CHAPTER 2:

INTERNATIONAL COMMERCE TERMS

CONTRACT ON INTERNATIONAL SALES OF GOODS

I. GENERAL VIEW OF INTERNATIONAL SALES

GOODS

OF

1. Definition
Purchase and Sale of Goods
VN Commercial Law 2005: Purchase and
sale of goods mean commercial activities whereby
the seller is obliged to deliver goods, transfer
ownership of goods to the purchaser and receive
payment; the purchaser is obliged to pay to the
seller and receive goods and the ownership
thereof as agreed.
International Sales of Goods.

I. GENERAL VIEW OF INTERNATIONAL SALES

GOODS

OF

VN C.L 2005 Art. 27 &28.

International purchase and sale of goods shall be
conducted in form of export, import, temporary
import for re-export, temporary export for re-import
and transfer through border-gates.
Export of goods means the bringing of goods out of
the territory of the Socialist Republic of Vietnam or
into special zones in the Vietnamese territory, which
are regarded as exclusive customs zones according
to the provisions of law.

II. INTERNATIONAL COMMERCIAL TERMS

1. Definition
-

Incoterms

are the ICC rules for the

interpretation of trade terms were created by

ICC with the aim of facilitating inter. Trade.
-

The Incoterms rules explain a set of threeletter trade terms reflecting business-business
practice in contracts for the sale of goods.

II. INTERNATIONAL COMMERCIAL TERMS

-

The Incoterms rules describe mainly the

obligations, costs and risks involved in the
delivery of goods from the seller to buyer.

2. Characteristics
-

Incoterms are ICC rules but no obligations of

applying to the Contract.

Use in the Contract for sale and purchase of

goods.

II. INTERNATIONAL COMMERCIAL TERMS

-

Choose the appropriate Incoterms rule in the

Contract.

Define exactly specific edition of Incoterms .

Incoterms does not deal with many issues

arising in or relating with the Contract.

Make additions, adjustment of Incoterms rules

in the Contract but keep principles and
featurers unchanged.

INCOTERMS 2010 11 terms

Group 1: Sea and Inland Waterway
1

FOB

Free on Board

Giao hng trn tu

FAS

Free alongside ship

Giao dc mn tu

CFR

Cost anf freight

Tin hng v cc ph

CIF

Cost, Insurance and Freight

Tin hng, cc ph v
BH

Group 2: Any mode or modes of transport

1

EXW

Ex Works

Giao ti xng

FCA

Free Carrier

Giao cho ngi CC

CPT

Carriage Paid to

Cc ph tr ti

CIP

Carriage Insurance paid to

Cc ph, BH tr ti

DAT

Deliveried at terminal

Giao ti bn

DAP

Delivered at place

Giao ti ni n

DDP

Delivered Duty paid

Giao ti ch thu tr

INTERNATIONAL SUPPLY CHAIN

II. INTERNATIONAL COMMERCIAL TERMS

SELLER

BUYER

A1

General obligations
of the Seller

B1

General obligations of
the Buyer

A2

Licenses,
B2
authorizations,
security clearances
and other formalities

Licenses,
authorizations,
security clearances
and other formalities

A3

Contracts of carriage B3
and insurance

Contracts of carriage
and insurance

A4

Delivery

B4

Take delivery

A5

Transfer of risk

B5

Transfer of risk

II. INTERNATIONAL COMMERCIAL TERMS

SELLER

BUYER

A6

Allocation of cost

B6

Allocation of cost

A7

Notices to the Buyer

B7

Notices to the Seller

A8

Proof of delivery

B8

Proof of delivery

A9

Checking Packing - B9
Marking

Inspection of goods

A10

Assistance with
information and
related cost

Assistance with
information and
related cost

B10

II. INTERNATIONAL COMMERCIAL TERMS

The Sellers Obligations

Features

E Group
EXW

F Group
FCA,
FOB, FAS

C Group
CFR, CIF,
CPT, CIP

D Group
DAT, DAP,
DDP,

Not bear
any of
cost and
risk for
goods
carriage

No
contract
for
Carriage

Contract
for
carriage

Bear all
cost and
risk for
goods
carriage

Distribution Departure Departure Departure Destination

of risk

II. INTERNATIONAL COMMERCIAL TERMS

Contract for None
carriage

Buyer

Seller

Seller

Clearance
for export

Buyer

Seller

Seller

Sleer

Clearance
for import

Buyer

Buyer

Buyer

Buyer:
DAT, DAP
Seller: DDP

Risk and Cost division

Buyer

Seller

Simultaneous:
Group E
Group F
Group D

Different points:
Group C
CFR, CIF: Risk passing like
FOB. The Seller bear all
transport cost and charges
to the destination port.
CPT, CIP: Risk pasing like
FCA. The Seller bear all
transport cost and charges
to the destination place.

II. INTERNATIONAL COMMERCIAL TERMS

4. Incoterms 2010 rules
4.1. EXW ( EX Works - named place of delivey)
EXW Garco10, Vietnam Incoterms 2010.

The Seller make delivery with no loading of

goods and clearance for export.

Risk and Cost: Fulfils his delivery obligation.

II. INTERNATIONAL COMMERCIAL TERMS

4.2. FOB ( Free on Board) named port of shipment)
FOB Haiphongport, Vietnam Incoterms 2010
-

Main Obligations of the Seller:

Delivery : goods are on board the vessel.

Clear the goods for export

Pay loading charges in case not included in the

freight of carriage contract.

II. INTERNATIONAL COMMERCIAL TERMS

Provide the usual proof of goods delivery.

Pass the risk and cost: Fulfils his delivery
obligation.
Q/A :
a. Why is FOB suitable with the mode of sea and
inland waterway transport?
b. What does early pass the risk and cost
mean?
c. FOB anyport of Vietnam, Incoterms 2010. T/F?

FOB

Goods

II. INTERNATIONAL COMMERCIAL TERMS

4.3. FAS ( Free alongside ship) named port of
shipment)
FAS Haiphongport, Vietnam Incoterms 2010
-

Main Obligations of the Seller:

Deliver : goods are on alongside the ship.

Clear the goods for export

Provide the usual proof of goods delivery.
Pass the risk and cost: goods delivered.

Q/A: Who bears loading and handling charges?

VIETNAM PORT DEPTH

Port
Province and city
Maximum depth
Cam Pha Quang Ninh
-9,0
Hon Gai Quang Ninh
-8,5
Hai Phong
Hai Phong -8,0
Da Nang Da Nang -12,0
Quy Nhon
Binh Dinh -9,0
Nha Trang
Khanh Hoa -9,0
Phu My Ba Ria -Vung Tau -12,0
Sai Gon Ho Chi Minh City -10,0
Cai Lan Quang Ninh
-13,0
Cai Mep Ba Ria -Vung Tau
-14,0
Dung Quat
Quang Ngai
-6,6
Chan May
Thua Thien Hue
-12,0
Ky Ha
Quang Nam
-6,3

II. INTERNATIONAL COMMERCIAL TERMS

4.4. FCA ( Free Carrier) named place of delivery
FCA Noibai Airport, Vietnam Incoterms 2010
-

Main Obligations of the Seller:

Delivery : goods are delivered to the carrier.

Place of delivery:
+ At the Sellers premise: loading.
+ Another place not the sellers premises:
unloading.

II. INTERNATIONAL COMMERCIAL TERMS

Clear the goods for export

Provide the usual proof of goods delivery.
Pass the risk and cost: goods delivered at the
point specified by the parties.

Q/A:
a. To compare FCA with FOB?
b. When does FCA replace for FOB incase of sea
and inland waterway transport?
c. Who is the carrier in the FCA rule?

II. INTERNATIONAL COMMERCIAL TERMS

d. In a contract F-termsHaiphong port, Incoterms 2010,
delivery

date

Feb.23,

2014,

goods

leave

the

sellerfactory in Hanoi on Feb.15, 2014, arrive at the

forwarders terminal in Haiphong port on Feb. 22, 2014
(date of the freight cargo receipt) and are received by
the ship on Feb.24, 2014 (date of boarding). When
does the FCA seller/FOB seller deliver??
e. FCA : What happens if the Seller delivers the goods
(and thus risk has passed to the buyer), but the the
seller fails to satisfy the required export formalities???

THE BOX THAT CHANGED THE WORLD

II. INTERNATIONAL COMMERCIAL TERMS

4.5. CFR ( Cost and Freight) named port of
destination)
CFR Haiphongport, Vietnam Incoterms 2010
-

Main Obligations of the Seller:

Contract

for

and

pay

the

costs,

freight

necessary to bring the goods to the named port

of destination.

Delivery : goods are on board of the vessel in

the port of shipment.

II. INTERNATIONAL COMMERCIAL TERMS

Provide the transport documents as proof of

delivery.
Transfer risk and cost:

Risk: Fulfils his delivery obligation in port of

shipment.

Cost: port of destination

Pay loading and unloading if included in the

freight of carriage contract.

II. INTERNATIONAL COMMERCIAL TERMS

Q/A :
a. For CFR rule, who will pay the additional cost
occurring after the time of delivery .?
b. Why does the Buyer agree to choose CFR rule
of Incoterms 2010? Is it so harmful to the Buyer
and beneficial for the Seller?
c. What is transport documents?
d. CFR = FOB + F.
T/F?
e. Filling in blank:

II. INTERNATIONAL COMMERCIAL TERMS

FOB Haiphong port,
Incoterms 2010
Seller
Contract of
carriage
Loading Port
Discharge
Port
Carrier

CIF Haiphong port,

Incoterms 2010

II. INTERNATIONAL COMMERCIAL TERMS

FOB Haiphong
port, In. 2010
Passing point of risk
Passing point of cost
Proof of Delivery
Contract Price
including Insurance
Loading charges
Unloading charges
Export Formalitites
Import Formalities

CIF Haiphong port,

In. 2010

FOB

BL

Goods

II. INTERNATIONAL COMMERCIAL TERMS

4.6. CIF ( Cost, Insurance and Freight) named port
of destination)
CIF Haiphongport, Vietnam Incoterms 2010
-

Main obligations of the Seller:

Pass risk and cost: like CFR

Obligations of the Seller in the CFR rule and

Contract of insurance:

+ Contract with an reputable underwriter or

insurance company.

II. INTERNATIONAL COMMERCIAL TERMS

+ Entitle the buyer or other person having insurable
interest in the goods.
+ At least with the minimum cover provided by
Clause C of LMA/IUA.
+ Cover at a minimum of 110% contract value.
+ With currency of the contract.
+ Time of cover: from the point of delivery to at
least the named port of destination.
+ Provide the proof of insurance contract.

II. INTERNATIONAL COMMERCIAL TERMS

Q/A :
a. For CIR rule, can the Buyer ask the Seller to
contract for insurance with higher clause and
value?
b. Why does the insurance contract cover at
minimum 110% of price of goods?
c. The Vietnamese traders should choose CIF or
CFR? Why?

II. INTERNATIONAL COMMERCIAL TERMS

4.7. CPT ( Carriage paid to) named place of
destination.
CPT Noibai airport, Vietnam Incoterms 2010.
-

Main obligations of the Seller:

+ Contract for carriage: see CFR

+ Delivery: deliver to the first carrier nominated by
the Seller at an agreed place.
+ Pass risk : fulfils his delivery obligation.

II. INTERNATIONAL COMMERCIAL TERMS

+ Pass cost: pay cost of carriage necessary to
bring the goods to the destination.
+ Clear for export.
+ Provide transport documents.
Q/A:
a. Comparing CPT with CFR , CPT with FCA
b. CPT = FCA + carriage cost.

II. INTERNATIONAL COMMERCIAL TERMS

4.8. CIP ( Carriage, Insurance paid to) named
place of destination.
CIP Tansonnhat airport, Vietnam, Incoterms 2010.
* Obligations of the Seller:
CIP = CPT + Insurance obligation
Insurance obligation: See CIF
Q/A: Except CIF, CIP, should the parties contract
for insurance? Why?

HOW TO SELECT THE SUITABLE TERMS

II. INTERNATIONAL COMMERCIAL TERMS

4.9. DAT ( Delivered at terminal) named terminal
at port or place of destination.
DAT Huunghi border gate, Vietnam, Incoterms
2010.
-

Main obligations of the Seller

Contract for and pay the costs, freight

necessary to bring the goods to the terminal at
the named place of destination.

II. INTERNATIONAL COMMERCIAL TERMS

Delivery : unload and place the goods at the

disposal of the buyer at a named terminal.

Clear the goods for export.

Provide the Buyer with documents for goods

receipt at the destination.

Transfer risk and cost to bring the goods to the

named terminal.

Q/A:- What is terminal mentioned in the DAT rule.?

II. INTERNATIONAL COMMERCIAL TERMS

4.10. DAP ( Delivered at Place) named place of
destination.
DAP

Foreign

Trade

Univeristy,

Vietnam

Incoterms 2010.
-

Main obligations of the Seller

Contract

for

and

pay

the

costs,

freight

necessary to bring the goods to the named

place of destination.

II. INTERNATIONAL COMMERCIAL TERMS

Delivery : place the goods at the disposal of the buyer

on the arriving means of transport at a named
terminal and ready for unloading.

Clear the goods for export.

Provide the Buyer with documents for goods receipt

at the destination.

Transfer risk and cost: deliver the goods as manner

said above.

Q/A: Can DAP replace for DAT?

II. INTERNATIONAL COMMERCIAL TERMS

4.11. DDP ( Delivered Duty paid) named place of
destination.
DDP

Foreign

Trade

Univeristy,

Vietnam

Incoterms 2010.
-

Main obligations of the Seller: Maximum

Contract for and pay the costs, freight

necessary to bring the goods to the named
place of destination.

II. INTERNATIONAL COMMERCIAL TERMS

Delivery : place the goods at the disposal of the

buyer on the arriving means of transport at a named
terminal and ready for unloading.

Clear the goods for export and import.

Provide the Buyer with documents for goods receipt

at the destination.

Transfer risk and cost: deliver the goods as the

manner said above.

Q/A: what are advantages and disadvantages of DDP?

II. INTERNATIONAL COMMERCIAL TERMS

FOB berth terms
FOB stowed
FOB trimmed
FOB shipment to destination:
FOB under tackle
CFR afloat
CFR landed hoc CIF ( landed)
CFR liner term
CFR FO, FI, FIO
CIF CQD ( custom quick dispatch)

II. INTERNATIONAL COMMERCIAL TERMS

CHOOSING AN APROPRIATE RULE OF INCOTERMS

1. Positions of contracting parties.

2. Features of goods, modes of packing and handling
as well as transactions.
3. Carriage distance.
3. Mode pf transport.
4. Port practices.
5. Notice of applying Incoterms.
Q/A: Why do VN trader usually use FOB for sale
contract and CIF for purchase contract? Can reverse
this practice?.

I want the
goods

I am sorry , it had
been lost

Group C
I will try to replace
in the next
shipment

The Buyer

Group D

The Seller

LA CHN IU KIN CSGH

LA CHN IU KIN CSGH