NGHIÊN CỨU VỀ CÁC YẾU TỐ GIÁ CẢ ĐƯỢC SỬ DỤNG TRONG 11 ĐIỀU KIỆN CỦA “CÁC ĐIỀU KHOẢN THƯƠNG MẠI QUỐC TẾ 2010”

The paper focused on investigating the price elements in 11 terms in Incoterms 2010 and these price terms’ frequency of use in international transactions. The paper was conducted to find out the logistic costs included in eleven price terms given by seller in international transactions. Besides, the most favorable price terms used in seven main regions in the world and particularly in Vietnam were also pointed out along with giving reasons for their preference to businessmen. In order to achieve these aims, both quantitative and qualitative methods were employed. At the end of the paper, through data collection and analysis, the logistics costs included in each terms as well as the most dominant price terms in international transactions and Vietnam are pointed out clearly. Overall, the researcher has partially succeeded in providing readers with both useful knowledge about economic terminology and practical information about international business. However, there still exits some limitations which leave room for improvement of the study. Finally, the researcher also offers some suggestions for further studies in the future.

VIETNAM NATIONAL UNIVERSITY, HANOI

University of Languages and International Studies

FACULTY OF ENGLISH LANGUAGE TEACHER EDUCATION

GRADUATION PAPER

A STUDY ON PRICE ELEMENTS

IN ELEVEN TERMS IN INCOTERMS 2010

Supervisor: Assoc Prof Nguyen Xuan Thom

Student: Nguyen Quynh Trang

Course: 2010

Hanoi, 5/2014

ĐẠI HỌC QUỐC GIA HÀ NỘI

Đại học Ngoại Ngữ KHOA SƯ PHẠM TIẾNG ANH

KHÓA LUẬN TỐT NGHIỆP

NGHIÊN CỨU VỀ CÁC YẾU TỐ GIÁ CẢ ĐƯỢC SỬ DỤNG TRONG 11 ĐIỀU KIỆN CỦA “CÁC ĐIỀU KHOẢN THƯƠNG MẠI QUỐC TẾ 2010”

Giáo viên hướng dẫn: PGS.TS Nguyễn Xuân Thơm Sinh viên: Nguyễn Quỳnh Trang

Khóa: 2010

Hà Nội, 5/2014

STATEMENT OF ACCEPTANCE

I hereby state that I: Nguyen Quynh Trang, class QH2010 F1 E16, being a candidate for the degree of Bachelor of Arts (TEFL) accept the requirements of the College relating to the retention and use of Bachelor’s Graduation Paper deposited in the library.

In terms of these conditions, I agree that the origin of my paper deposited in the library should be accessible for the purposes of study and research, in accordance with the normal conditions established by the librarian for the care, loan or reproduction of the paper.

Signature

Nguyen Quynh Trang

May 5th, 2014

First and foremost, I would like to express my sincere thanks to respectablelecturers of Faculty of English Language Teacher Education as well as the wholeteachers at University of Languages and International Studies – Vietnam NationalUniversity, Hanoi for their invaluable knowledge and precious lessons during myfour academic years at this university Their enthusiasm and devotion to eachlecture has inspired and motivated me in the process of writing this paper

Secondly, in particular, I would like to send to my supervisor, AssociateProfessor Nguyen Xuan Thom, my deepest gratitude With his enthusiasm andkind-heartedness, Prof Thom oriented, encouraged and supported me from theinitial to the final steps of completing this graduation paper

Finally, I owe my profound gratitude to my family, relatives and friends whohave always kindly supported and helped me both in terms of physically andmentally throughout completion of this paper

It is the first time I have carried out a study at the level of a graduation paper

In spite of my great efforts, the limitations and shortcomings of the paper areunavoidable I look forward to receiving helpful comments from the lecturers tofurther improve my paper

I sincerely thank you!

Nguyen Quynh Trang

The paper focused on investigating the price elements in 11 terms inIncoterms 2010 and these price terms’ frequency of use in internationaltransactions The paper was conducted to find out the logistic costs included ineleven price terms given by seller in international transactions Besides, the mostfavorable price terms used in seven main regions in the world and particularly inVietnam were also pointed out along with giving reasons for their preference tobusinessmen In order to achieve these aims, both quantitative and qualitativemethods were employed

At the end of the paper, through data collection and analysis, the logisticscosts included in each terms as well as the most dominant price terms ininternational transactions and Vietnam are pointed out clearly Overall, theresearcher has partially succeeded in providing readers with both usefulknowledge about economic terminology and practical information aboutinternational business However, there still exits some limitations which leaveroom for improvement of the study Finally, the researcher also offers somesuggestions for further studies in the future

1.1 Statement of the problem and the rationale for the study 1

CHAPTER 2: LITERATURE REVIEW

2.2.2 Contract for international sale of goods 8

(named port of destination)2.4.2.7 CPT – Carriage Paid To (named port of destination) 142.4.2.8 CIP – Carriage & Insurance Paid To 14

(named place of destination)2.4.2.9 DAT – Delivered At Terminal 14

(named terminal of destination)2.4.2.10 DAP – Delivered At Place 14

(named place of destination)2.4.2.11 DDP – Delivered Duty Paid 14

(named port of destination)2.5 Fundamental principle to calculate price following 11 terms 15

CHAPTER 4: RESULTS AND DISCUSSION

4.1.1The component parts of price element in 11 terms 19

in INCOTERMS 2010

4.1.2 The frequency of 11 price terms in practical use 25

4.1.2.1 The most commonly-used price terms in international 26freight by region

4.1.2.1.2 In other Asia (non-China) 27

4.2 Discussions of the findings 36

4.2.1 Explanation for some price terms’ high frequency 36

of use in international freight

4.2.2 Vietnam’s advantages and disadvantages when using 38these prices

CHAPTER 5: CONCLUSION

5.1 Major findings and contribution of the research 40

REFERNCES

GLOSSARY

LIST OF TABLES AND CHARTS

Table 2.3.1.1: Presentation of the 11 terms 10Table 2.3.1.2: Classification of Incoterms 2010 as mode of transport 11Table 2.3.1.3: Classification of Incoterms 2010 as Olegario Llamazares 11Table 2.5.1: The categories of costs 16Table 4.1.2.1: The respondents’ choices in using price terms by regions 32Table 4.1.2.2.1 Reference to export prices of some commodities 33

at the 3rd week April 2012 Table 4.1.2.2.2 Reference to export prices of cashew nut 34

in some markets on June 7th 2011Table 4.1.2.2.1 Reference to import prices of some commodities 35

at the 3rd week April 2012

CHARTS

Chart 4.1.2.1.1: The percentage of respondents ‘choices in using 27

price terms in China/ Hong KongChart 4.1.2.1.2: The percentage of respondents ‘choices in using 27

price terms in Other AsiaChart 4.1.2.1.3: The percentage of respondents ‘choices in using 28

price terms in Pacific RimChart 4.1.2.1.4: The percentage of respondents ‘choices in using 29

price terms in Western Europe Chart 4.1.2.1.5: The percentage of respondents ‘choices in using 30

price terms in Eastern Europe

Chart 4.1.2.1.6: The percentage of respondents ‘choices in using 30

price terms in Africa/Middle EastChart 4.1.2.1.7: The percentage of respondents ‘choices in using 31

price terms in Central/ South America

CHAPTER 1: INTRODUCTION

In this part, the statement of the problem, rationale for the study, aims and objectives

of the study together with significance, scope, and organization of the study are

demonstrated.

1.1 Statement of the problem and rationale for the study

In the present context, the trend of globalization and regionalization has givenbusiness broader access to almost markets in the world Vietnam, in a position of adeveloping country with the passionate desire to enter the world’s economy, has madeobvious advance in international trade with countries inside and outside region Theinternational trade brings about many positive results for Vietnam such as broader

consumer market, larger quantities and greater variety of goods sold However, the

more the volume and complexity of international businesses increase, the more themisunderstandings between parties happen

With the aim of limiting disagreement situations to a minimum, in 1936, theInternational Chamber of Commerce first created International Commercial Terms orINCOTERMS Incoterms are uniform, internationally recognized and most commonlyused trade terms, which facilitate the conduct of international trade through dealingwith the relation between buyers and sellers Hence, the confusion andmisunderstanding in using different interpretations of such terms in different countriescan be avoided or limited

During the courses of International Commercial Transactions and CommercialCorrespondence at University of Languages and International Studies - VietnamNational University, the researcher has found out that students often encounterdifficulties in distinguishing and interpreting price terms drafted by INCOTERMSwhich is written in the contract of sale The reason for this phenomenon can beexplained by the lack of specialized knowledge of both international language and

economics Also, being aware of the usefulness of profoundly understanding priceterms used in international trade practices, the researcher has been motived to choose “

A study on price element in 11 terms in INCOTERMS 2010” as the topic for hergraduation paper

As a double-degree student, it is very fortunate for researcher to havefundamental background knowledge in the field of economics in general and foreigntrade in particular, and to access to economic terminology in English at the same time.The researcher believes that in such a convenient position, she is fully capable ofcarrying out study on price element entailed in 11 terms in INCOTERMS 2010 Withthis paper, the researcher hopes to shed light on issues related to price in 11 terms inINCOTERMS, thereby helps people avoid confusion when applying these terms inpractice

1.2 Aims and objectives of the study

As a matter of fact, whenever a seller sends a quotation to a customer in adomestic or foreign transaction, the seller has to calculate the costs which are included

in the price, whether the insurance or freight is included in the price or not The list ofcosts borne by the seller can be very long depending on the agreement between otherparties

This paper aims at clarifying 11 price terms prescribed in Incoterms 2010 Atfirst, the component parts of price in each term will be pointed out In other words, thepaper deals with the costs borne by the seller with respective price terms, inclusive ofthe cost of producing goods, EXW price in the sale of contract includes the cost ofproducing goods, the cost of packaging and checking the goods Then the researcherwill examine the frequency of using these terms in practice and give implication forVietnam

Specifically, this paper focuses on answering three following questions:

1) What are the component parts of price in 11 terms in INCOTERMS 2010?

2) Which price term is the most commonly-used in international freight by region?

3) What are the most commonly-used price terms in Vietnam?

+ In export

+ In import

1.3 The significance of the study

Frequently, in an international transaction there is a variety of different tradingpractices of which parties to a contract are often unaware As a consequence, theobligation to bear the costs relating to goods between buyers and sellers is oftenmisapprehended These disputes due to inadequate contracts can cause damage to bothparties’ financial situation and ruin good relationship

In the book “INCOTERMS 2010 – the official rules for the interpretation oftrade term” drawn by international chamber of commerce, a presentation of the 11terms defining the parties’ responsibilities for the delivery of goods is given In thisbook, the interpretation of these three-letter terms has been carefully analyzed Forexample, “FOB” is the abbreviation of “free on board”, which means seller clears thegoods for export and delivers them when they are on board the vessel at the namedport of shipment

Continuing the same research on international trade, author of “the ICC Guide

to Incoterms 2010”, Professor Jan Ramberg, analyzes in detail each of the 11Incoterms rules in his work, especially to the extent of division of cost Nevertheless,when referring to a sales contract, the price element determined by the seller inaccordance with 11 terms has not been concretized explicitly For example, if the CIFprice is used in the sales contract, which costs are included in this price or which coststhe seller has to bear The practicability of these terms is somehow mentioned, forinstance the writer gives advice on the most suitable terms which should be used inaccordance with mode of transportation

Being aware of the importance of using provisions of Incoterms, three authorsnamed Nicolas Hien, Gilbert Laporte and Jacques Roy conducted a study under thetitle “Business Environment Factors, Incoterms Selection and Export Performance”

The objective of this study is to identify the main factors taken into considerationwhen deciding which Incoterms to use and to analyze the impact of the choices ofIncoterms on export performance Another author, Oscar Gonzalez, also pointed outthe necessity of Incoterms in international contracts through his article named

“Incoterms and international sales contracts” written on June 11 Through thesestudies, the indispensable role of Incoterms in international trade transactions hasstrongly confirmed Hence, the better understandings of price terms according to 11Incoterms have become more necessary than ever

Based on the available knowledge about price terms together with thecollection, synthesis and analysis of previous research materials, the researcher hascarried out the study on the price element in 11 terms in Incoterms 2010 This paper,once finished, is expected to be a useful and worth-reading material for people whohave desire to take part in foreign trade First, the paper provides reliable knowledgeabout widely known and recognized price terms used in international sale contractworldwide Second, based on the analysis of collected data about the percentage ofusing these 11 terms in terms of region, the paper serves as a reference on theapplication of using these terms in practical use

In short, understanding precisely the price element in interpreting these terms isvery important, not only for parties involved in international business but also forstudents having intention of participating in international trade in the future

1.4 The scope of the study

It is essential for exporters and importers to notice that although there is avariety of contracts needed to fulfill an international sales transaction, Incoterms onlyrelate to the contract of sale A series of three-letter trade terms deals with three mainproblems:

+ The carriage of goods from the sellers to the buyers

+ The import and export clearance

+ The division of risks and costs between the parties

The scope of this topic is limited to matter relating to the price in the contract ofsale given by sellers in accordance with 11 terms in INCOTERMS 2010, respectivelyEXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DPP In other words, inthis article, the researcher focuses on analyzing the logistics costs together with thecost of producing goods that the sellers have to bear included in 11 price terms and thefrequency of using these terms in practice.

1.5 Organization of the study

The paper consists of five chapters as follow:

Chapter 1 “INTRODUCTION” presents the rationale, aims and objectives,significance of the study, methodology and organization of the study

Chapter 2 “LITERATURE REVIEW” supplies theoretical backgrounds for thepaper To be specific, terms related to the study such as “Incoterms”, 11 terms inIncoterms would be explained and related studies would be discussed

CHAPTER 2: LITERATURE REVIEW

In this section, overviews of terminology, 11 terms in INCOTERMS 2010 and the

principle to calculate price are presented.

2.1 Introduction of terminology

2.1.1 Definition of terminology

Over a long period of research and understanding, many different linguists haveintroduced a variety of definitions of terminology As it is defined in the Longmandictionary, terminology is “the technical words or expressions that are used in aparticular subject” or in the Oxford dictionary, terminology is denoted as “the body ofterms used with a particular technical application in a subject of study, theory,profession.”

Carrying out research in the same field on terminology are a lot of famousVietnamese linguists That would be an omission if we do not mention to Nguyen Van

Tu In his work, he claims that “terminology is a word or combination of words that isused in science, technology politics, art… and it has a specific meaning, denotesprecise concepts and names of the above-mentioned scientific areas” In addition,according to Nguyen Thien Giap (1981), “terminology is a section of special lexis of alanguage It consists of fixed words and groups of words which are accurate names ofconcepts and subjects belonging to different specialized fields of human beings”.From these definitions, we can understand that terminologies are specific linguisticunits in relation to specialized field in which it is used

2.1.2 Characteristics of terminology

According to Gutiérrez Rodilla (1998) the features of terminology are precision,emotional neutrality and stability Under more comprehensive consideration,terminology should have the following qualities

2.1.2.1 Precision

Precision is one of the most important characteristic of a terminology If a term

is precise, its communicative dimension is unchanging or its meaning does not depend

on the context nor the sender of the message nor any other factor of a communicativeevent According to Gutiérrez Rodilla (1998), terms have to submit three conditions to

be really precise:

- Its meaning has to be previously delimited meaning

- This meaning has to be monosemic and there has not to be any synonym

- The relation established among the terms of a system has to be the same as theone among the concepts

2.1.2.2 Emotional neutrality

The second criterion of terminology is emotional neutrality The term has to befree of affective, personal or subjective components These factors affect to theconceptual content of the transmitted information, which modifies the message andmakes communication more difficult In specialized fields the emotional interference

is categorically rejected

2.1.2.3 Systematism

Another criterion of a terminology is systematism According to Hoang ThiBay (2005), “each term has its own position in the system of concepts and belongs to aterminological system Each term requires its meaning in the relationship with otherterms in its system Once separated from its system, its meaning is vague”

2.1.2.4 Internationalism

Together with the development trend of the world and the increasingly powerfulglobalization, terms are also internationalized to meet the increasing usage Especially inbusiness and commerce, it appears a variety of internationalized terms such as acronyms ineconomic terminology Several instances of these acronyms are GNP (Gross NationalProduct), UNESCO (United Nations Educational, Scientific and Cultural Organization),CIF (cost, insurance, freight) etc

2.1.2.5 Popularity

Popularity is one of terminology’s characteristics Because terminologies play avital role in promoting the development of mankind, it should be comprehensible to allpeople in its way of reading, writing, speaking and memorizing

2.1.3 The creation of terminology

Terminology can be more or less complex lexical units that are generatedfollowing several processes:

- The extension of the meaning of a word in the standard language (for instance,share in financial terminology is a unit of ownership interest in a corporation orfinancial asset)

- Generation of a phrase that functions as a whole with one specialized meaning(superconducting magnet)

- Symbolic expressions, as chemical element symbols (Fe) or chemical andmathematical formulas (H2O)

- Abbreviations (PVC) and acronyms (FOB from Free On Board)

- Names of post (Prime Minister), organizations or administrations (United State,Prime Minister)

2.2 Explanation of important terms

2.2.1 Definition of “price term”

Price is “a value that will purchase a finite quantity, weight or other measures of

a good or service […] It may be fixed by a contract, left to be determined by anagreed upon formula at a future date, or discovered or negotiated during the course ofdealings between the parties involved In commerce, price is determined by what abuyer is willing to pay; a seller is willing to accept (Business dictionary)

In domestic and international transaction, the seller often uses some recognizedtrade terms as a guide to calculate the price given in the sale of contract or saleagreement The price given in relation to these particular trade terms is called priceterm FOB price, CIF price, etc are some examples of price term

2.2.2 Contract for the International Sale of goods

- Definition of the sales contract

As a matter of terminology, “Contract for the international sales of goods” can beexpressed in different ways in Vietnamese such as “Hợp đồng mua bán ngoại thương”,

“Hợp đồng mua bán quốc tế”, “Hợp đồng xuất nhập khẩu”, “Hợp đồng thương mạiquốc tế” Whether being referred to by many ways, they still have the same contents

In general, International sale of goods is an agreement between 2 entities - buyer andseller (or exporter and importer) who have business headquarters in different countries.Accordingly, the seller has the obligation to transfer ownership of goods and receivemoney for the purchase, the buyer also has the obligation to receive goods and pay forthe purchase

- The application of price terms in the sale contract

In general, an international sale of goods consists of two groups of terms andconditions known as indispensable and fundamental terms and conditions and otherones In the former group there are 6 terms and conditions, respectively commodity,quantity, quality and specification, prices, shipment, payment Price terms defineresponsibilities and costs which buyer and the seller must bear in delivery as freight,handling, insurance fees, storage fees, customs procedures, etc so in the contract ofsale, the price is always recorded with an Incoterm As a result, price terms such asFOB price, CIF price, etc are more and more widely used

2.3 An overview of INCOTERMS

Incoterms, a contraction of International Commerce Terms Incoterms, is agroup of international rules proposed by Chamber of Commerce (ICC) which isrecognized and widely used worldwide in international and domestic contracts for thesale of goods

The first version of Incoterms was launched in 1936 However, to meet thechanging needs of the global trade environment and reflect the business practice

among enterprises, the International Chamber of Commerce has introduced amendedversions of Incoterms 1953, 1967, 1976, 1980, 1990, 2000 and most recently 2010

In general, Incoterms deals with the following issues:

(1) The carriage of goods from the sellers to the buyers

(2) The import and export clearance

(3) The division of risks and costs between the parties

The updated Incoterms 2010 became effective from 1/1/201 The number ofterms was reduced from 13 to 11 The 2010 version eliminated four terms: DES(Delivered at Frontier), DEQ (Delivered Ex Quay), DAF (Delivered At Frontier) andDDU (Delivered Duty Unpaid) and created two new terms: DAT and DAP DATreplaces DES, DEQ, DAF and DAP replaces DDU

2.4 An overview of INCOTERMS 2010

2.4.1 The presentation of 11 terms

The list of Incoterms, last revised in 2010, currently includes 11 terms (seeTable 2.3.1.1)

Table 2.3.1.1: Presentation of the 11 terms

Acronym Complete name Acronym Complete name

Free On BoardCost & FreightCarriage Paid To

CIFCIPDATDAPDDP

Cost, Insurance & FreightCarriage & Insurance Paid ToDelivered At Terminal

Delivered At PlaceDelivered Duty Paid

The 11 terms are generally divided into 4 groups: group E (EXW), group F(FCA, FAS, and FOB), group C (CPT, CFR, CIP, and CIF) and group D (DAT, DAP,DDP) The first group is called departure Incoterms, the second group is called maincarriage unpaid Incoterms, the third group is called main carriage Incoterms and theIncoterms in last group are called arrival Incoterms

However, the terms in Incoterms 2010 are also divided into 2 groups The termsfor "any mode of transport" can be used in case more than one mode of transport isemployed to transport the goods The terms for "sea and inland waterway transport"are specific to contracts in which both the point of delivery and the destination of thegoods are ports Below is table 2.3.1.2 which shows the classification of 11 terms.

Table 2.3.1.2: Classification of Incoterms 2010 as mode of transport

For any mode of transport For sea and inland waterway transport

EXW, FCA, CPT, CIP, DAT, FAS, FOB, CFR, CIF

Moreover, Prof Olegario Llamazares (2012) classifies 11 Incoterms according

to three criteria, namely mode of transport used, payment for the main transport andtransfer of risks in transporting the goods The classification is provided in Table2.3.1.3

Table 2.31.3: Classification of Incoterms 2010 as Olegario Llamazares

Acronyms Mode of transport Payment of main

transport

Transfer of risks intransport

BuyerBuyerSellerSellerSellerSellerSeller

OriginOriginOriginOriginDestinationDestinationDestinationFAS

FOB

CFR

CIF

SeaSeaSeaSea

BuyerBuyerSellerSeller

OriginOriginOriginOrigin

2.4.2 Brief explanation of 11 terms

2.4.2.1 EXW – Ex Works

“A trade term requiring the seller to deliver goods at his or her own place ofbusiness All other transportation costs and risks are assumed by the buyer” (Financialdictionary from Investopedia)

The seller’s minimum obligation is referred in this term, since the seller onlyhas to place the goods at the disposal of the buyer (at the seller’s premises or anothernamed place such as works, factory, and warehouse) The buyer has the obligation ofcarrying out all tasks of export and import clearance as well as arranging carriage andinsurance

2.4.2.2 FCA – Free Carrier (named place)

or other place where the carrier operates Costs for transportation and risk of losstransfer to the buyer after delivery to the carrier.” (Financial dictionary fromInvestopedia)

According to this term, the seller is responsible for delivering the goods,clearing for export to the carrier nominated by the buyer at the named place Seller isrequired to pay for carriage to the named place The buyer has to bear all costs andrisks from that moment

2.4.2.3 FAS – Free Alongside Ship (named port of shipment)

“A trade term requiring the seller to deliver goods to a named port alongside avessel designated by the buyer “Alongside" means that the goods are within reach of aship's lifting tackle When used in trade terms, the word "free" means the seller has anobligation to deliver goods to a named place for transfer to a carrier” (Financialdictionary from Investopedia)

According to this term, the seller is fully responsible for the goods until they areplaced alongside the vessel at the named port of shipment The seller has obligation ofclear the goods for export From that moment the costs and risks of loss or damage to

the goods shifts from the sellers to the buyers from that moment This term can beused only for sea or inland waterway transport.

2.4.2.4 FOB – Free On Board (named port of shipment)

“A trade term requiring the seller to deliver goods on board a vessel designated

by the buyer The seller fulfills its obligations to deliver when the goods have passedover the ship's rail When used in trade terms, the word "free" means the seller has anobligation to deliver goods to a named place for transfer to a carrier.” (Financialdictionary from Investopedia)

This term means that the seller delivers when the goods pass the ship’s rail atthe named port of shipment This means the buyer has to bear all costs and risks to thegoods from that point The seller must clear the goods for export This term can only

be used for sea transport If the parties do not intend to deliver the goods across theship’s rail, the FCA term should be used

2.4.2.5 CFR – Cost & Freight (named port of destination)

This term means the seller delivers when the goods pass the ship’s rail in port ofshipment Seller must pay the costs and freight necessary to bring the goods to thenamed port of destination, BUT the risks of loss or damage, as well as any additionalcosts due to events occurring after the time of delivery, are transferred from seller tobuyer Seller must clear goods for export This term can only be used for seatransport

2.4.2.6 CIF – Cost, Insurance & Freight (named port of destination)

The seller delivers when the goods pass the ship’s rail in the port of shipment Seller must pay the cost and freight necessary to bring goods to named port ofdestination Risk of loss and damage are the same as CFR Seller also has to procuremarine insurance against buyer’s risk of loss/damage during the carriage Seller mustclear the goods for export This term can only be used for sea transport

2.4.2.7 CPT – Carriage Paid To (named port of destination)

This term means that the seller delivers the goods to the carrier nominated byhim but the seller must in addition pay the cost of carriage necessary to bring thegoods to the named destination The buyer bears all costs occurring after the goodshave been so delivered The seller must clear the goods for export This term may beused irrespective of the mode of transport (including multimodal).

2.4.2.8 CIP – Carriage & Insurance Paid To (named place of destination)

This term is the same as CPT with the exception that the seller also has toprocure any mode of transportation

2.4.2.9 DAT – Delivered At Terminal (named terminal of destination)

This term means that the seller delivers when the goods once unladed from thearriving means of transport, are placed at the disposal of the buyer at a named terminal

at a named port or place of destination "Terminal" includes any place, whethercovered or not, such as a quay, warehouse, container yard or road, rail or air cargoterminal The seller bears all risks involved in bringing the goods to and unloadingthem at terminal at the named port or place of destination

2.4.2.10 DAP – Delivered At Place (named place of destination)

This term may be used regardless of the mode of transport and may also be usedwhere more than one mode of transport is utilized DAP means the seller deliverswhen the goods are placed at the disposal of the buyer on the arriving means ofcarriage ready for unloading at the names place of destination The seller bears allrisks involved in bring the goods to the named place

2.4.2.11 DDP – Delivered Duty Paid (named port of destination)

This term represents maximum obligation to the seller This term should not beused if the seller is unable to directly or indirectly obtain the import license This termmeans the same as the DAP term with the exception that the seller also will bear allcosts and risks of carrying out customs formalities including the payment of duties,taxes and customs fees

2.5 Fundamental principle to calculate price following 11 terms

It is necessary to take into account that the price quoted in the contract of sale

are decided in accordance with the seller’s point of view Therefore, the price quoted

in the contract by the sellers includes:

- The cost of producing the goods given by the sellers

- Costs involed in taking goods from the seller's premises to the desireddestination

According to Prof Ramberg (2012), there are four main categories of costinvolved:

(1) Costs related to dispatch, carriage and delivery

This type of cost is the most important because it includes the costs related to:

- Loading at the seller’s premises

- Delivering in the exporting country

- Signing the contract

- Paying storage charges and handling charges to prepare for shipment fromexporting country

- Leasing vehicles and transport equipment in the exporting country

- Paying charges for major international delivery route

- Paying storage charges and handling charges after unloading in the importingcountry

- Leasing vehicles and transport equipment in the importing country

- Delivering to the destination in the importing country

- Unloading at the buyer’s premises

(2) Costs for export and import customs clearance

- The cost of permit, certificate, consular invoice, licenses, and legal procedures

- The cost of inspection, customs warehousing, customs clearance

- Service fees for forwarders

(3) Costs for services and assistance

Costs for services and assistance are the costs that one side requests his partner

to refund the cost of services they have helped to clear the goods

(4) Costs of insurance

Insurance premium is only necessary when the seller contracts to sell goodsunder CIF or CIP price These prices regulate seller to purchase insurance for thebenefit of the buyer and pay the cost of insurance

Studying on the same field of allocation of logistics costs, Prof Jan RamBerg(2012) has defined cost sharing between seller and buyer from another point of view

He has divided the costs into 11 concepts, 5 of them in origin, 2 international and 4 atdestination Below is the table providing detailed information on allocation costsbetween buyer and seller in an international sale

Table 2.5.1: The categories of costs

Country of origin 1) Packing and checking

2) Loading in seller’s premises3) Transport in country of origin (pre-carriage)4) Customs clearance (export)

5) Terminal charges in originInternational 6) Main transport

7) Transport insuranceCountry of destination 8) Terminal charges at destination

9) Customs clearance (import)10) Transport in country of destination (on carriage)11) Unloading in buyer’s premises

CHAPTER 3: METHODOLOGY

In this chapter, methodology of the study is to be clarified

.

This paper concerns 11 price terms in accordance with 11 terms inINCOTERMS 2010 Therefore, the researcher utilizes books, studies, reports related toINCOTERMS as sources of materials to investigate Besides, two methods, namelyqualitative and quantitative are also applied to make the paper more comprehensiveand persuasive.

The very first phase is information collecting The researcher gathers reliableinformation about the formation and development of Incoterms as well as the maincontents of 11 terms in Incoterms from books, the Internet and other relevantdocuments to provide readers with basic knowledge about the research topic

After that, the researcher carries out processing data The information is synthesizedand analyzed, especially to the extent of division of costs between buyers and sellers tofind the precise answer for the question of component parts of 11 price terms It is atthis stage that quantitative method is adopted

As for the second question, the researcher uses quantitative method to analyzethe collected data about the frequency of 11 terms in practical use, specifically interms of regions The quantitative method is used to find out the most commonly-usedprice terms in international trade After that, through synthesizing and analyzingcollected documents about the general trend towards enterprises’ preference in somespecific terms, the researcher finds out the reasons which contribute to the popularity

of each mentioned price term

Finally, to answer the last research question, the researcher synthesizes,analyzes, compares, contrasts, and evaluates trusted information on the import-exportsituation in Vietnam in order to show the frequency of some price terms in Vietnam The advantages and disadvantages of using these price terms are also mentioned in theanswer for this question At this stage, both quantitative and qualitative methods areapplied

In short, this paper uses different methods and carries out through followingphases: