INTERNATIONAL TRADE Keywords of Logistics Activities: - Warehouse Packing/ Marking Shipping documentation: Bill of lading Transportation: trucking (used for local transport), freight (used for international transport) Customs declaration Differences between different types of transportation - Vessel: a kind of train which is not used to deliver goods to distant nations Eg: France and Vietnam – use ships instead of vessel. Truck: used to deliver goods to countries in close proximity Eg: Laos, Cambodia, China. Comparison between the freight cost through air and through marine ways - - 1 cbm = 14 hours Air transportation: much faster but the most expensive form. 450 USD from Vietnam Japan: by sea 4500 USD from Vietnam Japan: by air Shipping time: + sea: around 1 month, 30 days + air: around 7-10 days + cargo shipment: the process of delivery can be much longer due to excessive documentation, the differences in the law systems of various nations. FCL/LCL delivery I/ DIRECT TRADE TRANSACTION 1.1 Inquiry - From legal perspective: an appeal from the buyer to start a new transaction. - From commercial perspective: the buyer requests the seller to provide information related to commodity, price and other trade condition. 1.2. Offer - - A demand from the seller to conclude a contract. Firm offer: the seller expresses his will to commit right and obligation under a contract. + Irrevocable offer + Include time validation + Include major conditions of an international trade contract Information on offer letter: + Names + Dates of offer letter + Product code + Discount term + Price of commodities + The amount of time during which the validity of the offer letter is kept. + Payment modes, currency used, bank. + The quantity *NOTES: FOB Price is lower than CIF Price DIFFERENCES BETWEEN OFFER AND ACCEPTANCE - - Give the feedback, response: accept or not accept the offer to the offerer Give fundamental changes of some terms: counter offer 6 major terms in trade contract: + commodity + quality + quantity + price + delivery + payment 2 basic types of acceptance: + accept unconditionally + accept with some small changes and conditions 1.3. Confirmation - The offerer and offeree confirms his commitment to implement obligations. II. INTERMEDIARY TRADE 2.1. Concept - A transaction of goods: carried out via the third entity called authorized dealers. Vietnam Commercial Law 2005, article 1.3. Commercial Intermediary activities mean actitivies conducted by business entities in order to carry out commercial transactions for one or more specific traders, and comprises representation of business entities, commercial brokerage, purchase and sale of goods by authorized dealers, and commercial agency. 2.2. Characteristics - Acting on the authorization basis - Strengthen the link between a producer and consumer, the seller and buyer. - Based on mutual reliance. - Sharing profit. 2.3. Varieties - Commercial brokerage - Commercial agency a. Broker - An intermediary trader for other traders involves in the negotiation, conclusion or a contract and the benefits arising from the remuneration are pursuant to a brokerage contract. - Characteristics: + the relationship between a principal and broker is based on a single authorization. + does not act as one party of a contract. + does not involve in trade activities. b. Agent - A trader carries out a commercial activity authorized by a principal and the relationship between a commercial agent and a principal is based on an agency contract. - Characteristics: + can act as one party in the contract. + the relationship is on long term basis - Based on the relationship between the principal and agent: + Mandatory agent: paid with a certain amout of money based on the agency contract; small obligations. + Commission agent: can act as sellers or buyers; have to bear risks and causes related to the contract; profits and earnings of commission agents are based on the percentage of contract value, higher profit than mandatory agents. + Merchandise agent (Distributor): can act as sellers or buyers, can decide prices of commodities. c. Agency contract - Date of effectiveness and expiry of the contract - Product - Geographical area of activity - Rights and obligations of parties - Price: maximum price and minimum price (ceiling price and floor price) - Remuneration - Expenses - Contract liquidation and termination - Signature (of the principal) III. Countertrade 3.1. Concept - means exchanging goods and services which are paid for in whole or part with other goods or services rather than with money. A monetary valuation can however be used in counter trade for accounting purposes. 3.2. Characteristics - Export links closely with import - Parties care about the usage of goods rather than profits - A monetary valuation is used mainly for 3.3. Varieties a. Barter - is the direct exchange of goods between 2 parties, principal exports are paid for with goods and services supplied from the importing market. A single contract covers both flows, in its simpliest form involves no cash. b. Counter purchase - seller receives full amount in cash but agrees to spend an equal amount of money in that country within a given time. In contrast to bartering, both parties pay for their purchases in cash but agree to fulfill their counter commitments. At the same time, transactions do not become part of a single contract, but are entered c. Buy-back - Under the buy-back agreement, the sellers - A provides facilities, equipments, technology,... – B buys commodities from A d. Counter trade contract - Varieties and address of two parties: + Governments of two countries sign countercontract agreement: frame agreement, countertrade protocol, memorandrum of understanding, letter of undertaking. Single contract and Merged/Combined contract - Contents: + Name and address + Commodity + + 3.5. Guarantee Methods for contract implementation. - Participation of third party: can be a natural/non-person individual that is authorized by 2 parties controls over the commodities. - Open an account third party is the bank. - A guarantor controls over the commodity document. - Penalty for breach: fines and punishments due to failure to commit to mutually agreed obligations. - Reciprocal L/C: both parties in the counter-trade transactions apply for L/C. First transaction: B opens, Second transaction: A opens. IV. International Processing Trade. 4.1. Concept - a commercial activity whereby the processor uses part or all of the raw materials and supplies provided by the supplier to carry out one or more stages of the production process at the request of the supplier to receive remuneration. WHY INTERNATION NOT LOCAL? - Have an order think: how to make, need materials (machines, labour, raw materials,...) fixed cost?? Outsource: can make design, provide materials in a foreign country, rationales: profits = turnover – costs, reduce costs and increase profit margins + increasing turnover (but have to wait). - Obligations of suppliers (principals): provide raw materials, technology, equipments, sketch (design),... - Obligations of processors: arrange the production, deliver the finished goods to the importers/suppliers,... 4.2. Characteristics - Headquarters of both countries are located in different countries. - Property rights in reserved for both parties. - Wages - Preferential tariff 4.3. a. Bilateral b. Sell material and purchase goods c. Multiple subjects processing - Several processors each processor is responsible for one chain in the global value chain. 4.4. Commercial processing contract. - Names and addresses - Finished products - Materials - Brand names - Inspection costs
