Chapter 2 Incoterms and Contracts

4/15/2023
Chapter 2
INCOTERMS & FOREIGN
TRADE CONTRACT
INCOTERMS & FOREIGN TRADE CONTRACT
* Objective: to help the learners:

• Present the definition, meaning, and
history of Incoterms.
• Explain, compare, and apply the Incoterms
2020.
• Outline the definition, characteristics,
forms, and legal framework of foreign
trade contract.
• Present and analyze the basic content of a
foreign trade contract. 2
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INCOTERMS & FOREIGN TRADE CONTRACT
* Content:
2.1. Incoterms
2.1.1. General introduction to Incoterms
2.1.2. Incoterms 2020
2.1.3. Notes on Incoterms
2.2. Foreign trade contract
2.2.1. Definition, characteristics and forms
2.2.2. Legal framework
2.2.3. Content 3
2.1. INCOTERMS
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2.1.1. GENERAL INTRODUCTION TO INCOTERMS
-Incoterms - International Commercial Terms

: Các điều kiện thương mại quốc tế. điều kiện
- In practice, Incoterms ar also referred to as

some terms: “Shipment Terms”, “Terms of
thường dùng
Delivery”, “Trade Terms”.
- Incoterms are drafted and issued by the ICC

(International Chamber of Commerce –
-> quy tắc, tập quán quốc tế -> pháp lí tuỳ ý
Phòng Thương Mại Quốc Tế) 5
- Incoterms describe trade terms which are abbreviated

with three letters.
- Each trade term clearly defines the duties, costs, and
risks of the seller and buyer during the process of
transferring goods from the seller to the buyer.
sách gối đầu của dân xuất nhập khẩu
* The meaning of Incoterms:
+ To unify the understanding and implementation of
different delivery terms between regions and countries.
+ To minimize misunderstandings leading to disputes in
the international transaction process, contributing to the
development of international trade. 6
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- Incoterms were first issued by ICC in 1936 and changed

in 1953, 1967, 1976, 1980, 1990, 2000, 2010, and 2020.
- Incoterms 1936 : consisting of 7 trade terms: EXW,
FCA, FOT/FOR, FAS, FOB, C&F and CIF.
- Incoterms 1953 : consisting of 9 trade terms with the
addition of two terms of DES and DEQ to the 1936
version.
- Incoterms 1967 : consisting of 11 trade terms with two
terms of DAF and DDP added to the 1953 version.
- Incoterms 1976 : consisting of 12 trade terms with one
term of FOA (FOB Airport) added to the 1967 version. 7
- Incoterms 1980 : consisting of 14 trade terms with two terms

of CPT, CIP added to the 1976 version.
- Incoterms 1990 : consisting of 13 trade terms with one new
term of DDU added and two terms of FOA and FOT/FOR
removed from the 1980 version.
- Incoterms 2000: unchanged from the 1990 version, but with
changes to content of the three terms of FCA, FAS, and DEQ.
- Incoterms 2010 : consisting of 11 trade terms with two new
terms of DAT, DAP and four terms of DAF, DES, DEQ, DDU
removed from the 2000 version.
- Incoterms 2020 : consisting of 11 trade terms, the same as in
2010, with the exception of the change of DAT in 2010 to DPU,
8
effective from January 1, 2020.
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2.1.2. INCOTERMS 2020

* It consists of 11 trade terms divided into 2 groups:
- Group of terms that applies to any mode or
chỉ áp dụng cho 7 đk
modes of transport: consisting of 7 terms: EXW,
phương thức vận tải
- truck FCA, CPT, CIP, DAP, DPU and DDP.
- rail thứ tự theo trách nhiệm của ng bán tăng dần
- air - Group of terms that applies to sea and inland
- sea waterway transport: consisting of 4 terms: FAS,
- inland waterway (thuỷ nội địa)
. river FOB, CFR and CIF. thường nghe nói áp dụng cho 11 đk
. inland sea * Incoterms 2020 applies to both international and
domestic sales contracts. 9
đối vs quốc gia có lãnh thổ rộng

Each trade term presents the obligations of the seller and
buyer in 10 reciprocal groups: the seller from A1 to A10
(màu xanh) and the buyer from B1 to B10 (màu vàng).
A. THE SELLER’S OBLIGATIONS B. THE BUYER’S OBLIGATIONS

A1. General obligations B1. General obligations
A2. Delivery B2. Taking delivery
A3. Transfer of risks B3. Transfer of risks
A4. Carriage B4. Carriage
A5. Insurance B5. Insurance
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A. THE SELLER’S OBLIGATIONS B. THE BUYER’S OBLIGATIONS
A6. Delivery/ transport B6. Proof of delivery

document B7. Export/import
A7. Export/import clearance
clearance B8. Checking/ packaging/
A8. Checking/ packaging/ marking
marking B9. Allocation of costs
kiểm tra, đống gói, kí mã hiệu
A9. Allocation of costs B10. Notices
A10. Notices
11
2,3,4,5,9 -> đọc

bến đi chính bến đến chính
Seller’s Main departure Main arrival Buyer’s

premises point point premises
(in seller’s country) (in buyer’s country)
ghi nhớ
Local transport in Main transport Local transport in

seller’s country buyer’s country
rời khỏi nc người bán
* Main issues to be noted in a trade term:
- Point of transferring costs. cước phí: cho chặn vận tải chính
5 đk, ứng với - Point of transferring risks.
từng điểm trên
- Freight for main transport (abbreviated as “freight”).
hành trình
- Insurance for main transport (abbreviated as “insurance”).
- Export/ import clearance. 12
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Group of 7 terms applies to any mode

or modes of transport:
EXW, FCA, CPT, CIP, DAP, DPU, DDP.
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EXW (Ex Works)

English: EXW (insert named place of delivery) Incoterms®
2020. ghi rõ vì tuỳ ý cơ sở ng bán
Vietnamese: Giao tại xưởng (nơi giao hàng quy định)
Incoterms® 2020.
hh, điểm chuyển giao rr

-> ng mua chịu cước phí
-> chịu rr phải đi mua bảo hiểm
thủ tục hải quan xuất nhập khẩu

do ng mua làm hết
do ng mua thuê 14
để dưới đất thì ng mua chịu luôn chi phí bốc hàng lên
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. trách nhiệm ng bán -> tối thiểu

EXW (Ex Works) .ng mua -> Tối đa
- Giao tại xưởng – EXW (named place of delivery): seller
delivers goods to buyer at the delivery place after “EXW”. It can
be seller's premises (factory, warehouse, workshop,...) or any
other place specified (not necessarily seller's premises).
- Point
điểm chuyển giao rr và of transferring risks and costs: at the named place of
chi phí
delivery after “EXW”, normally at the seller's premises.
- Freight for main transport (Freight): paid by buyer + local
transport in seller’s country and buyer’s country.
- Insurance for main transport (Insurance): buyer purchases
and pays the premium (maybe purchase for local transport).
- Export/ import clearance: the buyer is responsible for the
export and import clearance and for transit clearance (if any). thủ tục hoá cảnh
** Note: the buyer pays the cost of loading goods on the means
of transport at the named place of delivery.
**For EXW, seller's obligation is minimum; buyer's is maximum.15
người mua phải rất am hiểu về nc người bán

(khó bán lại cho người mua mới)
giao cho người chuyên chở

FCA (Free Carrier) -> ng bán free
English: FCA (insert named place of delivery) Incoterms®
2020. địa điểm nằm ở nc người bán
Vietnamese: Giao cho người chuyên chở (nơi giao hàng
quy định) Incoterms® 2020.
thủ tục hải quan nc nào thì nc đó chịu trách nhiệm
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bến đi chính,
người mua chịu chi phí dở hàng khỏi
phương tiện của ng bán
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FCA (Free Carrier)

- Giao cho người chuyên chở - FCA (named place of
delivery): Seller delivers goods to buyer (by delivering to the
người chuyên chở carrier nominated by buyer) at the named delivery place after
“FCA” or procure goods so delivered. There are two ways:
mua sẳn hàng đã giao như vậy
+ Named place is the seller's premises: goods are delivered
when they are loaded on the means of transport receiving
ng mua mới mua lại mặcgoods/ arranged by buyer (the seller bears the cost of loading).
dù chưa nhận đc hàng, + Named place is another place: goods are delivered when
đang trong quá trình FCA they are placed on seller's means of transport at the named
delivery place (buyer bears the cost of unloading). từ ng bán đến bến đi chính
pp “string sales” (bán hàng
theo chuỗi) (chỉ phát sinh- Point
ở of transferring risks and costs: at the named place of
đường biển) delivery after “FCA”, belonging to the distance from the seller's
premises to the main departure point.
- Freight: born by the buyer. What about local freight in the
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seller's country and the buyer's country?
FCA (Free Carrier)

- Insurance: the buyer bears (can also purchase local transport).
- Export/ import clearance: Seller carries outreceive for shipment on board lating
export clearance,
-> đa
and buyer carries out import clearance and transit (if số k chuộng
any).
** Special note on the On Board Bill of Lading:
ghi rõ tàu nào, dễ dàng tra cứu
- If the shipment is multimodal and the first mode of transport is
not by sea, the carrier only provides the seller with a "Received
for Shipment" bill of lading, while the bank sets conditions for
payment only when the seller provides an On Board bill of lading.
- With FCA, the carrier is nominated by the buyer, so the seller
cannot request an On Board bill of lading from the carrier.
ng chuyên chở k cấp on board cho ng bán
tránh thiệt thòi - Therefore, FCA stipulates that if the two parties have agreed on
cho ng bán -> k nhận dc tiền khi bị yêu cầu
an On Board bill of lading, the buyer must bear the risk and cost
for nominating the carrier to issue the On Board bill of lading to
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the seller.
. EXW (seller’s premises) vs FCA (seller’s premises):

-> ≠ ở chổ: chi phí bóc hàng lên đơn vị vận chuyển and hợp đồng hải quan
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CPT (Carriage Paid To)

English: CPT (insert named place of destination)
Incoterms® 2020. địa điểm nằm ở nc ng mua
Vietnamese: Cước phí trả tới (nơi đến quy định)
Incoterms® 2020. ng bán trả cước phí
special
địa điểm chuyển giao chi

phí
19 ≠ chuyển giao rr
thoả thuận cụ thể địa điểm chuyển

giao rủi ro (đối vs FCA)…
ng. bán k chịu rr đến đó,

CPT (Carriage Paid To) đã quy ước vs ng mua trc
tránh nhầm lẫn
- Cước phí trả tới – CPT (named place of destination): Seller
delivers goods to the carrier nominated by seller at (agreed) place in
seller's country and pays freight for carriage of goods to the named tránh lầm lẫn ở
place of destination after “CPT” or procure goods so delivered. nhóm C
- Point of transferring costs: is the named place of destination after
“CPT”, belonging to the distance from the main destination point to
the buyer’s premises.
- Point of transferring risks: is the (agreed) place in the seller’s
country, belonging to the distance from the seller's premises to the
main departure point.
- Freight: born by the seller. What about the local transport?
- Insurance: born by the buyer (can also purchase for local transport
in the buyer’s country).
- Export/ import clearance: Seller carries out export clearance, and
buyer carries out import clearance and transit (if any).
** Note: The buyer bears the cost of unloading goods from the
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means of transport at the named place of destination.
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CIP (Carriage and Insurance Paid To)

English: CIP (insert named place of destination)
Incoterms® 2020.
Vietnamese: Cước phí và phí bảo hiểm trả tới (nơi đến quy
định) Incoterms® 2020.
21

- Cước phí và phí bảo hiểm trả tới – CIP (named place of
destination): Seller delivers goods to the carrier nominated by
seller at (agreed) place in seller's country and pays freight and
premium for carriage of goods to the named place of
destination after “CIP” or procure goods so delivered.
- Point of transferring costs, point of transferring risks,
freight, export/ import clearance: same as CPT.
- Insurance: seller buys insurance on the following terms:
+ Insurance clauses: must be ICC (A) or equivalent.
+ Insured amount: the minimum amount is 110% of the
foreign trade contract value and in the currency of the contract.
+ Insurance scope: minimum is from point of transferring risk
in seller's country to the named place of destination after “CIP”.
+ Additional agreements: need to buy additional insurance or
expand insurance scope, buyer has to negotiate with seller. 22
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** Institute Cargo Clauses – ICC (Các điều kiện bảo hiểm):
Institute of London Underwriters (ILU) issues Institute Cargo
Clauses (ICC) including three versions: ICC 1963, ICC 1982,
ICC 2009.
1. ICC 1963 (issued in 1963): has the following types of ICC:
+ FPA (Free from Particular Average – Miễn tổn thất riêng) :
insures the least types of risk, thus having the lowest premium.
+ WA (With Particular Average – Tính cả tổn thất riêng):
insures more types of risk, thus having the higher premium
compared to FPA.
+ AR (All Risks – Mọi rủi ro): covers almost types of risk and
has the highest premium.
++ Additionally, there are three types of ICC for specific risks:
1. War Clauses (Chiến tranh); 2. SRCC (Strikes, Riots and Civil
Commotion–Đình công, bạo lọan và dân biến); 3. TPND (Thief,
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Pilferage and Non-Delivery–Mất trộm, mất cắp và không giao hàng).

** Institute Cargo Clauses – ICC (Các điều kiện bảo hiểm):
2. ICC 1982 (issued in 1982): has the following types of ICC:
+ ICC (C): equivalent coverage to FPA (ICC 1963).
+ ICC (B): equivalent coverage to WA (ICC 1963).
+ ICC (A): equivalent coverage to AR (ICC 1963).
++ Additionally, the three types of specific ICC (which can be
purchased as add-ons) are still available as in ICC 1963,
specifically War Clauses, SRCC Clauses, and TPND Clauses.
3. ICC 2009 (LMA/IUA): retains the same clauses as in ICC
1982 but provides clearer and more detailed explanations for
the risks under each clause. At this time, ILU which changed its
name to IUA (International Underwriting Association of London
- Hiệp hội BH quốc tế Luân Đôn) and LMA (Lloyd’s Market
Association - Hiệp hội Thị trường Lloyd) compiled ICC 2009.
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*** Currently, ICC 1982 and ICC 2009 are widely used.
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DAP (Delivered At Place)

English: DAP (insert named place of destination)
Incoterms® 2020.
Vietnamese: Giao hàng chưa dỡ (nơi đến quy định)
Incoterms® 2020.
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DAP (Delivered At Place)

- Giao hàng chưa dỡ – DAP (named place of destination):
Seller delivers goods to buyer on the arriving means of
transport, ready for unloading at the named place of destination
after “DAP” or procure goods so delivered.
- Point of transferring risks and costs: is the named place of
destination after “DAP”, belonging to the distance from the
main destination point to the buyer's premises.
- Freight: born by the seller. What about local transport?
- Insurance: born by the seller.
- Export/ import clearance: Seller carries out export clearance
and transit (if any), buyer carries out import clearance.
** Note: Buyer bears the cost of unloading goods from the
means of transport at the named place of destination. 26
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DPU (Delivered at Place Unloaded)

English: DPU (insert named place of destination)
Incoterms® 2020.
Vietnamese: Giao hàng đã dỡ (nơi đến quy định)
Incoterms® 2020.
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DPU (Delivered at Place Unloaded)

- Giao hàng đã dỡ – DPU (named place of destination):
Seller delivers goods to buyer when goods are unloaded from
the arriving means of transport at the named place of
destination after “DPU” or procure goods so delivered.
destination after “DPU”, belonging to the distance from the main
destination point to the buyer's premises.
- Export/ import clearance: Seller carries out export clearance
and transit (if any), buyer carries out import clearance.
** Note: Seller bears the cost of unloading goods from the
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DDP (Delivered Duty Paid)

English: DDP (insert named place of destination)
Incoterms® 2020.
Vietnamese: Giao hàng đã thông quan nhập khẩu (nơi đến
quy định) Incoterms® 2020.
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DDP (Delivered Duty Paid)

- Giao hàng đã thông quan nhập khẩu – DDP (named place
of destination): Seller delivers goods (cleared for import) to
buyer on the arriving means of transport, ready for unloading at
the named place of destination after “DDP” or procure goods so
delivered.
destination after “DDP”, normally at the buyer's premises.
- Export/ import clearance: Seller carries out export, import
and transit clearance (if any).
** Note: Buyer bears the cost of unloading goods from the
** For DDP, buyer's obligation is minimum; seller's is maximum.
30
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Group of 4 terms applies to sea and

inland waterway transport:
FAS, FOB, CFR, CIF.
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FAS (Free Alongside Ship)

English: FAS (insert named port of shipment) Incoterms®
2020.
Vietnamese: Giao dọc mạn tàu (cảng bốc hàng quy định)
Incoterms® 2020.
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FAS (Free Alongside Ship)

- Giao dọc mạn tàu – FAS (named port of shipment): Seller
delivers goods to buyer when goods are placed alongside the
ship nominated by buyer (e.g. on a quay or barge) at the named
port of shipment after “FAS” or procure goods so delivered.
- Point of transferring risks and costs: when goods are
placed alongside the ship nominated by buyer at the named port
of shipment after “FAS”.
- Freight: born by buyer. What about local transport?
- Insurance: Buyer bears (can also purchase for local transport
in buyer's country).
- Export/ import clearance: Seller carries out export clearance,
** Note: Buyer bears the cost of loading goods onto the ship at
the named port of shipment. 33
FOB (Free On Board)

English: FOB (insert named port of shipment) Incoterms®
2020.
Vietnamese: Giao hàng trên tàu (cảng bốc hàng quy định)
Incoterms® 2020.
34
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FOB (Free On Board)

- Giao hàng trên tàu – FOB (named port of shipment): Seller
delivers goods to buyer when goods are placed on board of the
vessel nominated by buyer at the named port of shipment after
“FOB” or procure goods so delivered.
- Point of transferring risks and costs: when goods are
placed on board the vessel nominated by buyer at the named
port of shipment after “FOB”.
- Freight: born by buyer. What about local transport?
- Insurance: Buyer bears (can also purchase for local transport
in buyer's country).
** Note: Seller bears the cost of loading goods onto the vessel at
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the named port of shipment.
CFR (Cost and Freight)

English: CFR (insert named port of destination)
Incoterms® 2020.
Vietnamese: Tiền hàng và cước phí (cảng đến quy định)
Incoterms® 2020.
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CFR (Cost and Freight)

- Tiền hàng và cước phí – CFR (named port of destination):
Seller delivers goods to buyer when goods are placed on board of
the vessel nominated by seller at the (agreed) port of shipment (in
seller’s country) and pays the freight to bring goods to the named
port of destination after “CFR” or procure goods so delivered.
- Point of transferring costs: named port of destination after “CFR”.
- Point of transferring risks: when goods are placed on board the
vessel nominated by seller at the (agreed) port of shipment in seller’s
country.
- Freight: born by seller. What about local transport?
- Insurance: Buyer bears (can also purchase for local transport in
buyer's country).
** Note: Buyer bears the cost of unloading goods from the means of
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transport at the named port of destination.
CIF (Cost Insurance and Freight)

English: CIF (insert named port of destination) Incoterms®
2020.
Vietnamese: Tiền hàng, phí bảo hiểm và cước phí (cảng
đến quy định) Incoterms® 2020.
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CIF (Cost Insurance and Freight)

- Tiền hàng, phí bảo hiểm và cước phí – CIF (named port of
destination): Seller delivers goods to buyer when goods are
placed on board of the vessel nominated by seller at the
(agreed) port of shipment (in seller’s country) and pays the
freight, the premium to bring goods to the named port of
destination after “CIF” or procure goods so delivered.
- Point of transferring costs, point of transferring risks,
freight, export/ import clearance: same as CFR.
- Insurance: seller buys insurance on the following terms :
+ Insurance clauses: must be ICC (C) or equivalent.
+ Insured amount: the minimum amount is 110% of the foreign
trade contract value and in the currency of the contract.
+ Insurance scope: minimum is from point of transferring risk
in seller's country to the named place of destination after “CIF”.
+ Additional agreements: need to buy additional insurance or
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expand insurance scope, buyer has to negotiate with seller.

* New points of Incoterms 2020 compared to 2010: Inco. 2020 is
similar to Inco. 2010 except for the following new points:
1. Clearer explanation for Incoterms in the Introduction section:
what the Incoterms do and do not do, how to use Incoterms 2020
with detailed examples and illustrating images that are easier to
understand than Incoterms 2010.
2. Reorganized presentation of both parties’ obligations in each
term: more detailed and easier to understand. Meanwhile, Incoterm
2010 is presented as follows: A1/B1: General obligations of the
seller/ the buyer; A2/B2: Licences, authorizations, security
clearances and other formalities; A3/B3: Contracts of carriage and
insurance; A4/B4: Delivery/ Taking delivery; A5/B5: Transfer of
risks; A6/B6: Allocation of costs; A7/B7: Notices to the buyer/ the
seller; A8/B8: Delivery document/ Proof of delivery; A9/B9:
Checking – Packaging – Marking/ Inspection of goods; A10/B10:
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Assistance with information and related costs.
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* New points of Incoterms 2020 compared to 2010:
3. On Board Bill of Lading (B/L) when delivering under FCA
term: If two parties have agreed on On Board B/L, buyer must
bear the risk and cost for nominating the carrier to issue On
Board B/L to seller. This is not showed in Incoterms 2010, so
causing disadvantage to seller.
4. Different insurance clauses for CIF and CIP: With CIP, seller
is obliged to purchase at the ICC (A), and with CIF, seller only
needs to purchase at the ICC (C). Meanwhile, in Incoterms
2010, seller purchases at the ICC (C) for both CIP and CIF.
5. Replacing DAT (Delivered At Terminal) in Incoterms 2010
with DPU: DAT, similar to DPU, requires seller to bear the cost
of unloading goods, but the place of destination after “DAT” is
only limited within the scope of terminal, meanwhile with DPU,
it's expanded to buyer's premises. 41
DAT (Delivered At Terminal) Incoterm® 2010

English: DAT (named terminal at port or place of
destination) Incoterms® 2010.
Vietnamese: Giao tại bến (bến đến quy định) Incoterms®
2010.
- Seller delivers goods (already unloaded from the means of
transport) to buyer at the named terminal at port or place of
destination after “DAT”.
- Point of transferring risks and costs: is the named terminal
after “DAT” (within the scope of destination port or airport, ...)
- Local transport: each party bears this cost at their country.
- Freight, insurance, export/ import clearance: the same as
DPU in Incoterms® 2020.
** Note: Seller bears the cost of unloading goods from the
means of transport at the named terminal. 42
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2.1.3. NOTES ON INCOTERMS

* Discretionary legal nature of Incoterms :
- Incoterms are legally mandatory only if the foreign trade
contract refers to their application.
- All versions of Incoterms are equally effective. Therefore,
when referring to Incoterms in the contract, it is necessary
to specify which version of Incoterms.
- Parties can modify and supplement the content of
Incoterms when using, but these corrections must be
clearly agreed in the contract to avoid risk.
- If the content of Incoterms conflicts with national law,
national law will have higher legal value in settling disputes.
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2.1.3. NOTES ON INCOTERMS 2020

* The exacter the specification of place is, the
better it is:
- For terms in group E, F, and D (EXW, FCA, FAS, FOB, DAP,
DPU, DDP), the named place in the term title is the delivery
place and the point of transferring risks and costs from
seller to buyer.
- For terms in group C (CPT, CIP, CFR, CIF), the named
place in the term title is the place of destination for
determining the freight paid by seller (point of transferring
costs). The delivery place and the point of transferring
risks from seller to buyer is a different place in seller’s
country, which needs to be specified clearly in the foreign
trade contract. 44
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* Select the appropriate Incoterms:
- The appropriate Incoterms need to be chosen
depending on the type of goods, the means of
transport and the ability of seller and buyer to
perform their obligations.
- If goods are transported in container and by sea, it
is recommended to use FCA (instead of FAS or
FOB), CPT (instead of CFR), CIP (instead of CIF).
- For importers and exporters, it is recommended to
choose C group when exporting and to choose F
group when importing. 45

* Incoterms do not make the contract complete:
- Incoterms only indicate: the obligations of seller or
buyer in hiring the means of transport, buying insurance,
and doing export/ import clearance; the place where
seller delivers goods and transfers risks to buyer; the
costs that each party has to bear during the delivery
process.
- Incoterms do not mention other issues related to goods,
such as price, payment method, transfer of goods
ownership, consequences of violating the contract... 
these issues are specified in other clauses of the contract
or in the law stipulated in the contract. 46
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2.2. FOREIGN TRADE CONTRACT
47
2.2.1. DEFINITION, CHARACTERISTICS AND FORMS
* Definition of foreign trade contract:

- Foreign trade contract is also known as: international
sales contract, international trade contract, ex-import
contract.
- It is a sales contract for goods with international
characteristic.
- The international characteristic are reflected in two
criteria:
1. Parties in the contract have commercial headquarters
/ place of residence in different countries (Note: not based
on the nationality of the parties).
2. Goods are transported across the border of a country.
48
24
4/15/2023

- The 1964 Lahaye Convention on the International Sale
of Goods (Công ước Lahaye 1964 về mua bán quốc tế
các động sản hữu hình) indicated that the international
characteristic must include both above criteria.
- United Nations Convention on Contracts for
International Sales of Goods, Vienna 1980 – CISG (Công
ước Viên 1980 của Liên Hiệp Quốc về Hợp đồng mua
bán hàng hóa quốc tế, gọi tắt Công ước Viên 1980)
states that only the first criterion is enough to determine
the international characteristic. 49

- In Vietnam, Article 27 of the Commercial Law lists
activities that are considered international trade: export,
import, temporary import for re-export, temporary export for
re-import, and transit trade.
- From the definition of these activities, the international
characteristic of the foreign trade contract under
Vietnamese law is expressed in the following criteria:
1. The commodity is a movable property (goods).
2. The commodity is moved across the Vietnamese
border or through a export processing zone or a separate
customs area. 50
25
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* Characteristics of foreign trade contract: to distinguish

from domestic trade contract.
1. Contract subject: parties have commercial heaquarters
located in different countries (ignoring nationality).
2. Contract object: goods must be movable property in order
to cross the border of a country.
3. Payment currency: may be foreign currency for one or both
parties, causing exchange rate risk.
4. Contract language: may be foreign language.
5. Dispute-settling organization: may be a domestic or foreign
court or arbitration.
6. Contract-regulating law: may be domestic law, foreign law,
conventions, and international trade customs and rules. 51

Characteristics Foreign trade Domestic trade
contract contract
Contract subject Heaquarters in different Heaquarters in the
(Parties) countries same country
Contract object Movable property Movable property
(Goods) and real estate
Payment currency Foreign currency for Domestic currency
one or both parties (National currecny)
Contract language Foreign language for Mother language
one or both parties (National language)
Dispute-settling Domestic or foreign Domestic court or
organization court or arbitration arbitration
Contract- Convention, foreign Domestic law
regulating law law, domestic law, (National law)
international trade
customs and rules
26
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* Forms of foreign trade contract:

- In developed countries, foreign trade contract
can be made or signed by speech (verbal
agreement), written documents, or any other
form.
- In Vietnam, the Commercial Law stipulates
that “International sale of goods must be
carried out on the basis of written contracts or
equivalent legal forms" (including telegram,
telex, data message). 53

* Forms of foreign trade contract:
- Foreign trade contract in written form will be more
advantageous in case of disputes and lawsuits compared
to contract in verbal agreement.
- The electronic form of foreign trade contract is
susceptible to fraud.
- Foreign trade contract is not necessarily a single
document with the signature of both buyer and seller.
- Foreign trade contract can be constituted by:
+ An offer from the seller + acceptance of the offer from
the buyer.
+ An order from the buyer + confirmation of the order
from the seller. 54
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2.2.2. LEGAL FRAMEWORK

* When a foreign trade contract encounters a dispute,
what will the parties rely on to settle the dispute?
 The applicable law in the foreign trade contract needs
to be specified.
* Parties have the right to choose the applicable law:
- International law: Conventions (CISG 1980);
International principles (UNIDROIT Principles of
International Commercial Contracts 2004)…
- National law: law of buyer's country, law of seller's
country, law of a third country.
- International trade customs and rules: Incoterms
2010, URC 522, UCP 600, ISBP 745… 55
2.2.3. CONTENT OF FOREIGN TRADE CONTRACT
1. Introduction part: includes:

- Contract title: written in capital letters, bold and
placed in the middle at the top of the contract, usually
presented by the words "CONTRACT" or "SALES
CONTRACT".
- Contract number: placed under the contract title, in
the middle or right corner of the contract, usually
presented by the words "Contract No." or just "No.".
- Contract date: placed under the contract number,
usually presented by the words "Date" or "Dated". 56
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1. Introduction part:
Ex.: CONTRACT
No : 07N/AM/12
Date : Jan. 08, 2012
57
2. Part of contract subject information: shows the

information of both seller and buyer who participate in
the contract. The information includes :
- Name of the contract subjects.
- Address of the contract subjects.
- Contact information: phone, fax, telex, email,…
- Account number and bank where the account is
opened (optional).
- Contract representative: name and position. 58
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Between : ABC MACHINES
Address : P.O.Box 35, Tokyo, Japan
Tel : 81 539 47 8585 Fax : 81 539 47 8586
A/C No : 004-1078 The Okazaki Bank, Toyohashi Branch
Represented by : Mr. ICHIRO SUZUKI, President
Hereunder called : “The Seller”
And : XYZ JOINT STOCK COMPANY
Address : 12 Le Lai St., Dist. 1, Hochiminh City, Vietnam
Tel : 84 - 8 – 3725xxx Fax : 84 - 8 - 3725xxx
A/C No : 007.23.8 Joint Stock Commercial Bank For Foreign
Trade of Vietnam (Vietcombank), Hochiminh City Branch
Represented by : Mr. PHAM VAN A, Director
Hereunder called : “The Buyer”
It has been mutually agreed between The Seller and The Buyer to
sign this contract on the following terms and conditions : 59

3. Part of contract content: is the main part of contract,
including the terms and conditions :
1. Commodity (Tên hàng).
2. Quantity (Số lượng / trọng lượng hàng).
3. Price (Giá cả).
4. Quality (Chất lượng hàng).
5. Shipment (Giao hàng).
6. Payment (Thanh toán).
* In addition, it can also include: Packing and marking (Đóng
gói và ký mã hiệu); Insurance (Bảo hiểm) ; Warranty (Bảo
hành) ; Force Majeure/ Acts of God (Bất khả kháng); Claim
(Khiếu nại); Penalty (Phạt và bồi thường); Arbitration (Trọng
tài); Other terms and conditions (Các điều khoản khác). 60
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4. Conclusion part: shows the signatures of both

seller and buyer, including :
- At the left and right corners of the end of contract
will show "FOR THE SELLER" / "THE SELLER" and
"FOR THE BUYER" / "THE BUYER".
- Under each title is the signature of each party.
- Name and position of the signatories (Note: the
signatories must be the representatives indicated in
the part of contract subject information). 61
4. Conclusion part:
For example:
FOR THE SELLER FOR THE BUYER

(signature) (signature)
ICHIRO SUZUKI PHAM VAN A
President Director
62
31
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* Commodity (Tên hàng):

- It should be expressed accurately according to common
language so that both buyer and seller and relevant
authorities can understand immediately.
- The commodity name can be accompanied by the place
of production, manufacturer, function, and product
specifications …
- If there are too many kinds of goods or detailed
information (for example, more than two pages), it may
be listed separately in an annex attached to the contract.
63

* Quantity (Số lượng) : The content includes:
- Unit of measurement: should use the common system
of measurement, limit the use of specialized systems of
measurement (inch, feet, pound,...)
- Method of determining quantity: Specify exactly (barrel,
box, piece, item, etc.) and specify approximately/ with
tolerance (for bulk cargo with large quantities calculated
by meter, metric tons, liter,...)  using words such as
"about," "approximately," "more or less," …
- Method of calculating weight: net weight (trọng lượng
tịnh) or gross weight (trọng lượng cả bì). 64
32
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* Price/ Unit Price/ Amount (Giá cả): The content includes:
- Unit Price (Đơn giá): Pay attention to the unit of measure and
type of currency (usually the strong foreign currencies: USD,
EUR,...).
- Amount/ Total Amount (Tổng trị giá của hợp đồng): written in
numbers and in words.
- Incoterms (Điều kiện thương mại quốc tế): written right after
unit price and/ or total contract value.
- Payment currency (Đồng tiền thanh toán): is usually the
currency used for pricing.
- Pricing method (Phương pháp quy định giá): fixed price (giá
cố định) ; flexible price (giá linh hoạt) ; sliding scale price (giá di
động).
- Discount (Giảm giá) if applicable: discount due to buying in
bulk, early payment, seasonality,… 65

ARTICLE 1 : COMMODITY - QUANTITY - UNIT PRICE - AMOUNT :
--------------------------------------------------------------------------------------------------------------
ITEM QUANTITY UNIT PRICE AMOUNT
(CIF HOCHIMINH CITY PORT INCOTERMS 2010)
--------------------------------------------------------------------------------------------------------------
ABC Machine Model MSA 18-25 1 set USD 70,000 /set USD 70,000
** The machine has already assembled completely in Japan and is delivered
to The Buyer in a complete set.
Including the standard accessories as follows :
1. Standard accessories for MSA 18-25 1 set --- included ---
2. Servo motor 1 set --- included ---
3. Machine base frame 1 set --- included ---
** Specifications and standard accessories : Please see “ANNEX” that is
considered as the integral part of this contract.
TOTAL CONTRACT AMOUNT: USD 70,000 CIF HOCHIMINH CITY PORT
INCOTERMS 2010 ( SAY : UNITED STATES DOLLARS SEVENTY THOUSAND
66
CIF HOCHIMINH CITY PORT INCOTERMS 2010 ONLY).
33
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* Quality/ Specification (Chất lượng/ Quy cách): specify
the quality of goods, clarify the commodity article. Quality-
determining methods are as follows:
- According to predetermined sample.
- According to description of goods.
- According to available commodity standards.
- According to commodity brand.
- According to technical documents.
- According to content of substances determining the quality of
goods.
- According to goods status (“as it is”/ “as is sale”)
- According to common general standards: FAQ (Fair Average
Quality) or GMQ (Good Merchantable Quality).
* The origin of goods can also be added. 67
* For example:
ARTICLE 2 : QUALITY :
- Brand new 100%, fabricated in 2011 or 2012.
- The push button plates and signal plates will be
in English. All measuring scales are to be
graduated according to metric system.
- All machines are of Japanese origin and are to
be manufactured by ABC MACHINES,
Toyohashi, Japan. 68
34
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* Shipment/ Delivery (Giao hàng): including:
- Delivery time (Thời hạn giao hàng): A specific time frame must
be specified: a specific date, not later than a certain time, within
a range of time from date... to date...
- Delivery location (Địa điểm giao hàng): expressed in
Incoterms, delivery place, unloading place, transshipment place
(these items may show one or more places).
- Delivery notification (Thông báo giao hàng): when for
notification, times of notification, content of notification. It may
include: Pre-delivery notification or Post-delivery notification.
- Partial shipment (Giao hàng từng phần): allowed or prohibited.
- Transshipment (Chuyển tải dọc đường) : allowed or prohibited
69
- Other regulations: Seller hires a reputable company’s vessel…
ARTICLE 4 : SHIPMENT TERMS

4.1 : SHIPMENT :
- Time of shipment : not later than March 20, 2012.
- Partial shipment is not allowed
- Transshipment is allowed
4.2 : LOADING PORT : Any Japanese port.
4.3 : DISCHARGING PORT : Hochiminh city port, Vietnam
4.4 : NOTICE OF SHIPMENT : Within 03 working days after
departure of cargo vessel, the seller must notify by telex/fax to
the buyer of the following shipment particulars : Name of
vessel, B/L date and B/L No., Shipment time and ETA,
Loading port and discharging port, L/C number, invoice
number and invoice value. 70
35
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* Payment (Thanh toán): including:
- Payment currency (Đồng tiền thanh toán): if it is different
from the pricing currency, it must be specified (it may be in the
Price article).
- Payment term (Thời hạn thanh toán): advance payment,
sight payment, later payment (after shipment), or a combination
of these terms.
- Payment method (Phương thức thanh toán): remittance,
collection, documentary credit.
- Presented documents for payment (Chứng từ xuất trình để
được thanh toán): consisting of financial and commercial
documents.
- In addition, it maybe appears the account number and bank
details of the payer (buyer) and the beneficiary (seller). 71

*Time point to determine advance payment, sight payment,
later payment (after shipment):
- In fact, it is the time point that seller transfers the ownership of
goods to buyer.
- In international trade, as seller cannot directly deliver goods to
buyer, the above time point becomes the time point that buyer
receives commercial documents (with commercial documents,
buyer receives goods or the ownership of goods).
- Since the time point to receive commercial documents is difficult to
determine, it becomes the time point that seller completes the
delivery obligation (according to Incoterms) and is entitled to
demand payment from buyer. This is the shipment date specified
in contract and documents.
** In short, payment before or after delivery date/ shipment date is
considered as advance payment or later payment. For sight
payment, it has two forms: payment on delivery date or payment on
72
the date that buyer receives commercial documents.
36
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ARTICLE 6 : PAYMENT TERMS :

- By an irrevocable L/C at sight .
- BENEFICIARY : ABC MACHINES
- Advising bank : The Okazaki Bank, Toyohashi
Branch.
- Address of advising bank : 2-11, Maeda-chou,
Toyohashi, Aichi, Japan
- Beneficiary’s A/C No. : 004-1078
73

* Documents required :
1. 3/3 originals clean on board ocean B/L showing L/C
number made out to the order of the issuing bank marked
“Freight Prepaid” and notify the applicant.
2. 05 originals of signed Commercial Invoice.
3. 03 originals of certificate of origin showing vessel name
issued by Chamber of Commerce in Japan.
4. 02 originals of insurance certificate/ policy covering Clause
A and covering up to the installation, procedures and trial
operation at the applicant’s factory whose address is 75 Le
Van Luong Street, District 7, Hochiminh City, Vietnam for
110% of invoice value, blank endorsed, showing claim
payable in Hochiminh City, Vietnam and 01 copy.
5. 03 originals of certificate of Quantity and Quality issued by
the Independent Surveyor in Japan.
74
6. 05 originals of detailed packing list.
37
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* Packing and Marking (Bao bì và ký mã

hiệu hàng hóa):
- Packing (Bao bì) : regulates the type of packaging,
quality of packaging, inner packaging, outer
packaging, and the cost of packaging (if it is
expensive and separately charged).
- Ký mã hiệu hàng hóa (Marking) : to make the
identification of goods easier, or to provide guidance
on storage, transport, usage of goods … 75
ARTICLE 3 : PACKING AND MARKING :

3.1. PACKING : Machines must be packed in
seaworthy wooden cases confirming to international
standard. All wooden cases are contained in export
standard containers.
3.2. MARKING : XYZ JOINT STOCK CO.
HOCHIMINH CITY
ABC MACHINE
MADE IN JAPAN 76
38
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* Insurance (Bảo hiểm):

- This article will appear when the Incoterm is CIP or CIF
(seller buy insurance).
- The content needs to be agreed:
+ The type of ICC (A, B or C) and special clauses.
+ The party that bears premium and/ or additional cost.
+ The insured amount (usually 110% of invoice value).
+ The scope of insurance.
+ The place for insurance claim and payment (usually
in buyer's country). 77
ARTICLE 5 : INSURANCE :
- Be covered by the seller.
- Insurance is covered by Clause A for 110% invoice
value and covered up to the installation, procedures
and trial operation at the buyer’s factory whose address
must be presented in the insurance certificate : 75 Le
Van Luong Street, District 7, Hochiminh City, Vietnam
as the ending place of insurance.
- The insurance certificate marked that the
compensative expenses must be paid in Hochiminh
city, Vietnam.
78
39
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* Penalty (Phạt và bồi thường):

- Specifying the compensation way when the contract
is not fully or partially fulfilled according to the
requirements.
- Common cases of penalty are defined:
+ Penalty for late delivery.
+ Penalty for delivery of incorrect quantity and
quality.
+ Penalty for late payment.
+ Penalty for contract cancellation.
79
ARTICLE 7 : PENALTY :
In case of late shipment, the penalty amount
being charged by the seller is 1.5% of contract
value for the late maximum of 30 days. If the
late time is more than 30 days, the buyer can
cancel the contract without compensation.
80
40
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* Warranty (Bảo hành):

- This article usually appears when the goods are
machinery, equipment.
- Seller only compensates when the damage to the
goods is caused by the substandard goods
themselves.
- This article usually regulates the following contents:
+ Warranty period.
+ Cases covered by the warranty.
+ Method and place of warranty. 81
ARTICLE 8 : WARRANTY :
8.1. Warranty period : The warranty time is 12 months from
the date of signing the Report of checking and taking over.
8.2. If there are any defects, damage or malfunction of goods
due to the seller’s faults discovered in the warranty time, the
buyer will inform the seller by fax/telex and within 15 days
after the date of receiving the buyer’s announcement, the
seller will bear all charges and expenses to rectify such
irregularities by means of either provision of service,
correction, alteration and/or replacement. In this case, the
warranty time will be extended autically the correspondent
time with the time that the machine do not operate due to its
malfunction.
In the case of defects caused by the buyer, the buyer will bear
all costs relating to the repair. 82
41
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* Force Majeure / Acts of God (Bất khả kháng):

- Force majeure events are those caused by objective
factors that delay or prevent the implementation of the
contract.
- In such cases, neither party is liable for damages. At the
same time, parties are also exempted or delayed in fulfilling
their contract obligations.
- The contents need to be agreed: .
+ The clear definition of force majeure events.
+ The obligations that the related party must fulfill to be
accepted the force majeure event when it happens.
+ The way to resolve the situation when a force majeure
event appears. 83
ARTICLE 9 : FORCE MAJEURE :

In the event that the implementation of this contract by
either party is prevented or delayed in whole or in part by
war, rebellion, riot, Acts of God or events beyond control of
either party hereof, none of party shall be liable for
fulfillment of his obligations under this contract.
Force Majeure circumstances must be notified by each
party to other by fax/telex within 08 days and confirmed by
writing within 10 days with a certificate of Force Majeure
issued by government authority which is considered the full
proofs of the existence and the time of the Force Majeure
happens. Beyond this time, Force Majeure circumstances
shall not be taken into consideration. 84
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* Claim (Khiếu nại):

This article is for buyer to claim against seller
regarding the goods and the contract implementation
(quantity, quality, packaging, delivery,...), including
the following content:
- Method of claiming: Written complaint letter.
- Time for claiming: Depends on both parties’
relationship and the type of goods.
- Rights and obligations of buyer and seller when a
claim happens.
- Method of resolving claim. 85
ARTICLE 10 : CLAIMS :
In case of claim on quality and quantity discrepancy against
the seller, the buyer shall officially notify the seller by telex or
fax and dispatch the official claims together the original survey
report issued by any Inspection Company in Vietnam within 90
days after receipt of goods. All survey charges are born by the
party causing the faults.
All these claims must be solved right away within 30 days
from the date of receiving the buyer’s claim letter.
All other claims relating to the equipment in the warranty time
must be sent to the seller by telex or fax but not later than
within 30 days from the date of discovering the defects. The
seller must solve them right away according to the warranty
86
conditions being negotiated.
43
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* Arbitration (Giải quyết tranh chấp/ Trọng tài):

- If a dispute cannot be resolved by mutual agreement, the
parties will seek the assistance of a court or an arbitration in a
country (buyer’s, seller’s, third country) to resolve the dispute.
- Nowadays, arbitration is preferred to court.
- If using arbitration, the following contents are required:
+ Which arbitration committee resolves the dispute.
+ Method of establishing the arbitration committee
+ Applicable law.
+ Location of the arbitration.
+ Commitment to abide by the arbitration award.
+ Allocation of the arbitration costs. 87
ARTICLE 11 : ARBITRATION :
- If any disputes in connection with this contract are
not settled amicably by both parties within 30 days,
they will be referred to Vietnamese International
Arbitration Center beside Chamber of Commerce
and Industry of Vietnam and will be based on the
Vietnamese law.
- The Vietnamese arbitration’s decision is considered
final for both parties.
- The arbitration fee and other charges shall be borne
by the losing party unless otherwise agreed . 88
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* General Terms/Conditions /Other Terms /Additional

Conditions (Điều khoản chung/ Điều khoản khác):
The contents are included:
- The way of amending or supplementing the contract.
- The number of contract copies made and the number of
copies each party retains.
- The contract's validity period: regulating the beginning time
and the ending time of the validity.
- The language of the contract.
- Other provisions: the applicable law of contract, Incoterms
version, UCP version (if payment method is documentary
credit) … 89
ARTICLE 12 : GENERAL TERMS :

- Both sides undertake to execute strictly all the
articles of this contract. Any amendments or
additions to this contract shall be made in writing and
signed by authoritative representatives of both sides.
- This contract is made in 05 English copies with the
equal validity. 03 of which will be retained by the
buyer and 02 of which will be retained by the seller.
- This contract shall come into force from the date of
signing the contract to the project completion (ending
the warranty time). 90
45
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EXERCISE 2.1: With the same foreign trade contract (meaning

the terms and conditions are the same), please present the
basic similarities and differences in terms of cost and risk
between the following Incoterms 2020:
1. EXW (seller's premises) and FCA (seller's premises)
2. FCA (port of loading A) and FAS (port of loading A)
3. CFR (port of discharge B) and CPT (port of discharge B)
4. CPT (buyer's premises) and CIP (airport of discharge)
5. FOB (port of loading) and CFR (port of discharge)
6. CIF (port of discharge X) and DAP (port of discharge X)
7. CIF (port of discharge C) and DPU (port of discharge C)
8. DPU (airport of discharge Z) and DAP (airport of discharge Z)
9. DPU (buyer's premises) and DDP (buyer's premises) 91
EXERCISE 2.2: Based on the examples of the foreign trade

contract articles presented in the above slides, please answer
the following questions:
1. In the example of ARTICLE 5 - INSURANCE, why do seller
and buyer need to specify this article? Indicate the scope of
insurance (from where to where) in this case.
2. In the example of ARTICLE 9 - FORCE MAJEURE, give a
specific example of a force majeure event that prevents the
contract implementation of :
a. the exporter.
b. the importer.
3. In the example of ARTICLE 12 - GENERAL TERMS, what
language is the contract written in? How many copies are there
in total? How many copies does each party retain? What is the
validity period of the contract? 92
46

Chapter 2 Incoterms and Contracts

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Chapter 2 Incoterms and Contracts

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4/15/2023

INCOTERMS & FOREIGN TRADE CONTRACT

* Objective: to help the learners:

INCOTERMS & FOREIGN TRADE CONTRACT

2.1.1. GENERAL INTRODUCTION TO INCOTERMS

-Incoterms - International Commercial Terms

- In practice, Incoterms ar also referred to as

- Incoterms are drafted and issued by the ICC

2.1.1. GENERAL INTRODUCTION TO INCOTERMS

- Incoterms describe trade terms which are abbreviated

2.1.1. GENERAL INTRODUCTION TO INCOTERMS

- Incoterms were first issued by ICC in 1936 and changed

2.1.1. GENERAL INTRODUCTION TO INCOTERMS

- Incoterms 1980 : consisting of 14 trade terms with two terms

2.1.2. INCOTERMS 2020

2.1.2. INCOTERMS 2020

A. THE SELLER’S OBLIGATIONS B. THE BUYER’S OBLIGATIONS

2.1.2. INCOTERMS 2020

A. THE SELLER’S OBLIGATIONS B. THE BUYER’S OBLIGATIONS

A6. Delivery/ transport B6. Proof of delivery

2,3,4,5,9 -> đọc

2.1.2. INCOTERMS 2020

Seller’s Main departure Main arrival Buyer’s

Local transport in Main transport Local transport in

2.1.2. INCOTERMS 2020

Group of 7 terms applies to any mode

EXW, FCA, CPT, CIP, DAP, DPU, DDP.

EXW (Ex Works)

hh, điểm chuyển giao rr

thủ tục hải quan xuất nhập khẩu

. trách nhiệm ng bán -> tối thiểu

người mua phải rất am hiểu về nc người bán

giao cho người chuyên chở

thủ tục hải quan nc nào thì nc đó chịu trách nhiệm

FCA (Free Carrier)

FCA (Free Carrier)

. EXW (seller’s premises) vs FCA (seller’s premises):

CPT (Carriage Paid To)

địa điểm chuyển giao chi

thoả thuận cụ thể địa điểm chuyển

ng. bán k chịu rr đến đó,

CIP (Carriage and Insurance Paid To)

CIP (Carriage and Insurance Paid To)

CIP (Carriage and Insurance Paid To)

CIP (Carriage and Insurance Paid To)

DAP (Delivered At Place)

DAP (Delivered At Place)

DPU (Delivered at Place Unloaded)

DPU (Delivered at Place Unloaded)

DDP (Delivered Duty Paid)

DDP (Delivered Duty Paid)

2.1.2. INCOTERMS 2020

Group of 4 terms applies to sea and

FAS, FOB, CFR, CIF.

FAS (Free Alongside Ship)

FAS (Free Alongside Ship)

FOB (Free On Board)

FOB (Free On Board)

CFR (Cost and Freight)

CFR (Cost and Freight)

CIF (Cost Insurance and Freight)

CIF (Cost Insurance and Freight)

2.1.2. INCOTERMS 2020

2.1.2. INCOTERMS 2020