Ch1 Incoterms SV

International Trade
Transactions
(4 credits)
Tran Bich Ngoc

fromngoc@yahoo.com
FOREIGN TRADE UNIVERSITY

Aug 2009
Aug-09 INTERNATIONAL COMMERCIAL TERMS 2
The Trade Dilemma

• International trade must work around a
fundamental dilemma:
– Imagine an importer and an exporter who
would like to do business with one another
– Because of the distance between the two, it is
not possible to simultaneously hand over
goods and receive payments in person
– How do participants in international trade
mitigate the risks associated with conducting
business with a stranger?
1
Introduction
After the course, students should be
able to:
• Find out partners
• Draft the terms of contracts
• Negotiate and sign the contract
• Implement the contract
Textbook and references
• Vu Huu Tuu, Ky Thuat Nghiep Vu

Ngoai Thuong 2006
Shipment
• ICC, Incoterms 2000
• UN Convention on Contract for the
International Sale of Goods (CISG)
• Commercial Law of Vietnam
• Sample contracts
2
Overview
Chapter 1: INTERNATIONAL COMMERCIAL TERMS

Chapter 2: CONTRACTS FOR INTERNATIONAL SALE
OF GOODS
Chapter 3: MODE OF INTERNATIONAL
TRANSACTIONS
Chapter 4: PREPARATION FOR INTERNATIONAL
TRANSACTIONS
Chapter 5: CONTRACTS IMPLEMENTATION
CHAPTER 1
INTERNATIONAL COMMERCIAL TERMS
Definitions
ICC and Incoterms
Incoterms 2000
Most common terms
3
Definition of International
commercial terms
Short basic delivery terms used in foreign trade
practice in order to assign between the parties
+responsibility,
+Cost and expense
+and risk of damage
to the contractual commodities in the course of
transit from the seller to the buyer
Several Interpretation of
International Commercial terms
• International Law Association
– Warsaw Rules 1928
– Warsaw-Oxford Rules 1932
• USA
– The U.S. Export Quotations and Abbreviations- 1919
– Revised American Foreign trade definition 1941
– Uniform Commercial Code (UCC-1952)
• International Chamber of Commerce (ICC)
– International Commercial terms 1936
– Revised Incoterms 1953, 1967, 1976, 1980, 1990, 2000
Incoterms
set of uniform rules for

interpretation of
INternational COmmercial TERMS
4
Scope of Incoterms
Matters relating to
the right and obligation
of the parties
to the contract with
respect to
the delivery of tangible
goods sold
13
Development of Incoterms
1953: 9 terms
EXW /FOR/ FAS FOB DES DEQ /DDU/
/FOT/ CFR /DDP/
CIF
1980: 14 terms
EXW /FOR/ FAS FOB DES DEQ /DDU/
/FOT/ FCA CFR /DDP/
FOA CPT CIF
14
DAF CIP
Development of Incoterms
1990, 2000: 13 terms

EXW FAS FOB DES DEQ DDU
FCA CFR
CPT CIF DDP
CIP
DAF
15
5
INCOTERMS 2000
13 terms are represented in order of increasing
responsibilities, costs and risks for the seller
Each term is written in 3 letters, followed by named
place of delivery
Each term expresses respectively 10 obligations of the
two parties
16
13 terms in order of increasing

responsibilities, costs and risks for
the seller
EXW
DDU
DEQ
FOB
DDP
CFR
FCA
DES
DAF
CPT
FAS
CIF
CIP
Buyer Seller
E Group 1 EXW Ex works The seller’s premises

F Group 2 FCA Free Carrier Place of delivery
Main carriage 3 FAS Free Alongside Ship
Port of Shipment
unpaid 4 FOB Free On Board
C Group 5 CFR Costs and Freights

Main carriage 6 CIF Costs, Insurances & Freights Port of Destination
paid
7 CPT Carriage Paid To
8 CIP Carriage & Insurances Paid to Place of destination
D Group 9 DAF Delivered at Frontier Place at the Frontier

Arrival
10 DES Delivered Ex ship
Port of Destination
11 DEQ Delivered Ex quay
12 DDU Delivered Duties Unpaid Place of Destination

13 DDP Delivered Duties Paid
6
THE SELLER’S OBLIGATIONs THE BUYER’S OBLIGATIONs
The seller and buyers obligation
A1 Provision of goods in conformity B1 Payment of the price
with the contract
A2 Licences, authorization and B2 Licences, authorization and
formalities formalities
A3 Contracts of carriage and insurance B3 Contracts of carriage and insurance
A4 Delivery B4 Taking delivery
A5 Transfer of risks B5 Transfer of risks
A6 Division of cost B6 Division of cost
A7 Notice to the buyer B7 Notice to the seller
A8 Proof of delivery, transport B8 Proof of delivery, transport
document or equivalent electronic document or equivalent electronic
message message
A9 Checking, packing and marking B9 Inspection of goods
A10 Other obligations B10 Other obligations
Incoterms diagram
Incoterms diagram 2
7
TERMSSuitable Mode of transportation
MODE OF TRANSPORT
EXW Ex works Any mode of transport
FCA Free Carrier Any mode of transport
FAS Free Alongside Ship Maritime and inland waterway only
FOB Free On Board Maritime and inland waterway only
CFR Costs and Freights Maritime and inland waterway only
CIF Costs, Insurances & Frieghts Maritime and inland waterway only
CPT Carriage Paid To Any mode of transport
CIP Carriage & Insurances Paid to Any mode of transport
DAF Delivered at Frontier Any mode of transport
DES Delivered Ex ship Maritime and inland waterway only
DEQ Delivered Ex quay Maritime and inland waterway only
DDU Delivered Duties Unpaid Any mode of transport
DDP Delivered Duties Paid Any mode of transport
INCOTERMS 2000 in details
Student should master the following details for

each term
• Division of obligations between parties
• Division of costs and expenses between parties
• Transfer of risk of or damage to the goods
• Implications for uses of term
24
8
1) EXW: EX WORKS (…named place)
EXW
SELLER’S RISK BUYER’S RISK

SELLER’S COST BUYER’S COST
PLACE OF DELIVERY
The Seller delivers when he places the goods at
the disposal of the buyer at the place of delivery
The Buyer bears all cost and risk involved in
taking the goods
25
EXW(...named place),Incoterms 2000

Place of delivery: At the seller’s premise
(Factory, warehouse, plantation, mine,...)
The Seller must:
Provide the goods in conformity with the
sale contract
Provide Packing and marking
Document: commercial invoice only
No obligation: loading, export clearance,
other documentations
WAREHOUSE
9
The Buyer must:
Take delivery, Bear all cost, risk with respect
to “Pre-mature delivery”
Load the goods on to the vehicle
Export clearance
Arrange transportation
Import clearance

Implications for use of EXW:
All mode of transportation
Apply only if
The Buyer is able to fulfill export clearance
The Buyer is experience in booking carriage,
insurance
The seller dominates the market power

Question 1:
Whether the Seller as per EXW terms bears
the loading charge? In which case?
10
Question 2:
Whether the Buyer as per EXW terms can
choose the place of delivery outside the
seller’s premise?

Question 3:
The Buyer as per EXW terms fails to inform
the seller the time and place of delivery.
The seller must keep the goods in storage
but can not prevent the quality of goods
from decreasing. Who will bear this loss
and damage?

Question 4:
After signing the sale contract as EXW
terms. The government suspends the
goods from export. Whether the Buyer is
exempted from the contract obligations?
11
Question 5:
Sanitary Inspections by Government's body
is required for export of foodstuff in
Vietnam. As per EXW terms, who will pay
the cost and risk of this inspection?
2) FCA:FREE CARRIER (…named place)
FCA

PLACE OF DELIVERY
• The Seller must arrange the export clearance

• The Buyer nominated the carrier
• And the Seller delivers the goods to the carrier
nominated by the buyer 35
FCA (...Named place),Incoterms 2000

Place of delivery
• At the Seller’s premise
• Outside the seller’s premise
Roadway: Roadway terminal
Airway: Airport
Inland waterway: ferry station
Railway: Railway station, freight stations
Seaway: Sea port
Postal service: Post office
Forwarder:
– Less than Container load (LCL): Container Freight
Station (CFS)
– Full Container load (FCL): Container Yard
12
Container at port
FCA (...Named place), Incoterms

2000
Terminal Terminal
Free Carrier The seller delivers the

goods, cleared for export, to the carrier
FCA nominated by the buyer at the named place.
Seller’s premises: the seller is responsible
for loading.
Any other place: the seller is not responsible
for unloading.
FCA (...Named place), Incoterms

2000
13
The Seller must:
Provide the goods, packing and marking.
Inspections, Export clearance
Deliver the goods:
– If place of delivery is the seller’s premise, when the
goods have been loaded on the buyer’s means of
transport
– If place of delivery is not the seller’s premise, when
the goods are handled over the nominated carrier on
the seller’s mean of transport not unloaded
Provide usual proof of delivery

The Buyer must:
Take delivery and pay the price
Arrange the carrier, Inform the seller of the
time & Place of delivery, nominated carrier
Bear all risks and costs related to the goods
since the goods are delivered

Implication for uses:
All mode of transportation, especially
container transportation
Pay attention to the Divisions of loading/
unloading charge
Use FCA instead of FOB if the seller cannot
handle the goods over the ship’s rails
14
Question 1
Distinguish the FCA terms with EXW+
export clearance terms

Question 2
After delivery as per FCA terms, the seller
only get the “Cargo receipt”. Whether the
seller fulfills his obligations?

Question 3
How the division of loading/unloading
charges are stipulated as per FCA
Incoterms 2000
15
3) FAS : FREE ALONGSIDE SHIP
(…named port of shipment)
FAS

PLACE OF DELIVERY
• The Seller must arrange the export clearance
• The Seller delivers when the goods are placed
alongside the vessel at the named port of shipment.
• The Buyer bear all cost and risk of lost of or damage
to the goods since the goods are delivered 46
FAS (...Named Port of Shipment),

Incoterms 2000
Implication for uses:
Marine transportation only,
The seller finds difficult in collect evident
document of delivery
FAS is not popular in Vietnam
4) FOB : FREE ON BOARD

FOB

PLACE OF DELIVERY
The Seller delivers when the goods pass the

ship’s rail at the named port of shipment
The Buyer bear all cost and risk of loss of or
damage to the goods from that point
48
16
Fob, pass the ships rail
Terminal
Terminal
FOB
Free on board Seller delivers when the goods,
cleared for export, pass the ship’s rail at the named
port of shipment.
If parties do not intend to deliver the goods across the ship’s rail,
Aug-09 the INTERNATIONAL
FCA-term should COMMERCIAL
be used. TERMS 49
4) FOB, Cont.
What happen if the

goods fall out, hit
against the ship’s
rail, break into 2
parts:
+ one falls on board
of the ship
+ another falls into
the sea
Container at port
-
17
FOB (...Named port of shipment),
Incoterms 2000
Implication for uses
One of the most popular terms in Vietnam
Apply to maritime and inland waterway
transportations
Clearly mention to FOB as per Incoterms
2000, because there are many other
interpretations for FOB terms

Incoterms 2000
The Seller must:
Provide the goods in conformity with the sale
contract
Export clearance
Pay loading charge
Deliver the goods and provide deliver evidence:
– Ship’s/ dock’s tally sheet
– Mate’s receipt
– Bill of Lading
Notice the buyer of shipment

Incoterms 2000
The Buyer must:
Book a vessel to carriage the goods and
notice the seller of nominated vessel
Take delivery of goods, bear the cost and
risk of goods
Pay the price,
Import clearance
18
Incoterms 2000
Question 1
Which term of FCA and FOB will give the
Seller the best advantage
FOB variants
FOB Liner terms (FOB freight includes the cost of loading and
berth terms) discharging from the vessel
FOB under tackle (FOB the seller only put the goods to the
range within reach of vessel’s tackle,
and later loading charges are born by
the buyer
FOB Stowed-FOB.S. The seller deliver the goods into the
vessel cabin & bear the loading charges
FOB Trimmed-FOB.T. The seller load the goods into the vessel
cabin and trim the bulk cargo
FOB Shipment to The seller arrange the vessel and the
destination Buyer bear the cost and risk of goods in
transit
Loading, discharging containers

Fob Liner terms
FOB
Aug-09
Liner terms
INTERNATIONAL COMMERCIAL TERMS 57
from ship’s tackle till ship’s tackle
19
FOB Stowed
STOWAGE OF GENERAL
CARGO IN PALET,
• Stow the goods in to the ship hold
5) CFR : COST AND FREIGHT

(…named port of destination)
CFR

PLACE OF DELIVERY
• The Seller charters a vessel or books shipping space
• The Seller delivers when the goods pass the ship’s rail
at the named port of shipment
• After the goods are on board, the seller pay the freight
• All other charges and risk to the goods will be born60by
the buyer.
20
CFR price formations
• CFR= FOB+ F
6) CIF : COST,INSURANCE AND FREIGHT

CIF

PLACE OF DELIVERY
Similar to CFR, But the Seller must insure the
goods at minimum cover of the Institute Cargo
Clauses
62
CIF price formations
• CIF= FOB+ F+I

= CFR+I
21
CIF
Terminal
Terminal
Cost, Insurance and Freight Seller delivers

when the goods pass the ship’s rail in the port
of shipment.
Seller must clear the goods for export and pay If parties do not intend
the costs and freight necessary to bring the to deliver the goods
goods in the named port of destination. across the ship’s rail, the
CIP-term should be
Seller is obliged to insure used.
CIF
2) CFR & CIF variants

CFR Liner terms freight includes the cost of loading and
discharging from the vessel
CFR Landed (CFR dì hµng lªn The seller deliver the goods when goods
bê) landed in port of destination. The seller
bear the cost and risk of lighter hire and
other charge at the port of destination
CFR Quay (CFR dì hµng lªn cÇu The seller bear the cost of unloading the
c¶ng) goods into the quay
CIF and c (CIF.c), (c= Commission to the seller’s intermideate
commission) included in the quoted price
CIF and i (CIF.i), (i= interest) Interest rate included in the quoted price
CIF.c and i
CIF and e (CIF.e), (e= exchange) Exchange fee included in the quoted
price.
22
CIF and w (CIF and war risk War risk premium included in the quoted
insurance) price
CIF and WA (CIF with Particular average premium included in

Particular Average) the quoted price
CIF landed Duty Paid The seller deliver the goods when goods
landed in port of destination. The seller
bear the cost and risk of lighter hire and
other charge at the port of destination
and import clearance
CIF under ship’s tackle The goods delivered when the goods is
in reach of tackle at port of destination
CIF afloat Goods are on board when the contract is
signed
7) CPT:CARRIAGE PAID TO
(…named place of destination)
CPT

PLACE OF DELIVERY
• The Seller arranges carriage and clear the goods for
export.
• The Seller delivers when you pass the goods to the
first carrier
• The seller pay the cost of carriage to named
68
destination
8) CIP : CARRIAGE AND INSURANCE

PAID TO (…named place of destination)
CIP
SELLER’S RISK BUYER’S

Địa RISK giao
điểm chuyển
PLACE OF DELIVERY
Similar to CPT, But the Seller must insure the
goods at minimum cover of the Institute Cargo
Clauses
69
23
9) DAF : DELIVERED AT FRONTIER
(…named place)
DAF

PLACE OF DELIVERY
• The seller must contract for carriage to the name point
at frontier
• The seller deliver the goods when goods are placed at
the disposal of the Buyer on the arriving means of
transport, cleared for export but not cleared for import
70
10) DES: DELIVERED EX SHIP

DES

PLACE OF DELIVERY
• The seller delivers the goods when the goods
are placed at disposal of the Buyer, on board
the ship not cleared for import at port of
destination
71
11) DEQ : DELIVERED EX QUAY

DEQ

PLACE OF DELIVERY
• The seller delivers the goods when goods are
placed at the disposal of the buyer on the quay
not cleared for import at port of destination
72
24
12) DDU: DELIVERED DUTY UNPAID
DDU

PLACE OF DELIVERY
The seller delivers the goods to the buyer not
cleared for import not unloaded from arriving
means of transport at place of destination
73
13) DDP : DELIVERED DUTY PAID

DDP

PLACE OF DELIVERY
The seller delivers the goods to the buyer cleared
for import and not unloaded from arriving
means of transport at place of destination
74
Recommended uses of
Incoterms 2000
+ Incoterms only relate to the contract for sales of tangible
goods
+ If parties agree on one of these 13 terms, the contract
should be clearly refer to the term
+ Incoterms only deal with number of obligations but
They do not fully cover the contract.
+ The parties could increase or lift some obligations but
these amendment shoud not change the basic meaning of
the terms
+ The parties should not coporate the transportation terms
in to the incoterms
+ Where goods is delivered by container, lighter, the 75
parties should use the FCA, CPT, CIP
25

Ch1 Incoterms SV

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International Trade

Tran Bich Ngoc

FOREIGN TRADE UNIVERSITY

Aug-09 INTERNATIONAL COMMERCIAL TERMS 2

The Trade Dilemma

Aug-09 INTERNATIONAL COMMERCIAL TERMS 5

Textbook and references

• Vu Huu Tuu, Ky Thuat Nghiep Vu

Chapter 1: INTERNATIONAL COMMERCIAL TERMS

Aug-09 INTERNATIONAL COMMERCIAL TERMS 8

Aug-09 INTERNATIONAL COMMERCIAL TERMS 10

Aug-09 INTERNATIONAL COMMERCIAL TERMS 11

set of uniform rules for

1990, 2000: 13 terms

13 terms in order of increasing

Aug-09 INTERNATIONAL COMMERCIAL TERMS 17

E Group 1 EXW Ex works The seller’s premises

C Group 5 CFR Costs and Freights

D Group 9 DAF Delivered at Frontier Place at the Frontier

12 DDU Delivered Duties Unpaid Place of Destination

Aug-09 INTERNATIONAL COMMERCIAL TERMS 20

Aug-09 INTERNATIONAL COMMERCIAL TERMS 21

Aug-09 INTERNATIONAL COMMERCIAL TERMS 22

Aug-09 INTERNATIONAL COMMERCIAL TERMS 23

INCOTERMS 2000 in details

Student should master the following details for

SELLER’S RISK BUYER’S RISK

EXW(...named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 27

Aug-09 INTERNATIONAL COMMERCIAL TERMS 28

EXW(...named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 29

EXW(...named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 30

Aug-09 INTERNATIONAL COMMERCIAL TERMS 31

EXW(...named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 32

EXW(...named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 33

Aug-09 INTERNATIONAL COMMERCIAL TERMS 34

2) FCA:FREE CARRIER (…named place)

SELLER’S RISK BUYER’S RISK

• The Seller must arrange the export clearance

FCA (...Named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 37

FCA (...Named place), Incoterms

Free Carrier The seller delivers the

FCA (...Named place), Incoterms

Aug-09 INTERNATIONAL COMMERCIAL TERMS 39

FCA (...Named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 41

FCA (...Named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 42

Aug-09 INTERNATIONAL COMMERCIAL TERMS 43

FCA (...Named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 44

FCA (...Named place),Incoterms 2000

Aug-09 INTERNATIONAL COMMERCIAL TERMS 45

SELLER’S RISK BUYER’S RISK

FAS (...Named Port of Shipment),

Aug-09 INTERNATIONAL COMMERCIAL TERMS 47

4) FOB : FREE ON BOARD

SELLER’S RISK BUYER’S RISK