INTERNATIONAL MARKETING

WONKWANG UNIVERSITY

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Professor In Woo Jun / Bcom, MBA, Ph.D.2015

GLOBAL TRADING

I. GLOBAL TRADING 1. Benefits of International Trade2. Types of Trade3. The Process of International Trade 4. Companies involved in International Trade 5. Offer Sheet 6. International Contract 7. INCOTERMS 20108. Explanation of INCOTERMS 2010

CONTENTS

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1. Benefits of International Trade

International Trade is the purchase, sale or exchange of goods and services across national borders.

International Trade is opening doors to new business opportunity across the globe.

It also provides a country’s people with a greater choice of goods and services.

International Trade is an important engine for job creation in many countries. (The US Department of Commerce calculates that, for every U$1billion increase in exports, 22,800 jobs are created within the USA.)

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Visible Trade

Physical products and goods (e.g. Machinery and Equipment, Metal, Petrochemical products, Foodstuffs, etc.)

Invisible Trade

Capital, Labor, Technology, Software, Services, etc.

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Direct Trade

Trade that occurs directly between an exporter and an importer without the third party’s involvement.

IndirectTrade

Trade that occurs indirectly between an exporter and an importer with the third party’s involvement. (e.g. General Trading Companies, Sales intermediaries, etc.)

3Counter Trade

Trade that occurs to make balance of export and import between nations (e.g. Barter Trade, Compensate Trade, Counter Purchase, etc.)

2. Types of Trade

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Turnkey-base Export(Project)

A type of project that is constructed by a developer and sold or turned over to a buyer in a ready-to-use condition. (Combination of technology, know-how, engineering, machinery and equipment, etc.)

5 Cyber Trade B2B, B2C, C2C, etc.

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GLOBAL TRADING

• Market Selection

• Market Survey

• Feasibility Study

• Searching Biz. Partner

• Credit Inquiry

• Decision

• LC

• TT

• DA

• DP

• CAD (Cash against Document)

• COD (Cash on Delivery)

Business Proposal

Offer

Acceptance

Contract

LC Open

Dispute & Resolution

Payment

Shipment

3. The Process of International Trade

Source : Developed by In Woo Jun (2012)

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ManufacturerExporter

(GTCs, Ordinary Trading Firms)

Importer(GTCs, Ordinary Trading Firms)

Consumer

Ocean Transportation- Shipping Company- Freight Forwarder

Bank Bank

Negotiation & Contract

- Transportation Firm- Customs

-Transportation Firm- Customs

Others1) Chamber of Commerce 2) KOTRA & KITA 3) EXIM Bank , etc.

Payment

- Insurance Company

4. Companies involved in International Trade

Inland Transportation Inland Transportation

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Source : Developed by In Woo Jun (2012)

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- Description of goods- Quantity- Specifications - Unit price - Total amount - Price terms - Country of origin - Terms of payment - Packing method - Shipping date (Terms of delivery)- Validity of offer- Others (Shipping port, Unloading port, Inspection, Insurance, etc.)

5. Offer Sheet

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A formal written document stipulating a firm’s willingness tosell or buy products or services. The following things should be stipulated in the offer sheet.

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Source : In Woo Jun (2013), 글로벌무역영어, 무역경영사

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6. International Contract

6.1) Basic Terms in International Contract

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There are eight (8) terms (conditions) in international contract ;

- Terms of Quality- Terms of Quantity - Terms of Price- Terms of Shipment- Terms of Payment - Terms of Insurance- Terms of Packing- Terms of Dispute Settlement

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6.2) Types of International Contract

There are several types of international contract (agreement) ;

- Sales Contract - Purchase Contract - Sales and Purchase Contract- Agency Contract - Exclusive Contract - Distributorship Contract - Licensing Agreement - Loan Agreement, etc.

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GLOBAL TRADING

Source : In Woo Jun (2013), 글로벌무역영어, 무역경영사

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GLOBAL TRADING

Source : In Woo Jun (2013), 글로벌무역영어, 무역경영사

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GLOBAL TRADING

Source : In Woo Jun (2013), 글로벌무역영어, 무역경영사

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7. INCOTERMS 2010

The purpose of INCOTERMS is to provide a set of international rules for the interpretation of the most commonly used trade terms in foreign trade.

It consists of 11 terms :

- EXW, FCA, FAS, FOB, CFR, CIF, CPT, CIP, DAT, DAP, DDP

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1) EXW (Ex Works)

- Seller becomes free from all risks and costs when the goods are delivered at its premises (e.g. factories or works) without exportcustom clearance

- The minimum obligation of the seller- Example: US$150 EXW ABC’s Ulsan Factory

Seller’s premises CY Loading

PortUnloading

Port CY Buyer

The turning point of Risk and CostCost on seller’s

account

8. Explanation of INCOTERMS 2010

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2) FCA (Free Carrier)

- Seller becomes free from all risks and costs when the goods are delivered to the carrier designated by the buyer after export custom clearance

- Example: US$170 FCA Busan Seaport CY, Korea

Seller’s premises C Y CY

The turning point of Risk and Cost

Loading Port

Unloading Port Buyer

Cost on seller’s account

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3) FAS (Free Alongside Ship)

- Seller becomes free from all risks and costs when the goods are delivered at the alongside a ship after export custom clearance

- Example: US$200 FAS Busan Seaport, Korea

Seller’spremises CY Ship

The turning point of Risk and Cost

Loading Port

Cost on seller’s account

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4) FOB (Free on Board)

- Seller becomes free from all risks and costs when the goods are loaded on the vessel (i.e. On Board)

- Most frequently used term in practice- Example: US$220 FOB Busan Seaport, Korea

Seller’spremises CY Loading

portShip

The turning point of Risk and CostCost on seller’s

account

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5) CFR (Cost and Freight)

- Seller becomes free from risks when the goods are loaded on the vessel (i.e. On Board)

- Seller should pay ocean freight up to unloading port- Example : US$250 CFR Osaka Seaport, Japan

The turning point of Cost

Seller’spremises CY Loading

port

The turning point of Risk

Ship Unloadingport

Cost on seller’s account

Cost on seller’s account (Only Ocean Freight)

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6) CIF (Cost, Insurance and Freight)

- Seller becomes free from risks when the goods are loaded on the vessel (i.e. On Board)

- Seller should pay ocean freight and insurance up to unloading port- Example : US$270 CIF Osaka Seaport, Japan- Most frequently used one in practice

The turning point of Cost

Seller’spremises CY Loading

portShip Unloading

port

The turning point of RiskCost on seller’s account

Cost on seller’s account (Ocean Freight & Insurance)

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7) CPT (Carriage Paid to …..)

- Seller becomes free from risks when the goods are delivered to thecarrier designated by the seller after export custom clearance

- Seller should pay delivery cost up to destination designated by the buyer.

- Example : US$290 CPT Osaka Seaport CY, Japan

Seller’spremises CY Loading

portShip Unloading

port CY

The turning point of Risk

The turning point of CostCost on seller’s account

Cost on seller’s account (Only Ocean Freight)

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8) CIP (Carriage and Insurance Paid to …..)

- Seller becomes free from risks when the goods are delivered to thecarrier designated by the seller after export custom clearance

- Seller should pay delivery cost and insurance up to destination designated by the buyer

- Example : US$300 CIP Osaka Seaport CY, Japan

Cost on seller’s account (Ocean freight and Insurance)

Seller’spremises CY Loading

portShip Unloading

port CY

The turning point of Cost

The turning point of RiskCost on seller’s account

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9) DAT (Delivered at Terminal )

- Seller becomes free from all risks and costs when the goods are delivered to the buyer at the named terminal with unloading from the arriving vehicle

- Example : US$320 DAT Osaka Seaport Terminal, Japan

The turning point of Cost & Risk

Seller’spremises CY Loading

portShip Unloading

portNamedterminal

Cost on seller’s account

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10) DAP (Delivered at Place)

- Seller becomes free from all risks and costs when the goods are delivered at the named place with ready for unloading.

- Example : US$340 DAP XYZ’s Factory, Japan

The turning point of Cost & Risk

Seller’s premises CY Loading

portShip Unloading

portNamed

place

Cost on seller’s account

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11) DDP (Delivered Duty Paid)

- Seller becomes free from all risks and costs when the goods are delivered to the buyer after paying import taxes and import custom clearance fee, but without loading at the buyer’s premises.

- The maximum obligations of the seller- Example : US$370 DDP XYZ’s Warehouse, Japan

The turning point of

Cost & Risk

Seller’spremises

Loadingport

Unloadingport

Buyer’spremises

CY

Cost on seller’s account

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