Chapter 12: International Trade Terms

1.Introduction International trade terms should be clearly and reasonably stated in the contract so as to clarify the duties and obligations, price terms is the key point. International trade terms should be clearly and reasonably stated in the contract so as to clarify the duties and obligations, price terms is the key point. Price terms Price terms –Unit price Measuring unit, price, money of account, trade terms –Total price

2. Trade Terms Explain the price composition; Explain the price composition; Rights and obligations of the parties concerned; Rights and obligations of the parties concerned; has four categories E, F, C, D, which specified as departure, main carriage unpaid, main carriage paid and arrival. has four categories E, F, C, D, which specified as departure, main carriage unpaid, main carriage paid and arrival.

3. 3. E-term EXWORKS E-term EXWORKS –The seller makes the goods available to the buyer at the seller ’ s own premises F-terms FCA, FAS, FOB F-terms FCA, FAS, FOB –The seller is called upon to deliver the goods to a carrier appointed by the buyer C-terms CFR, CIF, CPT, CIP C-terms CFR, CIF, CPT, CIP –Where the seller has to contract for carriage, but without assuming the risk of loss of or damage to the goods or additional costs due to events occurring after shipment and dispatch D-terms DAF, DES, DEQ, DDU, DDP D-terms DAF, DES, DEQ, DDU, DDP –The seller has to bear all costs and risks needed to bring the goods to the country of destination

4. FOB (1) Seller clear the goods for export and fulfils obligations to deliver when the goods have passed over the ship ’ s rail at the named port of shipment Seller clear the goods for export and fulfils obligations to deliver when the goods have passed over the ship ’ s rail at the named port of shipment Buyer has to bear all costs and risks of loss of or damage to the goods from the time when the goods have passed over the ship ’ s rail Buyer has to bear all costs and risks of loss of or damage to the goods from the time when the goods have passed over the ship ’ s rail Only be used for sea or inland waterway transport Only be used for sea or inland waterway transport

4. FOB (2) FOB is followed by “ port of shipment ” instead of “ port of destination ” FOB is followed by “ port of shipment ” instead of “ port of destination ” The buyer should send the ship just in time The buyer should send the ship just in time In order to avoid discrepancies, following forms of FOB can be used: In order to avoid discrepancies, following forms of FOB can be used: –FOB Liner Terms –FOB Under Tackle –FOB Stowed –FOB Trimmed –FOB Stowed and Trimmed

5. CFR and CIF Seller clear the goods for export and pay the costs and freight to bring the goods to the port of destination; Seller clear the goods for export and pay the costs and freight to bring the goods to the port of destination; Buyer bear the risk of loss of or damage to the goods occurring after the time the goods have been delivered on board the vessel and pass the ship ’ s rail in the port of shipment Buyer bear the risk of loss of or damage to the goods occurring after the time the goods have been delivered on board the vessel and pass the ship ’ s rail in the port of shipment Only be used for sea or inland waterway transport Only be used for sea or inland waterway transport Different interpretations about customary practices Different interpretations about customary practices –CFR Liner Terms –CFR Landed –CFR Ex Ship ’ s Hold CIF require the seller only paid the insurance on minimum coverage CIF require the seller only paid the insurance on minimum coverage

6. Definitions of the Trade Terms in (1) EX WORKS EX WORKS –Minimum obligation for the seller, buyer has to bear all costs and risks involved in taking goods from the seller ’ s premiers FCA FCA –Seller handed over the goods, cleared for export, into the charge of the carrier –Used for any modes of transport –Carrier: any person who undertakes to perform the carriage –Transport terminal –Container

6. Definitions of the Trade Terms in (2) FAS FAS –The seller delivers when the goods are placed alongside the vessel at the port of shipment –Seller clear the goods for export –Only be used for sea or inland waterway transport FOB, CFR and CIF FOB, CFR and CIF CPT CPT –Seller pays the freight for the carriage of the goods to the destination –Seller clear the goods for export –Used for any modes of transport

6. Definitions of the Trade Terms in (2) CIP CIP –Same to CPT but with the seller has to procure insurance even on minimum coverage –Seller to clear the goods for export –Used for any modes of transport DAF DAF –The goods are to be delivered at a land frontier not for port DES DES –The seller delivers when the goods are placed at the disposal of the buyer on board –Only be used for sea or inland waterway transport

6. Definitions of the Trade Terms in (3) DEQ---delivered Ex Quay DEQ---delivered Ex Quay DDU---Delivered Duty Unpaid DDU---Delivered Duty Unpaid DDP---Delivery Duty Paid DDP---Delivery Duty Paid

7. How to determine the price for import and export (1) Appropriate trade terms Appropriate trade terms Reasonable price Reasonable price Favorable money of account Favorable money of account Set price adjustment clauses Set price adjustment clauses Flexible offer commissions and discounts Flexible offer commissions and discounts

7. How to determine the price for import and export (2) Pricing Pricing ---fixed pricing ---flexible pricing ---partial fixed price and partial unfixed price ---floating pricing

8. Selection money of account Hard currency should be chosen for export; Hard currency should be chosen for export; Soft currency for import; Soft currency for import; If unfavorable currency has to be adopted, to make corresponding adjustment and quotation If unfavorable currency has to be adopted, to make corresponding adjustment and quotation

9. Commission and Discount Commission is the service fees charged by the agents or brokers for the transaction made for their principals; Commission is the service fees charged by the agents or brokers for the transaction made for their principals; Discount is the price deduction allowed by the seller to the buyer. Discount is the price deduction allowed by the seller to the buyer.

Comprehension questions (Page 189)