chapter 2 freight forwarding

International Trade and Trade ContractsInternational trade can be riskier than trade within a... International Trade and Trade ContractsForeign trade risks:... Items of a trade contrac

Lecturer: Th.s Đoàn Thị Hoàng ThảoEmail: thaodth@ut.edu.vn

Phone : (+84) 836 418 992

INTRODUCTION TO FREIGHT

FORWARDING

Vietnam Logistics Research and Development Institute

5th Floor, Saigon Port Building, Dist 4, HCMCTel: (+84) 28 7301 8689 – Email: vli1@vli.edu.vn

Website: www.vli.edu.vn

 

Welcome to CHAPTER 2

CHAPTER 2 INTERNATIONAL TRADE

International Trade and Trade Contracts

International trade can be riskier than trade within a

International Trade and Trade Contracts

Foreign trade risks:

International Trade and Trade Contracts

Risks can be handled through:

Items of a trade contract and their relevance

for freight forwarding

ItemsRelevance for Freight ForwarderRemarks

Name and address of buyer and seller

Who is consignor and who is

consignee?Which countries are involved?

The country determines the export/import rules and documentation.Description of goodsDetermines cargo handling and transport mode,

customs tariffe.g bulky goods or general cargoQuantity of goodsHow to weigh or to count the goods?Determines transport technologye.g full load or parcel load; heavy lifte.g rail scale, crane scale, or ships

draught expertise

Items of a trade contract and their relevance for freight forwardingItemsRelevance for Freight ForwarderRemarks

PriceCustoms tariff

Terms of deliveryDetermines who is responsible for the carriage as shipper and which transport document proves the

Terms of payment

Determines which transport document proves delivery

and is decisive for payment.

e.g documentary credit, cash against

documents etc.

Applicable LawDuties of the parties involved, Liabilities

TERMS OF DELIVERY

The delivery of goods is agreed upon between

seller and buyer

The most commonly used trade terms are the

INCOTERMS

WHAT ARE INCOTERMS?

International Commercial Terms

They are a set of standard conditions of delivery which

can be incorporated into the contract by the party

Why are the INCOTERMS so important?

Avoiding misunderstanding of different cultures and languages

INCOTERMS tell us what to do in respect to:

Carriage of goods from seller to buyer

Export and import clearance

INCOTERMS also explains the division of costs and risks

between the seller and buyer

The importer is possible to calculate the true landed cost of a

product

THE CONDITIONS OF INCOTERMS

2 GROUPS OF INCOTERMS 2020

Group 1 - Rules for any Mode of Transport

Group 2 – Rules for Sea and Inland Waterway

Transport

Rules for any Mode of Transport

Rules for Sea and Inland Waterway Transport

FAS :Free Alongside Ship (named loading port)

FOB: Free On Board (named loading port)

CFR: Cost and Freight (named destination port)

CIF: Cost, Insurance and Freight (named destination

port)

TERMS OF PAYMENT

Payment for goods traded internationally can be

arranged in a number of ways

Terms and methods of payment should be stipulated in

the contract

The methods are the most widely used: Open

Account terms, Documentary Collections, Documentary credit

OPEN ACCOUNT TERMS

The seller dispatches the goods to the buyer and sends an

invoice at the same time Any documents of title are also sent to the buyer

The seller loses control of the goods when he dispatches them

and trusts the buyer to pay

These are the least secure terms for the seller For the buyer is it

the most advantageous mode of payment, because he has a possibility to receive and inspect the goods before making any

DOCUMENTARY COLLECTIONS

sends them to the buyer's bank through the banking system

buyer's bank will only hand over the documents of title to the buyer against payment or acceptance of a bill of exchange

DOCUMENTARY COLLECTIONS

made or a legally binding undertaking to pay is given

subject to the International Chamber of Commerce

Uniform Rules for Collections, URC 522

DOCUMENTARY COLLECTIONS

The buyer's bank passes on details to a bank in

the seller's country which advises the seller of the existence of a credit

DOCUMENTARY CREDIT

required under the credit

banking system and is paid

Chamber of Commerce Uniform Customs and Practice

for Documentary Credits UCP 600

DOCUMENTARY CREDIT

SellerExporter

BuyerImporterTrade Contact

goods

paymentdocuments

documents

documents

Acceptanceof documentsDelivery

against documents

9

SellerExporter

BuyerImporterTrade Contact

goods

paymentdocuments

documents

documents

Acceptanceof documentsDelivery

against documents

9