CHAPTER 2: ESSENTIAL TYPES OF INTERNATIONAL COMMERCIAL

TRANSACTIONS.

The chapter introduces some classical types of international commercial transactions,

including:
• Direct transactions
• Purchase of international goods through intermediaries
• Counter trade
• Processing
• International auction
• International bidding
• Trading at international fairs and exhibitions
• Trading in Commodity Exchanges

2.1. Direct transactions:

2.1.1. Concepts.
International sales are transactions in which the buyer and the seller are from
different nations. There are many types of international sales as follow:
2.1.1.1 Exports.
Export means to send goods or services across national frontiers for the purpose
of selling and realizing foreign exchange and import of goods means Products of foreign
origin brought into a country (National Assembly, 2005)
According to Article 28, Law on Commerce of Vietnam , 2005 stipulates 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.
On the basis of socio-economic conditions in each period and treaties to which the
Socialist Republic of Vietnam is a contracting party, the Government shall specify the
lists of goods banned from import and/or export, goods to be imported or exported under
permits of competent state management agencies, and the procedures for granting permits
2.1.1.2 Imports.
Import of goods means the bringing of goods into the territory of the Socialist
Republic of Vietnam from foreign countries or special zones in the Vietnamese territory,
which are regarded as exclusive customs zones according to the provisions of law
(National Assembly, 2005).

23
2.1.1.3 Temporary Import for re – export.
According to article 29 Law on Commerce of Vietnam 2005 stipulates:
Temporary import of goods for re-export means the bringing of goods into Vietnam from
foreign countries or special zones locating in the Vietnamese territory, which are
regarded as exclusive customs zones according to the provisions of law, with the
completion of the procedures for importing such goods into Vietnam, then procedures for
exporting the same goods out of Vietnam.
2.1.1.4 Temporary Export for re- import.
According to article 29 Law on Commerce of Vietnam 2005 stipulates:
Temporary export of goods for re-import means the bringing of goods overseas or into
special zones in the Vietnamese territory which are regarded as exclusive customs zones
according to the pro
visions of law, with the completion of procedures for exporting such goods out of
Vietnam, then procedures for importing the same goods back into Vietnam
2.1.1.5 Cross – Border Transshipment (Transfer of goods through border-gates)
Transfer of goods through border-gates indicates the activity of the buying and
selling of goods and services between businesses in neighboring countries, with the seller
being in one country and the buyer in the other country, for example, a company in the
United States selling to a company in Canada.
Law on Commerce of Vietnam 2005- VN, Article refers Transfer of goods
through border-gates means the purchase of goods from a country or territory for sale to
another country or territory outside the Vietnamese territory without carrying out the
procedures for importing such goods into Vietnam and the procedures for exporting such
goods out of Vietnam.
Transfer of goods through border-gates shall be conducted in the following forms:
a/ Goods are transported directly from the exporting country to the importing country
without going through Vietnamese border-gates;
b/ Goods are transported from the exporting country to the importing country through
Vietnamese border-gates without carrying out the procedures for importing them into
Vietnam and the procedures for exporting them out of Vietnam;
c/ Goods are transported from the exporting country to the importing country through
Vietnamese border-gates and brought into bonded warehouses or areas for transshipment
of goods at Vietnamese ports without carrying out the procedures for importing them into
Vietnam and the procedures for exporting them out of Vietnam.
The Government shall provide for in detail activities of transfer of goods through
border-gate. One type of trade included in types of international trade is intra-industry
trade in which importers import goods that are similar to those produced in the country.

24
2.1.2. Current regulations of Vietnam in ordinary international sales.
Current regulations in international sales are regulated in Commercial Law 2005
of Socialist Republic of Vietnam and Decree on detailing implementation of the Law on
Commerce of Vietnam No. 69/2018/ND-CP.
Following are some main contents that need to be considered:
Import and export licensing procedures
Vietnam does not require a company to have an import/ export license in order to
set up a trading company. However, in order to be able to conduct import/ export
business, a foreign investor must register with the Department of Planning and
Investment. Additionally, foreign investors who wish to engage in import/ export
activities in Vietnam are required to obtain an Investment certificate. Companies that
wish to expand their current business operations in order to engage in import/ export
activities must follow the procedures for adjusting their Investment certificates.
According to Circular 34/2013/TT-BCT, there are certain goods that foreign
invested enterprises may not export from or import into Vietnam. Goods banned for
export include petroleum oil. Goods banned from import into the country include cigars,
tobacco, petroleum oils, newspapers and journals, and aircraft. Certain goods require the
trading company to obtain import and export permits from the government, these include:
Goods subject to export control in accordance with international treaties to which
Vietnam is a contracting party.
Goods exported within quotas set by foreign countries.
Goods subject to import control in accordance with international treaties to which
Vietnam is a contracting party.
Explosive pre-substances and industrial explosives.
All imports and exports must comply with the relevant government regulations on
quarantine, food safety, and quality standards, and must be inspected by the relevant
government agencies before clearing customs.
Import/ Export duties
Most goods imported/ exported across the borders of Vietnam, or which pass between
the domestic market and a non-tariff zone, are subject to import/ export duties.
Exceptions to this include goods in transit, goods exported abroad from a non-tariff zone,
and goods passing from one non-tariff zone to another.
Most goods and services being exported are exempt from tax. Export duties (ranging
from zero percent to 45 percent and computed on free-on-board price) are only charged
on a few items, mainly natural resources such as minerals, forest products, and scrap
metal.

25
 Consumer goods, especially luxury goods, are subject to high import duties, while
machinery, equipment, materials and supplies needed for production, especially those
items which are not produced domestically, enjoy lower rates of import duties, or even a
zero percent tax rate. Duty rates for imported goods include preferential rates, special
preferential rates, and standard rates depending on the origin of the goods.
Import/ export duties declaration is required upon registration of customs declarations
with the customs offices. Export duties must be pain within 30 days of registration of
customs declarations. For imported goods, import duties must be paid before receipt of
consumer goods.
Depending on the trade conditions, Vietnam imposes a number of different types of
duties on the import and export of goods. Companies wishing to find in-depth
information on a range of goods would be well advised to visit the website of Vietnam
Customs.

2.1.3. Characteristics of ordinary international sales.

Cross border participation: There are lots of parties involved in an international
sales transaction such as exporter, importer, freight forwarder, shipping company,
transporter, insurer … who may be from different countries.
Foreign currency: currency in the contract can be of the buyer, the seller, or a third
party. Therefore, it will be foreign currency for at least one party.
Different laws applied across borders: parties in the contract are from different
countries so governing law is diversified and complicated. Law sources may be
International trade treaties, National laws, and International trade practices.
Transfer of goods/services across borders: Commodities are often transported
from this country to another or others.
Basically, any flow of value across borders.

2.1.4. Pros and cons of ordinary international sales.

The pros:
International growth
There is a possibility exporting companies can achieve levels of growth not possible
domestically in international markets. Therefore, a company’s sustained revenues from a
well-diversified portfolio of overseas customers are vital for a business to benefit.
ROI
Overseas trade works to increase financial performance and ultimately augment the
returns on investment. There is then potential for businesses to amplify the commercial

26
lifespan of existing products and services, even if they had become less popular in
domestic markets.
Spreading business risk
A company may protect itself from unprecedented global disasters and market
upsets such as financial meltdown, earthquakes and civil unrest through overseas
business. The home market of a business could contract or even disappear during these
unstable times, but the business may be saved by the revenue it generates overseas.
Market competition
If a business competes in several markets, then it may have the ability to thrive
overseas. Companies can improve their competitiveness through the observation of a
range of trends in quality, product development, design and packaging.
Exchange rates
As a business begins to trade overseas the reliance it has on its domestic market
reduces and risks can be spread, especially in relation to exchange rates. For example, if a
business does most of its trade in US Dollars it may be beneficial for said business to
trade
with Japan to spread the exchange rate risk between the Dollar and the Yen, therefore
creating benefit for the company.
The cons:
Exchange rate risk
Because exchange rates fluctuate there is also risk business trading in foreign
currencies may not be able to forecast finances accordingly. Currency fluctuations could
affect either the value of existing assets or liabilities denominated in foreign currency.
This could ultimately result in a business becoming less competitive overnight, resulting
in a loss of sales and loss of revenue.
Political risk
Investing in different countries whose political regimes can change over time also
poses a few risks. Governments could discriminatorily change laws, regulations or
contracts governing an investment. Interest in emerging markets has soared and host
countries have learned more value can be extracted from foreign enterprises through
regulatory control. Firms engaged in international business use a combination of legal
contracts, insurance and trade in financial instruments to protect income streams. These
approaches, however, offer little protection against policy risk.
Cultural risk
In addition to policy, cultural differences could create problems for businesses
wanting to trade overseas. Failure to take into account different cultures might lead to
damaging and costly mistakes. This could range from causing offence by not observing

27
correct protocol, to inappropriate packaging and marketing. It goes without saying that
the marketing of a certain business in one western country might differ to that of a
country that is still developing and has differing cultural habits and beliefs.
Credit risk
It is very easy to overlook the risk of non-payment when trading overseas too.
Businesses should establish the credit rating of potential clients in many countries and
guard against non-payment through, for instance, letter of credit or arrange credit
insurance. The risk comes with the impact of a customer’s financial drawback of the firm
and how to finance the offered credit period.

2.2. Purchase of international goods through intermediaries

2.2.1 Concepts
Purchase of international goods through intermediaries is the mode of transaction in
which two parties buy and sell through a third party to sign and perform the contract
(National Assembly, 2005).
The forms of selling goods through intermediation are usually expressed in the form
of: Representation of traders, commercial brokerage, purchase and sale of goods by
mandated dealers, and commercial agency (National Assembly, 2005)

2.2.2 Types of purchase of international goods through intermediaries

* Representation of traders:
Representation of traders means an activity whereby a trader (referred to as
representative) is authorized by another trader (referred to as nominator)
- Obligations of representatives
Unless otherwise agreed, a representative shall have the following obligations:
1. To conduct commercial activities in the name and for the interest of the
nominator;
2. To notify the nominator of opportunities and results of performance of
authorized commercial activities;
3. To follow instructions of the nominator if such instructions do not violate the
provisions of law;
4. To refrain from conducting commercial activities in his/her/its own name or in
the name of a third party within the scope of representation;
5. To refrain from disclosing or supplying to other people secrets related to
commercial activities of the nominator during the period of representation and
within two years after the termination of the representation contract;

28
 6. To preserve assets and documents assigned for performing activities of
representation.
- Obligations of nominators
Unless otherwise agreed, a nominator shall have the following obligations:
1. To notify the representative immediately of the signing of contracts negotiated
by the representative, the performance of contracts entered into by the
representative, and the acceptance or non-acceptance of activities conducted by
the representative outside the scope of representation;
2. To supply assets, documents and information necessary for the representative to
perform activities of representation;
3. To pay remuneration and other reasonable expenses to the representative;
4. To notify promptly the representative of the impossibility of entering into or
performing the contract within the scope of representation
* Commercial brokerage
Commercial brokerage means a commercial activity whereby a trader acts as an
intermediary (referred to as broker) between parties selling and purchasing goods or
providing commercial services (referred to as principals) in the course of negotiations and
entering into contracts for sale and purchase of goods or provision of services and shall
be entitled to a remuneration under a brokerage contract.
- Obligations of commercial brokers
Unless otherwise agreed, a commercial broker shall have the following obligations:
1. To preserve samples of goods and documents assigned for the performance of
brokerage activities, and to return them to the principals after the completion of
brokerage;
2. Not to disclose or supply information to the detriment of the interests of the
principals;
3. To be responsible for the legal status, but not for the solvency, of the principals;
4. Not to take part in the performance of contracts between the principals, except
where so authorized by the principals.
- Obligations of principals
Unless otherwise agreed, a principal shall have the following obligations:
1. To supply information, documents, necessary means related to goods and
services;
2. To pay brokerage remuneration and other reasonable expenses to the broker.
* Purchase and sale of goods by mandated dealers
Purchase and sale of goods by mandated dealers mean commercial activities
whereby the mandatory conducts the purchase and sale of goods in his/her/its own name

29
under terms agreed upon with the mandator and is entitled to receive mandate
commission.
- Mandatories
A mandatory for purchase and sale of goods is a trader dealing in goods which are
consistent with the mandated goods and conducting the purchase and
Obligations of mandators
Unless otherwise agreed, mandators shall have the following obligations:
1. To provide information, documents and means necessary for the performance of
mandate contracts;
2. To pay mandate commissions and other reasonable expenses to mandatories;
3. To hand over money and goods as agreed upon;
4. To bear joint responsibility in cases where mandatories commit law violations
which are attributable to acts of mandators or intentional law-breaking act
- Mandators
A mandator of purchase and sale of goods may, or may not, be a trader that
authorizes a mandatory to conduct the purchase and sale of goods at his/her/it
Obligations of mandatories
Unless otherwise agreed, mandatories shall have the following obligations:
1. To conduct the purchase and sale of goods as agreed upon;
2. To notify mandators of matters related to the performance of mandate contracts;
3. To follow instructions of mandators as agreed upon;
4. To preserve assets and documents assigned to them for the performance of
mandate contracts;
5. To keep secret information related to the performance of mandate contracts;
6. To hand over money and goods as agreed upon;
7. To bear joint responsibility for law violation acts of mandators, in cases where
such law violation acts are partially attributable to their own faults
* Commercial agency
Commercial agency means a commercial activity whereby the principal and the
agent agree that the agent, in its own name, sells or purchases goods for the p
- Forms of agency
1. Off-take agency is a form of agency whereby the agent definitely sells or
purchases a specific quantity of goods or provides a full service for the principal.
2. Exclusive agency is a form of agency whereby a sole agent is authorized by the
principal to sell or purchase one or more goods items or to provide one or more
types of services within a given geographical area.

30
 3. General goods sale or purchase or service provision agency is a form of agency
whereby an agent organizes a network of sub-agents to sell or purchase goods or
provide services for the principal.
The general agent represents the network of sub-agents. Sub-agents operate under
the management and in the name of the general agent.
4. Other forms of agency agreed upon by the parties
- Obligations of principals
Unless otherwise agreed, principals shall have the following obligations:
1. To guide, supply information to, and facilitate, agents to perform agency contracts;
2. To bear responsibility for quality of goods of goods sale or purchase agents, and
quality of services of service-providing agents;
3. To pay remuneration and other reasonable expenses to agents;
4. To return to agents their assets used as security (if any) upon the termination of agency
contracts;
5. To bear joint responsibility for law violation acts of agents if such law violation acts
are partly attributable to their faults
- Obligations of agents
Unless otherwise agreed, agents shall have the following obligations:
1. To purchase or sell goods or provide services to customers at prices or charge rates
fixed by principals;
2. To comply strictly with agreements on handover and receipt of money and goods with
principals;
3. To take security measures for performance of civil obligations as provided for by law;
4. To pay to principals any proceeds of the sale of goods, for sale agents; to deliver
purchased goods to principals, for purchase agents; or to pay service charges to
principals, for service-providing agents;
5. To preserve goods after the receipt thereof, for sale agents, or prior to the delivery
thereof, for purchase agents; to bear joint responsibility for quality of goods of purchase
or sale agents or quality of services of service-providing agents in cases where they are at
fault;
6. To submit to inspection and supervision by principals, and to report to principals on
their agency activities;
7. Where it is specified by law that an agent shall be allowed to enter into an agency
contract with a principal for a certain type of goods or service, such provision of law
must be strictly followed.

31
2.2.3 Pros and cons of purchase of international goods through intermediaries
* Pros:
- Intermediaries are often persons who have knowledge of local laws and practices and
have the capacity to promote sales and avoid risks to the trustee.
- Intermediaries, especially agents often have certain facilities, so when using them, the
trustee does not need to do direct investment into foreign countries.
- Thanks to intermediary services in sorting, packaging, the trustee can reduce
transportation costs.
* Cons:
- The import-export business loses its direct contact with the market.
- Capital is often occupied by the agent
- Companies often have to meet the requirements of agents and brokers.
- The profit of the company is shared.

2.2.4 Current regulations of Vietnam in Purchase of international goods through

intermediaries
- Firstly: It is allowable act as agents only for the items having the business
registration inscribed in the permits
- Second: When acting as sale agents for foreign countries, Vietnamese traders shall
have to open separate accounts at banks for payment under the guidance of the State
Bank of Vietnam. However, traders may pay for goods not subject to export ban,
conditional export goods. In case of payment by goods on the list of goods subject to
conditional export, they must be approved by the competent authorities
- Third, when acting as agents to help foreign parties purchase goods, Vietnamese
traders shall have to request foreign partners to transfer foreign currency (ies) which are
capable of being converted through banks so that Vietnamese parties may use such
money to buy goods.
- Fourth: Goods under the agency of goods purchase and sale agency with foreign
traders shall be subject to taxes and other financial obligations as prescribed by
Vietnamese law.
- Fifth: goods under sale and purchase contracts with foreign traders, when being
exported or imported, shall be carried out by Vietnamese traders as for other import and
export goods.
- Sixth: Goods under sale agency contracts in Vietnam for foreign traders to be re-
exported if they cannot be sold in Vietnam and tax shall be rebated.

32
2.3 Counter Trade.
Over the last few decades there has been an enormous increase in countertrade
throughout the world, and the breakup of the state-planned economies of Eastern Europe
only served to accelerate this development. Some estimates suggest that in anything up to
33 percent of world trade, countertrade at least forms part of the negotiations, although
final payment might actually be made in currency.
It is obvious that the severe hard-currency shortages experienced by many developing
countries lead to countertrade being seen as the only way in which international trade can
occur in some situations.

2.3.1 Concepts
Countertrade is any commercial arrangement in which sellers or exporters are
required to accept in partial or total settlement of their deliveries, a supply of products
from the importing country. In essence, it is a nation’s (or firm’s) use of its purchasing
power as a leverage to force a private firm to purchase or market its marginally
undesirable goods or exact other concessions in order to finance its imports or obtain
needed hard currency or technology. Although the manner in which the transaction is
structured may vary, the distinctive feature of such arrangements is the mandatory
performance element that is either required by the importer or the importer’s government,
or made necessary by competitive considerations (Verzariu, 1992)

2.3.2 Characteristics of countertrade.

Exporter is also importer.
Currency is not a payment tool but a calculation one.
Types of commodity in countertrade are more than those of ordinary international
sales. High value goods can be exchanged for other high value goods. Low value goods
can be exchanged for low value goods.

2.3.3 Types of countertrade.

The expression “countertrade” actually covers a variety of possible procedures,
which include:
Barter means the exchange of goods or services directly for other goods or
services without the use of money as means of purchase or payment. It refers to the direct
exchange of goods between two parties in a transaction.
Bartering brings benefits to individuals, companies and countries that see a mutual
benefit in exchanging goods and services rather than cash, and it enables those who are
lacking hard currency to obtain goods or services.

33
 Barter is not uncommon in Africa and Latin America and is preferred by some oil-
dependent economies. There are specialist consultants who will handle the disposal of the
bartered products on behalf of the exporter.
For example: barter 4 tons of coffee for 1 TOYOTA automobile.
Drawbacks: Delivery is not taken at the same time so there will be difference in
credit.
Switch trading refers to practice where one company sells to another its
obligation to make a purchase in a given country.
For example: Vinaconex takes delivery of brick from an Italian company,
meanwhile Bim Son Cement Company owes Vinaconex a sum of money. Therefore,
Vinaconex requires Bim Son to deliver cement for Italian company.
Counter purchase is the agreement of an exporter to purchase a quantity of
unrelated goods or services from a country in exchange for and approximate in value to
the goods exported. An agreement where one company agrees to sell products to a
foreign purchaser for cash, but also simultaneously agrees to purchase specified products
or services from the foreign partner.
The counter-purchase contract can be anything from 10 to 100 percent (or even
more) of the value of the export sale.
Buy back occurs when a firm builds a plant in a country – or supplies technology,
equipment, training, or other services to the country and agrees to take a certain
percentage of the plant’s output as partial payment for the contract.
Offset is an agreement that a company will offset a hard-currency purchase of an
unspecified product from that nation in the future. Agreement by one nation to buy a
product from another, subject to the purchase of some or all of the components and raw
materials from the buyer of the finished product, or the assembly of such product in the
buyer nation.
Compensation trade is a form of barter in which one of the flows is partly in
goods and partly in hard currency.
Examples of Countertrade
Indonesia negotiated for a power station project with Asea Brown Boveri and for
an air traffic control system with Hughes Aircraft. Counter-purchase obligations were to
be 100 percent of the FOB values. The firm export, through a trading company, a range
of Indonesia products: cocoa to the United States, coal to Japan, and fertilizer to Vietnam
and Burma.
Lockheed Martin agreed to sell F-16 military aircraft to Hungary in exchange for
large investment and counter-purchase commitments. The firm agreed to buy $250 (U.S.)
worth of Hungarian goods. It established an office in Budapest to participate in tendering

34
and to procure the country’s industrial goods for export. One of the classic examples of a
barter deal of the century—that went awry—was when Pepsico Inc. signed in 1990 with
the Soviet Union to double its soft-drink sales there, open two-dozen new bottling plants
and launch its Pizza Hut restaurants in the country's biggest cities.
To finance the expansion, Pepsico promised to increase its sales of Russian vodka
in the United States and begin a new venture selling and leasing Soviet-built ships
abroad.

2.3.4 Pros and cons of countertrade.

Pros of countertrade:
 Transfer of technology: In exchange for a guaranteed supply of raw materials or
other scarce resources, a developed nation will provide the capital, equipment, and
technology that is needed to develop such resources. Western firms, for example, assisted
Saudi Arabia in the development of its refinery and petrochemical industry in exchange
for the right to purchase a certain amount of oil over a given period of time.
 Alleviating Balance of Payments difficulties: the debt crisis of the 1980s,
coupled with adverse movements in the price of key export commodities, such as coffee
or sugar, left may developing countries with severe balance-of-payments difficulties.
Countertrade has been used as a way of financing needed imports without depleting
limited foreign currency reserves. Some countries have been used it as a way of earning
hard currency by promoting the export of their domestic output. Countertrade has thus
helped these nations avoid the burden of additional borrowing to finance imports as well
as the need to restrict domestic economic activity.
 Countertrade is also used as method of entering a new market, particularly in
product areas that invite strong competition.
 Maintenance of stable prices of exports: Countertrade allows commodity
exporters to maintain nominal prices for their products even in the face of limited or
declining demand. The price of the product that is purchased in exchange could be
increased to take into account the inflated price of exports. In this way, an exporter can
dispose of its commodities without conceding the real price of the product in a
competitive market.
 Other benefits include increased employment, higher sales, better capacity
utilization.
 Benefits for exporters:
- Increased sales opportunities: Countertrade generates additional sales that
would not otherwise be possible. It also enables entry into difficult markets.

35
 - Access to sources of supply: Countertrade provides exporters access to a
continuous supply of production components, precious raw materials, or
other natural resources in return for sales of manufactured goods or
technology.
- Flexibility in prices: Countertrade enables the exporter to adjust the price of
a product in exchange for overpriced commodities
Cons of countertrade:
 The value proposition may be uncertain, especially in cases where the goods
being exchanged have significant price volatility. Other disadvantages include, but are
not limited to:
 Time-consuming. As in any unconventional tactic, there will be haggling over
the good trades, so expect a long, drawn-out negotiation until all parties are satisfied.
 Complexity in the nature of the negotiations. What should you do with the goods
being offered?
 Higher transaction costs (including brokerage, for instance). Costs can quickly
add up, especially while looking for a buyer for the goods, commissions to middlemen
and so forth.
 Logistical issues, especially if commodities are involved.
 Greater uncertainty on the value of the goods being traded and uncertainty on
the quality of the goods.

2.3.5 Measures to ensure the implementation of countertrade

The measure is often stipulated in the contract:
Reciprocal L/C: this letter of credit is only valid when another letter of credit
with equivalent amount is also opened.
Special account: Bank will be a third party who follows, supervises and speeds
up the contract.

A B

1st time 2m 1m
2nd time 3m 2m
End of the period 5m 3m

The bank will inform B to increase the consignment value by 2m to get equilibrium
in the next period.

36
 Third party controls documents: The third party only delivers documents to
goods receivers if this person presents another equivalent set of documents.
Late delivery or shortage penalty: Penalty will be in strong currency (through
provisions prescribed in the contract or arbitrator)
Notice:
Countertrade is often used when foreign exchange is controlled by the government
or there is the exchange rate fluctuation.

2.4 Processing of international commodities.

2.4.1 Concept.
Processing trade refers to the business activity of importing all or part of the raw
and auxiliary materials, parts and components, accessories, and packaging materials from
abroad in bond, and re-exporting the finished products after processing or assembly by
enterprises within the mainland. It includes processing with supplied materials and
processing with imported materials) (National Assembly, 2005)
Under processing with supplied materials, the imported materials and parts are
supplied by the foreign party also responsible for selling the finished products. The
business enterprise does not have to make foreign exchange payment for the imports and
only charges the foreign party a processing fee.
Under processing with imported materials, the business enterprise makes foreign
exchange payment for the imported materials and parts and exports the finished products
after processing.
Processing enterprises refer to production enterprises with legal person status that
process or assemble imported materials and parts for business enterprises, or factories
established by business enterprises but with no legal person status and yet practice
independent accounting and have their own business license.

2.4.2. Some current regulations of Vietnam on international processing.

In relation to Law on Commerce of Vietnam 2005, commercial processing is
stipulated in following articles.
Commercial processing
Commercial processing means a commercial activity whereby a processor uses part
or whole of raw materials and materials supplied by the processee to perform one or
several stages of the production process at the latter’s request in order to receive
remuneration.
Processing contracts

37
 Processing contracts must be made in writing or in other forms of equivalent legal
validity.
Goods for processing
Goods of all types can be processed, except for goods banned from business.
In case of processing of goods for foreign traders for overseas consumption, goods
banned from business, goods banned from export or import may be processed if so
permitted by competent state agencies.
Rights and obligations of processees
To hand over part or whole of raw materials and materials for processing in
accordance with processing contracts or transfer money for purchase of materials with
agreed quantities, quality and at agreed prices;
To take back all processed products, leased or lent machinery and equipment, raw
materials, auxiliary materials, supplies and discarded materials after the liquidation of
processing contracts, unless otherwise agreed.
To sell, destroy, donate or give as gifts on the spot processed products, leased or
lent machinery and equipment, raw materials, auxiliary materials, redundant supplies,
faulty products and discarded materials according to agreements and provisions of law.
To send their representatives to examine and supervise processing activities at
processing places, to assign experts to guide production technology and inspect quality of
processed products according to agreements in processing contracts.
To be responsible for the legality of the intellectual property rights over processed
goods, raw materials, materials, machinery and equipment for processing handed over to
processors.
Rights and obligations of processors
To supply a part or whole of raw materials and materials for processing as agreed
upon with processees in terms of quantities, quality, technical standards and prices.
To receive processing remunerations and other reasonable expenses.
In case of processing for foreign organizations and individuals, to be entitled to
export on spot processed products; leased or borrowed machinery and equipment, raw
materials, materials, redundant supplies, faulty products and discarded materials under
the authorization of processees.
In case of processing for foreign organizations and individuals, to be exempt from
import tax on machinery, equipment, raw materials, auxiliary materials and supplies, that
are temporarily imported for the performance of processing contracts according to the
provisions of tax law.
To be responsible for the legality of goods processing activities in cases where
goods being processed are those banned from business, export or import.

38
 Processing remuneration.
Processors may receive processing remuneration paid in cash or in processed
products, or machinery and equipment used for the processing.
In case of processing for foreign organizations and individuals, if processors
receive processing remunerations in processed products, machinery and equipment used
for processing, regulations on import of such products, machinery and equipment must be
complied with.

2.4.3. Characteristics of international commodities processing.

What is the trading object? That is labor force.
What is the difference between Processing contracts and Labor contracts?
The processing contract does not specify risks of using labor. But the labor
contract must bear risks of using labor.
In the processing contract, manufacturing and export are close-knit, but in the
labor contract, those two activities are separate.
- Processing is exporting goods.
- Commodities in processing are labor-intensive and do not require high techniques.
- Country of processee has higher development level than country of processor.
Developing countries are usually processors.

2.4.4. The main forms of international processing.

In terms of title to materials:
Processee hands over part or whole of raw materials and materials, unfinished
products for processing and pay processing remunerations
* Strengths: Processor does not need to use their own capital.
* Drawbacks: Processor receives low processing remunerations, and it’s difficult for
processee to manage materials.
Processee sells materials and then buys finished products from processor.
* Strengths: Processing remuneration is higher.
* Drawbacks: high risks.
Processee supplies main materials and processor supplies auxiliary materials.
In terms of processing remuneration:
Target price: parties define target price for each product (target cost and target
remuneration)
Cost plus contract: processee must pay processor real costs and processing
remuneration.
In terms of processing relation:

39
 Two - party processing: there are only processor and processee. For example,
Japan supplies spare parts for Hanel company to manufacture TV.
Multi-party processing: is a type of processing that finished processed products of
this unit are materials of later unit.
For example: Korea supplies fabric for company A, cotton for company B.
Company B produces thread from cotton. Company A uses thread of company B to make
clothes.

2.4.5. Pros and cons of international processing:

Pros:
For processor:
Create jobs, increase income for laborer, which will stabilize the social political
situation.
Receive new technology and manufacturing methods, and management
experience of foreign countries.
Have less or no risks in consuming goods but low interest.
Have chances to use domestic materials and
For processee:
Prices of finished products are low because of cheap labor.
Unfavorable industries can be moved to foreign countries.
Cons:
For processor:
Low labor price.
Technology received is out of date.
For processee:
The product quality will be low, which will make it difficult to consume.
Model and trademark can be stolen.

2.5. International auction transactions

2.5.1. Concept.
Auction of goods means a commercial activity whereby sellers themselves conduct
or hire auction organizers to conduct public sales of goods to select purchasers that offer
the highest prices (National Assembly, 2005)

2.5.2. Some provisions of Vietnam on auctions.

In relation to Law on Commerce of Vietnam 2005, auction of goods is stipulated in
following articles:
Auctions of goods

40
 Auction of goods means a commercial activity whereby sellers themselves
conduct or hire auction organizers to conduct public sales of goods to select purchasers
that offer the highest prices.
Auctions of goods shall be performed by either of the following two modes:
Upward bidding mode, which is an auctioning mode whereby the person who
offers the highest price as compared with the reserve price shall have the right to
purchase the auctioned goods;
Downward bidding mode, which is an auctioning mode whereby the person who
first accepts the reserve price or the lower price next to the reserve price shall have the
right to purchase the auctioned goods.
Auction organizers, goods sellers.
1. Auction organizers are traders that register the business of providing auctioning
services or sell their own goods in cases where goods sellers conduct auctions by
themselves.
2. Goods sellers are owners of such goods or persons mandated by goods owners to
sell goods or persons entitled to sell goods of others according to the provisions of law.
Auction participants, auctioneers
1. Auction participants are organizations and individuals that register to participate
in auctions.
2. Auctioneers are auction organizers or persons authorized by auction organizers to
run auctions.
Auctioning principles
The auction of goods in commerce must be conducted on the principles of
publicity, honesty and assurance of legitimated rights and interests of auction
participants.
Rights of auction organizers
Unless otherwise agreed, auction organizers shall have the following rights:
1. To request goods sellers to provide fully, accurately and promptly necessary
information on auctioned goods, to create conditions for auction organizers or auction
participants to examine auctioned goods and hand over auctioned goods to good
purchasers in cases where auction organizers are not goods sellers;
2. To determine reserve prices in cases where auction organizers are sellers of
auctioned goods or persons authorized by goods sellers;
3. To organize auctions;
4. To request goods purchasers to make payment;
5. To receive auction service charges paid by goods sellers according to the
provisions of Article 211 of this Law.

41
 Obligations of auction organizers
1. To organize auctions of goods in compliance with the principles and procedures
provided for by law and by auction modes agreed upon with goods sellers.
To notify and post up in a public, full and accurate manner necessary information
on auctioned goods.
To preserve auctioned goods when they are entrusted by sellers for safe-keeping.
To display goods, goods samples or documents introducing goods for auction
participants to consider.
To compile documents on auctions of goods and send them to goods sellers and
purchasers and relevant parties according to the provisions of Article 203 of this Law.
To deliver auctioned goods to purchasers according to contracts for provision of
goods auctioning services.
To carry out the procedures for transferring ownership rights over auctioned
goods which are subject to the ownership registration as provided for by law, unless
otherwise agreed goods sellers.
To pay to goods sellers proceeds from the sale of goods, including differences
collected from persons that withdraw their offered price defined in Clause 3, Article 204
of this Law or return unsold goods to goods sellers according to agreements. In case of no
agreement, to pay money to goods seller within three working days after receiving money
from goods purchasers, or to return the goods immediately within a reasonable time after
auctions.
Rights of goods sellers that are not auction organizers
Unless otherwise agreed, goods sellers shall have the following rights:
To receive money for auctioned goods and differences collected in cases
specified in Clause 3, Article 204 of this Law or receive goods back in case of
unsuccessful auctions;
To supervise the organization of auctions of goods.
Obligations of goods sellers that are not auction organizers Unless otherwise agreed,
goods sellers shall have the following obligations:
To deliver goods to auction organizers, create conditions for auction organizers and
auction participants to examine goods, and supply in full, accurate and timely manner
necessary information on auctioned goods;
To pay auction organizing service charge according to Article 211 of this Law.
Goods auction-organizing service contract
Goods auction organizing service contracts must be made in writing or in other
forms of equivalent legal validity.

42
 In cases where auctioned goods are objects of pledges or mortgages, goods auction
organizing service contracts must be approved by pledgees or mortgagees, and sellers
shall have to notify auction participants of the pledged or mortgaged goods.
If the auction is agreed upon in pledge or mortgage contracts but pledgers or
mortgagors are absent without plausible reasons or refuse to enter into goods auction
organizing service contracts, such contracts shall be entered into between pledgees or
mortgagees and auction organizers.
Determination of reserve prices
Goods sellers must determine reserve prices. In cases where auction organizers
are authorized to determine reserve prices, goods sellers must be notified thereof before
auctions are posted up.
In cases where auctioned goods are objects of pledges or mortgages, pledgees or
mortgagees must reach agreements with pledgers or mortgagors on the determination of
reserve prices.
In the auction is agreed upon in pledge or mortgage contracts but pledgers or
mortgagors are absent without plausible reasons to refuse to enter into goods auction
organizing service contracts, the reserve prices shall be determined by pledgees or
mortgagees.
Notification to persons with rights and obligations related to goods being
objects of mortgage or pledge.
In cases where goods are objects of pledge or mortgage, auction organizers,
simultaneously with posting up goods auctions, must notify persons with related rights
and obligations within seven working days before such goods are auctioned according to
the provisions of Article 197 of this Law.
Time limit for notification and posting up of goods auctions
Within seven working days before a goods auction is held, the auction organizer
must post up the auction venue, the place of goods displays and his/her/its head office
according to the provisions of Article 197 of this Law.
In cases where auction organizers are also goods sellers, the time limit for
posting up auctions shall be decided by goods sellers themselves.
Contents of goods auction notification and posting up
A notice and post-up of a goods auction must have all the following contents:
The date and venue of auction;
The name and address of the auction organizer;
The name and address of the goods seller;
The list of goods, their quantities and quality;
The reserve prices;

43
 Necessary information on the goods;
The place and time for displaying the goods;
The place and time for consulting the goods files;
The place and time for registering the purchase of goods.
Persons not allowed to participate in auctions
Persons who do not have civil act capacity, lose civil act capacity, or have
restricted
civil act capacity under the provisions of the Civil Code, or persons who, at the time of
auction, are unable to cognize or control their acts;
Persons working in auctioning organizations; their parents, spouses and children;
Persons who have personally conducted the assessment of to be-auctioned goods;
their parents, spouses and children;
Persons who do not have the right to purchase auctioned goods as provided for
by
law.
Registration for participation in auctions
Auction organizers may request persons who wish to participate in auctions to
register for the auction participation before such auctions take place.
Auction organizers may request persons who wish to participate in auctions to
make token payments which must not exceed 2% of the reserve prices of auctioned
goods.
Where persons participating in auctions purchase auctioned goods, their token
payments shall be cleared against the purchase prices; if they cannot purchase auctioned
goods, their token payments shall be refunded to them right after auctions are completed.
Where persons who register for participation in auctions have made token
payments but later failed to participate in auctions, auction organizers shall be entitled to
retain such token payments.
Display of auctioned goods.
Goods, goods samples, documents introducing goods and other necessary
information on such goods must be displayed at places announced since the posting up.
Conducting of auctions.
An auction shall be conducted in the following order:
The auctioneer makers a roll call of registered participants in the goods auction;
The auctioneer presents each auctioned goods item, repeats their reserve prices,
answer questions of the auction participants, and ask them to offer bids;
As for the upward bidding mode, the auctioneer must clearly and accurately repeat
the latest offered price which is higher than the price offered by the previous bidder for at

44
 least three times with an interval of at least thirty seconds. The auctioneer shall announce
the winning bidder to purchase the auctioned goods only if after repeating for three times
the price offered by such person, no one offers a higher price;
As for the downward bidding mode, the auctioneer must clearly and accurately
repeat every reduced-price level below the reserve price for at least three times with an
interval of at least thirty seconds. The auctioneer shall announce immediately the person
who first accepts the reserve price or any reduced-price level below the reserve price to
have the right to purchase the auctioned goods.
In cases where many persons concurrently offer the last price as for the upward
bidding mode, or the first price as for the downward bidding mode, the auctioneer shall
have to organize a lot drawing among such persons and announce the person who has
drawn the winning lot as the purchaser of auctioned goods.
The auctioneer shall have to prepare a document on goods auction right at the
auction venue, even when the auction is unsuccessful. The auction document must clearly
state the auction result and be signed by the auctioneer, the purchaser and two witnesses
from among the auction participants. For auctioned goods which must be notarized by the
State Notary according to the provisions of law, the auction document must also be
notarized.
Unsuccessful auctions
An auction shall be considered unsuccessful in the following cases:
There is no auction participant, or no bid price is offered;
The highest price offered is lower than the reserve price, for the upward bidding
mode.
Goods auction documents
Goods auction documents are documents certifying the goods purchase and sale. A
goods auction document must have the following contents:
a) The name and address of the auction organizer;
b) The name and address of the auctioneer;
c) The name and address of the goods seller;
d) The name and address of the goods purchaser;
e) The time and venue of the auction;
f) The auctioned goods;
g) The price at which the goods were sold;
h) The names and addresses of two witnesses.
Auction documents must be sent to goods sellers, goods purchasers and related
parties.

45
 In case of unsuccessful auctions, auction documents must clearly state that the
auctions were unsuccessful and have the contents specified at Points a, b, c, e, f, and h,
Clause 1 of this Article.
Withdrawal of offered prices
In case of an auction by the upward bidding mode, if the person offering the
highest price immediately withdraws his/ her bid, the auction shall still continue, starting
again from the preceding offered price. In case of an auction by the downward bidding
mode, if the person who first accepts the price immediately withdraws the accepted price,
the auction shall still continue, starting again from the preceding accepted price.
The person who withdraws his/her offered price or withdraws his/her acceptance
of the price shall not be allowed to further participate in the auction.
Where the auctioned goods are sold at a price lower than the withdrawn price
which is previously offered for the upward bidding mode, or accepted for the downward
bidding mode, the bid withdrawer shall have to pay the price difference to the auction
organizer. Where the goods are sold at a higher price, the bid withdrawer shall not be
entitled to such a difference.
In case of an unsuccessful auction, the bid withdrawer shall have to bear
expenses for the auction and not be refunded his/her token payment.
Refusal to purchase
Unless otherwise agreed, after auctions are declared to be complete, purchasers
shall be held liable. If purchasers refuse to purchase goods, they must obtain consents of
goods sellers and bear all costs related to the organization of auctions.
In cases where purchasers of auctioned goods have paid token payments but
refuse to purchase such goods, they shall not be refunded such token payment. Such
token payments shall belong to goods sellers.
Registration of ownership right
Auction documents shall serve as basis for the transfer of the ownership right
over auctioned goods, which must be registered according to the provisions of law.
On the basis of goods auction documents and other valid papers, competent state
agencies shall have to register the goods ownership rights for goods purchasers according
to the provisions of law.
Sellers and auction organizers are obliged to carry out procedures for transferring
goods ownership rights to goods purchasers. Expenses for carrying out procedures for
such transfer shall be deducted from proceeds from goods sale, unless otherwise agreed.
Time of payment for goods purchase

46
 Time of payment for goods purchase shall be agreed upon by auction organizers and
auctioned goods purchasers. If no agreement is reached, the time of payment for goods
purchase shall be the time provided for in Article 55 of this Law.
Place of payment for goods purchase
Place of payment for goods purchase shall be agreed upon by auction organizers
and goods purchasers. If no agreement is reached, the place of payment shall be the
places of business of auction organizers.
Time limit for delivery of auctioned goods
Unless otherwise agreed upon by auction organizers and goods purchasers, the time
limit for delivery of auctioned goods is provided for as follows:
For goods over which the ownership right is not required to be registered, auction
organizers must deliver goods to their purchasers immediately after auction documents
are made;
For goods over which the ownership rights have been registered, auction organizers
must immediately carry out procedures for transferring the ownership rights and deliver
goods to their purchasers immediately after the procedures for ownership right transfer
are completed.
Place of delivery of auctioned goods
Where goods are things attached to land, the place of delivery thereof is the place
where such goods are located.
Where goods are movables, the place of delivery thereof is the place where the
auction is organized, unless otherwise agreed upon by auction organizers and goods
purchasers.
Goods auction service charges
Where there is no agreement on goods auction service charges, such charges shall
be determined as follows:
In case of successful auctions, auction service charges shall be determined
according to Article 86 of this Law;
In case of unsuccessful auctions, goods sellers must pay a charge equal to 50% of
the charge rate provided for in Clause 1 of this Article.
Expenses related to auctions of goods
Unless otherwise agreed upon between goods sellers and auction organizers,
expenses related to auctions of goods shall be determined as follows
Goods sellers shall bear the expenses for transportation of goods to the agreed
places and the expenses for preservation of goods in cases where they do not deliver the
goods to auction organizers for preservation;

47
 Auction organizers shall bear the expenses for preservation of goods delivered to
them, the expenses for posting up, notification and organization of auctions and other
related expenses.
Responsibilities for auctioned goods untrue to notified or posted up ones
Within the time limit provided for in Article 318 of this Law, goods purchasers may
return the goods to auction organizers and request compensations for damage if the
auctioned goods are untrue to notified or posted up ones.
Where the auction organizer defined in Clause 1 of this Article is not the seller and
the untruthful notified or posted up contents are attributable to the fault of the seller, the
auction organizer shall have the right to return the goods and claim damages from the
seller.

2.5.3. The types of international auction.

There are two types of auction:
Commercial auction: the goods are often classified and sold for traders.
Non-commercial auction: buyers sell the goods as they are to clear stock.

2.5.4 Procedures of an auction

a) Preparation
Goods owner follows his sale plan, contacts with auction centers to make
formalities.
Auction centers:
Set up sale requirements for each commodity, sale plan, deposit and other
regulations on payment.
Advertise to raise demand.
Divide into lots and mark for each lot and choose a sample.
Display the sample.
b) Goods examination:
Auction center opens display department for everyone who is interested in the
auctioned goods.
If buyers do not come and see the goods, they will lose their rights to complain on
the goods.
c) Auction:
There are two modes:
a) Upward bidding mode, which is an auctioning mode whereby the person who
offers the highest price as compared with the reserve price shall have the right to
purchase the auctioned goods;

48
 b) Downward bidding mode, which is an auctioning mode whereby the person who
first accepts the reserve price or the lower price next to the reserve price shall have the
right to purchase the auctioned goods.
At the auction table, if the person who offers the highest price withdraws the offered
price, auction will be done right away and start at the previous offered price. This person
is not allowed to join the auction anymore.
In case of downward bidding mode, if the person who offers the lower price next to
the reserve price withdraws his offered price, he must pay the differential amount for the
auctioning seller, if the offered price is higher than the reserve price, the withdrawer does
not get the differential amount.
If the auction does not succeed, the withdrawer must pay all costs for that auction
and is not allowed to receive the deposit.
Within 03 days, the buyer is allowed to return the goods if their quality does not
conform to what is advertised.
d) Contract signing and delivery:
The buyer must pay 20-35% of the consignment value after signing the contract.
The remaining will be paid 15 days later; delivery will be executed after 100% of
payment.

2.6. International bidding

2.6.1. Concept
International bidding is a transparent procurement method in which bids from
competing contractors, suppliers, or vendors are invited by openly advertising the scope,
specifications, and terms and conditions of the proposed contract as well as the criteria by
which the bids will be evaluated. Competitive bidding aims at obtaining goods and
services at the lowest prices by stimulating competition, and by preventing favoritism.
(National Assembly, 2005)
In (1) open competitive bidding (also called open bidding), the sealed bids are
opened in full view of all who may wish to witness the bid opening; in (2) closed
competitive bidding (also called closed bidding), the sealed bids are opened in presence
only of authorized personnel.

2.6.2. Some provisions of Vietnam for international bidding.

Bidding for goods or services is regulated from Article 214 to Article 232 in Law on
Commerce of Vietnam 2005:
Bidding for goods or services

49
 Bidding for goods or services means a commercial activity whereby a party
purchases goods or services through bidding (referred to as bid solicitor) in order to
select, among traders participating in the bidding (referred to as bidders), a trader that
satisfies the requirement set forth by the bid solicitor and is selected to enter into and
perform a contract (referred to as bid winner).
The provisions on bidding in this Law shall not apply to bidding for public
procurement according to the provisions of law.
Forms of bidding
Bidding for goods or services shall be conducted in either of the following two
forms:
a) Open bidding which is a form of bidding whereby the bid solicitor does not limit
the number of bidders;
b) Restricted bidding which is a form of bidding whereby the bid solicitor invites
only a limited number of bidders to participate in the bidding.
The selection of the form of open bidding or restricted bidding shall be decided
by bid solicitors.
Modes of bidding
Modes of bidding include bidding with one bid dossier bag and bidding with two
dossier bags. Bid solicitors shall have the right to select the mode of bidding and must
notify such in advance to bidders.
In case of bidding by mode of one dossier bag, a bidder shall submit its bid dossier
consisting of technical and financial proposals in one dossier bag according to the
requirements in the tendering dossier and the opening of bids shall be effected only once.
In case of bidding by mode of two dossier bags, a bidder shall submit its bid
dossier consisting of technical and financial proposals in two separate dossier bags
submitted simultaneously, and the opening of bids shall be effected twice. The dossier on
technical proposals shall be opened first.
Pre-qualification of bidders
Bid solicitors may organize the pre-qualification of bidders in order to select those
bidders that are capable of satisfying the conditions set forth by bid solicitors.
Tendering dossiers
A tendering dossier comprises:
a) Tendering notice;
b) Requirements related to goods or services subject to bidding;
c) Methods of evaluation, comparison, grading and selection of bidders;
d) Other instructions related to bidding.

50
 Expenses for supply of documents provided to bidders shall be stipulated by bid
solicitors.
Tendering notice
A tendering notice comprises the following principal contents:
a) Name and address of the bid solicitor;
Brief description of bidding contents;
Time limit, place and procedures for receipt of tendering dossiers;
Time limit, place and procedures for submission of bid dossiers;
Instructions for reading tendering dossiers.
Bid solicitors shall have to notify on the mass media in case of open bidding or
send notice on invitation on register for bidding participation to qualified bidders in case
of restricted bidding.
Instructions to bidders.
Bid solicitors shall have to provide bidders with instructions on the tendering
conditions, procedures to be applied in the bidding process, and to answer questions of
bidders.
Management of bid dossiers.
Bid solicitors shall have to manage bid dossiers.
Bid bonds
Bid bonds shall be made in the form of bid deposit, collateral or guarantee.
Bid solicitors may request bidders to make bid deposits, bid collaterals or provide
bid guarantees when submitting their bid dossiers. The percentage of a bid deposit or
collateral shall be set out by bid solicitor but must not exceed 3% of the total estimated
value of goods or services subject to bidding.
Bid solicitors shall stipulate the mode and conditions for making deposits,
collaterals or providing bid guarantees. In case of bid deposits or collaterals, such
deposits or collaterals shall be returned to unsuccessful bidders within seven working
days from the date the bidding result are announced.
Bidders shall not be allowed to receive back their bid deposits or collaterals in
cases where they withdraw bid dossiers after the expiration of the time limit for
submitting bid dossiers (referred to as “bidding closure”), fail to enter into contracts or
refuse to perform contracts in cases where they are bid winners.
Guarantors for bidders are obliged to guarantee bids for the guaranteed within the
value equal to deposits or collaterals.
Confidentiality of bidding information
Bid solicitors must keep confidential bid dossiers.

51
 Organizations and individuals involved in the organization of bidding and in the
evaluation and selection of bids must keep confidential information relevant to the
bidding.
Bid opening
Bid opening is the opening of bid dossiers at a fixed time or in cases where there is
no prefixed time, the time of bid opening shall be the time immediately after the bidding
closure.
All bid dossiers submitted on time must be opened publicly by bid solicitors.
Bidders shall be entitled to attend the bid opening.
Bid dossiers which are not submitted on time shall be rejected and returned to
bidders unopened.
Consideration of bid dossiers upon bid opening
- Bid solicitors consider the validity of bid dossiers.
- Bid solicitors may request bidders to clarify unclear contents in their bid dossiers.
Requests and clarification of bid dossiers must be made in writing.
Minutes of bid opening
- Upon bid opening, the bid solicitor and bidders that are present shall have to sign
the minutes of bid opening.
- A minute of bid opening must have the following contents:
a) Name of goods or services subject to bidding;
b) Date, time and place of the bid opening;
c) Names and addresses of the bid solicitor and bidders;
d) Bidding prices of bidders;
e) Written amendments or supplements and relevant contents, if any.
Evaluation and comparison of bid dossiers
Bid dossiers shall be evaluated and compared according to each criterion for an
overall evaluation. The criteria for evaluation of bid dossiers shall be provided for by bid
solicitors.
The criteria mentioned in Clause 1 of this Article shall be evaluated by the score-
giving method or other methods determined prior to the bid opening.
Amendment of bid dossiers.
- Bidders are not allowed to amend their bid dossiers after the bid opening.
- In the course of evaluation and comparison of bid dossiers, bid solicitors may
request bidders to clarity matters related to their bid dossiers. Requests of solicitors and
replies of bidders must be made in writing.

52
 - Where bid solicitors amend some contents in tendering dossiers, they must send
such amendments in writing to all bidders at least ten days before the deadline for
submitting bid dossiers so that bidders have enough time to finalize their bid dossiers.
Classification and selection of bidders
On the basis of the result of the evaluation of bid dossiers, bid solicitors shall have
to classify and select bidders according to the method already determined.
Where many bidders obtain equal scores and equally satisfy criteria to win the
bidding, the bid solicitor shall have the right to select winning bidder.
Notification of biding results and entry into contracts
Immediately after bidding results are available, bid solicitors shall have to notify
them to bidders.
Bid solicitors shall finalize and enter into contracts with bid winners on the
following bases:
a) Bidding results;
b) Requirements stated in tendering dossiers;
c) Contents in bid dossiers.
Contract performance security
Involved parties may agree that bid winners should make deposits or collaterals or
be provided with guarantees to secure the performance of contracts. The amount to be
deposited or used as a collateral shall be set by bid solicitors but must not exceed 10% of
the contract value.
Contract performance security measures shall be effective up to the time of
completion of contractual obligations by bid winners.
Unless otherwise agreed, bid winners shall receive back deposits or collaterals as
security for the performance of contracts upon the liquidation of such contracts. Bid
winners shall not be entitled to receive back deposits or collaterals as security for the
performance of contracts if they refuse to perform such contracts after they are entered
into.
After paying deposits or making collaterals to secure the contract performance,
bid winners shall have their bid deposits or collaterals refunded.
Reorganization of bidding
A bidding shall be reorganized in one of the following cases:
- Where there is a violation of the regulations on bidding;
- Where all bidders fail to satisfy the bidding requirements.

2.6.3. Types of international bidding.

a) In terms of bidding scope:

53
 - Open bidding
- Restricted bidding
b) In terms of quotation form:
- One bid dossier bag
- Two bid dossier bags
c) In terms of bid opening procedure:
- One period bid
- Two period bid
d) In terms of bidder evaluation procedure:
- Preselecting bid
- Un-preselecting bid
e) In terms of bid purposes:
- Purchasing bid
- Service bid
- Management bid

2.7. Trading at international fairs and exhibitions

2.7.1. Concept
Trade fairs and exhibitions are periodically organized in a specific time and place so
that companies in specific industry can showcase and demonstrate their latest products
and services, meet industry partners and customers to sign sale contracts. (National
Assembly, 2005)

2.7.2. Some current regulations of Vietnam on trade in international fairs and

exhibitions
Trade fairs and exhibitions are regulated in Law on Commerce of Vietnam
2005from Article 129 to Article 140.
Trade fairs and exhibitions
Trade fairs and exhibitions mean commercial promotion activities conducted in a
concentrated manner at particular locations and for given periods of time for traders to
display and introduce their goods and/or services for the purpose of promoting them and
seeking opportunities for entering into contracts for sale and purchase of goods or service
contracts.
Provision of trade fair and exhibition services
Provision of trade fair and exhibition services means commercial activities whereby
traders dealing in these services provide services of organizing or participating in trade

54
fairs and exhibitions to other traders for receiving trade fair and exhibition organization
service charges.
Trade fair and exhibition organization service contracts must be made in writing or
in other forms of equivalent legal validity.
Rights to organize or participate in trade fairs and exhibitions
Vietnamese traders, branches of Vietnamese traders, Vietnam-based branches of
foreign traders shall have the right to directly organize or participate in trade fairs and
exhibitions for goods and/or services they trade in or hire traders providing trade fair and
exhibition services to do so.
Representative offices of traders shall not be allowed to directly organize or
participate in trade fairs and exhibitions. When being authorized by traders,
representative offices shall have the right to sign contracts with traders providing trade
fair and exhibition services to do so for the traders they are representing.
Foreign traders shall have the right to directly participate or hire Vietnamese
traders providing trade fair and exhibition services to participate, on the behalf, in trade
fairs and exhibitions in Vietnam. Where they wish to organize trade fairs and exhibitions
in Vietnam, foreign traders must hire Vietnamese traders providing trade fair and
exhibition services to do so.
Organization of trade fairs and exhibitions in Vietnam
Trade fairs and exhibitions organized in Vietnam must be registered with and
certified in writing by the state management agencies in charge of commerce of the
provinces or centrally-run cities where such trade fairs and exhibitions are to be
organized.
The Government shall specify the order, procedures, contents of registration and
certification of the organization of trade fairs and exhibitions in Vietnam provided for in
Clause 1 of this Article.
Organization of and participation in overseas trade fairs and exhibitions
Traders not providing trade fair and exhibition services, when directly organizing
or participating in overseas trade fairs and exhibitions for goods and/or services they
trade in, must comply with the regulations on export of goods.
Traders providing trade fair and exhibition services, when arranging for other
traders to participate in overseas trade fairs and exhibitions, must register such with the
Ministry of Trade.
Traders that have not yet to register their business of providing trade fair and
exhibition services shall not be allowed to arrange for other traders to participate in
overseas trade fairs and exhibitions.

55
 The Government shall specify the order, procedures and contents of registration
for organization of, and participation in, overseas trade fairs and exhibitions provided for
in Clauses 1 and 2 of this Article.
Goods and/or services displayed and introduced at trade fairs and exhibitions
in Vietnam
Goods and/or services which are not permitted for participation in trade fairs and
exhibitions include:
a) Goods and/or services banned from business, subject to business restrictions, or
not yet permitted for circulation according to the provisions of law;
b) Goods and/or services provided by overseas traders and banned from import
according to the provisions of law;
c) Counterfeit goods and goods infringing upon intellectual property rights, except
where they are displayed and introduced for comparison with genuine ones.
Apart from the provisions of this Law on trade fairs and exhibitions, goods and/or
services subject to specialized management must also comply with regulations on
specialized management of such goods and/or services.
Goods temporarily imported for participation in trade fairs or exhibitions in
Vietnam must be re-exported within thirty days after the end of such trade fairs or
exhibitions.
The temporary import for re-export of goods for participation in trade fairs or
exhibitions in Vietnam must comply with the provisions of customs law and other
relevant provisions of law.
Goods and/or services participating in overseas trade fairs and exhibitions
All types of goods and services shall be permitted to participate in overseas trade
fairs and exhibitions, except for those banned from export according to the provisions of
law.
Goods and/or services banned export shall only be permitted for participation in
overseas trade fairs and exhibitions when so approved by the Prime Minister.
The time limit for temporary export of goods for participation in overseas trade
fairs and exhibitions shall be one year from the date such goods are temporarily exported.
If past that time limit, the goods are not re-imported yet, such goods shall be subject to
taxes and other financial obligations as provided for by Vietnamese law.
The temporary export for re-import of goods for participation in overseas trade
fairs and exhibitions must comply with the provisions of customs law and other relevant
provisions of law.
Sale, presentation of goods as gifts and provision of services at trade fairs and
exhibitions in Vietnam

56
 Goods and services displayed and introduced at trade fairs and exhibitions in
Vietnam are permitted to be sold, presented as gifts or provided at such trade fairs and
exhibitions; for imported goods, registration thereof must be made with customs offices,
except for the cases specified in Clause 2 of this Article.
Goods which are imported under permits of competent state agencies shall be
sold or presented as gifts only after written approvals of such competent state agencies
are obtained.
The sale and presentation of goods as gifts at trade fairs and exhibitions
mentioned in Clause 2, Article 134 of this Law must comply with regulations on
specialized import management of such goods.
Goods sold or presented as gifts, and service provided at trade fairs and
exhibitions in Vietnam shall be subject to taxes and other financial obligations as
provided for by law.
Sale, presentation of Vietnamese goods as gifts and provision of Vietnamese
services participating in overseas trade fairs and exhibitions
Vietnamese goods and services participating in overseas trade fairs and exhibitions
are permitted to be sold, presented as gifts or provided at such trade fairs and exhibitions,
except the cases defined in Clauses 2 and 3 of this Article.
The sale and presentation as gifts of goods which are banned from export but
have temporarily exported for participation in overseas trade fairs and exhibitions, shall
be made only after the Prime Minister’s approval is obtained.
Goods exported under permits of competent state agencies shall be sold or
presented as gifts only after written approvals of such competent state agencies are
obtained.
Vietnamese goods and/or services participating in overseas trade fairs and
exhibitions and being sold, presented as gifts or provided overseas shall be subject to
taxes and other financial obligations as provided for by law.
Rights and obligations of organizations and individuals participating in trade
fairs and exhibitions in Vietnam
To exercise rights and perform obligations as agreed upon with traders
organizing trade fairs and exhibitions.
To sell, present goods as gifts and provided services displayed and introduced at
trade fairs and exhibitions according to the provisions of law.
To temporarily import and re-export goods and documents on goods and/or
services for display at trade fairs and exhibitions.
To comply with regulations on organization of trade fairs and exhibitions in
Vietnam.

57
 Rights and obligations of traders organizing or participating in overseas trade
fairs and exhibitions
To temporarily export and re-import goods and documents on goods and/or services
for display and introduction at trade fairs or exhibitions.
To comply with regulations on organization of, and participation in, overseas trade
fairs and exhibitions.
To sell and present as gifts goods displayed and introduced at overseas trade fairs
and exhibitions; and to pay taxes and fulfill other financial obligations as provided for by
Vietnamese law.
Rights and obligations of traders providing trade fair and exhibition services.
To post up topics and durations of trade fairs and exhibitions at places where such
trade fairs and exhibitions are to be organized before their opening dates.
To request services hirers to supply goods for participation in trade fairs and
exhibitions within time limits agreed upon in contracts.
To request service hirers to supply information on goods and/or services for
participation in trade fairs and exhibitions and other necessary means as agreed upon in
contracts;
To receive service charges and other reasonable expenses;
To organize trade fairs and exhibitions as agreed upon in contracts.

2.7.3. Forms of international fairs and exhibitions.

There are many types of fairs and exhibitions because of its diversity in activities. In
reality, there has not had any classification of fairs and exhibitions. In order to realize
them relatively, we can divide them into many following types:
2.7.3.1 In terms of periodicity
Periodic fairs and exhibitions which are often organized annually or some times
per year in a specific time and place are often large-scale, prestige, and familiar to
customers, and introduces products with large markets.
Non-periodic fairs and exhibitions: are organized to meet demand of enterprises
whose products’ markets are small such as local ones. These fairs and exhibitions are
coordinated and supported by the local authority or related industries.
2.7.3.2 In terms of industry
Synthetic fairs and exhibitions: with the participation of different domestic and
international enterprises of different economic industries in order to introduce and sell
products.

58
 Specialized fairs and exhibitions: The purpose of this type of fair and exhibition is
to introduce products of one economic area in the economy such as Industry Fair,
Environment Fair …
2.7.3.3 In terms of scope
International fairs and exhibitions: can be organized inland or abroad with the
participation of customers from different countries such as Hamburg Trade Fair, Expo
Trade Fair (annually organized in April)
National fairs and exhibitions: Customers are domestic enterprises. The purpose of
this fair and exhibition is to promote sale and capability of domestic businesses such as
Fashion Fair, Consumer Product Fair …
Local fairs and exhibitions: are organized in the town or city or any localities with
the participation of the local businesses so as to encourage the local economy, open
relation with other localities.

2.7.4. Procedure of joining international fairs and exhibitions

After receipt of the invitation from the Fair (or Exhibition)’s organizer in foreign
country, Industry and Trade Department or Foreign Trade Development Center studies
some issues related to organization.
The purpose, the meaning and the role of the fair or exhibition.
The time, place and period of the fair or exhibition.
The conditions and protocols of showing products and exhibits, the rent of
space.
The prestige of the fair or exhibition that enterprises tend to take part in.
Then Industry and Trade Department or Foreign Trade Development Center will
inform import-export enterprises or economic organizations of the fair or exhibition that
they can join. Information needed to inform import-export enterprises or economic
organizations involves the fair/ exhibition’s purpose, meaning and prestige; scope and
date of the fair/exhibition; rent cost of space, ability to sell products at the fair, ways to
transport the exhibits to the exhibition or fair, import-export formality for fair and
exhibition, and other related costs.

2.8. Trading in Commodity Exchanges

2.8.1. Concept.
Purchase and sale of goods through the Goods Exchange mean commercial
activities whereby the parties agree to purchase and sell a defined quantity of goods of a
defined type through the Goods Exchange under the standards of the Goods Exchange, at
a price agreed upon at the time the contract is entered into, and with the time of goods

59
delivery determined to be a specific point of time in the future. (National Assembly,
2005)

2.8.2. Some current regulations of Vietnam for trading on an exchange of goods.

Purchase and sale of goods through the Goods Exchange
Purchase and sale of goods through the Goods Exchange mean commercial
activities whereby the parties agree to purchase and sell a defined quantity of goods of a
defined type through the Goods Exchange under the standards of the Goods Exchange, at
a price agreed upon at the time the contract is entered into, and with the time of goods
delivery determined to be a specific point of time in the future.
The Government shall specify activities of purchase and sale of goods through
the Goods Exchange.
Contracts for purchase and sale of goods through the Goods Exchange
Contracts for purchase and sale of goods through the Goods Exchange include
forward contracts and option contracts.
Forward contract means an agreement whereby the seller undertakes to deliver,
and the purchaser undertakes to receive the goods at a specific point of time in the future
under the contract.
Call option or put option contract means an agreement whereby the purchaser has
the right to purchase or sell specific goods at a pre-fixed price level (hereinafter called
executed price) and must pay a certain sum of money to buy this right (hereinafter called
option money). The option purchaser may opt to effect or not to effect such purchase or
sale of goods.
Rights and obligations of parties to forward contracts
Where the seller delivers the goods under the contract, the purchaser is obliged to
receive the goods and pay for them.
Where the parties agree that the purchaser may make cash payment and reject the
goods, the purchaser shall have to pay to the seller a sum of money equal to the
difference between the price agreed upon in the contract and the market price announced
by the Goods Exchange at the time the contract is performed.
Where the parties agree that the purchaser may make cash payment and refuse to
deliver the goods, the seller shall have to pay to the purchaser a sum of money equal to
the difference between the market price announced by the Goods Exchange at the time
the contract is performed, and the price agreed upon in the contract.
Rights and obligations of parties to option contracts

60
 The call option or put option purchaser shall have to pay for option purchase in
order to become call option or put option holder. The sum of money to be paid for option
purchase shall be agreed upon by the parties.
The call option holder has the right to purchase but is not obliged to purchase
goods ascertained in the contract. Where the call option holder decides to perform the
contract, the seller shall be obliged to sell goods to the call option holder. The seller that
has no goods to deliver shall have to pay to the call option holder a sum of money equal
to the difference between the price agreed upon in the contract and the market price
announced by the Goods Exchange at the time the contract is performed.
The put option holder has the right to sell but is not obliged to sell goods
ascertained in the contract. Where the put option holder decides to perform the contract,
the purchaser shall be obliged to purchase goods from the put option holder. Where the
purchaser does not purchase goods, it shall have to pay to the put option holder a sum of
money equal to the difference between the market price announced by the Goods
Exchange at the time the contract is performed and the price agreed upon in the contract.
Where the call option or put option holder decides not to perform the contract
within the valid duration of the contract, the contract shall automatically be invalidated.
The Goods Exchange
The Goods Exchange has the following functions:
a) Providing the material – technical conditions necessary for transactions of
purchasing or selling goods;
b) Running trading operations;
c) Listing specific prices formed at the Goods Exchange at each specific time.
The Government shall specify the conditions for the establishment of the Goods
Exchange, the powers and tasks of the Goods Exchange, and the approval of the
operation charter of the Goods Exchange.
Goods traded at the Goods Exchange
The list of goods traded at the Goods Exchange shall be promulgated by the Trade
Minister.
Brokers for purchase and sale of goods through the Goods Exchange
Brokers for purchase and sale of goods through the Goods Exchange shall be
allowed to operate at the Goods Exchange only when they fully satisfy the conditions
provided for by law. The Government shall specify the conditions for operation of
brokers for the purchase and sale of goods through the Goods Exchange.
Brokers for purchase and sale of goods through the Goods Exchange shall be
allowed to conduct only activities of brokerage for purchase and sale of goods through

61
the Goods Exchange and must not be a party to a contract for purchase and sale of goods
through the Goods Exchange.
Brokers for purchase and sale of goods through the Goods Exchange shall be
obliged to deposit money at the Goods Exchange to secure the performance of their
obligations arising in the course of goods purchase and sale brokerage activities. The
deposit level shall be set by the Goods Exchange.
Prohibited acts of brokers for purchase and sale of goods through the Goods
Exchange
Enticing customers to enter into contracts by promising to compensate the whole
or part of loss incurred or to guarantee profits for them.
Offering or conducting brokerage for goods without entering into contract with
customers.
Using sham prices or other fraudulent measures in the course of brokerage.
Refusing or unreasonably delaying the brokerage for contracts in accordance
with contents agreed upon with customers.
Other prohibited acts specified in Clause 2, Article 71 of this Law.
Prohibited acts in activities of purchase and sale of goods through the Goods
Exchange
Staff members of the Goods Exchange shall not be allowed to conduct the
brokerage for, purchase or sale of goods through the Goods Exchange.
Parties involved in the purchase and sale of goods through the Goods Exchange
must not conduct the following acts:
a) Committing fraudulences or deceits about volumes of goods in forward or option
contracts which are transacted or may be transacted, and fraudulences and deceits about
real prices of goods in forward or option contracts;
b) Supplying false information on transactions, the market or prices of goods
purchased or sold through the Goods Exchange.
c) Applying illegal measures to cause disorder of the goods market at the Goods
Exchange.
d) Committing other prohibited acts provided for by law.
Application of management measures in emergency cases
Emergency cases mean circumstances where the disorder of the goods market
occurs, making transactions through the Goods Exchange unable to accurately reflect the
goods supply and demand relation.
In emergency cases, the Trade Minister shall be entitled to apply the following
measures:
a) Temporarily suspending transactions through the Goods Exchange;

62
 b) Limiting transactions within a price bracket or a specific quantity of goods;
c) Changing the schedule of transactions;
d) Adjusting the operation charter of the Goods Exchange;
e) Other necessary measures as provided for by the Government.
Right to conduct the purchase and sale of goods through overseas Goods
Exchanges
Vietnamese traders are entitled to conduct purchase and sale of goods through
overseas Goods Exchange according to regulations of the Government.
In addition to above types of transactions, we also have some other types like Spot,
Forward, Future, Hedge, Franchise, E-commerce …

CHAPTER SUMMARY

In import-export activities, there are lots of transaction methods. Each method has
its own features, drawbacks and strengths. To improve import-export business, each
enterprise will subject to its business conditions (scale, capital, goods, workforce …) to
choose a suitable transaction method or combine some methods into one

REVISION QUESTIONS

1. Present characteristics, types, advantages, and disadvantages of countertrade.

2. Present measures to ensure the implementation of countertrade.
3. Present concepts, characteristics and main forms of international processing.
4. Analyze features and procedures of international bidding.
5. Present ways to execute transactions at a trade fair or exhibition.
6. Distinguish temporary import for re-export, temporary export for re-import, and
cross-border transshipment.

63