INTERNATIONAL TRADE TRANSACTION

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

Email: [email protected]
Phone: 0914676782
BIBLIOGRAPHY

• Book International trade transaction, 2012 Education Publication House of Vietnam

• Vietnam’s Commercial Law 2005 (Abolishing Clause 3 Article 28, Clause 3 Article 29, Clause 3
Article 30, Articles 31, 33, 242, 243, 244, 245, 246 and 247 of the Commercial Law No. 36/2005
/ QH11)
• Vietnam Law on foreign trade management 2018
• Vietnam’s Bidding Law 2013
• Decree No 187/2013 of the Government details implementation of the Commercial Law with
respect to international purchases and sales of goods, activities of agency for sale and purchase,
processing and transit of goods involving foreign parties.
• Decree No 69/2018 of the Government details implementation of the Law on Foreign Trade
Management 2018
• United Nation Convention on Contracts for the International Sales of Goods 1980
CHARACTERISTICS OF INTERNATIONAL TRADE TRANSACTIONS

• Principle of voluntary consent

• Parties of international trade transaction come from different countries

• Parties come from different countries therefore using supportive modern means of transportation

• Each party aims to obtain their own trade objectives

1. 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 conditions.

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
INQUIRY LETTER

I am a systems engineer at Bell trading. We are planning to launch a new cell phone model. We need an
advanced semiconductor for this project.
My company is considering using your new release semiconductors of your company.
We need, however, information about the following:
1. Discount
2. Unit price
3. Delivery
4. Term of payment
5. Warranty
I would be happy to talk to you further about your product. You can email me at [email protected]
 INQUIRY LETTER

Dear Sir,

Our company Vaxuco is working in the field of import and export in Hanoi, Vietnam. From the goods
description in your website, we are interested in your product “walk through Metal detector Garrett
PD 6500i” and should be glad if you would send us the price quotation for 20 above mentioned items
with the delivery term CIP Noi Bai, airport.

If the price offered is competitive and the quality is of the standard we require, we shall place large
orders with you in future.

Looking forward to receiving your prompt reply.

Thank you and best regards,

1. DIRECT TRADE TRANSACTION

- Free offer
+ Delivered to a number of potential buyers.
+ The seller does not commit to bind his obligation

- Firm offer and free offer: what is the difference

+ Title
+ Objective
+ Commitment to implement obligations of the offerer
+ Time validation
OFFER LETTER - QUOTATION

TERMS AND CONDITIONS OF VISLINK INTERNATIONAL OFFER #SQ 100000-01

Prices: in GBP and EXW Hemel Hemstead, UK and net to Tekcast, Vietnam. Any duties,
importation/customs charges or local taxes which may become due as a result of any purchase are the
responsibility of Tekcast, Vietnam.
Payment: Payment to be received into Vislink’s bank account prior to shipment.
Delivery: Typically 8-10 weeks from receipt of deposit and all technical information. Exact delivery time
will be confirmed with the order acknowledgement at the time of order.
Standard warranty: 12 months from shipment for Vislink manufactured equipment. 12 months from
shipment for 3rd party manufactured equipment. Warranty is on return to factory basis. Shipment to UK is
the responsibility of Tekcast.
Validity: 30 days from the date of the quotation
Terms: To Vinslink standard conditions of sale
 OFFER LETTER
Dear Mr Schmisth,
Thank you for your enquiry of 30 May 2015 and please find enclosed our offer for bamboo salad bowl sets No
05/VH-WM/15 and the latest catalogue. However, we would like to note the following points:

The price at which the goods are offered is $10.5 per set CIF Hamburg Germany including packing, firm within
three months, we also allow a 5% usual trade discount of FOB price for your first order.

We have the good available for immediate shipment from stock within 3 weeks from receipt of your official order
for order 2000sets.

Payment is to be made in US dollar by L/C at sight to be opened through CommerzBank, Muenchen 30 days prior
to the shipment.

We assure that our bamboo salad bowl sets are food safe, attractive in design, reasonable in price and will be
popular in Europe.

We look forward to your early order.

1. DIRECT TRADE TRANSACTION

1.3. Counter offer

+ Indicates the buyer’s bargain relating to price and other trade conditions which can be made at
many points of time.

1.4. Acceptance to offer

+ The agreement towards the conditions indicated in the offer letter.
+ Made in written form
+ Accept unconditionally
+ Or accept with reservation
• Extra conditions are requested to amend
ORDER

I am writing to confirm my acceptance of your

COUNTER OFFER

Thank you for sending us samples and quotations.

We’re interested in Vietnam Robusta Coffee Grade 1. Screen No.18 at USD 5050.00/FOB stowed
HCM port (Incoterms 2010). We find this kind of product suitable for our market, but the price is not
competitive compared with other suppliers, and payment term is not much convenient for us. If you
could come down to price USD 5000/MT and let we pay by irrevocable L/C at sight, we might be
able to order 30,000MT.

Your consideration of this matter and immediately reply would be appreciated.

1. DIRECT TRADE TRANSACTION

Effectiveness conditions

• Final offeree accepts

• Accept unconditionally

• Accept within the time validation of the offer letter

• Must be conveyed to the offerer

• Effective acceptance means contract is concluded

1. DIRECT TRADE TRANSACTION

2.5. Confirmation
The offerer or offeree confirms his commitment to implement obligations.
2. INTERMEDIARY TRADE

2.1. Concept
A transaction mode of goods is carried out via the third entity called authorized dealers

Vietnam Commercial law 2005, art.13

Commercial intermediary activities mean activities conducted by business entities in order to carry
out commercial transactions for one or more specified traders, and comprises representation of
business entities, commercial brokerage, purchase and sale of goods by authorized dealers, and
commercial agency.
2. INTERMEDIARY TRADE

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
2. INTERMEDIARY TRADE

2.1. Broker

An intermediary trader for the other traders involves in the negotiation, conclusion of a contract and
the benefits arising from 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.

2. INTERMEDIARY TRADE

2.2. 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 a contract

+ The relationship is on long term basis

- Based on the relationship between the principal and agent:

+ Mandatory agent

+ Commission agent

+ Merchandise agent
2. INTERMEDIARY TRADE

- Based on the jurisdiction of the agent

+ Off-take agency: a form a agency whereby the agent conducts the sale or purchase of a whole quantity of goods
or provides a complete service for principal.

+ Exclusive agency: within a specified geographical area, a principal authorizes only one agent to sell or purchase
one a number of specified lines of goods or to provide one a number of specified types of services.

+ General agency: the agent organizes a network of sub-agents to conduct the sale or purchase of goods or to
provide services for the principal.

- Based on the field of activities of an agent

+ Export agent

+ Import agent

+ Forwarder agent

+ Customer agent
2. INTERMEDIARY TRADE

- Agency contract:
+ Date of effectiveness and expiry of the contract
+ Product
+ Geographical area of activity
+ Rights and obligations of parties
+ Price
+ Remuneration
+ Expenses
+ Contract liquidation and termination
+ Signature
3. COUNTERTRADE

3.1. Concept

Counter trade means exchanging goods or 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 profit

- A monetary valuation is used mainly for accounting purposes.

- Mutual benefits are assured

3. COUNTERTRADE

3.3. Varieties of countertrade

a. Barter: Barter is the direct exchange of goods between two parties in a

transaction. The principal exports are paid for with goods or services supplied from
the importing market. A single contract covers both flows, in its simplest form
involves no cash. Goods and or
services
Seller Buyer
Goods and or
services
3. COUNTERTRADE

b. Compensation: Two parties exchange goods and or services on the

basis of real valuation which is compared at the end of the specified
period by the two parties. If a surplus between transactions arises, it
may be required to pay back for the creditors at the place of the debtor.
3. COUNTERTRADE

Payment in the shape

Payment in cash
of goods

Compensation deal
3. COUNTERTRADE

• McDonnell Douglas agreed to a compensation deal with Thailand for eight top of
the range F /A – 18 strike aircraft. Thailand agreed to pay $578 million of the total
cost in cash, and McDonnell Douglas agreed to accept $93 million in a mixed bag
of goods including Thai rubber, ceramics, furniture, frozen chicken and canned
fruit.

• General Motors Corporation sold $ 12 million worth of locomotive and diesel

engines to Yugoslavia and took cash and $4 million in Yugoslavian cutting tools as
payment.
3. COUNTERTRADE

Goods and/or services

Payment in cash
Seller Buyer

Goods and/or services

3. COUNTERTRADE

- Based on the delivery time of countertrade

+ Ordinary compensation

+ Pre-compensation

+ Parallel- compensation

- Based on the balanced valuation between delivery goods and counter goods

+ Partial compensation

+ Full compensation

+ Escrow account
3. COUNTERTRADE

c. Counter purchase
In counter purchase agreement seller receives the 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 into two different contracts. Counter
purchase is also called “Parallel Trading” or “Parallel Barter”.

Goods and/or services

Payment in cash

Seller Buyer
Goods and/or services

Payment in cash
3. COUNTERTRADE

Pepsi Cola sold concentrates in the USSR and got paid in Rubles, which
according to the agreement with Russia, these Rubles were spent for
purchase of Russian products like Vodka and wine.
3. COUNTERTRADE

d. Buy-back
- Under the buy-back agreement,  the seller supplies plant, equipment or technology and agrees to
buy goods produced with that plant, or equipment as payment.

- Typically, the buy-back deals are of much longer term and also of larger amounts. The seller of
equipment can receive a part of the payment in the shape of products produced by that equipment
and the remaining amount in the shape of cash. 
3. COUNTERTRADE
3. COUNTER TRADE

e. Offset

Offset is the type of countertrade, which is mostly related to very high value of exports and/or medium to
high technology capital goods supplied by a multinational corporations or a major manufacturer. It may
be in many forms such as coproduction, license production, subcontractor production, technology
transfer, overseas investment, research and development, technical assistance and training, or patent
agreements etc.,

- Direct offset: some components of the item sold are to be manufactured within the buyer’s country and
that the seller agrees to buy those components to use them in-house.

- Indirect offset: the buyer requires the seller to enter into a long term industrial or other co-operation and
investment, but this co-operation or investment is not related to goods supplied by the seller.
3. COUNTER TRADE
3. COUNTER TRADE

f. Switch trading
Switch Trading involves the role of third party in a countertrade transaction.  If a seller in the
countertrade does not want goods offered by the buyer as payment, it may bring in third party to
dispose of the merchandise offered by the buyer.  For example: An exporter in Poland exports
transport equipments to Greece and in return does not want processed food from the importer of
Greece as payment. It can sell the processed food to a German company, which will pay in Euros to
the Polish exporter, which is hard and convertible currency.  The following diagram will make the
example clearer.
3. COUNTER TRADE
3. COUNTER TRADE
3. COUNTER TRADE
3. COUNTERTRADE

3.4. Counter trade contract

- Varieties of countertrade contract:

+ Governments of two countries sign countertrade agreement: frame agreement, countertrade protocol, memorandum of
understanding, letter of undertaking.
+ Firms of two countries (two firms) sign countertrade contract: a single contract or a merged contract

- Content

+ Name and address of two parties

+ Commodity (Name and Quantity)

+ Price and determination of price

+ Delivery term

+ Payment

+ Claim
3. COUNTER TRADE

3.5. Guarantee methods for contract implementation

- Participation of the third party: a guarantor identified by both parties controls over the commodity

- A guarantor controls over the commodity document

- Open an account

- Penalty for breach

- Reciprocal L/C
4. INTERNATIONAL PROCESSING TRADE

4.1. Concept

Commercial processing means a commercial activity whereby the processor uses part or all of the
raw materials and supplies provided by the supplier in order to carry out one or more stages of the
production process at the request of the supplier to receive remuneration. (Vietnam Commercial Law
2005, art 178).
4. INTERNATIONAL PROCESSING TRADE

5.2. Characteristics

- Headquarter of both parties are located in different countries.

- Property right is reserved for parties

- Wages of employees are paid upon the working hour

- Preferential tariff and custom procedure

4. INTERNATIONAL PROCESSING TRADE

- Providing materials and receiving finished products

Supplier Processor
5. INTERNATIONAL PROCESSING TRADE

5.2. Selling material and purchasing finished product

Supplier 3 Processor
4
4. INTERNATIONAL PROCESSING TRADE

- Multiple subjects processing

Supplier First Processor

3 2

Second processor
4. INTERNATIONAL PROCESSING TRADE

4.4. Commercial processing contract

- Names and addresses of parties
- Finished products
- Materials: Classify materials, unintentional loss, Loss arising from production
- Machines
- Brand name of products
- Finished product inspection
- Price
- Delivery
- Dealing with redundant materials
- Liquidating machines
- Claim for indemnity
- Expiry date
5. INTERNATIONAL AUCTION

5.1. Concept
Auction of goods means a commercial activity whereby the seller itself conducts, or hires an
auctioneer to conduct, the public sale of goods in order to select the purchaser offering the highest
price

5.2. Characteristics

+ Identified place and time

+ Visible and hardly standardized goods

+ Rules imposed by the seller

+ Buyers freely compete

5. INTERNATIONAL AUCTION

5.4. Varieties of international auction

- For profit auction

- For nonprofit auction

+ Antique

+ Liquidation goods, inventory

+ Ownerless goods

+ Items of bankruptcy firms

5. INTERNATIONAL AUCTION

5.5. Steps to conduct an auction sale

- Preparation

+ To sign the contract with an auctioneer

+ To deliver the goods to the auctioneer

+ To classify goods

+ To make rules for an auction sale:

• Item list

• Pre-inspection

• Fixing a reserve price

• To identify the currency of payment

• To deposit

• Other fees
6. INTERNATIONAL AUCTION

- To notify an auction sale

- To display the goods to be auctioned

- Opening an auction sale

• Upward bidding method means the auction method by which the bidder offering the highest price
compared with the reserve price has the right to purchase the goods.
• Downward bidding method means the auction method by which the first bidder accepting the
reserve price or a price lower than the reserve price has the right to purchase the goods.

- To sign the contract and to deliver the goods

6. INTERNATIONAL TENDERING
Tendering Law 2005

6.1. Concept

Means a commercial activity whereby one party purchases goods or services by way of an invitation
to tender (referred to as the party calling for tenders ) aimed at selecting from a number of business
entities participating in the tendering (referred to as the tenderers) the business entity which best
satisfies the requirements stipulated by the party calling for tenders and which is selected to enter
into and to perform a contract (referred to as the successful tenderer).

Tenderers have the headquarters in different countries.

6. INTERNATIONAL TENDERING

6.2. Characteristics

- Time and place are specified

- High value commodity

- The Buyer dominates the market

- The bidding is carried out upon terms pre-stipulated

- The Buyer depends on conditions of loan and capital usage.

6. INTERNATIONAL TENDERING

6.3. Forms of tendering

- Based on the form of tendering invitation
+ Open tender
• Prequalification
• No prequalification
+ Limited tender
+ Single tender
- Based on method of tendering
+ One envelope, one phrase tendering
+ Two envelopes, one phrase tendering
+ Dual phrases
6. INTERNATIONAL TENDERING

- Based on tendering objective

+ Construction tendering

+ Procurement tender

+ Consultancy tendering
6. INTERNATIONAL TENDERING

6.4. Rules on international tendering

FIDIC (International federation of consulting engineers)

+ Compete under the equivalent conditions

+ Figures are fully provided

+ Equal assessment

+ Three subjectives

+ Warranty
6. INTERNATIONAL TENDERING

6.4. Rules on international tendering

Asian development bank

+ The origin of good can be clearly identified

+ Economical and effective

+ Parties have equal and full chances to approach

- World Bank

+ Appropriate tendering package

+ Early notification

+ Non-discrimination, accessible and neutral

+ Fulfilment, confidential, consistent, objective, no pre-negotiation prior contract.

6. INTERNATIONAL TENDERING

6.5. Procedure

- Preparation

+ Planning for tendering

+ Making tendering charter

+ Tendering notification

+ Establishing an expert team who assess and appraise tendering document

- Tendering organization

+ Supplying tendering document

+ The contractor makes a construction site visit

+ Questions and Answers relate to tendering documents

6. INTERNATIONAL TENDERING

+ Receiving tendering document

+ Tendering opening

+ Assessing tendering document

+ Submitting tendering

+ Determining tendering result

+ Approving tendering result

- Notifying the tendering result

- Negotiating and signing the contract

6. INTERNATIONAL TENDERING

6.6. Tendering contract

Standard contract comprises general and specific clauses as follows:

- Name of the goods or services/ the subject of the tendering

- Quantity or weight

- Specification or technical requirement

- Price

- Form of contract

- Time validation and

- Payment method

- Acceptance and delivery conditions

6. INTERNATIONAL TENDERING

- Warranty

- Right and obligation of two parties

- Obligation arising from breaching

- Time validation

- Other terms and conditions

7. RE-EXPORT

7.1. Concept
Re-export means exporting goods which were previously imported and those goods are required not
to be processed in the territory of a re-exporting country.

7.2. Characteristics

- Goods are not processed in the country where goods are transited

- High demand of the products

- Preferential tax

- Profit is obtained upon the difference between values of the two contracts

- Participation of parties
7. RE-EXPORT

7.3. Varieties

- Conventional re-export

Exporter

1 4

Re-exporter Importer
2
7. RE-EXPORT

- Transit of goods

Exporter

3 1

Re-exporter Importer
2
7. RE-EXPORT

7.4. Contract

Two contracts: Export-transit and Transit-Import

7.5. Guarantee method for the fulfillment of the contract

- deposit/performance bond

- penalty

- Back to back L/C Exporter

L/C 2

Re-exporter Importer
L/C 1
8. COMMODITY EXCHANGE

8.1. Concept

• Art 63, Vietnam commercial law 2005: “Purchase and sale of goods via the Commodity Exchange
means a commercial activity by which the parties agree to implement a purchase and sale of a
certain quantity of a certain type of goods via the Commodity Exchange in accordance with the
standards of the Commodity Exchange and at a price agreed at the time of entering into the
contract, and the time of delivery of goods is determined to be at a future point in time”.
8. COMMODITY EXCHANGE

8.2. Varieties

- Spot transaction (FX spot): is an agreement between two parties to buy one good against selling
another good at an agreed price for settlement on the spot date.

- Forward transaction

+ The price is specified at the date of contract signed.

+ Purchase or sale of a good or service at a certain price for delivery on a fixed future date.
9. COMMODITY EXCHANGE

Forward transaction
1 (1) The seller and buyer signed a contract
Seller Buyer on 1 of August, good delivered in 3
(upward (downward months with the unit price of 300USD/MT.
price) price) xuống)
3 2 (2) On 1 of November when the contract is
liquidated, the price decreased at
250USD/MT. The buyer lost 50USD/MT,
Clearing payment is made to clearing house.
house
(3) The seller gained 50USD/MT and
obtained the difference value from the
clearing house.
8. COMMODITY EXCHANGE

Hedging

2
Seller 1 Buyer
1//8, 300USD/MT
300USD
/MT 4 3

50USD/MT 50USD/MT

Clearing house