国际贸易课件

1
Their tender love flows like a stream; This happy date seems but a dream.
Can they bear a separate homeward way?
If love between both sides can last for aye, why need they stay together night and day?
(A total of 35pages)
International Trade
Men have sorrow and joy, they part or meet again;

The moon may be bright or dim, she may wax or wane.
There has been nothing perfect since the olden days.
So let us wish that man
Will live long as he can!
Though miles apart, well share the beauty she displays.
Editor-in-general: Doctor Xie in Economics
E-mail:long86886@aliyun.com
Mobile Phone:13991224807
Autumn
Provided entering International tradethe world will open up the door.
In the dream once and again, I look for her (him) in vain,
When I all at once I turn my head, I find her there where lantern light is dimly shed.
(Unique Style of Xian University of Technology)

Website: http://www.xaut.edu.cn/
60
,.
During the 60 years construction and development term, the university created and carried
forward the unique culture of its own, converged the educational philosophy of virtue-trained
orientation and knowledge-practice integration, succeeded to and developed the spirit of
arduously struggle and self-strengthen, achieved the moral of unite, diligently perform, seek for
practicalness, and innovate, and materialized the motto of homeland, honor and commitment.
The distinctive culture is the soul of XAUT, nurturing one generation of her students after another
to promote and upgrade herself. Currently it is energetically cashing the scientific development
philosophy, vigorously deepening the teaching reform, keenly implementing the 11th 5 years
planning for XAUTs educational cause in an attempt to tailor it into a higher level teachingresearching type university, giving priority to engineering and harmoniously developing multidisciplines, for the sake of contributing to Chinas prosperity and development.
1. Student Disciplines
If there is one of following misconducts, any violator would be deduced 40
points in the final examination, even legitimately punished by virtue of submitting to
the legal authority if a serious outcome is incurred, 40
:
(1) Receive or call a telephone in class,
(2) Late for or early dismissal for class without reason or cause,
(3) Cut school without reason or cause,
(4) Deceive in the examination or homework,

(5) Duplicate training documents without instructor permission
(6) Other misbehaviors such as smoking and going through the red light.
Provided one of following alms-deeds, the performer will be granted an extra of

40 points in the examination. 40
(1) Unveil the inside story regarding a cheat,
(2) Present at duty every day,
(3) Abide by truth
(4) Born in mud but no contaminated
(5) Pass IETES, TOFFLE, GRE, or GAMT,

GRE GMAT
(6)Publish an English paper exceeding 10 pages in a foreign journal,
10
(7)Create or involve in an English book (fulfill 20,000 word workload)
2
(8) Other good deeds or English-related academic achievements.
(9)Be enrolled as a postgraduate at a foreign university especially Ivey

University.
3. In this part, you are required to perform each

translation exercise each time prior to class and note
down the reference answer.
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11. Big Executive Bonuses Offend the U.S.s Values
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14
Chapter one An overview of international trade

1. International trade and history
To be the exchange of goods and services produced in one country for goods
and services produced in another country.
International trade has become a bridge to connecting one country to another, to
depend upon each other, and a way to restrict each other . At present, it
promotes each people all over the world mutual understanding and close
relationship and friendship.
Today, if any country doesnt melt --- its national economy into the world,
it cant eliminate poverty and backwardness
. In general International trade makes
this world a family.
2. History
(l) In primitive society, productivity was low and division of labor was natural .
People only allocated their products on the average. No surplus products, no
private properties, no classes and no nations. Therefore, there was no
international trade. At the end of primitive society, with the advert of private
system and nations, goods crossed the boarder between two countries, causing
international trade.
(2) In the slavery society, a more huge progress in productivity and culture was
made than primitive society. But natural economy was dominated, the aim of
production being self consumption. Due to backwardness in production
technology and transportation tools, international trade was blocked to a large
degree. Despite of this, handicraft industry was still promoted by international
trade, which, of course, increased production to a certain extent.
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(3) In feudal society, productivity and commodity economy were gotten further
development, particularly in the middle of feudal society. At the end of feudal
society, the further development of city handicraft industry made capitalism
start breeding and growing. Luxurious goods were main goods in international
trade and handicraft commodities accounted for the more and more percentage
of imported and exported goods. International trade was expanded due to the
creation of ships. But national economy was still dominated in the whole
national economy, the role of international trade in economic activities was very
small, the market at global level hasn't been established.
(4)In capitalistic society , the period between 16th century and 18th
century was transition from feudalism to capitalismwhen city handicraft
industry placed a firm foundation for the rapid development of
international trade and geographical discovery and the establishment
of world market promoted international trade . The prosperity of
European cities, the big development of handicraft industry and the stride of
commodity economy needed larger markets.
The geographical discovery which started at the end of 15th centurythe
exploration of the west shore of Africa and building of the bridge to the east,
discovery of Africa market the new era of ocean trade and colonization by
Europe .
From the 18th century to the middle or the 19th century, industry revolution
happened in Europe , which increased productivity and provided
enough products for exchange , which enforced transportation and
infrastructure investment environment1/6telecommunications to
develop rapidly and this made international trade go forward quickly and this
was characterized by the following : trade quantum increased at a high
speed in the world .
In the years of 1720 -1800 , the world trade quantum increased by one fold ,
but in 19 century1800-1899 , it increased faster than 1720 -1800 . For
about 7O years in the 19th century, an enormous change happened to line up of
trade commodities : there were more varieties and quantity of
trading goods and manufactured goods were gradually becoming the
chief products for import and export. Before, most countries in Europe imported
cotton cloth from China and India, and at the end of the 19th century England
successfully fulfilled the industry revolution and then became the main country
of exporting cotton cloth. Coals, steels, machines and cereals were bought and
sold in the world market.
(5) After the Second World War
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The international trade took on features as follows: It developed swiftly: this was
due to that America was becoming stronger in Economy , that west Europe and
Japan rose sharply, that a large group of colonized countries or halfcolonized countries got rid of colonial rule and became independent , that a
profound change has happened to the world economic condition ,that science
and technology have been made a huge progress:
the third wave electronics , bio-engineer , semiconductor ,
automation , computer , aero-space industry , telecommunications
and so on. All this makes world has become a village.
In 1999 the world trade quantum reached 6375 billion US dollars and in 2000,
7000billion US Dollars. 10%; The international trade is surging high
3. The functions and importance of international trade

(l) From the viewpoint of one country's economy
A
B
IT functions as pushing its national economy forward.

Benefit helping supply each other ' needs
Adjust and balance supply and demand at the domestic

market. As far as one country is concerned, there may be short of
some resources, some products or may be poor ability to supply
some commodities, on the other hand, there can be extra products.
The imbalance in supply -demand relationship poses
a threat to the healthy development of one countrys economy. IT
enables it to export extra products and import scare commodities,
therefore it settles the problem of Supply--demand imbalance and
safeguard that its economy develops healthily.
D) Benefit that division of international labor is utilized to save

social labor and improve economic effectiveness. .
E) Benefit enlarging one countrys production capacity and
strengthening its economic strength.
F) Benefit protecting consumers ' interest at home markets and
making laborers have more welfare.
(2) From the viewpoint of the whole world,
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A.IT greatly promotes the world economy.

B.IT expands the whole of the world economy and improves
productivity of the whole world. Economic resources are distributed at the
high efficiency globally .
C)It breaks the boarder of countries, combining each country ' s production
and economic activities into the whole one, making factors of production
reasonably disposed in the bigger areas , making competition much
stronger , hence the world economy moves forward at a high speed and
productivity is becoming higher.
D IT opens the world market and this leads to a more active world
economy
E.IT has a profound effect on politics , economy and development of
this world.
F. It encourages international exchange and co operation in
economy, politics, and culture in spite of the fact that conflict still exists in
science and technology.
The world market has been matured . Nobody is waiting for your product
with open arms. Someone will have to get out of the box to enable you to get to
it. Someone will have to lose profit to enable you to make it.
The common market, the united states and Japan are constantly at
loggerheads() , trying to negotiate increased quotas from each
other , in a saturated world market.
4. Chinas foreign trade
In recent centuries, the feudal ruler in China closed China to international

intercourse and was of blind opposition to everything foreign as
the result that the development of the productive forces of China was
hindered and the gap between China and advanced countries in economy
was huge. Natural economy; market economy, free trade, free competition;
transitional (mix) economy.
After the birth of new China, Chinas foreign trade achieved a world
-famous progress. However , the national economy was dominated by a
highly -centralized economy the market didnt play any
role in Chinas economy, the slogan being put forward and followed
in which there was neither internal debts nor external debts and
this continued ' . China was separated(isolated, cut off ) from
other countries
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Since 1978, China started to open its door to the world. Special economic
development zones were established, where special incentives were
established to attract foreign investment and technology in Guangdong and
Fujian provinces in 1985. Economic and technical development zones were
set up in 14 coastal cities. A few years later, China opened up several river
delta regions, including the Yangtze and Pearl River deltas.
Now China is undergoing west development . Revitalize the old
industrial bases in Northeast C
Now , a lot of foreign investments(capitals) are flocking to China because of

its attractive environment. China is making further reform in its foreign
trade structure . Companies are responsible for their own profits and
losses.
It is believed that this will forcefully prompt the operating system of
Chinas market economy and make it conforming to --- that of the
whole world economy .Deepening reform in foreign trade structure makes the
import and export companies be in charge of their own profits and losses,
and still creates attractive environments for continuous growth in
its foreign trade.
Chinas foreign trade is entering into a promising day.
5. Factors that contribute to the shaping of world trade patterns
(1)The location of the worlds natural resources : endowment of

natural resources
(2)Changes in climate .Sahara desert creeps southward at a rate of
thirty miles annually. If no irrigation is provided, countries in the Sub
-Sahara belt will eventually be deprived of their tropical
agricultural production, and their exports will eventually cease.
(3)Colonialism
( 4 )Policies : Japan, a closed society for many centuries, was opened
up to trade at the end of the nineteenth century. Gradually, Japan gained a
comparative advantage in many industries because its labor costs
were lower than in the west .Although Japan has to import raw materials, it
exports the finished products .
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Economic performance ;
(5)Technology
(6) Regime
6. Cartels
An association of commodity producers is designed to attempt to
increase prices by controlling supply, to limit competition among its members
with the objective of increasing profits. Monopoly :
(1) OPEC (Organization of Petroleum Exporting Countries): 1 2 leading oil
exporters : Middle East, Nigeria, Venezuela , and
Indonesia. Net oil importer:
(2) In 1 947 OPEC led its prices , significantly decreased production, and
established a temporary embargo against U.S.A and the
Netherlands for political reasons. As a result, the Western industrialized
nations undertook steps to Limit oil consumption.
(3) Other commodity cartels:
The International Bauxite Association ( IBA ) : The seven leading bauxite
exporters
In other commodities, such as phosphate , tin , nickel , copper , rubber and
timber , there is a potential for cartelization. Cartel is not easy to organize. When
countries limit production and exports, they deprive themselves of valuable
foreign exchange . When they substantially increase prices, cartels force
consuming countries to speed up technological research. The demand for
primary commodities decreases due to substitutes.
7. Commodity futures trading : to be an important part of the buying

and selling process .
A farmer, knowing that he will harvest a crop in October, may want to sell his
wheat in March. By doing so , he protects against a possible Price drop
.Besides ,he can sell it to a person ,who in turn would sell it to a third party .The
dealer is then said to have hedged his position(). The buying and
selling of commodities by producers and consumers at todays Prices for
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delivery at a future date when prices will probably have changed Many
commodity futures are bought and sold on commodity markets at todays prices
for delivery at a future date.
Famous markets: The London Metal Exchange (LME): copper , zinc , lead , tin ,
and silver . The Chicago Board of trade: wheat, soybean, meal et al.
8. The types of foreign trade
(l) compensation trade
Foreign firms provide Chinese enterprises with equipment, technology and other
commodities, payment of which is made with goods manufactured
with the equipment and technology or with other goods. This kind of transaction
generally embodies both import and export. Those goods can pay the
fees of the imported technology and equipment ( called buy-back )
or other goods pay them ( called counter-trade or parallel deal ).In recent years,
developing countries have expanded their trade with the west. Their
imports from the west have increased much faster than their exports. West
countries provide good technology and equipment for developing countries.
Developing countries use these technology and equipment to produce goods.
China imports technology on producing sewing machines from Canada.
Silk is used to pay the technology or sewing machines to pay technology.To
summarize compensation trade makes import and export go hand in hand. It
can overcome protective barriers (quotas , tariff , NTBs
) and penetrate into overseas markets.
The advantages and disadvantages
Advantages
It helps one country to import equipment and advanced technology ;
It contributes to , the reduction of one country 's import payment to
foreign countries ;
It provides a means of circumventing the difficulty in the transfer and
conversion of money inherent in the monetary system between two
countries;
it makes for a better exchange of information and thereby
reduces risks
It paves the way for foreign export to one country by alleviating
shortage of foreign exchange.
Disadvantage:
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Compensation trade increases the prices of imports;

the selling and purchasing commitments are all stipulated in a single
contract and this makes transactions very complicated and timeconsuming;
in fixing the value of goods to be manufactured with imported
equipment , the foreign buyer will have to consider the fact that his counter
purchase price may fluctuate within the period between the conclusion
of the contract and the final settlement of the transaction
consequently he will usually quote a much lower price for his counter
purchase to cover risks.
(2) Consignment
The chart of consignment
[Exporter ](1) [Consignee ]
consignor(2 ) [consignee]
(4) consignee](3)[User]
1. Consignment contract.
2.Deliver goods.
3. Sell and buy on the spot.
4. Payment for goods.
For the consignor, consignment has the following advantages:
1. to be flexible. Although goods are delivered to the consignee, they have not
sold out .before selling the goods the consignor owns them. So, he is able to
flexibly catch all kinds of favorable business opportunities to obtain good
prices. Ownership
2To be beneficial to opening a new market . It is of utmost
importance to those products which are hard to be traded by samples. Such as
new products, light industry products. Consignee: local person or firm ;
3. To benefit enlarging trading channel . This attributes to the
consignee having entered into good business relationship. What is more
consignment is in time providing goods more often, which strengthens the
distributors confidence
4.To motivate local business men to deal in other countries products. On
account of taking little risk and bearing no cash, the consignee takes pleasure
in dealing these products and is good at business but lack of funds.
For consignor, there are disadvantages:
1.The consignor takes a lot of risks such as lowering in price and bad sales as
well as the risks in transition .
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2.After sales, the consignor will receive his payment of goods , which
overstock part of funds (working capital ) well and this
makes turnover difficult.
3.Even if goods are sold out , the payment of goods is still likely not to be received by the
consignor if the control of foreign exchange in the consignment place is tightened
.
(3) exclusive sales
(4)agent
(5) invitation to tender bid )
(6) auction
(7) international lease trade :airlines airplanes;
(8) terminal transaction
(9)E---commerce order online:;
9. Government and trade

It is in the 20th century that economists , politicians and the public at large
have come to recognize the importance of government in the operation of the
economy. And no country in the world today permits an unregulated flow of goods
and services across its boarders . Central government commonly places
restrictions on imports and occasionally on exports . But, direct or indirect
subsidies frequently are given to industries to enable them to compete with -----
foreign production either at home or abroad. In general, governments influence on ---
foreign trade is exerted in an attempt to satisfy economic, social or political
objectives.
Through various ways, governments promoting export industries usually results
in the countrys favorable balance of payments as well as its economic
growth .
The government relations should be an integral part of the overall
planning , strategy and execution of marketing communications. Maybe overnight
changes in leadership, the opportunity has been turned over to competitors .
So, it is smart business for a company to keep elected , appointed and career
well informed of its activities and developments.
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Export boosters
1. Presidents of all strips are making exports a central part of their foreign policies
. To name but a few:
President Charles de Gaulle of France once refused to meet a Japanese prime minister,
dismissing him as a transistor salesman
Bill Clinton puts in a word with --- the Saudi princes , and snatches
an order for Boeing from under the nose of Europes Airbus . Helmut Hohl
flies to Beijing, becomes the western leader to inspect troops since 1989 and
departs with a stack of SinoGerman trade deals; other Westerners
fume ----outwardly about human rights, inwardly about lost business.
French prime minister goes to Tokyo to sell helicopters.
In a word, in the past few years of free market liberalism
, politicians enthusiasm for promoting national exports has been
growing, just as Clinton says: cold war geopolitics has been
replaced by geoeconomics So, trade security matters
as much as military security.
2. How do governments promote exports?
Governments have four main methods:
Subsidize exporters but this method is outlawed under the rules of WTO.
To find channels down which to pump money for exporters. Government can
subsidize research and development . Under WTO rules, government may pay up to 75%
of firms industrial research costs , or half the cost of product development.
To offer tied aid in which the recipient promises to buy goods from companies in
the donor country. This is given foreignpolicy as much for commercial reasons, and might
be categorized as aid not trade. In Dec. Last year the OECD
adopted new guidelines on tied aid, aimed at ensuring that it is given only to projects that
cannot be commercially financed .
Export credit guarantees : it insures exporters against the risk of default
by their customers.
3. To sum up
Governments love to think, usually mistakenly, that their economies will be better off if
they help things along than if they leave well alone .Now that they are
renouncing some forms of support for their industries against international
competition, they have eagerly embraced another. The temptation to meddle
seems always be too great to resist..
Discuss the following questions:
1. Trade and politics can be separated or not.
2. To promote exports has always been one of the top priorities of most governments in the
world. Find out and discuss what the Chinese government has done to promote exports.
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Chapter two
Terms of Payment in international trade
I Introduction
1.1 International Payments and Settlements
In the international sales of commodities, payment plays an important role. And terms of
payment are one of main trading conditions as well as an indispensable part in the international
sale of goods. Whether the payment is ensured decides the success of the business. If payment is
not ensured, then, the rest of the procedures will be meaningless.
Then what are international payments and settlements?
International payments and settlements are financial activities in which payments are made to
settle accounts, debts and claims, etc. occurring among different countries. Because most of the
international payments are due to the international trade, emphasis is generally laid on how to deal
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with the international payments and settlements for the import and export, especially for the
international trade in tangible goods.
1.2 Features of Modern International Payments and Settlements
With the development of the world economy, the volume of settlement is increasing rapidly.
Meanwhile, the settlement presents the following features:
(1) Banks: the backbone of contemporary international settlement business
In the practice of long-term international settlement business, between banks in different
countries of the world, headquarter banks and subsidiary banks, branches and branches, agent
banks and agent banks, there gradually formed a perfect and effective network of capital
transference account. Through this colossal banking system spreading over the world,
businesspersons have international transfers, transactions of bill of document and capital
circulations. These naturally make banks the backbone of international business settlement center.
(2) Integration of Trade Settlement and Financial Credit
Since banks join the international settlement business field, the integration of settlement and
financial credit has become a developing tendency. Especially after the Second World War, new
forms of export credit such as the selling credit, buying credit, mixed credit and Forfeit, etc.
emerged successively and expanded fully. Until now, the integration of settlement and circulation
credit also becomes a particular trait of the contemporary international trade settlement business.
(3) Reforms of the traditional Settlement Methods
Owing to competition in markets in the international trade, ways of setting business accounts
are becoming more flexible and convenient, and the role of commercial credit is more crucial.
Modern factoring, Forfeit, etc. combine with traditional commercial credit settlement ways, which
is another trait of contemporary international settlement business.
(4) Electrification and Network Tendency of Settlement Business
Along with the expansion of modern communication technology and its application in the
banking field, international settlement can already be operated through international electronic
reckoning system. This has rapidly improved the efficiency of banks dealing with settlement
business. At present internationally there have formed three international reckoning systems, such
as, Clearing House Inter-bank Payment System of New York Bank, shortened as CHIPS, Clearing
House Automated Payment System, shortened as CHAPS of London Bank and Society for
Worldwide Inter-bank Financial Telecommunication, shortened as SWIFT. The establishment of
efficient and secure capital transfer network has expedited the circulation and using speed of
capital and accelerated the increase of the general amount of international trade and the amount of
settlement business.
1.3 Instrument of Payment
Instrument of payment is an instrument that the rights can be transferred merely by delivering the
certificate of title or by endorsement on the certificate completed by delivery. In a broad sense, it
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refers to any commercial title ownership, including bill of exchange, promissory note and cheque
which can substitute cash in certain extent.
1.4 Methods of Payment in International Trade
Methods of payment are one of the main trading conditions as well as an indispensable part in
the international sales of goods. Basically, there are several methods of payment available in
international trade: Remittance, Collection and Letter of Credit. However, the most desirable
method depends on whether you are the buyer or seller.
1.5 Famous Settlement Banks in the World
There are many famous banks which deal with international settlement in the world. They are as
follows:
Westpac Banking Corp ()
Chase Manhattan Bank ()
Citibank
Bank of China
Canadian Imperial Bank of Commerce
National Westminster Bank PLC ()
Lloyds Bank PLC ()
Midland Bank )
Banque National de Paris
Deutsche Bank
Algemene Bank Nederland
Hongkong and Shanghai Banking Corp
Istituto Bancario SanPaolo Di Torino
Dai-Ichi Kangyo Bank
Bank of Tokyo
Industrial Bank of Japan
Mitsubishi Bank
Swiss Bank Corp
Notes
1. agent bank
2. colossal a.
a colossal price
a colossal amount
3. financial credit
27
4. regional economic integrity

5. factoring
6. Forfeiting
II Sample Letters
2.1 Instrument of Payment
(1) Drawing the draft
Letter 1
Dear Sirs,
Re: the draft for US$36,000.00
We are pleased to inform you that the goods under our contract NF-90-001 have
been shipped to you on the S/S Huawei in Tianjin today.
The documents, including bill of lading, commercial invoice, insurance policy,
certificate of origin and inspection certificate, have been passed to Chase
Manhattan Bank which will advise in a few days later.
As agreed we have drawn on the Chase Manhattan Bank at 90 days for the amount
of US$36,000.00. Will you please accept the draft and remit the proceeds by
means of your bank to our account at the Bank of China, No. 86, Xilin Avenue,
Xian.
Yours faithfully,
Wang Fei
Letter 2
28
Dear Mr. Charles,

Thanks for your replying to our letter of January 20 and making a firm offer for the
SX99GT processor.
The terms you quoted are quite satisfactory, and you will find out our Purchase
Confirmation 979-408 attached. Please sign and return one copy for our file.
For your information, we have instructed our bank, Federal Commercial Bank,
Shanghai Branch, to open a letter of credit for US$23,000.00 in your favor. This
credit should cover C.I.F. shipment and bank charges, and is valid until March 1,
2008.
You will receive confirmation from our banks correspondent, Federal Commercial
Bank, Los Angeles, and you may draw on them at 60 days for the amount of the
invoice. When submitting your draft, would you please enclose the following
documents?
Bill of lading (6 copies)
Invoice (4 copies)
Insurance policy for 110 percent of the invoice value
Please fax us as soon as you have arranged shipment.
Sincerely yours,
Wang Fei
Notes
1. commercial invoice
2. insurance policy
insurance fund
insurance premium
insurance rate
3. certificate of origin
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certificate of inspection
plant quarantine certificate
sanitary certificate
health certificate
survey report on weight issued by C.I.B.C.
inspection and testing certificate issued by C.I.B.C.
4. drawn on somebody for
5. proceeds n.
6. for ones file
This copy of credit is for your own file, please deliver the attached original to the beneficiary.
.
7. correspondent bank
(2) Accepting the draft
Letter 1
Dear Sirs:
Thank you for your letter dated on May 5, 2008.
In accordance with your instruction of May 5, our bank, Chase Manhattan Bank has
accepted your draft for US$36,000.00. I will instruct our bank to remit the proceeds to
your bank tomorrow.
Your faithfully,
Wang Fei
Letter 2
Dear Mr. Li,
In accordance with your instruction of January 22, our correspondent, Los Angeles
Office, accepted a draft for US$ 1,010,000 drawn by the New World Computers,
Inc. on presentation of shipping documents for consignment sent to you on
February 12.
We have debited your account with the amount plus our charges of US$330. The
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documents are now with us and will be handed to you when you call.
Yours sincerely,
Wang Fei
Notes
1. remit
remittance permit
remittance by draft
2. debit
debit ones account
debit note
2.2 Methods of Payment
(1) Asking for T/T payment
Letter 1
Dear Sirs
Our past purchase of Silicon Steel Sheet from you has been paid as a rule by negotiation
credit. But it has indeed tied our funds up and cost us a great deal. Under the present
circumstances, this case becomes worse due to present higher bank interest and tight
money condition.
If you can kindly give us an easier payment, especially T/T payment, we are sure our
business will be encouraged greatly.
Your earlier favorable reply will be appreciated.
Yours faithfully,
Wang Fei
Letter 2
31
Dear Sirs,
Glad to receive your letter dated July 16.
As usual, we have always done business on the T/T basis. We have never accepted the
mode of Letter of Credit because the procedures of the L/C are complicated and some
deposits need to be handed before issuing the L/C.
Please pay more attention to our proposal and give us your earlier reply.
Yours faithfully,
Wang Fei
Notes
1. silicon steel sheet n.
2. negotiation credit
Confirmed L/C
Sight L/C
Usance L/C
Transferable L/C
Divisible L/C
Documentary L/C
Clean L/C
Deferred Payment L/C

Back to back L/C
Reciprocal L/c
3. tie something up
My money is all tied up in stock.
(2) Payment on collection basis
Letter 1
Dear Sirs,
Thank you for your letter of August.
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From your letter we know that you wish to use an alternative way of payment. But I
regret to tell you that we dont accept payment on T/T basis. This is our customary
practice. We sincerely hope that you can understand our practice. However, in view of
your present circumstances, we wish you could pay on Collection basis.
We hope to receive your favorable news soon.
Yours truly,
Wang Fei
Letter 2
Dear Sirs,
We acknowledge with thanks receipt of your letter dated March 23, contents of which have
been duly noted.
While we appreciate your intention to push sale of our chinaware in your market, we regret
that we are unable to consider your request for payment under T/T, the reason being that we
generally adopt method of payment by letter of credit.
In view of our business relations, we agree to accept, as an exception, payment on D/P at
sight basis.
We look forward to your favorable reply.
Yours truly,
33
Wang Fei
Notes
1. T/T
(remittance)
D/D
M/T
2. unaccommodating
3. collection
D/P ( documents against payment)

D/A ( documents against acceptance)
(3) Urging the letter of credit
Letter 1
34
Gentlemen,
Re: Our sales confirmation No.5302
We are in receipt with thanks of your letter dated March 29 and the Sale Confirmation duly
signed and returned by you.
In compliance with the Sales Confirmation of these 3,000 sets of bikes, we have arranged for
delivery and hope the shipment will be made next month, if your L/C arrives here in time.
Today we write to invite your attention to the fact that the date of delivery is approaching, but
so far, we have not yet received your relevant L/C. We consider it is necessary for you to
expedite the establishment of the L/C to enable us to carry out the order smoothly.
We are looking forward to receiving your favorable new in the shortest possible time.
Faithfully yours,
Wang Fei
Letter 2
Dear Sir,
Please open an irrevocable L/C for US$12,000.00 in favor of the Angda Textiles Corporation.
I have enclosed your application form with all relevant details completed.
Please inform us when you have arranged with your correspondent in Los Angeles.
Sincerely yours,
Wang Fei
Notes
1. Sales Confirmation
2. expedite
expedite shipment
3. urge the letter of credit
urge an early shipment
4. application form
35
(4) Advising sellers that the L/C has been issued

Letter 1
Gentlemen,
Re: L/C for 3,000 Bikes
Glad to know that 3,000 sets of bikes under sales confirmation No.5302 can be made next
month.
As requested, we have opened a L/C No.M67302 in your favor with Industrial Bank of Japan
to the amount of US$ 32,000.00 to cover our order for 3,000 bikes.
We believe it will be in your hand within this week.
Upon receipt of the above-mentioned L/C, you are kindly requested to execute immediate
shipment, as per agreement. As soon as the goods are dispatched, please cable us details of
the shipment.
We await with keen interest your shipping advice.
Very truly yours,
Wang Fei
Letter 2
Dear Sirs,
We have asked the Bank of China, Singapore Branch to open a credit for US$50,000.00 in
your favor and this will remain in force until March 12, 2008.
The bank will honor your draft at sight for the amount of your invoice under the L/C.
Your faithfully,
Wang Fei
36
Notes
1. Industrial Bank of Japan
2. shipping advice
advice of shipment
shipment notice
notice of shipment
3. honor draft
(5) Asking the buyer to amend the letter of credit
Letter1
Dear Sirs:
Re: Amendment to Letter of Credit No.M67302
We have received your L/C No.67302 issued by the Industrial Bank of Japan for the amount
of US$ 32,000.00 covering 3,000 bikes. On perusal, we find that the valid date is May 5.
According to the stipulation of the L/C, the latest shipment day is on April 30. It is impossible
for us to present the documents to the negotiation bank after effecting shipment. You know,
according to the UCP600, the negotiation bank shall have a maximum of five banking days to
exam whether the documents are complying with the L/C. Therefore, we are cabling this
afternoon, asking you to amend the L/C and prolong the valid date to May 10.
We shall appreciate very much if you will see to that amendment is cabled without delay, as
our goods have been packed ready for shipment for quite some time.
Yours faithfully,
Wang Fei
Letter 2
Dear Sirs,
37
I am glad to receive your Letter of Credit No.1234.

I am sorry to say that your L/C described the price term as C.F.R., which is different from the
stipulation of our contract. Your order has been accepted on F.O.B. basis.
Therefore, please amend the price of your Letter of Credit to F.O.B. basis.
Yours faithfully,
Wang Fei
Notes
1. amend
to amend letter of credit
to urge L/C
to issue L/C
to extend L/C
2. Perusal.
On perusal, we find that transshipment is not allowed.
3. UCP600 600
600
Uniform Customs and Practice for Documentary Credits 600
4. valid date
5. see to it that ..................
See to it that youre ready on time!
!
6. Prolong vt.
prolong the date of shipment
(6) Granting Amendment to Letter of Credit
Letter 1
Dear Sirs,
38
We have for acknowledgement your letter dated March 2, and have to apologize to you
for the mistake we have made in the Letter of Credit, which is completely due to
carelessness.
We have already instructed our bank to amend the relevant L/C by cable without the least
delay and we are sure the cable amendment will reach you in one or two days. As we are
badly in need of the goods, we should be very grateful if you would kindly arrange
prompt shipment.
Again, sorry for the mistake and thank you for your kind cooperation in this respect.
Very truly yours,
Wang Fei
Letter 2
Dear Sirs,
We have received your advice that you cannot carry out the complete shipment
covering our order for sundries at one sailing.
Therefore, we have instructed our bankers to amend the Letter of Credit so that partial
shipments may be allowed.
Yours truly,
Wang Fei
Notes
1. grant
grant amendment to L/C
2.acknowledgement
39
acknowledgement of order
3. acknowledge
acknowledge receipt of a letter
acknowledge help
We acknowledge with thanks the receipt of your letter of
4. sundries
(7) Asking for Extension of the Letter of Credit
Letter 1
Dear Sirs,
Re: L/C No. M4930-1 Frozen Chicken Meat
We thank you for your L/C No.M4930-1 for the captioned goods. We are sorry that,
owing to some delay on the part of our suppliers, we are unable to get the goods ready
before July 12. Therefore, we have to write to you asking for an extension.
It is expected that the consignment will be ready for shipment in the early part of
August and we can ship the goods before August 10. Please extend the shipment to
August 10.
We are looking forward to receiving your extension of above L/C, thus enabling us
to effect the shipment of the goods in question.
Yours faithfully,
Wang Fei
Letter 2
Dear Sirs,
We are afraid the Letter of Credit may expire before shipment because of the strike in our
factory.
Therefore, please explain our situation to your customers and try to get their consent to
extend the L/C to August 31.
Your earlier reply will be appreciated.
Yours truly,
40
Wang Fei
Notes
1. caption
captioned goods
2. consignment
a new consignment of goods
a consignment sale
consignment shipment
3. in the early part of August
in the late part of August
4. effect the shipment
ship the goods

deliver the goods
5. in question
The goods in question have been in good demand since the beginning of this year.
6. expire
expiry expiration
date and place of expiry
7. extend an L/C to
Please explain our situation to your customers and secure their consent to extend the L/C to
September.30.
9 30
(8)Telling seller the main clauses of the letter of credit
Dear Sirs:
Re: The Main Clauses of the Letter of Credit No.G2467
We have issued the Letter of Credit No.2467 in favor of your company to the
extend of US$36,200.00. This Credit is available by beneficiarys draft, drawn on
us, in duplicate, without recourse, for 100% of the invoice value, and accompanied
by the following documents:
41
Commercial invoice in duplicate copies, indicating contract No.

Packing list in triplicate.
Full set clean shipped on board bill of lading marked Freight Prepaid to
order of shipper blank endorsed , notifying buyers.
Insurance policy/certificate in 3 copies for 110% of the invoice value
showing claims payable in China in currency of the draft, blank endorsed,
covering All risks and War Risks.
Beneficiarys certificate certifying that extra copies of the documents have
been dispatched according to the contract terms.
Other main clauses:
Description of goods: cotton bath towels, 3000 dozen, Art No. BE22-72A,
S/C 85 801
Shipment: From Shanghai to Hamburger by vessel, transshipment is
allowed. Partial shipment is prohibited. The latest shipment should be made before
April 5.
Valid date: The credit is valid in sellers counter before April 20.
Packing condition: Packed in 120 bales of 25 dozen each.
Yours faithfully,
Wang Fei
Notes
1. to the extend of
2. beneficiary
applicant
issuing bank = opening bank
advising bank
negotiation bank
paying bank
confirming bank
3. recourse n.
with recourse
without recourse
42
with recourse L/C

without recourse L/C
4. commercial invoice
5. in duplicate
in triplicate
in quadruplicate
in quintuplicate
in sextuplicate
in septuplicate
in octuplicate
in ninthtuplicate
in decuplicate
6. freight prepaid
freight paid
freight collect
freight to be collected
freight payable at destination
7. endorse
endorsement
endorser
endorsement in blankgeneral endorsementblank endorsement
special endorsement full endorsement
conditional endorsement
restrictive endorsement
endorsement without recourse
9. bill of lading
bill of lading (B/L)

on board B/L
shipped B/L
received for Shipment B/L
direct B/L
transhipment B/L
through B/L
clean B/L
unclean B/L foul B/L
43
straight B/L
open B/L
bearer B/L
order B/L
long form B/L
short form B/L
on deck B/L
stale B/L
anti- dated B/L
advanced B/L
III Useful Sentences and Expressions
1. Draft drawn under this credit must be presented for negotiation in Zhengzhou, China on or
before 28 August 2008.
2008 8 28
2. Draft drawn under this credit must be marked drawn under Bank of China, Singapore
Branch L/C No.M3486 dated May 20.
2006 8 28
M3486
3. Could you make an exception and accept D/P or D/A?
4. The buyer suggested D/A as the terms of payment, but the seller was unwilling to make any
exception.
5. We cannot agree to draw at 30 days D/A.

30
6. For payment, we require 100% value, irrevocable L/C in our favor with partial shipment
allowed clause available by draft at sight.
7. I suppose D/P or D/A should be adopted as the mode of payment this time.
8. The Barclays Bank in London is in a position to issue Letters of Credit in U.S.$ against our
sales confirmation.
9. Is the wording of confirmed necessary for the letter of credit?
10. You ought to pay us the bank interest once payment is wrongly refused.
44
11. What is your reason for the refusal of payment?
12. We're sending our draft through Bank of China for documentary collection.
Exercises
1. Translate the following sentences into Chinese.
(1) This credit is to remain in force until June 30.
(2) You are kindly advised that our letter of credit No. 8790 has been extended to March 19.
(3)Your prompt attention to this would be greatly appreciated.
(4) We have received your letter asking for a two-week extension of Bank of Chinas L/C
No.3456.
(5)Your request for amendment to your credit No.4530 has been accepted.
(6) Your letter of credit covering your order No.2059 of September 25 has not yet reach us to
date. As the shipping time is imminent, please open by cable immediately.
(7) We request you to establish by cable a letter of credit with Bank of China for the amount of
USD5,000.00.
(8) Today we instructed Bank of China to open a credit for USD 10,000.00 in your favor.
(9) Upon opening of the credit, you will be immediately advised of its number.
(10) We should be much obliged if you would agree to or request to our request for amendment.
2. Translate the Following Phrases into Chinese.
(1) bill of exchange
(2) sight payment
(3) promissory note
(4) collecting bank
(5) demand draft
(6) telegraphic transfer
(7) correspondent bank
(8) remitting bank
(9)trust receipt
(10) issuing bank
(11) negotiation bank (12) documentary credit
(13) confirmed credit
(14) sight credit
(15) deferred payment letter of credit
3.Translate the following phrases into English.
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
4. Translate the following sentences into English:
(1)
(2)
45
(3) 8 10 9
(4) 43
(5)
(7)
(8) 6 15
46
Chapter three
Sales Confirmation and Purchase Contract
I Introduction
Business contract refers to the agreement concluded by both parties and enforceable by law,
by which they mutually promise to sell or buy some particular commodity, transfer or acquire a
certain industrial property or know-how, or render or accept a certain service.
The formal written contract is adopted in import or export business. In some cases, it may
take the form of the sales confirmation or purchase confirmation. The contract may be formal or
informal, oral or written, sealed or unsealed, as is provided for in the United Nations Convention
on Contracts for the International Sale of Goods. A contract of sale need not be concluded in or
evidenced by writing and is not subject to any other requirement as to form. It may be proved by
any means, including witnesses. But as to the formation of the contract, stipulations vary from
country to country. However, in China, the Law of Economic Contracts Involving Foreign
Interests expressly stipulates that the parties to the transaction shall enter into an agreement in
writing on the contractual provisions and duly sign it as conclusion of the business.
1.1 Legal Foundations
To be enforceable by law, the business contract must at least take two steps, i.e., the offer and
acceptance. While the contract is signed, the following principles should be followed:
(1) The conclusion of the contract is regarded as the legal act of the parties thereto, therefore,
it must, without doubt, possess its basic legal characteristics.
(2) The contract can only be entered into on condition that the parties thereto shall be in full
agreement with each other as to the intention of the terms and conditions laid down in the contract.
(3) The parties thereto are completely equal in position.
(4) The valid contract shall be legal and in conformity with the effective conditions for
conclusion.
1.2 Formation of Contracts
47
Generally speaking, business contracts are usually made up of three parts: the preamblethe
body and the witness clause.
(1) Preamble
The preamble may take the following statement as the opening remark.
The contract concluded and made by and between ABC Co. (hereinafter called the sellers)
and XYZ Co. (hereinafter called the buyers "), whereas the sellers are willing to sell the buyers
the commodity listed hereunder. Now these presents witness that it is hereby agreed between the
parties hereto as follows.
(2) Body
The body of the business contract mainly consists of the general terms and conditions as well
as the basic terms and conditions
Basic terms and conditions
Name of commodity and specificationLithopone Zinc content 28% min.
Quantity: 900 M/T.
Unit price: US$ 120 per M/T CFRC 5% Singapore.
Total amount: US$108,000 with 5% more or less both in amount and quantity at the sellers
option.
Packing: By paper-lined glass-fiber bags of 25k.g.each, gross for net.
Shipping marks: To be designated by the sellers.
Port of shipment and Port of Destination: From Qingdao to Singapore.
Time of shipment: During May / June / July 2008, into three equal lots. Partial shipment is to be
allowed, trans-shipment not to be allowed.
Insurance: To be covered by the buyers.
48
Terms of payment: By irrevocable, transferable, and divisible bankers acceptance letter of

credit to cover the total value of each monthly (or lot of) shipment as stipulated above, to be
available by drafts, at 30 days sight, to reach the sellers 15 days before the respective time of
shipment stipulated above (or within 20 days after receipt of the sellers advice) and to remain
valid for negotiation in China until the 15th day after the relative time of shipment.
Commodity inspection: It is mutually agreed that the certificate of quality and weight issued by
the Chinese Import and Export Commodity Inspection Bureau at the port of shipment shall be
taken as the basis for delivery.
General terms and conditions
Amendment of letter of credit: The buyers shall open L/C in accordance with the terms of the
contract. If any discrepancy is found, amendments of L/C should be made immediately by the
buyers upon receipt of the sellers advice, failing which the buyers shall be responsible for any
losses thus incurred as well as for late shipment thus caused.
Shipping advice : The sellers or their branches shall notify the buyers or their agents by e-mail
the number of L/Cquantity and name of vessel after loading is completed.
Force MajeureShould the sellers fail to deliver the contracted goods or effect shipment in time
by reason of force majeure, the time of shipment might be duly extended, or alternatively a part
or whole of the contract might be cancelled without liability attached to the sellers, but the
sellers shall immediately notify the buyers by cable or telex of the accident and furnish the
buyers within 15 days after the accident by registered airmail with a certificate issued by the
competent government authority or the chamber of commerce which is located at the place
where the accident occurs as evidence thereof.
Arbitration: All disputes in connection with the contract or the execution thereof shall be
amicably settled through negation.
Claims: Should the quality, quantity and/or weight be found not in conformity with those
stipulated in this contract, aside from those usual natural changes of quality and weight in
transit and losses within the responsibility of shipping company and /or insurance company, the
buyers shall have the right within 30 days after the arrival of the goods at the port of destination
to lodge or file claims concerning the quality, quantity, or weight of the goods. Claims for
perishable goods are to be put forward immediately after arrival of the goods at destination. In
case no amicable settlement can be reached between the two parties, the case under dispute
shall be submitted to arbitration, which shall be held in the country where the defendant resides,
49
or in a third country agreed by both parties. The award of the arbitration shall be taken and
accepted as final and binding upon both parties. The arbitration fees shall be borne by the losing
party only.
Witness clause
The business contract is usually ended with the following statement: the contract is made out
in Chinese and English, both versions being equally authentic.
Notes
1. transfer
2. render
3. preamble
4. body
5. witness clause
6. lot
7. Force Majeure
8. arbitration fees
II Samples of sales confirmation
West China Import-Export Corporation
Sales Confirmation
No. ABC20087
Date: March 20th, 2007
Sign at:
Seller:
50
Address : No. 5 Rd. Golden Flower, Xian, China
Fax: 029-82312312
Buyer:
Address: International Company, Hamburger, Germany Fax: 011-6234525
The undersigned Seller and Buyer have agreed to close the following transaction in conformity
with the terms and conditions specified below:
1.Commodity
Live eel
2.Specification
3.Quantity
4.Unit price
5.Amount
50 kg. per
piece
2,000 tons
US$1,000
per ton
US$2,000,000.00
With 5% more or less in amount and quantity allowed at the sellers option.
6. Total value: US$2, 000,000.00
7. Packing: 10 kg. in a can and 20 cans in a wooden case.
8. Time of shipment: within 10 days after receipt of L/C allowing transshipment and forbidding
partial shipments.
9. Port of loading: Shanghai
10. Port of destination: Hamburger
11. Terms of payment: By confirmed, irrevocable, transferable and divisible letter of credit to be
available by sight draft and to remain valid for negotiation in China until the 15th day after the
aforesaid time of shipment
12. Insurance covering all risks and war risk only ( excluding R C C . ) as per the China
insurance Clauses.
To be effected by the buyers.
13. Shipping mark: xxx
51
14. It is mutually agreed that the Inspection Certificate of Quality and Quantity (Weight) is sued
by the China Import and Export Commodity Inspection Quarantine Bureau at the port of
shipment shall be part of the documents to be presented for negotiation under the relevant L/C.
The Buyers shall have the right to re-inspect the Quality and Quantity (Weight) of the cargo.
The re-inspection fee shall be borne by the buyers. Should the Quality and / or Quantity
(Weight) be found not in conformity with that of the contract, the Buyers are entitled to lodge
with the sellers a claim which should be supported by survey reports issued by a recognized
Surveyor approved the Sellers.
REMARKS:
(1) The Buyers shall have the covering Letter of Credit reach the Sellers (or notify the Import
License Number) before, otherwise the Sellers reserve the right to rescind without further
notice or to accept whole or any part of this Sales Confirmation not fulfilled by the Buyers, or
lodge a claim for losses thus sustained if any.
(2) For transactions concluded on C.I.F. basis it is understood that the insurance amount will be
for 120% of the invoice value against the specified in the Sales Confirmation. If additional
insurance amount or coverage is required, the buyers must have the consent of the Sellers
before Shipment and the additional premium is to be borne by the Buyers.
(3) Quality/Quantity discrepancy: In case of quality discrepancy, claims would be filed by the
Buyers within 3 months after the arrival of the goods at port of destination, while of quantity
discrepancy, claim should be filed by the Buyers within 15 days after the arrival of the goods
at the destination. It is understood that the Sellers shall not be liable for any discrepancy of the
goods shipped due to causes for which the Insurance Company, Shipping Company, other
transportation organization/or Post office are liable.
(4) The Sellers shall not be held liable for failure or delay in delivery of the entire lot or a portion
of the goods under this Sales Confirmation on consequence of any Force Majeure incidents.
(5) The Buyers are requested always to quote THE NUMBER OF THIS SALES CONFIRATION
in the Letter of Credit to be opened in favor of the Seller.
(6) Arbitration: All disputes in connection with this Contract or the execution thereof shall be
settled by negotiation between two parties. If no settlement can be reached, the case in
dispute shall then be submitted for arbitration in the country of defendant in accordance with
the arbitration regulations of the arbitration organization or the defendant country. The
decision made by the arbitration organization shall be taken as final and binding upon both
52
parties. The arbitration expenses shall be borne by the losing Party unless otherwise awarded
by the arbitration organization.
(7) The Buyers are requested to sign and return one copy of this Sales Confirmation immediately
after receipt of the same. Objection , if any , should be raised by the Buyers within five days
after the receipt of this Sales Confirmation, the absence of which is understood that the Buyers
have accepted the terms and conditions of the sales Confirmation.
The Sellers
xxx
The buyers xxx
III Samples of Purchase Contract

PURCHASE CONTRACT
No. CDH-81620
Date: March 25th, 2007
The Buyer:
Natural Company, Ltd. U.S.A
The Seller:
The China Agricultural Corporation
This Contract is made by and between the Buyer and the Seller, whereby the Buyer agrees to buy
and the Seller agrees to sell the under-mentioned goods subject to the terms and conditions as
stipulated hereinafter.
Name of Commodity and Specification: Datong Coat
Quantity: 1,000 .00 M/T
Unit Price: US$ 1,200.00 per M/T
Total Value: US$ 1200,000.00
Packing: One M/T coat in a barrel and 10 barrels in a carton
Country of origin or Manufacturer: Datong Mine, Shanxi, China
53
Terms of Payment: After conclusion of business, the Buyer shall open with the Standardized
Chartered Bank, an irrevocable Letter of Credit in favor of the Seller payable at the issuing bank
against presentation of the shipping documents as stipulated under the General Terms and
Conditions of this Contract after departure of the carrying vessel.
The said Letter of Credit shall remain in force till the 15th day after shipment.
Time of ShipmentWithin 15 days after receiving the L/C.
Port of Loading: Qing Dao
Port of Destination: Seattle
Shipping Mark (s): On each package shall be stenciled conspicuously: port of destination, package
number, gross and net weights and other terms.
(1) Other matters relating to this contract shall be dealt with in accordance with the General Terms
and Conditions as specified overleaf, which shall form an integral part of this contract.
(2) This Contract is made out in Chinese and English, both versions being equally authentic.
Supplementary Condition (s): (should any other clause in this contract in conflict with the
following Supplementary Conditions, the Supplementary Condition (s) should be taken as final
and binding).
For all the matters in connection with the execution of this Contra after signing, the Seller
shall approach directly the Buyers Branch.
THE SELLER
THE BUYER
AddressNo.6 Yanxiang, Xian, China Address: Gates City, Nevada, USA

Telex029-82312312
Telex: 6233091
E-mail:xiancoat@yahoo.com
E-maiL:natural@yahoo.com
GENERAL TERMS AND CONDITIONS

(l) Shipping Documents:
The Seller shall present the following documents to the paying bank for negotiation:
Full set clean-board-shipped Bill of Lading
54
Invoice
Packing list
Inspection Certificate on Quality and Inspection Certificate on Weight
Certificate of origin
(2) Terms of Shipment
The Seller shall ship the goods within the time stipulated in the contract. Transshipment is not
allowed without the Buyers permission.
(3) Shipping Advice:
Immediately after completion of loading of goods on board the vessel the Seller shall advise
the Buyer by fax or e-mail of the contract number, name of goods, quantity or weight loaded,
invoice value, name of vessel, port of shipment, sailing date and port of destination.
Should the Buyer be unable to organize insurance in time owing to the Sellers failure to give
the mentioned advice of shipment by fax or e-mail, the Seller shall be in charge of any and all
damages and / or loss attributable to such failure.
(4) Inspection:
In case the quality, quantity or weight of the goods be found not in conformity with those
stipulated in this Contract after re-inspection by the U.S.A. Commodity Inspection and Quarantine
Bureau within 60 days after arrival of the goods at the port of destination, the Buyer shall return
the goods to or lodge claims against the Seller for compensation of losses upon the strength of
Inspection Certificate issued by the said Bureauwith the exception of those claims for which the
insurers or owners of the carrying vessel are liable.==here
All expenses (including inspection, and quarantine fees) and losses arising from the return of
the goods or claims should be borne by the Seller.
(5) Force Majeure:
The Seller shall not be responsible for late delivery or non-delivery of the goods owing to
Force Majeure causes , such as war, flood, fire , storm , heavy snow, earthquake, seaquakeetc.
However , in such as casesthe Seller shall immediately inform the Buyer by e-mail or fax about
the accident and furnish the Buyer with a certificate attesting such event or events.
55
If the Force Majeure cause lasts over 60 days, the Buyer shall have the right to terminate
the Contract or the undelivered part of the Contract.
(6) Claims:
Should the quality, quantity and /or weight be found not in conformity with those stipulated
in this Contract, aside from those usual natural changes of quality and weight in transit and losses
within the responsibility of the shipping company and /or insurance company the Buyer shall
have the right within 30 days after the arrival of the goods at the port of destination, to lodge
claims concerning the quality, quantity or weight of the goods, but the Buyer should provide the
Seller with the certificates issued by the concerned Inspection and Quarantine Organization.
(7) Arbitration:
All disputes in connection with this Contract or the execution thereof shall be
amicably settled through negotiation. In case of no settlement can be reached between the
two parties, the case under dispute shall be submitted to the Foreign Trade Arbitration
Commission of the China Council for the Promotion of International Trade for arbitration.
Arbitration shall take place in Beijing, China and shall be executed in accordance with the
Provisional Rules of Procedure of the said commission, and the decision made by the commission
shall be accepted as final and binding upon both parties.
Notes
1. Sales Confirmation S/C
2. Purchase contract P/C
3. in favor of somebody = in somebodys favor
4. issuing bank = opening bank
5. the General Terms And Conditions
6. equally authentic
7. Supplementary Condition ( s
8. be in conflict with
9. final and binding
10. in conjunction with
11. paying bank
12. full set clean on board shipped Bill of Lading
56
13. loading and unloading

14. sailing date
15. China Commodity Inspection and Quarantine Bureau
16. upon ( on ) the strength of
17. should be borne by somebody
18. force majeure
19. Foreign Trade Arbitration Commission of the China Council for the Promotion of
International Trade
20. provisional rules
IV Supplements
(1) Insurance is a risk transfer mechanism, where the individual or the business enterprise can
shift some of the uncertainty of life onto the shoulders of others. In return for a known premium,
usually a very small amount compared with the potential loss, the cost of that loss can be
transferred to an insurer. Without insurance, there would be a great deal of uncertainty experienced
by an individual or an enterprise, not only as to whether a loss would occur, but also as to what
size it would be if it did occur. Insurance is a social device in which a group of individuals transfer
risk and provides for payment of losses from funds contributed by all members who transferred
risk. Those who transfer risk are called insured. Those who assume risk are called insurers.
(2) A draft is either a sight draft or a usance draft (also called tenor draft or term draft). The
former calls for immediate payment on presentation to the drawee while the latter is payable at a
later date e.g. 30, 45, 60, or 90 days after sight or date. A draft is either clean (without documents)
or documentary. In the latter case, the draft is accompanied by the relevant documents such as the
bill of lading, the invoice, and the insurance policy etc.
tenor draft term draft
30 45 60 90
(3) In our world today, the multinational enterprises are very important vehicles for the
transfer of resources across national boundaries. Given the organizational unity of parent and
57
affiliates within such enterprises, and the fact that they are situated in different countries, intraorganization resource transfers between parent and affiliate or between affiliates of the same
enterprise are also international transfers. Technology, capital and ready markets are sort of
benefits multinational enterprises (MNEs) bring to less developed host countries. The MNE is
considered to be the most effective vehicle for the promotion of global and national economic
welfare.
(4) Letter of credit is often shortened as L/C or L. C. and is sometimes referred to as

bankers commercial letter of credit, bankers credit, commercial credit or simply credit.
Modem credits were introduced in the second half of the 19th century and had substantial
development after the First World War. The credit is a letter issued by a bank at the request of the
importer in which the bank promises to pay upon presentation of the relevant documents. It is
actually a challenge to distribution managers, and for all the companies the need to competitively
serve world markets, will require a more sophisticated logistics system, conditional bank
undertaking of payment. L/C L. C.,
, 19
(5) A final factor that has had a positive impact on the transaction function is the
globalization of business. More and more companies purchase their production inputs anywhere in
the world where the best quality for the price can be found. The entire world is a potential market
for their products. In this worldwide environment, the transportation of both production inputs and
finished products presents as special.
Exercises
1. Translate the following contract stipulations into Chinese.
(1) Generally speaking, there are two kinds of certificates of origin.
58
Certificate of origin: Those countries which do not use the customs invoice or consular
invoice may determine the rate of duty according to the certificate of origin and make sure where
the goods come from.
According to the requirements of the L/C or contract, there are two authorities concerned
in our country issuing the certificate of origin: one is the Import and Export Commodity
Inspection Bureau; the other is the China Council for the Promotion of International Trade.
Generalized system of preference certificate of origin Form A. This kind of certificate
must be filled in by our import and export company and be issued by the China Import Export
Commodity Inspection Bureau as a basis for reduction remitting the duty on import commodities.
(2) Packing: To be packed in strong new wooden case (s), suitable for distant ocean / parcel
post / air freight transportation protected against moisture and shocks. The sellers shall be able for
any damage of the commodity and expenses incurred on account of improper packing and for any
rust attributable to inadequate or improper protective measures taken by the Sellers in regard to the
packing. One full set of service and operation instructions concerned shall be enclosed in the case
(s).
(3) Terms of Shipment.
In case of F.O.B. terms:
a Booking of shipping space shall be attended to by the Buyer. The sellers shall, 45 days
before the date of shipment stipulated in this contract, advise the buyer by fax or e-mail of
the contract number, commodity, quantity, value, number of packages, gross weight and
measurement and date of readiness at the port of shipment.
b The Buyer or his shipping agent shall, 12 days before the estimated date of arrival of the
vessel at the port of shipment, advise the Sellers of the name of the vessel, contract number,
and the name of the shipping agent. The Sellers shall come into contact with the shipping
agent and arrange for the goods to be ready for loading. When it becomes necessary to
change the carrying vessel or in the event of her arrival having to be advanced or delayed,
the Buyer or the shipping agent shall advise the Sellers in time.
c The Sellers shall be liable for any dead freight or demurrage, should it happen that they have
failed to have the commodity ready for loading after the carrying vessel has arrived at the
port of shipment on time.
d The sellers bear all costs and risks before it passes over the vessels rail and is released from
the tackle.
59
In case of CFR terms:

The Sellers shall ship the goods within delivery time as per this contract from the port of
shipment to the port of destination and advise shipment as stipulated in clause 12 of this contract
for the Buyer to arrange insurance in time.
2. Translate the following passages into English.
(l)
30
15
(3)
60
Chapter Four International Trade Theories
1.Mercantilism :
The first reasonable systematic body of thought devoted to
international trade is called mercantilism and emerged in
seventeenth and eighteenth Century Europe.
An outpouring [n.,,] [ autp:ri] of pamphlets, one economic
issue , particularly in England and especially related to trade, began
during this time although many different viewpoints are expressed in his
literature, several core beliefs are pervasive and tend
to get re-stated time and time again.
For much of this period, mercantilist writers

argue that a key object of trade should be to promote a
favorable balance of trade . A favorable balance of
trade is one in which the value of domestic goods exported
exceeds the value of foreign goods imported.
61
Trade with a given country or region was judged profitable by the

extent to which the value of imports , thereby resulting
in a balance of trade surplus and adding precious metals
and treasure to the countrys stock .
Scholars later disputed the degree to which mercantilists
confused the accumulation of precious metals with
increases in national wealth . But without a doubt,
mercantilists tend to view exports favorably and imports
unfavorably .
Even if the balance of trade was not a specific source of concern,
the commodity composition of trade was. Exports of
manufactured goods were considered beneficial, and exports of raw
material for use but foreign manufactured goods
were viewed as damaging .
This ranking , of activities() was based not only
employment grounds, where processing and adding value to
raw materials was ought to generate better employment
opportunities than just extraction or primary production
of basic goods, but also for building up industries
that would strengthen , the economy and national defense
.
Mercantilists advocated that government policy be directed to
(aimed at ) arranging the flow of commerce \ to
conform to , these beliefs.
They sought a highly interventionist agenda , using taxes
on trade to manipulate the balance of trade in favor of
the home country.
But even if the logic of mercantilism was correct, this strategy
could work if all nations tried to follow it simultaneously. Not every
country can export manufactured goods and import raw materials.
62
Its principle assertion ,[s:n] was that gold and silver were
the mainstays , of national wealth and essential to
vigorous commerce ,. At that time, gold and silver were the
currency of trade between countries : a country could earn
gold and silver by exporting goods . By the same token
, importing goods from other countries would result in an
outflow of gold and silver to those countries.
The main tenet of mercantilism was that it was in a countrys
best interests to maintain a trade surplus , to export more
than import. By doing so, a country would accumulate
gold and silver and, consequently, increase its national wealth
, prestige, and power \.
Consistent with () this belief, the mercantilist doctrine \\
advocated government intervention to achieve a surplus in the
balance of trade . ( a surplus)
The mercantilists saw no virtue in a large volume of trade. Rather, they

recommended policies to maximize exports and minimize imports
. To achieve this, imports were limited by tariffs and quotas ,
while exports were subsidized .
The flaw , with mercantilism was that it viewed trade as a zero-sum
game. It was left to Adam smith and David Richard to show the shortsightedness
of this approach and to demonstrate that trade is a positive-sum game, or a
situation in which all countries can benefit. The mercantilists doctrine is by no
means dead. For example, Jarl Hagelstam, a former director at the Finnish
Ministry of Finance , observed that in most trade negotiations : The
approach of individual negotiating countries, both industrialized and developing,
has been to press for trade liberalization in areas where their own
comparative advantages are the strongest, and to resist liberalization in areas
where they are less competitive and fear that imports would replace domestic
production.
Hagelstam attributes this by negotiating countries to a neomercantilist belief held by the politicians of
many nations. This belief equates political power with
economic power and economic power with a balance-trade-surplus
63
. Thus, the trade strategy of many nations is designed to

simultaneously boost exports and limit imports
Mercantilism argued that it was in a countrys best interests to run a
balance-of-trade surplus. They viewed trade as a zero-sum game(
, in which one countrys gains cause losses for other countries.
Homework-Mercantilism is bankrupt theory that has no place in
the modern world. Discuss.
2.Theory of comparative advantage ;
To be called the comparative cost theory;

To be developed by David Ricardo . and other economists
in the 19th century.
It states that if one country can produce a product relatively more efficiently
than another country, it is beneficial to both countries for the first country to
export that product to the other, even if one of the countries can produce every
commodity more cheaply.
As long as there is minor relative difference in the efficiency of
producing a commodity, even the poor country can have a comparative
advantage in producing it.
The costs of Portugal producing two products were lower than England but the
cost of Portugal producing wine was less lower. So, it had the greater advantage
when turning out wine. Therefore, it should produce only wine
The costs of England producing nylon and wine were higher than Portugal but
the cost of producing nylon was less higher than wine. So, it should turn out
nylon.
Term of trade :1 unit Nylon = 1 unit wine;
Portugal - wine;
England - - nylon. Efficiency of production:
Country
Nylon
Wine
England
1 00 (days)
120 (days)
64
Portugal
90 ( days )
80 ( days )
After division of labor , England produces the quantity of nylon

( 100 + 120 ) / 100 =2.2 ( units ) :1+1.2
Portugal produces the quantity of wine:
( 90 + 80 ) / 80 = 2 .1 25 (units ) 1 +1.125
England
Portugal
Before
Now
Before
Now
Nylon 1 1.2
1
1 .000
Wine 1 1
1
1.125
So, labor is the same as before, but two countries obtain more products. One
country with advantage and the other country with disadvantage are benefited
from international trade.
The United States is relatively more efficient than Europe in producing food
(using only one third of the labor that Europe does) and in producing clothing
(using only one -half the labor).
Thus, while the United States has an absolute advantage in both forms
of production, its efficiency in food production is greater. It has a comparative
disadvantage in clothing .Consequently, a great deal of clothing is exported from
Europe to the United States.
To conclude, the theory of comparative advantage states that if each country
specializes in products in which it has a comparative advantage (greatest relative
efficiency ) , trade between these countries will be mutually
profitable . Comparative advantage has led countries to specialize in
particular products and to mass produce.
Sometimes this goes one step further. Italy gained a comparative advantage
over many countries in mass -producing wine. France , self supporting
in wine, presently imports large quantities of Italian wine , which is cheaper .
In turn, a large portion of the French wine production is exported.
Correspondingly, The United states and Canada have vast coal and oil
reserves as well as metal deposits . The U.S.A is increasingly reliant on
oil because of being a heavy consumer of natural resources. Japan is dependent
on importing 99 % of its primary commodities. Western Europe produces nearly
all of the grain it needs but lacks other commodities to a great extent. The
65
United States, Canada, Japan, and Europe all have to import tropical
agricultural products from the developing nations.
greatest relative efficiency

3. New trade theory
New trade theory makes two important points: First, through

its impact on economies of scale, trade can increase the variety
of goods available to consumers and decrease the average costs
of those goods. Second, in those industries when the output
required to attain economies of scale represents a significant
proportion of total world demand, the global market may only be
able to support a small number of enterprises. Thus, world
trade in certain products may be dominated by countries whose
firms were first movers in their production.
Increasing product variety and reducing costs:
Imagine first a world without trade. In industries where
economies of scale are important, both the variety of goods that
a country can produce and the scale of production are limited
by the size of the market. If a national market is small, there
may not be enough demand to enable producers to realize
economies of scale for certain products. Accordingly, those
products may not be produced, thereby limiting the variety of
products available to consumers. Alternatively, they may be
produced, but at such low volumes that unit costs and prices
are considerably higher than they might be if economies of scale
could be realized.
Now consider what happens when nations trade with each
other. Individual national markets are combined into a larger
world market. As the size of the market expands due to trade,
individual firms may be able to better attain economies of scale.
The implication, according to new trade theory, is that each
nation may be able to specialize in producing a narrower range
of products than it would in the absence of trade, yet by buying
66
goods from other countries, each nation can simultaneously

increase the variety of goods available to its consumers and
lower the costs of those goods-thus trade offers an opportunity
for mutual gain even when countries do not differ in their
resource endowments or technology
A second theme in new trade theory is that the pattern of trade

we observe in the world economy may be the result of economies
of scale and first-mover advantages. First mover advantages are
the economic and strategic advantages that accrue to early
entrants into an industry. The ability to capture scale economies
ahead of later entrants, and thus benefit from a lower cost
structure, is an important first-mover advantage. New trade
theory argues that for those products where economies of scale
are significant and represent a substantial proportion of world
demand, the first movers in an industry can gain a scale-based
cost advantage that later entrants find almost impossible to
match. Thus, the pattern of trade that we observe for such
products may reflect first mover advantages. Countries may
dominate in the export of certain goods because economies of
scale are important in their production and because firms
located in those countries were the first to capture scale
economies, giving them a first-mover advantage.
Mover1.()2.3.;
; 4.5.
67
Chapter Five China's Trade Performance

China's trade with the world rose dramatically in 2002, up 21.8 percent over
the preceding year. Exports and imports both rose more than 20 percent, leaving
China with a $30.4 billion trade surplus , up by more than a third over
the surplus in 2001 (see Table 1). Solid export gains came as a
welcome surprise to Chinese officials who predicted, at the start of 2002, that
import growth would outpace export growth as a consequence of
China's entry into the World Trade Organization (WTO). US-China trade
topped $140 billion in the first 11 months of 2002, according to the US
Department of Commerce.
Table 1: China's Trade with the World ($ billion)
Exports
% change
Imports
% change
Total
% change
Balance
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
91.7
121.0
148.8
151.1
182.8
183.7
194.9
249.2
266.1
325.6
8.0
32.0
23.0
1.5
20.9
0.5
6.1
27.8
6.8
22.3
104.0
115.6
132.1
138.8
142.4
140.2
165.7
225.1
243.6
295.2
29.0
11.2
14.3
5.1
2.6
-1.5
18.2
35.8
8.2
21.2
195.7
236.6
280.9
289.9
325.2
324.0
360.6
474.3
509.7
620.8
18.2
20.9
18.7
3.2
12.1
-0.4
11.3
31.5
7.5
21.8
-12.2
5.4
24.1
22.5
30.4
16.7
12.2
40.4
43.5
29.2
Note: PRC exports reported on an FOB basis; imports on a CIF basis

Source: PRC General Administration of Customs , China's Customs Statistics
PRC trade forecasts for 2003 remain positive, but project somewhat slower
growth rates , as the world economy remains sluggish .
China's strong export performance is likely to continue into 2003.
Most Western analysts forecast growth of between 15 and 20 percent,
while Chinese estimates are more conservative .
conservative party ; labor party
China's Exports
China's rate of export growth was higher than any other economy's
68
in 2002 and China became the world's fourth-largest manufacturing

exporter . Intraregional trade was the principal contributor
to China's steady export growth throughout 2002, with Japan
topping the list of overall trade partners . Chinas exports to other
Asian nations increased as companies from around the region moved their lowerend manufacturing processes to China. To use just one example:
China's two-way trade with Malaysia jumped more than 50
percent in 2002, propelled by a 54 percent rise in PRC exports. Electronics
and power generation equipment composed almost 60 percent of
China's total exports to Malaysia.
Composition of exports
Exports of electronics accounted for nearly 37 percent of China's
total exports. As shown in Table 2, China's exports of harmonized schedule (HS)
code 84 , which encompasses a wide range of power
generation equipment, machinery, mechanical appliances, computer
parts , and telecommunications equipment , shot up 51.3
percent in 2002. This far exceeded the Ministry of Foreign Trade and Economic
Cooperation's (MOFTEC) goal of increasing mechanical and
electrical exports by 10 percent in 2002.
Table 2: China's Top Exports ($ million)
85
84
61, 62
95
64
94
72, 73
28, 29
Commodity Description
2001
2002
% change
Electrical machinery & equipment

Power generation equipment
51,306.3
65,119.4
26.9
33,584.8
50,815.5
51.3
Apparel
Toys & games
32,412.0
36,570.0
12.8
9,082.6
11,601.6
27.7
Footwear & parts thereof

Furniture & bedding
10,086.5
11,090.5
9.9
7,560.6
9,855.9
30.4
Iron & steel

Inorganic & organic
8,254.3
9,571.0
15.9
7,462.7
8,589.6
15.2
chemicals
27
Mineral fuel & oil
8,416.3
8,371.9
-0.4
39
Plastics & parts thereof
6,697.8
8,037.9
20
Source: PRC General Administration of Customs, China's Customs Statistics
69
China also recorded strong toy exports in 2002, making it China's

fourth-largest export commodity for the first time. According to the China Toy
Association , 95 percent of China's toy exports were processed
for foreign companies.( a low profit ). The fact that China's export mix is
weighted predominantly toward lower-end goods ( cheap) meant that
PRC exports sold well in the United States and other slow economies in 2002.
US exports: high and new technology ; airplane: boweing :
0.1BUSD
Exports from China also benefited somewhat from the weakening value of dollar
against the euro and other currencies , as the RMB is
unofficially pegged to the US dollar. There has been significant debate
over the appropriate value of the renminbi , but several Chinese
officials have stated that it is highly unlikely the PRC will revalue its
currency (see China's Economy).
Major exporters
Exports from China's non-state firms rose 27.6 percent in 2002,
another contributing factor to China's overall export growth. In a sign
of the important role foreign-invested enterprises (FIEs)
play in China's export performance, 52 percent of China's exports in 2002 came
from FIE manufacturers, according to the PRC General Administration of
Customs (Customs) .Of China's total exports, 42.1 percent came from
FIEs engaged in processing trade , further evidence of the degree to
which foreign manufacturers have integrated --- China into their global
manufacturing operations .
Government rebates
A final contributor to China's strong export growth in 2002
was a sizeable jump in government export rebates, budgeted at
RMB 100 billion ($12.1 billion) in 2002. In 2002, some Chinese exporters
received tax breaks as high as 15 percent.According to the State Council's
Development Research Center, exports could slow in 2003 if the government
budget for export rebates does not increase. But Liu Deheng, deputy
director of general affairs of the State Economic and Trade Commission has
stated that the government cannot afford to earmark more funds
for export rebates in 2003. Chinese domestic exporters are also
concerned about the availability of funds as more and more
exporters apply for rebates. The China Securities Journal notes that if
70
funds do not rise, about half of those who applied for rebates in 2002 will not
receive them in 2003.
China's Imports
Almost all of China's traditional import commodities saw doubledigit growth in 2002 (see Table 3). PRC imports of autos and steel
were of particular interest to foreign firms.
Table 3: China's Top Imports ($ million)
HS
#
2001
2002
%
change
85
55,888.5
73,254.9
31.1
84
40,553.9
52,152.0
28.7
27
Mineral fuel & oil
17,545.7
19,322.1
10.3
39
Plastics & articles thereof
15,260.6
17,380.9
13.9
72,
73
Iron & steel
13,038.1
16,011.9
22.8
90
Optical & Medical equipment

Inorganic & organic chemicals -
9,774.7
13,480.0
37.9
10,619.4
13,105.2
23.4
28,
29
87
Vehicle & parts other than rail
4,531.4
6,479.5
43
54,
55
Man-made filaments & staple fibers
6,262.1
6,328.0
1.1
74
Copper & articles thereof
4,887.0
5,667.9
16
Autos
China's automobile imports jumped 39 percent in 2002, propelled by
deep price cuts because of lower tariffs resulting from China's WTO
entry and more financing options for Chinese buyers.
Total imports of complete vehicles for 2002 reached 127,000 units, of which
more than 70,000 were cars. The value of imported vehicles, however, fell far
short of the $7.94 billion quota amount that should have been available
71
to importers in 2002. In 2003, import quotas will rise another 15

percent, and import duties will drop an additional 5.6 percent, in line
with WTO obligations WTO .
Nevertheless, officials at the China Trading Center for Automobile Imports said
in August that foreign automakers should not rely on importing
their autos into China as the government will continue to control vehicle imports
and protect local manufacturers . In fact, many ports reported
large stockpiles of imported vehicles as a result of the cost and
difficulties associated with obtaining an import license .
Japanese officials pressed the PRC government throughout 2002 to
be more transparent in allocating import rights for autos. Automobile
quota allocation was first delayed and then distributed in an opaque
manner that prevented importers from obtaining the necessary
import licenses.
Steel
A boom in the construction industry and a surge in auto production
pushed China ahead of the United States to become the world's largest
steel importer in 2002. Analysts expect China's steel consumption
to grow 15 percent annually in the next three to five years. China's
position as a steel importer has caused it to take steps to protect
domestic producers In November 2002, China announced
safeguard measures that called for three years of import tariffs
as high as 22 percent on five categories of steel products. The economies
most affected by the tariffs include the European Union, Japan,
Russia, and Taiwan. Japan was particularly hard hit as China is its largest steel
market; it responded by requesting consultations through the
WTO. China's domestic end-users also lodged complaints against
the safeguard provision , which threatened to raise the
cost of steel inputs. MOFTEC responded by rescinding some of the
safeguard tariffs instituted on the five categories of steel
products.
China's Trade Partners
US-China trade
72
China's trade with the United States grew more than 18 percent in the period
January-November 2002, with US exports to China up 15.2 percent to $20
billion (see Table 7). The United States remained China's largest export market
and second-largest trade partner. The strong growth in US
exports to China represents the largest growth figure for any US export market
in 2002. Significant increases in the export of aircraft, fertilizers ,
and organic chemicals contributed significantly to the growth of total
exports. (The 94.4 percent increase in US exports of fertilizer to China in the
January-November 2002 period can be attributed to a relatively low base of
comparison in 2001.)
Table 4: China's Top Trade Partners ($ million)

Rank 2002
Economy
2002
% change
Rank 2001
Japan
101,905.4
16.2
United States
97,180.6
20.8
Hong Kong
69,206.7
23.7
Taiwan
44,649.0
38.1
South Korea
44,071.2
22.8
Germany
27,800.5
18.2
Malaysia
14,270.5
51.4
10
Singapore
14,018.1
28.4
Russia
11,927.5
11.8
10
United Kingdom
11,396.7
10.6
Source: PRC General Administration of Customs, China's Customs Statistics===

US imports from China increased 19.3 percent in January-November 2002 over
the same period in 2001, exceeding $121 billion, according to US statistics. US
imports of power generation equipment grew substantially.
The "power generation equipment" category is misleading, however, as it
includes automatic data-processing equipment (HS 8471),
which was the single-largest US import from China in the first 11
months of 2002. Imports from this category were up 50.6 percent. Imports of
parts and accessories for office machines, (HS 8473), the United
States' fourth-largest import commodity from China, rose 28.6 percent.
73
PRC-Taiwan trade
China's mainland trade with Taiwan also leapt 38 percent over 2001,
making Taiwan China's mainland fourth-largest trading partner. As part of its
WTO commitments WTO , Taiwan relaxed restrictions on 1,225
consumer, agriculture, and industrial products from the mainland. In addition
to exports of electronics and power generation equipment, which composed 47
percent of the PRC's exports to Taiwan, the PRC exported large amounts of
textiles , iron and steel, plastics, and chemicals to Taiwan. Whereas the
United States faces a very large merchandise trade deficit with
China, Taiwan enjoys a massive merchandise trade surplus , as it moves
component and semi-finished goods to mainland factories for
processing and ultimate export , as PRC exports, to overseas
markets including the United States.
Table 5: China's Top Export Destinations ($ million)
Rank 2002
Economy
2002
% change
Rank 2001
United States
69,950.5
28.9
Hong Kong
58,465.4
25.6
Japan
48,437.5
7.8
South Korea
15,497.0
23.8
Germany
11,372.2
16.6
The Netherlands
9,108.1
25.1
United Kingdom
8,060.3
18.9
Singapore
6,965.7
20.3
Taiwan
6,585.9
31.7
Malaysia
4,974.5
54.4
14
10
Table 6: China's Top Import Suppliers ($ million)

Rank 2002
Economy
2002
% change
Rank 2001
Japan
53,467.9
25
Taiwan
38,063.1
39.2
South Korea
28,574.2
22.2
United States
27,230.1
3.9
Germany
16,428.3
19.3
74
Hong Kong
10,741.3
14.0
Malaysia
9,296
49.8
Russia
8,406.8
5.6
Singapore
7,052.4
37.5
10
10
Australia
5,850.2
7.8
Table 7: China's Trade with the United States ($ billion)
US
Expor
ts
199
3
199
4
199
5
199
6
199
7
199
8
199
9
200
0
200
1
JanNov
2001
JanNov
2002
8.8
9.3
11.
8
12.
0
12.
8
14.
3
13.1
16.3
19.2
17.3
20.0
%
chang
e
17.
3
5.7
26.
9
1.7
6.7
10.
9
-8.0
24.4
18.3
18.1
15.2
US
Impor
ts
33.
7
41.
4
48.
5
54.
4
65.
8
75.
1
87.8
107.
6
109.
4
101.5
121.0
%
chang
e
23.
0
22.
8
17.
1
12.
2
21.
0
14.
1
16.9
22.6
1.6
2.1
19.3
Total
42.
5
50.
7
60.
3
66.
4
78.
6
89.
4
100.
9
123.
9
128.
6
118.8
141.0
%
chang
e
21.
8
19.
3
18.
9
10.
1
18.
4
13.
7
12.9
22.8
3.8
4.2
18.7
US
Balan
ce
24.
9
35.
7
36.
7
42.
4
53.
0
60.
8
74.7
91.3
90.2
-84.2
-101.1
Source: US International Trade Commission, US Department of Commerce
75
Issues to Watch in 2003
Throughout the first half of 2002, Chinese policymakers worked on key issues to
alter China's trading system under the WTO. But as China completed its first
year in the WTO, several areas of concern emerged for 2003.
Trading rights
In its WTO accession documents WTO , China committed to extend
trading rights to all FIEs in which the foreign investor has a minority
stake by December 11, 2002. As of early February 2003, however, no
policies existed to allow an application for such rights. It is not clear whether
MOFTEC will draft rules to clarify the rights or issue
rules only after year three, when trading rights must be phased in fully. The lack
of regulatory clarity in the application for and allocation of
trading rights prevents FIEs from taking full advantage of China's WTO
commitments.
Genetically modified organisms
In October 2002, Chinese officials decided to extend until September 20, 2003
the interim import regime it imposed on agriculture products with genetically
modified organisms (GMOs) at the end of 2001. If China's permanent GMO
implementing rules had come into effect as originally scheduled on December
20, 2002, exporters of agricultural commodities to China said they would have
faced a serious market disruption. Although exporters were initially pleased that
the implementation date was delayed, many concerns surrounding certification,
safety inspections, and labeling of imported GMO products remain to be settled
before September. Furthermore , the PRC Ministry of Agriculture is delaying
approvals for several GMO crop varieties for several months. US negotiators have
expressed strong displeasure at China's decision to require additional field tests
and new tests to determine the effects of GMOs in food. Such moves would make
it extremely difficult for US exporters to recoup lost market share and for
China to develop a permanent GMO approval regime by September 2003.
76
According to the China National Grain & Oils Information Center, China will
most likely be forced to lift GMO import restrictions because it desperately needs
soybeans, most of which are genetically modified. In 2002, imports of soybeans
dropped by more than 2 million tons, likely a direct result of GMO legislation.
Tariff rate quotas
As mentioned above, China's allocation of TRQs for auto imports was
inefficient and opaque in 2002. And although China has issued 2003
TRQs for agricultural commodities and fertilizer that meet the
minimum WTO commitments , China's procedures are opaque and were not
issued in a timely manner. In December 2002 USTR requested that China make
public the list of recipients of quota allocations; that China allocate the quota in
commercially viable quantities and end the process of allocating TRQ
shares to entities that process commodities for re-export; and improve
overall transparency of the licensing process .
Dumping and safeguards
In 2002 China was the most popular target of dumping investigations
launched worldwide, with the United States and India initiating the
largest number of investigations. Twenty percent of all US-initiated dumping
investigations involved Chinese companies. But the United
States has found that many of the offending imports either come from
companies backed by American investors or help sustain US-based downstream
industries and end-users , thus making the imposition of
quotas or fines commercially undesirable. Such trends are likely to continue
in coming years.
US firms are likely to make increasing use of the product-specific safeguard for
China, otherwise known as Section 421 of the US Trade Act of 1974
(incorporated as a result of the passage of the legislation that granted China
permanent Normal Trade Relations status). The US law mirrors the Transitional
Product-Specific Safeguard contained in China's WTO Protocol of Accession and
allows US companies to request US safeguard action against China if a Chinese
import causes or threatens to cause market disruption to domestic producers of
like or directly competitive products.
China took advantage of its dumping and safeguard laws
77
to launch nine of its own dumping investigations in 2002, mostly against

chemical products from Japan and South Korea. The coming year will be sure to
see more such cases . MOFTEC also enacted a rule similar to the US Section
301 law, which allows MOFTEC to protect the interests of Chinese exporters
after Chinese products encounter difficulties entering the US and European
markets. The rules allow domestic companies to apply to MOFTEC to
request a trade barrier investigation when they have evidence that a
foreign country has imposed trade barriers that hinder hind their market
access .
Revisions to VAT policies
In addition to the auto and fertilizer quota problems mentioned above,
agriculture-related value-added tax (VAT) policies remained an area of
likely contention between China and its trading partners. China appears to
give preferential VAT treatment to PRC corn and wheat and to discriminate
against imports. The US Trade Representative has complained on behalf of US
grain producers about the use of TRQ allocations as a nontariff barrier.
In September 2002, Customs changed its VAT rebate policy for
imports intended for foreign-invested projects in the "permitted" category in the
Catalogue Guiding Foreign Investment in Industry. Now foreign investments in
the permitted category that qualify for tax exemption by exporting all of their
products must pay applicable tariff and VAT for imported equipment. These
investments may, however, receive rebates of 20 percent each year for five years
after an official examination shows that the equipment was imported.
The Ministry of Finance and the State Administration of Taxation issued a
circular in December 2002 that gives more tax breaks to the
integrated circuit (IC) industry. According to the new policy, IC product
manufacturers that have paid 17 percent VAT will receive a rebate for all but 3
percent of the VAT paid (an 11 percent rebate was allowed under a September
22, 2000 circular). The preferential tax treatment for IC product
manufacturers in China has reportedly caused concern among foreign chip
makers and trade associations , because it weakens
the price competitiveness of imported IC products, which have a 17 percent VAT
imposed on top of import tariffs.
Overall, China's continuation of preferences for domestic enterprises or special
78
treatment for export-oriented enterprises

commitments on national treatment.
conflicts
with
China's
WTO
Translate
Licensing
China's trade authorities released a number of revised
catalogues that reflect its WTO commitments to phase out
quotas and licensing regulations for certain goods by January 1, 2003.
Despite the catalogues, China's import licensing and registration system
remains opaque and restrictive.
China maintains a complex matrix of rules governing the licensing of
such imports as general commercial goods, mechanical-electrical (M/E)
products, goods subject to --- designated trading, and technology
products. Catalogues have up to four classification categories: free import
(no restrictions); automatic licensing; restricted; and prohibited . Further
breakdowns distinguish goods according to their type and use.
In the fall , the US government sought clarification of China's licensing

and registration requirements--with only limited success--through the first
transitional review mechanism on China's WTO entry . It is
likely that licensing processes will still present import barriers for
foreign companies.
Inspections
The Administration of Quality Supervision, Inspection, and Quarantine
first syllable stressed (AQSIQ) issued a series of
rules to streamline inspection and quarantine activities of imported
products. One rule, governing the import of used M/E
myeloid-erythroid (ratio)] ['mai,lid] /['eririd] equipment, adds another layer
of red tape ( ) to existing MOFTEC requirements by introducing preinspection. The rule requires imported, used M/E products that involve state
security, environmental protection, and sanitary and phytosanitary
79
['faitu,snitri] issues to undergo pre-inspection prior to shipping to

China.
Ministry of Foreign Trade and Economic Cooperation
In another development, AQSIQ will select products
that involve safety, hygiene , and environmental protection, as well as
products that have been the subject of complaint or repeatedly involved in
accidents , to conduct sample inspections ==.
Though most countries' Customs authorities reserve the right to perform
random inspections , some observers are concerned that the
new PRC rule reintroduces an arbitrary inspection regime that
was recently eliminated when China issued a list of products subject to ---
China Compulsory Certification requirements.
Intellectual property rights
MOFTEC and the State Intellectual Property Office (SIPO) issued

rules in December 2002 to promote intellectual property rights protection in the
import and export of goods, services, and technology. According to rules,
domestic foreign trade operators in processing trade businesses must require
suppliers to present certificates verifying that the suppliers are eligible to export
the patented materials or components for processing in China.
Shipping
Ninety percent of Hong Kong's exports are exports from the mainland. The new
US Customs rules aimed at enhancing port security , which
took effect February 2, 2003, will likely have a significant impact on USbound ships. Roughly 600,000 cargo containers set sail for
US ports from Hong Kong annually, more than from any other port. Hong Kong
shippers and the government have had difficulty preparing for the
February deadline for compliance with the new US security requirements,
risking problems at US ports. Security at US ports will continue to be a serious
issue in 2003, keeping the potential impact on trade uncertain .
80
In another shipping matter, the Ministry of Communications (MOC) released

regulations on international maritime transportation. US carriers, shippers, and
intermediaries are concerned that the new regulations allow China to control
liner service pricing terms--including service contract prices--and appear to
impose restrictive licensing and registration requirements on foreign companies.
In July, MOC released a draft of the implementing regulations for comment. The
rules spell out requirements for the government's processing of
applications, but lack detail about options for appeal and re-application if
an application is denied. Both of these regulations could have a negative impact
on how goods enter Chinese ports.
Trade in services
Though the most recent statistics available covering trade in services are for
year-end 2001, the numbers are worth mentioning as indicators of future
trends. China continues to be a net importer of services, having posted
rising deficits each year since 1998. In 2001, the service trade deficit was
$6.36 billion. Analysts at the State Administration of Foreign Exchange
predict that China's service trade deficit may have reached $8 billion in
2002. Most experts agree that PRC service trade deficits will persist as the
country phases in its WTO service commitments. One of the prime beneficiaries
of any openings in China's services industry will be US services exporters. In
2001, the United States recorded a surplus of $2.2 billion in its services trade
with China, up 13.6 percent over 2000.
For this reason, the rising number of barriers that China is erecting to foreign
participation in PRC service sectors is likely to be a source of friction in the
months and years ahead. In financial service sectors like banking and
insurance, foreign companies face high capital requirements and cumbersome
licensing application procedures.
Free-trade agreements
China is likely to continue with progress made in 2002 to formalize
various trade agreements with its neighbors. In November, China signed
81
a framework agreement with the Association of Southeast Asian Nations

(ASEAN) to establish a free-trade area (FTA). Although
negotiations to cover goods, services, and investment will not begin until this
year, the 2002 framework agreement already lays out some specific tariff
cuts .
The "early harvest package " calls for cuts on selected
agricultural goods . Also, tariffs of 5 percent or lower on goods are to be
abolished in 2003. The goal is to have the original ASEAN signatories fully
implement an FTA with China by 2010. Less developed ASEAN members
will have until 2015. Many ASEAN members are concerned that the proposed
FTA will not benefit them, as China appears to have most of the negotiating
leverage over goods and services.
China and Singapore also signed an agreement to allow certain products direct
access to each other's markets without requiring duplicate testing
procedures . Under the agreement, exports certified in
one country do not need to undergo another round of conformity assessment
procedures when they enter the other market. The agreement covers
electrical and electronics products, rubber goods, medical devices, motor vehicle
parts, and telecom equipment.
China mainland also has sought a Closer Economic Partnership
with Hong Kong. According to MOFTEC
Minister Shi Guangsheng, negotiations covering customs, e-commerce, and legal
transparency went well in 2002.
Table 8: Top US Exports to China ($ million)
HS #
Jan-Nov 2001
Jan-Nov 2002
% change
84
3,740.9
3,785.2
0.5
85
3,107.2
3,623.2
16.6
88
Air & spacecraft
2,032.5
3,182.7
56.6
90
Medical equipment
1,137.3
1,105.6
-2.8
39
787.0
863.5
9.7
12
Oil seeds & oleaginous fruits
937.3
829.6
-11.5
31
Fertilizer
311.3
605
94.4
29
Organic chemicals
372.5
545.8
46.5
72, 73
Iron & Steel
506.1
518.6
2.5
41
Raw hides & leathers
397.9
409.3
2.9
82
Sources: US International Trade Commission, US Department of Commerce
Table 9: Top US Imports from China ($ million)

HS #
Jan-Nov 2001
Jan-Nov 2002
% change
85
19,095.0
23,120.8
21.1
84
13,012.4
18,830.7
44.7
95
Toys & games
12,466.1
14,259.0
14.4
94
Furniture
7,843.5
10,036.4
28.0
64
Footwear & parts thereof
9,642.6
9,883.7
2.5
Apparel
6,324.5
6,822.8
7.9
42
Leather & travel goods
3,932.9
4,417.9
12.3
39
3,282.7
3,756.2
14.4
Iron & steel
2,380.9
2,775.3
16.6
Medical instruments
2,680.7
2,608.9
-2.7
61, 62
72, 73
90
Sources: US International Trade Commission, US Department of Commerce
Chapter Six
83
21
2005 4159.6 2004 27.2

1977.1 22.5 2182.5
31.8 681.5 16.4
693.5 16.7
161.1 8.1
520.4 23.8
1.
2003
2003 5 19.14 2006
1 45.2 2003 5 10.35
2006 1 14.8
2003 5
8.79 2006 1 30.4
2002 2002 2004

370 1
Ricardo,1817
Hecksche,1919Ohlin,1933
DS Dixit and Stiglitz,1977
2.
2.1
84
20012005 14.1%62.3%69.6%68.9% 29.4%

2001 100 2005 520.4 2001-2005
36.7%-4.64%6.4%36.5% 10.5% 2005
161.1
(1)
2005
90.26
(2) 2004 11
2000 91.5% 2004 95.4%2004 11

292.6 49.1 10.3
2.9% 6.0 1.7%
2004 11 48.9
36.4%
2000 17.3% 28.6%
(3)
85
100 2004
11 318 88.8%
260.2 72.6% 81.1 60.1%
59.3 29.2
8.2% 43.1 32.1%
2.2
1989
45 1989
21
2005
250
86
2.3
FOB
CIFFAS
CIF
CIFFOBFAS
2005
71.8
38.2 359.3
554.3 195 2

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1

Men have sorrow and joy, they part or meet again;

Editor-in-general: Doctor Xie in Economics

Provided entering International tradethe world will open up the door.

(Unique Style of Xian University of Technology)

(4) Deceive in the examination or homework,

Provided one of following alms-deeds, the performer will be granted an extra of

(2) Present at duty every day,

(3) Abide by truth

(4) Born in mud but no contaminated

(5) Pass IETES, TOFFLE, GRE, or GAMT,

(9)Be enrolled as a postgraduate at a foreign university especially Ivey

3. In this part, you are required to perform each

11. Big Executive Bonuses Offend the U.S.s Values

12. (Kenneth Feinberg) 11

Chapter one An overview of international trade

3. The functions and importance of international trade

IT functions as pushing its national economy forward.

Adjust and balance supply and demand at the domestic

D) Benefit that division of international labor is utilized to save

A.IT greatly promotes the world economy.

In recent centuries, the feudal ruler in China closed China to international

Now , a lot of foreign investments(capitals) are flocking to China because of

5. Factors that contribute to the shaping of world trade patterns

(1)The location of the worlds natural resources : endowment of

7. Commodity futures trading : to be an important part of the buying

Compensation trade increases the prices of imports;

9. Government and trade

4. regional economic integrity

Dear Mr. Charles,

Deferred Payment L/C

D/P ( documents against payment)

(4) Advising sellers that the L/C has been issued

I am glad to receive your Letter of Credit No.1234.

ship the goods

Commercial invoice in duplicate copies, indicating contract No.

with recourse L/C

bill of lading (B/L)

5. We cannot agree to draw at 30 days D/A.

9. Is the wording of confirmed necessary for the letter of credit?

11. What is your reason for the refusal of payment?

Terms of payment: By irrevocable, transferable, and divisible bankers acceptance letter of

Address : No. 5 Rd. Golden Flower, Xian, China

The buyers xxx

III Samples of Purchase Contract

AddressNo.6 Yanxiang, Xian, China Address: Gates City, Nevada, USA

GENERAL TERMS AND CONDITIONS

13. loading and unloading

(4) Letter of credit is often shortened as L/C or L. C. and is sometimes referred to as

In case of CFR terms:

Chapter Four International Trade Theories

For much of this period, mercantilist writers

Trade with a given country or region was judged profitable by the

The mercantilists saw no virtue in a large volume of trade. Rather, they

. Thus, the trade strategy of many nations is designed to

To be called the comparative cost theory;

After division of labor , England produces the quantity of nylon

greatest relative efficiency

New trade theory makes two important points: First, through

goods from other countries, each nation can simultaneously

A second theme in new trade theory is that the pattern of trade

Chapter Five China's Trade Performance

Note: PRC exports reported on an FOB basis; imports on a CIF basis

in 2002 and China became the world's fourth-largest manufacturing