Chapter 10 International
Trade Forms




Abstract: This chapter mainly tells about the concept
and characteristic of various trade forms; main contents
of various trade agreement; and issues of using various
trade forms.
Section 1: Distribution
Section 2: Agency
Section 3: Consignment
Section 4: Fairs and
Sales
Section 5: Invitation to tender and Submission of
Tenders
Section 6: Auction
Section 7: Counter Trade Section 8: Processing
trade
Section 1: Distribution
1. Concept and nature of
Distribution


The Concept of Distribution
The Types of Distribution
• Distribution
• Sole Distribution or Exclusive Sales
Advantages and disadvantages of sole
distribution

Advantages:
Exclusive sales helps to arouse the enthusiasm of
exclusive distributor, use the distributor's marketing.
Channel, and consolidate and expand the market
 Exclusive sales can effectively reduce multi-channel’s
self competition
 Exclusive sales help to organize production and supply
in a planned way.
Disadvantages:




The exclusive distributor may take advantage of its
monopoly position to manipulate market.
The exclusive distributor may still sale the goods of other
export enterprises and not sale the appointed goods
attentively.
Section 2: Agency
1. The nature and characteristics of
agency
The relationship between agent and
principal is Principle-Agent
relationship.
 Case analysis:

2. Kinds of agency
General Agent
 Agent or Commission Agent
 Solo Agent or Exclusive Agent
Case analysis:

The Comparison of Sole Distribution and
Solo Agent

Similarities:



1. They both have monopoly ability and the
right of exclusive sales within appointed
territory and time limit.
2. They both help to arouse the enthusiasm
of exclusive distributor and exclusive agent.
Differences:



1. They have different relationships between
involving parties
2. They have different risk.
3. They have different reward.
3. Agency agreement



Please notice the non-competition clause. (Restrain
the Agent)
As to the sole agency, in order to safeguard the
interests of export enterprise, the minimum
purchase amount is usually stipulated. If the agent
fails to reach or exceed the minimum amount, the
principle will adjust the agent's commission
accordingly.
As to the sole agency, the exclusive agency
agreement usually stipulates that the agent can
still obtain commission when the principle sign the
contract direct with client inside the territory
Section 3: Consignment
1.
2.
3.
4.
The concept and nature of
consignment
The characteristics of consignment
The main contents of consignment
agreement
The advantages and disadvantages
of consignment
Section 4: Fairs and Sales
1． The meaning and practice of
Fairs and Sales
2． Fairs and Sales in our country





International fair
Chinese Export Commodities Fair
3． Issues of doing Fairs and Sales
business
Section 5: Invitation to tender and
Submission of Tenders
1. The meaning and characteristic of
Invitation to tender and submission


(1) The meaning of Invitation to tender and
submission
(2) The characteristic of Invitation to tender
and submission
• 1. It’s competed by numerous bidders in a fixed
time and place
• 2. The trade is concluded without negotiation
• 3. The bidder can only bid once, no counter-offer.
2. Kinds of Invitation to Tender

(1) Open Bidding or International
Competitive Bidding
Note: The purchase under World Bank's loan,
mostly adopt the international competitive
bidding.
(2) Selected Bidding
 (3) Negotiated Bidding
 (4) Two-stage Bidding

• It’s a combination way of opening
bidding and selected bidding.
3. Procedure of Invitation to
tender and Submission of
Tenders
(1) Invitation to tender
• 1. Issue announcement of tender:
Note: Selected bidding doesn’t need issuing
announcement of tender.
• 2. Prequalification
• 3. Draw up invitation document
(2) Submission of tenders

1. Prepare work before submission
Note: the submission of tenders is a firm bid
can’t be withdrawn before the award.
2. Make invitation document and
provide bid bond
 3. Submit application for tender

(3) Opening of bids and award of
bid
 (4) Win the bid and sign the
contract

• When concluding the contract, the
winning bidder is usually required to
pay the performance bond.
Section 6: Auction
1. The conception and characteristics
of auction
（1）The conception of auction
（2）The characteristics of auction
• It’s a kind of spot transaction bid publicly
• It is according to certain principles and regulations
• It is well organized and carried on in some certain
organizations
2. Kinds of Auction
Mark-up auction
 Mark-down auction or Dutch auction
 Sealed bids or closed bids

3. General procedure of auction
Preparation
 Inspection by the buyers
 Formal auction
 Making payment and taking delivery
of the goods
4. Some explanations to the issues
raised in auction business

Section 7: Counter Trade
1. The conception, characteristics and
main forms of counter trade



The conception of counter trade
The characteristics of counter trade
The main forms of counter trade
2. Barter Trade


The forms of barter trade
The advantage and disadvantage of barter
trade
3. Compensation Trade
(1) The conception and
characteristics of compensation
trade
 (2) Types of compensation trade




Product Buy-back
Counter Purchase
Labor Compensation
(3) The functions of
compensation trade
The function on the importer of
equipment technology
 The function on the exporter of
equipment technology

(4) Limitations of
compensation trade




1. Equipment suppliers do not generally accept
repaying with the counter sale product.
2. It is difficult to bring in highly advanced
technical equipment, and the price is usually on
the high side
3. If the export quantum of the compensation
product is great, it may compete with the export
of the similar product.
4. Compensation trade is relative complicated
and time-consuming.
Section 8: Processing trade
1. Processing with supplied materials
(1) The nature of Processing with supplied
materials
(2) The function of Processing with supplied
materials
(3) The main contents of Processing with
supplied materials
•
•
Pay attention to the terms of payment
Pay attention to the stipulations of transportation
and insurance
2. Processing with imported material
①
②
③
The conception of Processing with imported
material
The difference between Processing with imported
material and Processing with supplied material
The meaning of doing processing business with
imported material
3. Overseas processing trade
①
②
③
④
The conception of overseas processing trade
The necessity and feasibility of overseas
processing trade
The application procedure of developing overseas
processing trade
Precautions of developing overseas processing
trade
Summary


In order to promote the development of foreign trade and
strengthen the export commodities' competitiveness, we
hope the students can use various kinds of trade forms
flexibly in practice, and pay attention to the combination
use of different trade forms.
Key points:
similarities and differences of exclusive distribution and
exclusive sales, pros and cons on consignment,
compensation trade.

Difficult points:
similarities and differences of processing with imported
material and processing with supplied material