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OVERVIEW OF
INTERNATIONAL TRADE
CHAPTER 1

LEARNING OBJECTIVES

 To learn the definition of international trade

 To appreciate the opportunities and challenges offered by
international trade
 To understand the differences between int’l trade vs domestic trade

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CONTENTS

LO1: Introduction
 What is International Trade?
 Classification of International Trade
 Reasons For International Trade
 Benefits of International Trade
LO2: Difference between Int’l Trade and Domestic Trade
LO3: Risks of Exporting and Importing
LO4: Int’l organization

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What is international trade? LO1

International business consists of transactions that are devised and

carried out across national borders to satisfy the objectives of
individuals, companies, and organizations

Note: Exclusive customs area

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Import-export trade
Primary
FDI

Licensing
Types of International
Business Franchising

Management contract

Additional Manufacturing contract

Turnkey project

JV

Strategic alliance
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What is International Trade?

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.
- Direct trade
- Indirect trade
- Counter trade
- Mercantile exchange (https://en.mxv.com.vn/)

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Direct Trade?

Transaction between a buyer and a seller that directly establishes a

trading relationship with each other under normal trading conditions
(goods-money relationship)

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Article 28.- Export and import of goods

(Commercial Law)
 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.
 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.

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Article 29.- Temporary import for re-export and temporary export

for re-import of goods

 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.
 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

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Article 30.- Transfer of goods 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
 Triangle trade

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Indirect trade

 Commercial intermediary activities mean activities carried out by a

trader to effect commercial transactions for one or several identified
traders, including representation for traders, commercial brokerage,
goods sale or purchase entrustment, and commercial agency.

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Representation for traders

 Representation for traders is defined as an arrangement where a

trader is granted authorization (hereinafter referred to as the
representative) by another trader (hereinafter referred to as the
principal) to perform trades under the name or direction of the
former, and earn remunerations for his/her representation service
rendered. (Art.141)

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Commercial agency

 Commercial agency means a commercial activity whereby the

principal and the agent agree that the agent, in its own name, sells or
purchases goods for the principal or provides services of the
principal to customers for remuneration.. (Art.166)

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Commercial agency

 Commercial agency means a commercial activity whereby the

principal and the agent agree that the agent, in its own name, sells or
purchases goods for the principal or provides services of the
principal to customers for remuneration.. (Art.166)
 Universal Agent
 General Agent
 Special Agent

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Commercial agency

 Universal Agent
 General Agent
Form of agent
 Special Agent

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Commercial agency

 Mandatory Agent
 Commission Agent Relationship
 Merchant Agent
Others:
 Factor
 Del credere Agent
 Exclusive/ Sole Agent

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Commercial brokerage

 Commercial brokerage means a commercial activity whereby a

trader acts as an intermediary (referred to as broker) between parties
selling and purchasing goods or providing commercial services
(referred to as principals) in the course of negotiations and entering
into contracts for sale and purchase of goods or provision of services
and shall be entitled to a remuneration under a brokerage contract.
(Art.150)

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Purchase and sale of goods by mandated dealers

 Purchase and sale of goods by mandated dealers mean commercial

activities whereby the mandatory conducts the purchase and sale of
goods in his/her/its own name under terms agreed upon with the
mandator and is entitled to receive mandate commission (Art.155)

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Counter trade

 Countertrade is considered to be the oldest methods of payment in

the known history. It means the exchanging of goods and services in
whole or part, with other goods and services as payment, rather than
with money
Counter
Trade

Switch Counter
Barter Compensation Buyback Clearing Offsets
trading purchase

Direct Indirect

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Barter

 The goods and/or services are exchanged with other goods and/or
services of equal value, where little or no money is paid by the
buyer. This is the only trade activity with no money involved.
 Barter involves a single contract that covers both transaction flows

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Mercantile Exchange

 Purchase and sale of goods through the Goods Exchange mean

commercial activities whereby the parties agree to purchase and sell
a defined quantity of goods of a defined type through the Goods
Exchange under the standards of the Goods Exchange, at a price
agreed upon at the time the contract is entered into, and with the time
of goods delivery determined to be a specific point of time in the
future.
 Forward contracts and option contracts.

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Characteristics of International Trade

 Separation of parties
 Foreign currency
 Risk elements
 Restrictions
 Governmental Control
 Need for Middlemen

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Reasons for International Trade?

Theories of why trade occurs can be grouped into three categories:

 Market size and distance between markets determine how much
countries buy and sell. These transactions benefit both buyers and
sellers.
 Differences in labor, physical capital, natural resources and
technology create productive advantages for countries.
 Economies of scale (larger is more efficient) create productive
advantages for countries.

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Benefits of International Trade?

Job creation
Bring in wide range of products & services to a country
Exert pressure on domestic products to improve
Expand consumer choices
Improve standard of living
Allows for economies of scale
Allows firms to home their competitive skills abroad

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Benefits of International Trade?

Growth in World Merchandise Trade & GDP (1998 – 2008)

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Trends and developments of Int’l Trade

 Merchandise trade growth has

stagnated
The global recession of 2008-
2009
Energy prices in 2015
Protectionism + trade war

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Trends and developments of Int’l Trade

 Merchandize trade growth has stagnated
 Digital Technologies are transforming and disrupting the export Marketplace
 e-L/C eUCP
e-B/L  Bolero system
Web-based platform  Li&Fung  buyer optimize their purchases from supplier factories
 E-commerce continues to grow
Usd 1.9 trillion # 9% of total retail spending
Usd 4 trillion # 15% of total sales
Overseas shopping is accelarating
Asia-Pacific  the world’s largest e-commerce market
 Sustainability/green standard have become imperative
Climate change  Maersk: slow steaming slower speed  less fuel
Consumer demand  organic or sustainably produce or free of “conflict minerals”/”conflict
resources
 Worker protection and safety
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Difference between Int’l Trade and Domestic Trade

LO2
Domestic Commercial Law vs Freedom of Contract
The additional distance
Diversity of Languagues
Currencies
Customs duties and Import quotas
Local conditions/ economic policies
Other variables  compel to use terms & devices not commonly used
in domestic trade, ex: Incoterms rules, UCP…

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The risks of Exporting and Importing LO3

Legal risks
Transport risks
Quality of goods risks
Risks of cultural and languague differences
Exchange rate fluctuations
Non-payment risks
Unforeseen events

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International Organization and International Trade

LO4

Non-govermental
organizations
(NGOs)
International
organizations
Intergovermental
organizations
(IGOs)
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International Organization and International Trade

Local/Regional
Chambers of
Commerce

NGOs ICC

Others

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Local Chamber of Commerce

•Assisting importers and exporters

•Organizing seminars and providing information on trade and trade-
related procedures
•Promoting foreign markets in finding customers/agents/distributors
•Issuing Certificate of Origin (C/O)

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The International Chamber of Commerce

https://www.youtube.com/watch?v=nbS9p0_9m6E

 The World Business organization developer of int’l commercial, legal and

banking Standard  UCP 600, Int’l Court of Arbitration, Incoterms
 ICC commissions and Working Parties (Task Forces)  review issues affecting
world business
 ICC Commercial Crime Service
 Int’l Maritime Bureau  all types of maritime crime incl. Fraud, cargo theft and
piracy
 Financial Investing Bureau  combat financial fraud and Money laundering
 Counterfeiting Intelligence Bureau  helps company to prevent the faking of their
products.
 World Chambers Federation  serving the global chamber of commerce
communitty  manage the ATA carnet System
 ICC Publications
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Others NGOs in Int’l Trade

 Int’l Air Transport Association (IATA)  for the world’s air cargo
simplifying and standardizing air transport documents  www.iata.org
 Int’l Federation of Freight Forwarder’s Associations (FIATA)  promoting
standards and quality in int’l freight forwarding  www.fiata.com
 Int’l Maritime Committee (CMI)  promoting the unification of maritime
and commercial law  the Hague/ Hague-Visby Rules 
www.comitemaritime.com
 Int’l Road Transport Union (IRU)  representing commercial operators of
road vehicles  www.iru.org

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International Organization and International Trade

UNCITRAL
www.uncitral.org

UNIDROIT
www.unidroit.org
IGOs
WCO
www.wcocmd.org

ITC (UNCTAD/WTO)
www.intracen.org

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Review

1/ Solutions for managing int’l business risk? (pg 17 LO3)

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