Part1- Chapter I_Bookbooming

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Chapter 1: Transportation in International Trade

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Outline

I. Concept of international transport1. Definition

2. Characteristics

3. Effects

II. Transport right/liability1. Definition

2. 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

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

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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.