goods are for the Seller’s account.
 CLAIM

- Claim period

- Claim documents

- Methods of claim resolution

 CLAIM

A claim document includes:

- A commercial contract
- An inspection record
- A certificate of quality
- A certificate of quantity
- A certificate of analysis issued by an authorized quality management organization by parties and
within 30 days since the date of arrival.
 CLAIM CLAUSE

In case upon taking the delivery, the Goods are not in strict conformity with conditions stipulated in
the contract in terms of quality, quantity and packing, the Buyer shall submit his claim together with
sufficient evidence of copy of the contract, Survey Report, Certificate of Quality, Certificate of
Quantity, Packing List with certification of the authorized inspection company agreed by the two
Parties within 30 days upon the ship’s arrival.

Upon receiving the claim, the Seller shall in a timely maner solve it and reply in writing within 30
days, after such receipt. Incase of the Seller’s fault, the Seller shall deliver the replacements not later
than 30 days after the official conclusion.
 FORCE MAJEURE

- Các sự kiện tạo nên bất khả kháng

- Thủ tục ghi nhận sự kiện

- Hệ quả của bất khả kháng

- Rights and obligations of parties

 FORCE MAJEURE

Meaning “superior force” also known as “chance occurrence, unavoidable accident” is a common
clause in contracts that essentially frees both parties from liability or obligation when an
extraordinary event or circumstance beyond the control of parties such as a war, strike, riot, crime or
an event described by the legal term act of God (such as hurricane, flooding, earthquake, volcanic,
eruption) prevents one or both parties from fulfilling their obligations under the contract. In practice,
most force majeure clauses do not excuse a party’s non-performance entirely, but only suspend it for
the duration of the force majeure.
 FORCE MAJEURE

FM is generally intended to include occurrences beyond the reasonable control of a party and
therefore would not be cover:

- Any result of the negligence and malfeasance of a party which has a materially adverse effect on
the ability of such party to perform its obligations.

- Any result of the usual and natural consequences of external forces.

- Any circumstance that are specifically contemplated in the contract.

 OBLIGATIONS OF PARTIES

- Notification: A party who encounters a force majeure event has the obligation to send a prompt
notification to the other party within 24 or 48 hours after the termination of the event.
- Certification: A party who encounters a force majeure event has the obligation to request the
certification from the local government for this event (the local chamber of commerce) within 7
days after the termination of the event.
 FORCE MAJEURE CLAUSE

Force majeure cases shall be understood the occurrence of situations to be considered as force
majeure in ICC pubication No 421.

The force majeure cases shall be informed to the other party by the concerned party by phone
within 7 days and confirmed by writing within 10 days from the date of such a phone call together
with certification of force majeure issued by the Chamber of Commerce located in the region of the
case. After this deadline, claims for force majeure shall not be taken into account.

In the event of force majeure, the concerned party shall bear no responsibility of any penalty arising
from delay of delivery.
 ARBITRATION

- An arbitration clause is a clause in a contract that requires the parties to resolve their disputes
through an arbitration process.

- Place of arbitration
- Steps for arbitration procedure
- Applicable law
- Execution of referee’s decision
 PLACE OF ARBITRATION

- Exporting or importing country

- A third country
 STEPS FOR ARBITRATION PROCEDURE

- To organize an arbitration committee: Each party appoints their own arbitrator and both parties
agree to appoint the president of the arbitral tribunal.
- On an identified date, both parties are present at the arbitral tribunal and free to argue.

- Parties may conciliate

- To make decision: Based on the principle of majority. The arbitrator’s decision should be final.
 APPLICABLE LAW

- Based on commercial contract

- Or otherwise, The arbitration committee will select an applicable law upon the place of arbitration.
 EXECUTION OF ARBITRATOR’S DECISION

In the even of any disputes and differences in opinion arising during implementation of this contract
between the parties which can not be settled amicably, such dispute shall be settled by the Vietnam
International Arbitration Center (VIAC), at the Chamber of Commerce and Industry of Vietnam.
Arbitration fees shall be borned by losing party.
 EXERCISE 1

• Please draft the following clauses of a coffee contract: commodity, quantity,

specifications, price, delivery and payment to France knowing that the coffee
price is 1050 USD/MT, FOB Hai Phong port, Vietnam. The delivery is made at
the third quarter of 2020 and the payment is made by irrevocable at sight letter of
credit.