(Tiểu luận FTU) letter of credit payment

In order to do good import and export, we need to clarify the process of implementing an import and export contract as well as papers and documents related to the contract.. Therefore, t

TABLE OF CONTENT

A INTRODUCTION: 1

B CONTENT OF THE INTERNATIONAL SALES CONTRACT 2

I PREAMBLE OF THE CONTRACT: 2

II CLAUSES OF THE CONTRACT: 2

1 Commodity, Price and Quantity: 2

2 Quality: 3

3 Packing and Shipment: 3

4 Payment: 4

5 Insurance: 4

6 Other terms and conditions: 5

C THE SHIPPING DOCUMENTS 7

I COMMERCIAL INVOICE 7

1 Definition 7

2 Invoice Information: 7

II BILL OF LADING 8

1 Definition and general information: 8

III PACKING LIST 11

1 Information 11

2 Comments 11

IV BILL OF EXCHANGE 11

1 Definition 11

2 Content of the bill of exchange 11

V CERTIFICATE OF ORIGIN 12

1 Definition 12

2 Types of C.O 12

3 The parts of C.O: 12

4 Comments: 14

VI LETTER OF CREDIT 15

1 Definition: 15

2 Type of the LC in the contract: 15

3 Elements: 15

4 Process of Payment by LC: 16

VII HEALTH CERTIFICATE: 16

1 Definition: 16

A INTRODUCTION:

Along with the development and integration of the world economy, Vietnam has also gradually cooperated in international exchange, creating many opportunities for cooperation with countries around the world Import-export sector plays an extremely important role in the development of the country's economy

Import and export not only bring a large source of foreign currency to the country but also through that, create jobs for many workers In order to do good import and export,

we need to clarify the process of implementing an import and export contract as well as papers and documents related to the contract

In daily life, we make contracts in all forms and in all fields, from sales contracts serving daily needs to contracts signed between corporations big, even between nations Many people think that the contract's strictness is the factor that maintains the stability and success of business activities these days The drafting of the contract should have sufficient skills as well as in-depth understanding of the relevant laws Not to mention the disagreements about language and cultural traditions between countries can also cause conflicts and disputes to occur between contracting parties In addition, no matter how carefully crafted a contract is, the parties to the contract cannot anticipate all the problems that will arise during the implementation Therefore, the team chose the research topic

"Analysis and evaluation of export contract between Anh Minh Quan Corporation and Haedam Global Company Limited" to analyze some issues related to the content of economic contracts Analytical objectives include: Overall analysis to clarify factors that are the contractual conditions; Analyzing in detail the terms of the contract in order to define rights and obligations between the parties involved; Learn from experience in drafting contracts and analyzing an economic contract in general and a contract for the sale of international goods in particular

The group would like to thank the lecturer of International Trade Transaction for her enthusiastic guidance and the knowledge that she has conveyed in class This knowledge has become a useful platform to help the group complete this essay Thank you for the active participation of the team members

B CONTENT OF THE INTERNATIONAL SALES CONTRACT

The preamble of a contract is the introductory paragraph that identifies the parties to the agreement It is typically followed by paragraphs known as recitals (also called the background section) Sometimes, these recital paragraphs are labeled “Whereas” Taken together, the preamble and the recitals tell the who, what, when, and why of the transaction In other words, they should tell the reader who the parties to the agreement are, the date of the agreement, and what the parties hope to accomplish by entering into the agreement

One of the most common mistakes in these preliminary sections of a contract is to incorrectly name the owner of the business as a party, rather than using the entity name

This mistake results in the owner being personally obligated as a party to the contract, which is clearly not the result an owner expects after taking the trouble to incorporate

In the contract, it is written down as:

 The seller:

- Anh Minh Quan Corporation

- Address: 91C/12 Ngo Chi Quoc Str, Quarter 2, Binh Chieu Ward, Thu Duc Dist, HCMC, Vietnam

- Tel: 08-62-842-481 Fax: 08-842-581

- Represented by Mr Truong Dinh Quan Director

 The buyer:

- Haedam Global Company Limited

- Address: 90 donggureung-ro 136 Beongil, Guri si, Gyeonggi-do, Korea

- Tel: 0082-31-544-3150 Fax 514-3150

- Represented by Mr Park Hark Ryong Director The preamble of the contract is fully detailed The entities have legal status in signing the contract The contract No HG/AMQ-030314 was signed on 15 March 2014

1 Commodity, Price and Quantity:

- Name of commodity: FROZEN CUT POULP SQUID

- HS code: 03074920

- Quantity: 11970 +/- 10% at seller's option

- Price terms: USD 4.73/kg CFR Incheon port, incoterms 2000 The very first clause of every contract shall be the name of commodities The contract goods should be specified at least to the degree that they can be identified Naturally, greater precision describing them reduces the potential for misunderstanding If the product is very complex (for example, machinery), a detailed description can be made in

an annex of the contract

In this contract, the name is only specified as commercial name which shall be added the origin of the goods as well as HS code

The quantity is a compulsory term and expressed in metric system (11970 KGS) with generally accepted commercial tolerances (+/- 10% at the seller’s option) In general, this term is detailedly stated

Depending on the nature of the product and the degree of precision that can be applied to quantity and delivery, the price may or may not expressed in fixed terms In situations where the price depends on other factors, all such factors and their relationship to the price should be clearly recited so as to leave no doubt Any applicable currency should be specified

The price in the contract is quoted CFR Incheon port, incoterms 2000 The seller is required to arrange for the carriage of goods by sea to a port of destination and provide the buyer with the documents necessary to obtain them from the carrier Under CFR, the seller does not have to procure marine insurance against the risk of loss or damage to the cargo during transit

2 Quality:

Quality of the goods clearly defines main characteristic of contractual goods to distinguish the goods from other one and is a compulsory term However, this can be considered as the most complex term as it requires a wide knowledge on technical characteristics of the commodities

It is stated that “as per export standard of Vietnam and meet to the buyer's standard” The term could be more improved with some major specification stated firmly and a copy of standard attached to the contract

3 Packing and Shipment:

The contract packing agreement constitutes the legal agreement made between the manufacturer and the packing company It doesn’t really matter what discussions have taken place beforehand – if the work isn’t detailed in the contract then you have no recourse to ensure it will happen

When it comes to the law, in most instances the manufacturer is legally responsible for all risks associated with a product, even if the co-packer has played a part in causing these risks, so you need to make sure your agreement is water-tight and explicit

Furthermore, if your product is a cosmetic or food product that involves a specific recipe

or certain blending, you may have to share this with your co-packer, meaning they are privy to trade secrets This is another reason why you must ensure your agreement is comprehensive

The packaging clause is stated as “570 Gr/ Block x 6 equal 3.42 Kgs/carton” This should

be added with information such as the block is marked with buyer’s address, numbered from 1 to 6, etc

In contrast, the delivery term is clearly stated as 20 March 2014 Partial shipment is allowed but transhipment is prohibited Ports of loading and discharging are subject to the CFR incoterm

4 Payment:

Payment is to be made by an irrevocable letter of credit at 90 days after sight

Letter of Credit (L/C or LC) is a document issued by the buyer’s bank in the buyer’s orders, in which the bank promises to pay the seller a specified amount under specified conditions

The term also mentions place and date of expiry This field specifies the latest date for presentation under the documentary credit and the place where documents may be presented

The issuing bank is Suhyup Bank Seoul while the advising bank is Vietcombank Song Than Branch with the address: 79 Binh Duong 2 Street, An Binh Ward, Di An District, Binh Duong Province, Vietnam The required documents include:

- Signed commercial invoice in three folds

- Packing list in three folds

- Full set of Clean on-board ocean Bill of landing

- Certificate of origin one-fold

- Sanitary Certificate original one-fold

- Inspection certificate The contract, however, does not mention about the kind of currency which is used to pay

The more information on Letter of Credit is to be specified in the shipping documents

5 Insurance:

This clause is covered by the buyer so this kind of agreement is CFR

The agreement does not require the seller to purchase marine insurance against the loss, destruction, or damage to the goods during transit The risk to the goods passes once they reach the vessel, so the seller is not liable

The receiver—or buyer—assumes responsibility once the ship has docked in the destination port All remaining costs including those for unloading and any further transportation costs are then assumed by the receiver or buyer

Deliver happens in the port of loading, risk for seller ends at port of origin In addition to this, seller must arrange international freight transportation and provide all documentation to buyer Seller must also clear exports customs In summary, seller arranges transportation under buyers’ risk, therefore it is recommended that buyer gets additional insurance coverage

6 Other terms and conditions:

In general, the content and form of the document are quite coherent However, the main disadvantage of the contract is a lack of arbitration clauses

Arbitration is an out-of-court proceeding in which a neutral third party called an arbitrator hears evidence and then makes a binding decision Arbitration is the most commonly used method of alternative dispute resolution (ADR), and people'll find an arbitration clause in the fine print of all kinds of contracts these days

Arbitration can be binding (which means the participants must follow the arbitrator's decision and courts will enforce it) or nonbinding (meaning either party is free to reject the arbitrator's decision and take the dispute to court, as if the arbitration had never taken place) Binding arbitration is more common

For simple contract disputes in which the matter can be heard in one day, arbitration is usually a good choice However, if in doubt, consider the following advantages and disadvantages:

- Advantages: Arbitration is usually faster, simpler, more efficient, and more

flexible for scheduling than litigation Also, it avoids some of the hostility of courtroom disputes, perhaps because it's a private proceeding versus the public drama of the courtroom And if the subject of the dispute is technical for example, about a patent the parties can select an arbitrator who has technical knowledge in that field, rather than a judge who may not be familiar with the issues

- Disadvantages: Unlike a court ruling, a binding arbitration ruling can't be

appealed It can be set aside only if a party can prove that the arbitrator was biased

or that the arbitrator's decision violated public policy Unlike a court case, there is

no automatic right to discovery (the process by which the parties have to disclose

information about their cases to the other party) The costs of arbitration can be significant; in some cases, they may even exceed the costs of litigation

C THE SHIPPING DOCUMENTS

1 Definition

Commercial invoice is one of commodity document that required in the transaction It is

a legal document between the seller and the buyer that clearly describes the sold good(s), and the amount due on the buyer It is also one of the main documents used by customs in determining customs duties

2 Invoice Information:

- Invoice Number: HG-010414

- Invoice Date:1 April 2014

- Order Number: Not mentioned

Seller’s Information:

- Name: Anh Minh Quan Group

- Address: 91C/12, Ngo Chi Quoc, Quarter 2, Binh Chieu Ward, Thu Duc District,

Ho Chi Minh City, Vietnam

- Telephone: +84862842461

- Fax: F842581

- VAT Number: not mentioned

- Country: VIETNAM Buyer’s Information:

- Name: Haedam Global Co., ltd

- Address: Donggureung-ro, 136 Beongil, Guri Si, Gyeonggi-do, Korea

- Telephone: +82315543150

- Fax: 31-514-3150

- VAT Number: not mentioned

- Country: KOREA

- Notify Party: not mentioned

Shipping information:

- Port of loading: Ho Chi Minh port, Vietnam

- Port of discharge: Incheon port, Korea Payment Information:

- LC No.: M05C01403NU00160

- Terms of payment: CFR (Incheon port, Korea)

- Total price: (in words) USD Fifty-six thousand six hundred eighteen and ten cents

Collating this commercial invoice with UCP 600/2007/ICC, we can see that it satisfies the criteria: must appear to have been issued by the beneficiary; must be made out in the name of the applicant; must be made out in the same currency as the credit This commercial invoice is signed because the exporter (seller) needs this one for doing export clearance or keeping documents for accouting purposes

1 Definition and general information:

A bill of lading is a document issued by a carrier (or their agent) to acknowledge receipt

of cargo for shipment Although the term historically related only to carriage by sea, a bill of lading may today be used for any type of carriage of goods

B/L is one of three crucial documents used in international trade to ensure that exporters receive payment and importers receive the merchandise

A bill of lading must be transferable and serves three main functions:

- it is a conclusive receipt, i.e an acknowledgement that the goods have been loaded;

- it contains or evidences the terms of the contract of carriage;

- it serves as a document of title to the goods

This bill of lading is a non-negotiable FIATA multimodal transport bill of lading (FBL), issued subject to UNCTAD/ICC Rules for Multimodal Transport Documents (ICC Publication 481)

In a report about Bill of Lading by secretariat of UNCTAD, “the sequence events in the life of a bill of lading maybe summarized as being”:

a) The shipper’s description of the good, with his own name and that of the consignee inserted on the carrier’s form, particulaer of the total gross weight and measurement, for freight caculation purposes, and where necessary, the value of the goods is inserted by the shipper

b) The lodging of the B/L at the office of the shipowner or his agent/broker

c) The completion and checking of the contents of B/L of those people tallying details taken at the time of loading the cargo

d) Caculation of freight

e) The signature of the B/L by or on behalf of the carrier or the ship’s master and by such other parties as may by law required to do so in some countries