Chapter 1: Transportation in International Trade

Pham Thanh Ha (MA)

Outline
I.
1. 2. 3.

Concept of international transport

Definition Characteristics Effects

II.
1. 2.

Transport right/liability
Definition Dividing of transport responsibility in international sales contracts
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I. Concept of International transport

1. Definition International transport is a process in which goods are moved among different countries. 2. Characteristics Carrying process is conducted among two or many different countries Departure and arrival points must be in different countries Relationships, which arising from carrying process, must be regulated by international law scale.
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I. Concept of International transport

3. Effects of international transport Promote the development of international trade: The amount of goods that circulate between two countries is in direct proportion to the product of economic potentialities of the two countries, and is in inverse ratio to distance between them (St. William) Q = P1 x P2 / L
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I. Concept of International transport

3. Effects of international transport Expand of goods and market structures in international trade:
Goods structure: high value, small quantity => any kinds of goods Market mechanism: near, neighbor, favorable markets => any markets

Improve the international balance of payments

Serving function Trading function
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II. Transport right/liability

1. Definition Transport right/liability is the right and obligation of organizing of carrying process and directly making payment to the carrier. 2. Dividing of transport right/liability in international sales contracts 2.1. Basis to divide of transport responsibility: Incoterms
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II. Dividing of transport right/liability in international sales contracts

2.2. How to divide: 2 ways Incoterms 2000: 3 groups Group 1: transport responsibility belongs to importers (EXW, FCA) Group 2: transport responsibility belongs to exporters (DDU, DDP, CIP, CPT) Group 3: transport responsibility belongs to both of importer and exporters (FAS, FOB, CFR, CIF, DES, DEQ) Incoterms 2000: 4 groups (base on main transport section) Group E: EXW Group F: FCA, FAS, FOB Group C: CPT, CIP, CFR, CIF Group D: DDU, DDP, DES, DEQ Special term: DAF

Pham Thanh Ha (MA)

II. Dividing of transport right/liability in international sales contracts

Pham Thanh Ha (MA)

Incoterms 2010
Base on main transport stage: Group E: EXW Group F: FCA, FOB, FAS Group C: CIP, CPT, CIF, CFR Group D: DDP, DAT, DAP

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Incoterms 2010

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II. Dividing of transport right/liability in international sales contracts

2.3. Benefits of getting transport right/liability in international trade Gaining initiative in carriage of goods, negotiation and signing contracts Utilizing national merchant fleets and other transportation means Improving the national balance of payment Promoting the development of other sectors: freight forwarding, broker, consolidation
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II. Dividing of transport right/liability in international sales contracts

2.4. Cases that should not get the transport right/liability Assuming that prices in shipping market sharply increase in comparison with the time of signing sales contract. Predicting that it will be hard to charter vessels Calculating that the difference between the CIF/CFR price (export price) and the FOB price that offered by foreign importer (or the difference between the CIF/CFR (import price) that offered by foreign exporter and the FOB price) is not enough to compensate freight and/or insurance premium that we have to pay. Dividing of transport right/liability is assigned by international law or practices.
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II. Dividing of transport right/liability in international sales contracts

2.5. Summary In 11 terms of Incoterms 2010, there are 4 terms in which goods must be transported by sea or inland waterway: FAS, FOB, CFR, CIF. In the rest terms, goods can be carried by all modes of transport. Transport right belongs to exporters if they sell goods by CIF, CFR, CIP, CPT, DDU, DDP prices Transport right belongs to importers if they buy goods by EXW, FAS, FOB, FCA prices Exporters will get transport responsibility when they sell the goods at the places that nearest to consuming sites. And importers will get one when they buy the goods at the places that nearest to producing locations.
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