NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Chapter Ten: Trade Forms International trade forms refer to the common practices and channels between countries for the flow of commodities or services. Every import or export is carried out through certain trade form. Besides the direct trade form discussed in this book so far, there are a few indirect ones commonly used in international trade as well. Some of the most commonly used ones are discussed in the last four chapters of this book.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Contract A contract is an agreement which sets forth binding obligations of the relative parties. It is enforceable by law, and any party that fails to fulfill his contractual obligations may be sued and forced to make compensation.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Confirmation A confirmation is less detailed than a contract, covering only the essential terms of the transaction. It is usually used for smaller deals or between familiar partners

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY If the exchange of letters or cables or telexes eventually leads to the conclusion of business, both parties should confirm the deal. Such letters are usually accompanied by a Purchase Confirmation/ Purchase Contact or a Sales Confirmation/ Contact.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Do you know the following definition? Counter-signature?

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY A Market Channel

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Agency Definition of Agency An agency is a relationship between one person or a firm （ the agent ） who represents, acts on behalf of, and binds another person or a firm （ the principal ） in accordance with the principal's request or instruction.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Persons concerned and relationships （ 1 ） The agent （ 2 ） The principal （ 3 ） The third party

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Agency ～ Persons concerned ---Agent, Principal ～ Duties of Agent … 赔偿因其过失使委托人遭受的损失； … 毫无保留地向委托人提供情况，以便委托人考虑是 否同买主订立合同； … 一般不以自己的名义和别人订立合同； … 不得受贿或谋取私利或串通别人； … 不得泄露与代理有关的保密情报和资料； … 必须向委托人申报有关帐目； … 不得把代理权委托给别人。

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY ～ Duties of Principal … 支付佣金或约定的报酬； … 偿付代理人应履行代理义务而开支的 费用； … 有义务让代理人查看有关帐册，以核 对所付佣金是否正确

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Classification of Agent General Agency Sole Agency Commission Agency

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Other types of agents with varying degrees of authority: （ 1 ） Brokers （ 2 ） Factors---Who have authority to sell the goods in their own name for the principal, to receive payment, and to sell at times and prices which they consider advisable.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY （ 3 ） Forwarding agents Who carry out all the duties connected with collecting and delivering the goods. The services of forwarding agents are particularly valuable in foreign trade because of the complicated arrangements that have to be made.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY How to choose an agent? In choosing an agent, the company should make searching enquiries into the qualifications, experience and personal qualities of prospective agents.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY In details: （ 1 ） Their reliability and financial soundness; （ 2 ） Their market connections and the effectiveness of their sales organization; （ 3 ） Their technical ability to handle the goods to be marketed; （ 4 ） The native and extent of other agencies they may hold.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY The content of agency agreement （ 1 ） The nature and the duration of the agency; （ 2 ） The territory to be covered; （ 3 ） The duties of agent and principal; （ 4 ） The method of purchase and sale.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Distribution Definition Two Kinds: Sole or Exclusive Distribution Non-exclusive Distribution

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY The distributor makes an agreement the supplier abroad that he undertakes to buy and sell some given goods in the regular time and space.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY According to the powers of the distributor, distribution can be divided into the following: ～ General distribution ～ Exclusive distribution: the distributor has the exclusive rights to sell or buy the given goods in the regular time and space.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Characters of Exclusive Distribution 三定三自一专 （ commodity, region, time ） （ Buy, sell, on his own account ） （ Exclusive sale right ）

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Contents of Distribution Agreement Scope of the commodity; Region of distribution … distributor, market, politics and some other factors. Amount or sum of distributor Methods of pricing Other duties Deadline （ deferred or stop ）

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Question: The relationships between sole agency and exclusive distribution?

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Key points: 1 Nature: principal-agent ;buy and sell 2 Purpose: commission; profit 3 Risk: low; high 4 Exclusive sale right: Exclusive sale ; Exclusive rights of buying and selling.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Consignment Definition Operation Mode Consignment ～ Persons concerned : 委托人 — 货主 （出口人）； 受托人 -- （代销人）双方 是委托与受托的关系。

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Contract of International Plant- engineering 1) As per subject matters in contracts, they are named as contract for plant-engineering construction, contract for … 2) As per modes of business operation, they are named as general monopoly contract, monopoly contract for … 3) As per modes of valuation, they are named as total price contract, unit price contract, cost and commission contract.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Invitation for Bids Bid Documents Terms of Contract Base Price Limit on Bids Technical Specifications Kinds of Invitation to Bid

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Tenders Discussions and Tender Decision These activities are carried out between the employer and the bidders chosen after the evaluation of tenders, including the technical reply and price negotiations. Tender decision shall normally be made within the period of three to six months. Then the promoter should send a notice of award to the winning bidder.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY The last work for the both parties to do is to conclude an agreement of contract to determine the terms and conditions of contract and the rights and duties of the promoter and the contractor. At the same time, the contractor shall establish with his banker a letter of performance guarantee and submit it to the employer as an economic guarantee.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Basic process 招标 - 投标－开标－评标－决标－议标 （澄清合同条款）－商签合同 拒绝投标 最低标价大大超过国际市场的价格水平 所有投标书的内容与招标要求不符

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Bid Opening & Evaluation of Tender In accordance with the specific conditions three modes may be adopted: (1) Bid opening in public; (2) Bid opening in Limitedly; (3) Bid opening secretly.

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Futures Trading Introduction to Futures Futures Market Hedging

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Counter Trade Definition: an umbrella term that includes all of the variations of the exchange of goods for goods Common Reasons for Counter-trade: 1 ． To create new export markets or promote export products 2 ． To acquire new technology or attract foreign investment 3 ． To balance trade for economic or political reason Compensation Trade Counter-purchase Switch Trade

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Compensation Trade Full Compensation Export Goods Counter-trade Goods Exporter in Country A Importer in Country B

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Compensation Trade Partial Compensation Export Goods Counter-trade Goods Foreign Exchange Exporter in Country A Importer in Country B

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Counter-purchase Foreign Exchange Export Goods Counter-trade Goods Foreign Exchange Exporter in Country A Importer in Country B

NORTH CHINA INSTITUTE OF SCIENCE AND TECHNOLOGY Switch Trade Hard Currency (with a profit) 5 Hard Currency Clearing Units Clearing Units 3 Goods 4 (at a 2 discount) 1 Bilateral Clearing + Agreement - Switch Dealer The Third Country Creditor Country Debtor Country