DepartmentForeign Trade Operations

of International Business Administration VKT-20191

THE IMPORTANCE OF FOREIGN TRADE

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 CONTENTS

Overview of foreign trade operations

Incoterms

International Sales Contract (ISC)

Documentation

Execution of the ISC

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 ASSESSMENT
• Class Attendance: 10%
• Mid Term Test: 30%
• Final Examination: 60%

LEARNING MATERIALS
• Import - Export Operations, Assoc. Prof. Dr.Nguyen Xuan Minh
Assoc. Prof. Dr.Nguyen Thi Thu Ha, VNU-HCM Press, 2016
• Practice of International Trade, Dr. Nguyen Tien Hoang
Assoc. Prof. Dr. Nguyen Xuan Minh
Assoc. Prof. Dr. Nguyen Thi Thu Ha, VNU-HCM Press, 2017
• Incoterms 2010, International Chamber of Commerce
• UCP 600, International Chamber of Commerce 2007 Revision

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 CHAPTER 1

OVERVIEW OF
FOREIGN TRADE OPERATIONS

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* In this chapter
1. Definitions and features
2. Subjects in Foreign Trade operations
3. Steps in Foreign Trade transaction
4. Forms of foreign market joining

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 1. Definitions and Features

• Foreign trade operation: Process of meeting,

negotiating for product trading, signing and
executing international sale contract.
• This process can be carried out directly or
indirectly, under regular or specialized
conditions.

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 1. Definitions and Features
Commercial activities
Commercial activities mean activities for the purpose of
generating profits, including: sale and purchase of goods,
provision of services, investment, commercial promotion and
other activities for the profit purpose.
(Commercial Law - Article 3.1)

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 1. Definitions and Features
Purchase and sale of goods
Purchase and sale of goods mean commercial activities whereby the
seller is obliged to deliver goods, transfer ownership of goods to the
purchaser and receive payment; the purchaser is obliged to pay to the
seller and receive goods and the ownership thereof as agreed.
(Commercial Law - Article 3.8)

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 1. Definitions and Features
International purchase and sale of goods
International purchase and sale of goods shall be conducted in form of
export, import, temporary import for re-export, temporary export for
re-import and transfer through border-gates
(Commercial Law - Article 27.1)

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 1. Definitions and Features
Export of goods
Export of goods means the bringing of goods out of the territory of the
Socialist Republic of Vietnam or into special zones in the Vietnamese
territory, which are regarded as exclusive customs zones according to
the provisions of law
(Commercial Law - Article 28.1)

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 1. Definitions and Features
Exclusive customs zones?
• Export processing zone
• Bonded warehouse
• Tax-suspension warehouse / zone
• Etc.

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 1. Definitions and Features
Export: Pros & Cons for the Government
* Pros: * Cons:
- Create more jobs - Make countries’ resources
- Spur economic growth scarce
- Bring in tax revenues - More dependent on
- Improve the balance of payment overseas markets
- Complete international commitments - Confront with more trade
disputes
- Improve people’s living standard
- Improve country’s image
- Earn more foreign exchange

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 1. Definitions and Features
Export: Pros & Cons for the Company
* Pros: * Cons:
- Increase sales income - Complicated business
- Diversify markets environment
- Reduce vulnerability to lags in domestic - Fluctuation in exchange
demand rates, prices, …
- Extend product life cycle - Trade barriers
- Use idle capacity
- Reduce unit costs through economies of scale
- Sharpen competitiveness
- Broaden contacts
- Understand global markets and cultures
- Better choice of buyers

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 1. Definitions and Features
Import of goods
Import of goods means the bringing of goods into the territory of
the Socialist Republic of Vietnam from foreign countries or
special zones in the Vietnamese territory, which are regarded as
exclusive customs zones according to the provisions of law
(Commercial Law - Article 28.2)

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 1. Definitions and Features
Import: Pros & Cons for the Government
* Pros: * Cons:
- Full use of country’s comparative - Reduce country’s foreign
advantage exchange
- More modern technology, managerial - Local market may be
experience dominated by foreign
- Better competitiveness of products companies

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 1. Definitions and Features
Import: Pros & Cons for the Company
* Pros:
- Better choice of suppliers
- More modern technology and
managerial experience
- Supply of good prices
- Better approach to new products
* Cons:
- Complicated business
environment
- More fluctuations in
exchange rates, prices, …

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Foreign Trade Operations 18
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 1. Definitions and Features (Cont’d)
Other definitions
• Temporary import for re-export
• Temporary export for re-import
• Transfer through border-gates

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 1. Definitions and Features (Cont’d)
Temporary import of goods for re-export
Temporary import of goods for re-export means the bringing of goods
into Vietnam from foreign countries or special zones locating in the
Vietnamese territory, which are regarded as exclusive customs zones
according to the provisions of law, with the completion of the
procedures for importing such goods into Vietnam, then procedures
for exporting the SAME goods out of Vietnam
(Commercial Law - Article 29.1)

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 1. Definitions and Features (Cont’d)
Temporary export of goods for re-import
Temporary export of goods for re-import means the bringing of goods
overseas or into special zones in the Vietnamese territory, which are
regarded as exclusive customs zones according to the provisions of law,
with the completion of procedures for exporting such goods out of
Vietnam, then procedures for importing the SAME goods back into
Vietnam
(Commercial Law - Article 29.2)

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 1. Definitions and Features (Cont’d)
Transfer through border-gates
Transfer of goods through border-gates means the purchase of goods
from a country or territory for sale to another country or territory
outside the Vietnamese territory without carrying out the procedures
for importing such goods into Vietnam and the procedures for
exporting such goods out of Vietnam
(Commercial Law - Article 30.1)

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 1. Definitions and Features (Cont’d)
Features
• Subjects are from different countries.
• Modern technology is applied to enhance speed and reduce distance.
• Target: to achieve business goals ($).

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 1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Languages

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Culture

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1. Definitions and Features (Cont’d)
Barriers in Foreign Trade operations - Difference in Goals

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1. Definitions and Features (Cont’d)
Tariff and non-tariff barriers

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2.1 Subjects in Foreign Trade Operations
• Businesses
• Countries
• Non-government organization (NGOs)
• International organizations: WTO, ASEAN, ...

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 2.2 Features of Vietnamese business
• Limit in finance and technology due to small and medium size.
• Unclear and short-term (rather than long-term) strategy.
• Little experience and knowledge in market economy.

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