A study on price elements in eleven terms in incoterms 2010 nghiên cứu về các yếu tố giá cả được sử dụng trong 11 điều kiện của các điều khoản thương mại quốc tế 2010

Also, being aware of the usefulness of profoundly understanding price terms used in international trade practices, the researcher has been motived to choose “ A study on price element in

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

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ACKNOWLEDGEMENTS

First and foremost, I would like to express my sincere thanks to respectable lecturers of Faculty of English Language Teacher Education as well as the whole teachers at University of Languages and International Studies – Vietnam National University, Hanoi for their invaluable knowledge and precious lessons during my four academic years at this university Their enthusiasm and devotion to each lecture has inspired and motivated me in the process of writing this paper

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

Finally, I owe my profound gratitude to my family, relatives and friends who have always kindly supported and helped me both in terms of physically and mentally 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 are unavoidable I look forward to receiving helpful comments from the lecturers to further improve my paper

I sincerely thank you!

Nguyen Quynh Trang

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ABSTRACT

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

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

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2.4.1 The presentation and classification of 11 t terms 10

2.4.2.2 FCA – Free Carrier (named place) 12 2.4.2.3 FAS – Free Alongside Ship (named port of shipment) 12 2.4.2.4 FOB – Free On Board (named port of shipment) 13 2.4.2.5 CFR – Cost & Freight (named port of destination) 13 2.4.2.6 CIF – Cost, Insurance & Freight 13

(named port of destination) 2.4.2.7 CPT – Carriage Paid To (named port of destination) 14 2.4.2.8 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 26 freight by region

4.12.1.1 In China/ Hong Kong 26 4.1.2.1.2 In other Asia (non-China) 27

4.1.2.1.5 In Eastern Europe 29 4.1.2.1.6 In Africa/ Middle East 30 4.1.2.1.7 In Central/ South America 31 4.1.2.2 The most commonly-used price terms in Vietnam 32

4.2 Discussions of the findings 36

4.2.1 Explanation for some price terms‟ high frequency 36

of use in international freight

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

CHAPTER 5: CONCLUSION

5.1 Major findings and contribution of the research 40

REFERNCES

GLOSSARY

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 2011 Table 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 Kong Chart 4.1.2.1.2: The percentage of respondents „choices in using 27 price terms in Other Asia

Chart 4.1.2.1.3: The percentage of respondents „choices in using 28

price terms in Pacific Rim Chart 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

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

price terms in Africa/Middle East Chart 4.1.2.1.7: The percentage of respondents „choices in using 31

price terms in Central/ South America

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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 give n business broader access to almost markets in the world Vietnam, in a position of a developing country with the passionate desire to enter the world‟s economy, has made obvious advance in international trade with countries inside and outside region The international 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 the

misunderstandings between parties happen

With the aim of limiting disagreement situations to a minimum, in 1936, the International Chamber of Commerce first created International Commercial Terms or INCOTERMS Incoterms are uniform, internationally recognized and most commonly used trade terms, which facilitate the conduct of international trade through dealing with the relation between buyers and sellers Hence, the confusion and misunderstanding in using different interpretations of such terms in different countries can be avoided or limited

During the courses of International Commercial Transactions and Commercial Correspondence at University of Languages and International Studies - Vietnam National University, the researcher has found out that students often encounter difficulties in distinguishing and interpreting price terms drafted by INCOTERMS which is written in the contract of sale The reason for this phenomenon can be

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explained by the lack of specialized knowledge of both international language and economics Also, being aware of the usefulness of profoundly understanding price terms 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 her graduation paper

As a double-degree student, it is very fortunate for researcher to have fundamental background knowledge in the field of economics in general and foreign trade 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 of carrying out study on price element entailed in 11 terms in INCOTERMS 2010 With this paper, the researcher hopes to shed light on issues related to price in 11 terms in INCOTERMS, thereby helps people avoid confusion when applying these terms in practice

1.2 Aims and objectives of the study

As a matter of fact, whenever a seller sends a quotation to a customer in a domestic 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 of costs borne by the seller can be very long depending on the agreement between other parties

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

Specifically, this paper focuses on answering three following questions:

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

1.3 The significance of the study

Frequently, in an international transaction there is a variety of different trading practices of which parties to a contract are often unaware As a consequence, the obligation to bear the costs relating to goods between buyers and sellers is often misapprehended These disputes due to inadequate contracts can cause damage to both parties‟ financial situation and ruin good relationship

In the book “INCOTERMS 2010 – the official rules for the interpretation of trade term” drawn by international chamber of commerce, a presentation of the 11 terms defining the parties‟ responsibilities for the delivery of goods is given In this book, the interpretation of these three-letter terms has been carefully analyzed For example, “FOB” is the abbreviation of “free on board”, which means seller clears the goods for export and delivers them when they are on board the vessel at the named port 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 11 Incoterms 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 in accordance with 11 terms has not been concretized explicitly For example, if the CIF price is used in the sales contract, which costs are included in this price or which costs the seller has to bear The practicability of these terms is somehow mentioned, for instance the writer gives advice on the most suitable terms which should be used in accordance with mode of transportation

Being aware of the importance of using provisions of Incoterms, three authors named Nicolas Hien, Gilbert Laporte and Jacques Roy conducted a study under the

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title “Business Environment Factors, Incoterms Selection and Export Performance” The objective of this study is to identify the main factors taken into consideration when deciding which Incoterms to use and to analyze the impact of the choices of Incoterms on export performance Another author, Oscar Gonzalez, also pointed out the necessity of Incoterms in international contracts through his article named

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

Based on the available knowledge about price terms together with the collection, synthesis and analysis of previous research materials, the researcher has carried 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 who have desire to take part in foreign trade First, the paper provides reliable knowledge about widely known and recognized price terms used in international sale contract worldwide Second, based on the analysis of collected data about the percentage of using these 11 terms in terms of region, the paper serves as a reference on the application of using these terms in practical use

In short, understanding precisely the price element in interpreting these terms is very important, not only for parties involved in international business but als o for students 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 a variety of contracts needed to fulfill an international sales transaction, Incoterms only relate to the contract of sale A series of three-letter trade terms deals with three main problems:

+ The carriage of goods from the sellers to the buyers

+ The import and export clearance

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+ 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 of sale given by sellers in accordance with 11 terms in INCOTERMS 2010 , respectively EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DPP In other words, in this article, the researcher focuses on analyzing the logistics costs together with the cost of producing goods that the sellers have to bear included in 11 price terms and the frequency 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 the paper To be specific, terms related to the study such as “Incoterms”, 11 terms in Incoterms would be explained and related studies would be discussed

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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 have introduced a variety of definitions of terminology As it is defined in the Longman dictionary, terminology is “the technical words or expressions that are used in a particular subject” or in the Oxford dictionary, terminology is denoted as “the body of terms 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 famous Vietnamese 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 is used in science, technology politics, art… and it has a specific meaning, denotes precise 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 a language It consists of fixed words and groups of words which are accurate names of concepts and subjects belonging to different specialized fields of human beings” From these definitions, we can understand that terminologies are specific linguistic units 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

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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 communicative event 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 the one among the concepts

2.1.2.2 Emotional neutrality

The second criterion of terminology is emotional neutrality The term has to be free of affective, personal or subjective components These factors affect to the conceptual content of the transmitted information, which modifies the message and makes 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 Thi Bay (2005), “each term has its own position in the system of concepts and belongs to a terminological system Each term requires its meaning in the relationship with other terms 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 powerful globalization, terms are also internationalized to meet the increasing usage Especially in business and commerce, it appears a variety of internationalized terms such as acronyms in economic terminology Several instances of these acronyms are GNP (Gross National Product), UNESCO (United Nations Educational, Scientific and Cultural Organization), CIF (cost, insurance, freight) etc

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2.1.2.5 Popularity

Popularity is one of terminology‟s characteristics Because terminologies play a vital role in promoting the development of mankind, it should be comprehensible to all people 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 generated following 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 or financial 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 and mathematical 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 an agreed upon formula at a future date, or discovered or negotiated during the course of dealings between the parties involved In commerce, price is determined by what a buyer is willing to pay; a seller is willing to accept (Business dictionary)

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

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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 be expressed 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 mại quốc 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 and seller (or exporter and importer) who have business headquarters in different countries Accordingly, the seller has the obligation to transfer ownership of goods and receive money for the purchase, the buyer also has the obligation to receive goods and pay for the purchase

- The application of price terms in the sale contract

In general, an international sale of goods consists of two groups of terms and conditions known as indispensable and fundamental terms and conditions and other ones In the former group there are 6 terms and conditions, respectively commodity, quantity, quality and specification, prices, shipment, payment Price terms define responsibilities 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 of sale, the price is always recorded with an Incoterm As a result, price terms such as FOB 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 a group of international rules proposed by Chamber of Commerce (ICC) which is recognized and widely used worldwide in international and domestic contracts for the sale of goods

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

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among enterprises, the International Chamber of Commerce has introduced amended versions of Incoterms 1953, 1967, 1976, 1980, 19 90, 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 of terms was reduced from 13 to 11 The 2010 version eliminated four terms: DES (Delivered at Frontier), DEQ (Delivered Ex Quay), DAF (Delivered At Frontier) and DDU (Delivered Duty Unpaid) and created two new terms: DAT and DAP DAT replaces 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 (see Table 2.3.1.1)

Table 2.3.1.1: Presentation of the 11 terms

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 main

Acronym Complete name Acronym Complete name

Free On Board Cost & Freight Carriage Paid To

CIF CIP DAT DAP DDP

Cost, Insurance & Freight Carriage & Insurance Paid To Delivered At Terminal

Delivered At Place Delivered Duty Paid

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 and transfer of risks in transporting the goods The classification is provided in Table 2.3.1.3

Table 2.31.3: Classification of Incoterms 2010 as Olegario Llamazares

Acronyms Mode of transport Payment of main

transport

Transfer of risks in transport

Buyer Buyer Seller Seller Seller Seller Seller

Origin Origin Origin Origin Destination Destination Destination

Buyer Buyer Seller Seller

Origin Origin Origin Origin

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 of business All other transportation costs and risks are assumed by the buyer” (Financial dictionary from Investopedia)

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

insurance

2.4.2.2 FCA – Free Carrier (named place)

“A trade term requiring the seller to deliver goods to a named airport, terminal,

or other place where the carrier operates Costs for transportation and risk of loss transfer to the buyer after delivery to the carrier.” (Financial dictionary from Investopedia)

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 is required to pay for carriage to the named place The buyer has to bear all co sts and

risks 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 a vessel designated by the buyer “Alongside" means that the goods are within reach of a ship's lifting tackle When used in trade terms, the word "free" means the seller has an

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 passed over the ship's rail When used in trade terms, the word "free" means the seller has an obligation to deliver goods to a named place for transfer to a carrier.” (Financial dictionary from Investopedia)

This term means that the seller delivers when the goods pass the ship‟s rail at the named port of shipment This means the buyer has to bear all costs and risks to the goods 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 the ship‟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

of shipment Seller must pay the costs and freight necessary to bring the goods to the named port of destination, BUT the risks of loss or damage, as well as any additional costs due to events occurring after the time of delivery, are transferred from seller to buyer Seller must clear goods for export This term can only be used for sea transport

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 of

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destination Risk of loss and damage are the same as CFR Seller also has to procure marine insurance against buyer‟s risk of loss/damage during the carriage Seller must clear 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 by him but the seller must in addition pay the cost of carriage necessary to bring the goods to the named destination The buyer bears all costs occurring after the goods have been so delivered The seller must clear the goods for export This term may be used 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 to procure 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 the arriving 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, whether covered or not, such as a quay, warehouse, container yard or road, rail or air cargo terminal The seller bears all risks involved in bringing the goods to and unloading them 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 used where more than one mode of transport is utilized DAP means the seller delivers when the goods are placed at the disposal of the buyer on the arriving means of carriage ready for unloading at the names place of destination The seller bears all risks 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 be used if the seller is unable to directly or indirectly o btain the import license This term

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means the same as the DAP term with the exception that the seller also will bear all costs 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 desired destination

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

(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 from exporting 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 importing country

- 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

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- 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 goods under CIF or CIP price These prices regulate seller to purchase insurance for the benefit 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 at destination Below is the table providing detailed information on allocation costs between 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 premises 3) Transport in country of origin (pre-carriage) 4) Customs clearance (export)

5) Terminal charges in origin International 6) Main transport

7) Transport insurance Country 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

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

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

As for the second question, the researcher uses quantitative method to analyze the collected data about the frequency of 11 terms in practical use, specifically in terms of regions The quantitative method is used to find out the most commonly-used price terms in international trade After that, through synthesizing and analyzing collected documents about the general trend towards enterprises‟ preference in some specific 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-export situation in Vietnam in order to show the frequency of some price terms in Vietnam

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The advantages and disadvantages of using these price terms are also mentioned in the answer for this question At this stage, both quantitative and qualitative methods are applied

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

- Phase 1: Collecting data

- Phase 2: Processing data

- Phase 3: Summarizing and concluding