Application of incoterms in the international sale of goods contract

nsibilities of the signing parties. Incoterms has 11 
rules detailing the time points of different responsibilities. 
Fourth, a query about liability when the dispute is arising. Incoterms is an internationally recognized 
provision that takes effect when selected by contracting parties. So when problems related to terms 
in Incoterms arise. Incoterms can completely become a legal document to resolve disputes. 
Incoterms are terms of international trade so the Incoterms contract must be an international goods 
purchase and sale contract. In addition, Incoterms only apply to tangible goods, goods not 
belonging to the field of intellectual property or service provision. For example, technology software, 
copyright, public services, etc. cannot apply Incoterms. 
When learning about Incoterms, understanding the role and concepts of Incoterms helps people 
apply the rules easily and accurately. However, if you ignore the Incoterms during the agreement 
process, sometimes there will be unnecessary errors. There are six things to keep in mind when 
applying Incoterms: 
Firstly, Incoterms are not mandatory. Incoterms are not a law, but an international custom of 
commerce should be considered as a common voice of contracting parties to help accelerate the 
negotiation process. Incoterms are not compulsory but when selected for use in international 
contracts of sale of goods, which the parties need to specify in the contract terms, the seller and the 
buyer will have the obligations and responsibilities for this clause. 
Secondly, the validity of the Incoterms versions. The first Incoterms were issued in 1936 and have 
undergone many revisions and improvements, but the new versions of Incoterms do not lose the 
validity and validity of the previous versions. Depending on the habit, the parties may choose the 
appropriate Incoterms version, but when using, the name of the version must be clearly stated 
when the agreement is entered into in the contract to avoid causing unnecessary disputes. 
Thirdly, Incoterms stipulate the issues of places of transfer of responsibilities, costs, risks from sellers 
to buyer during the import and export of goods. The remaining issues as a result of breach of 
contract or the time of transfer of ownership are not specified in Incoterms, so Incoterms cannot be 
applied to solve them but instead need a clear agreement in other terms of the contract. 
Fourth, conditions of delivery facilities can not be changed. It is necessary to clearly distinguish 
between practical responsibilities and delivery bases. Because, depending on the advantages of 
business, the parties may increase or decrease their responsibilities according to the agreement 
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but not affect the conditions of delivery. Therefore, when making the contract, it is necessary to 
specify the conditions of delivery and the responsibilities of the parties in detail. When using 
Incoterms, you need to write in the order of 'selected condition', ‚location name‛ then ‚Incoterms 
version name‛. For example, FOB Ben Nghe Port, Ho Chi Minh, Vietnam, Incoterms 2020. 
Fifth, Incoterms have a lower legal value than local law. Incoterms are a solid legal basis when 
disputes occur, but when drafting the contracting parties need to understand the local law carefully 
because if any provision of Incoterms conflicts with local law, the Incoterms will no longer value 
whether previously selected or under contract conditions. 
Finally, every term in Incoterms stipulates a certain type of transport, so when selecting, the relevant 
group of conditions should be selected, so when choosing, you need to understand the terms as 
the type of goods in progress. The agreement will be appropriate with the means of transportation 
and the destination will be like that there is a choice that suits the needs of use. 
Although the new Incoterms versions do not invalidate the other versions, nowadays most people 
no longer use the old versions anymore. The current commonly used versions are the Incoterms 
2000 versions, 2010 and the latest version 2020. The differences between these versions 2000, 
2010 and 2020 are summarized as follows: 
Table 1: Change of Incoterms over time 2000, 2010, 2020 [1] 
2 APPLICATION OF INCOTERMS IN CONTRACT FOR THE INTERNATIONAL 
SALE OF GOODS OF SOME COUNTRIES IN THE WORLD 
Each Incoterms article deals with a different shipping agreement and liability between seller and 
buyer when engaging in an international trading environment. The purpose of this system is to help 
the international trade environment operate in an orderly and secure manner through simple 
contract models that overcome the language barrier. 
As a requirement on every commercial contract, these terms help minimize the risk of confusion 
that can result in significant costs. Some commercial terms have been widely used in the world and 
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EXW is the most commonly used commercial terms. EXW - EX Works - ex-factory price, the seller 
must place the goods at the disposal of the buyer within the time-limit and at the place determined 
by the contract, so that the buyer can load the goods onto his means of transport. The buyer must 
accept the goods at the seller's location (warehouse, workshop, etc.) together with the costs and 
risks of delivering the goods to the designated location. In fact, the buyer arranges the freight 
collection at the designated location and is responsible for customs clearance of goods through the 
Customs. The buyer is also responsible for completing all export documents, although sellers are 
obligated to obtain information and documents required by buyer. In the UK, when importing 
goods by this method, it is quite simple to clearly state your responsibilities as an importer. The 
buyer is responsible for all costs, arrangement of export documents and liability from collecting the 
goods from the supplier's factory to the buyer until the goods are delivered in the UK. EXW also has 
similar benefits and is used quite a lot when importing goods in the US, China, 
It can be seen that EXW's transportation methods are a little different from the rest of them: All costs 
and risks during the entire process from loading at the warehouse to unloading at the final point 
are due to The buyer is responsible (except for the storage at the original warehouse or packaging, 
if any), and the seller is only responsible for ensuring that the buyer receives the goods. It is most 
commonly used because almost all costs and risks are the responsibility for the buyer during the 
entire shipping process (the seller is almost only in packaging), which means set maximum 
obligations to buyer and minimum obligations to seller. Therefore, it is not suitable for small lots, 
less cargo. 
In order to the agreements to be made explicitly and to avoid problems that may occur in the 
process of working, as well as protect their legitimate rights, when using EXW, a number of things 
are paid attention below: 
First of all, EXW is a more convenient terms for the seller because the buyer is responsible for the 
greater part. 
The second important thing, the parties should specify as clearly as possible the location at the 
place of delivery specified as the costs and risks to that point are borne by the seller. The buyer 
bears all costs and risks related to the receipt of goods from the prescribed point, if any, at the 
designated delivery place. 
Moreover, a buyer who buys from a seller under EXW terms for export needs to know that the seller 
is obliged to assist the buyer only when the buyer requests to make the export and the seller is not 
obliged to do customs clearance manually. Therefore, buyer should not use the EXW condition if 
they can not carry out export clearance procedures directly or indirectly. 
3 PRACTICE OF APPLICATION INCOTERMS IN CONTRACT FOR THE INTERNATIONAL 
SALE OF GOODS IN VIETNAM 
Incoterms have come in many versions. The first is the version, which was born in 1936, has been 
revised, supplemented and developed in 1953, 1967, 1980 versions, etc. Because Incoterms are not 
considered as law, they can not be applied by default but only upon the agreement of the parties 
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concerned and the terms of the contract. Unlike other countries in the world, when exporting by CIF 
term and importing by FOB term, in Vietnam, most businesses choose to export by FOB term and 
import by CIF term. With this option, Vietnamese businesses can avoid the risks of hiring and 
purchasing cargo insurance such as not being able to charter a ship, the unsuitable type of vessel 
or the increase in freight rates and insurance premiums because when choosing to export by FOB, 
the seller does not have to hire ships or buy insurance for the goods. In addition, businesses in 
Vietnam often have low capital, if used under this condition, it will solve the situation as there is not 
enough capital to prepay for charter costs and insurance. On the payment side, there is also little 
risk that when a high-value shipment is sold, it will be insolvent, leading to large losses. Besides, 
choosing to export by FOB instead of CIF will also lead to certain risks. When exporting by FOB, 
Vietnamese enterprises will give up the right to hire ships and buy insurance for the buying 
countries, which inadvertently insulates Vietnamese insurance enterprises and shipping lines 
economy. Opposite, When importing by CIF and having loss of goods, there will be difficulties for 
Vietnamese enterprises when having to negotiate directly with foreign shipping lines and 
insurance. Moreover, compared to import by CIF, FOB export earns a much lower amount of foreign 
currency. 
For a developing country like Vietnam, there are still many obstacles in import and export. In terms 
of knowledge as well as experience in insurance transport, many Vietnamese businesses do not 
really understand the chartering and insurance business, so choosing a reputable carrier is very 
difficult, especially for cargo. If cargo is in large quantities, chartering is more complicated. 
Vietnam's exports are mainly raw or semi-processed raw materials of low value so the rate of 
freight to goods is quite large. Normally, freight to transport wares is from 7% to 10% of CIF value of 
goods, but because Vietnam's exports are bulky, low value, this rate is often higher (up to 50% of 
items) [2] but capital of many businesses are not enough to pay for freight or insurance, businesses 
that choose to export at FOB prices do not have to worry about chartering as well as cargo 
insurance. Insurance companies in Vietnam have low staff quality, which leads to embarrassment 
in dealing with time-consuming issues. In addition, the unreasonable insurance fee calculation 
makes the import-export companies feel inadequate to receive compensation. The coordination 
between shippers, ship owners and insurers in Vietnam is still loose and unconnected, so there is 
often a situation of overcapacity but lack of ships or vice versa. Moreover, Vietnam's shipping 
industry has not developed strongly, foreign networks are scarce, the management system is 
sparse, high freight rates. Because of all that, Vietnamese businesses have chosen to export by FOB 
and import by CIF to suit Vietnam's economy and minimize risks. Explaining the fact that when 
shipping by container, FCA should be used instead of FOB because FOB requires the seller to deliver 
goods on the deck but most container goods are required to ‚land‛ at container yard or container at 
an odd warehouse before loading the goods on board. In the process of transfer between seller 
and buyer, if the goods (according to FOB conditions) arrive at the wharf or the odd warehouse, 
there are losses and damages, the dispute between the two sides will certainly occur. Therefore, 
the buyer and seller should specify the time and place of risk transfer, force majeure cases so that 
when a dispute occurs, the two sides soon find a satisfactory solution. Within Incoterms 2010, FCA 
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conditions were adjusted to suit modern container transport modes. When the parties agree to use 
FCA terms, the two parties agree that the buyer shall arrange loading and loading of goods on the 
means of transport provided by the seller, the location of risk transfer may be the seller's premises 
or at a certain agreed location within the seller's inland. This will minimize the risk of the goods 
being transferred from seller to buyer. 
For any type of contract, disputes are inevitable between the parties involved but limiting those 
disputes is possible. When discussing the issue of applying Incoterms in international sales 
contracts, we have some suggestions for experience as follows: 
First, learn and understand about the versions and terms of Incoterms. To avoid misunderstandings 
about the parties' responsibilities. 
Second, choose the dispute settlement agency in the contract. 
Third, clearly defining the cases of liability waiver, the seller needs to clearly define the force 
majeure cases as well as the payment responsibility of the buyer when the dispute occurs. 
Fourth, the seller should try to reach an agreement so that the responsibility for carrying out import 
procedures rests with the buyer. At the same time, the buyer is also responsible for payment in the 
event that the law of the buyer country changes so that the goods cannot be imported but the 
goods are on the way of transportation to the buyer or have arrived at the buyer's port. 
4 CONCLUSION 
Up to the present time, Vietnam's economy has developed and improved a lot more than before. 
Viet Nam has been backward from agriculture, experienced many periods and wars have also 
strongly revived and opened the door to integrate into the world. The continuous development in all 
fields of economy, science, technology, transportation, etc., especially in international trade, has 
made strong developments when Vietnamese businesses learn and apply. Incoterms’ terms of sale 
of international goods. This proves that Vietnamese businesses have quickly caught up with the 
pace of the world trend and are constantly evolving to improve as well as bring more benefits to 
Vietnamese businesses when participating in the deals. international trade translation. 
REFERENCES 
[1] Công ty cổ phần logistics Vinalink, 2019, Incoterms 2020 có gì mới, xem tại: 
https://www.vinalinklogistics.com/ban-tin/Incoterms-2020-co-gi-moi-1745.html Truy cập 
ngày 10/05/2020. 
[2] Logistics Institute, 2019, Mua bán CIF-FOB ở nước ta như thế nào?, xem tại: https://logistics-
institute.vn/mua-ban-cif-fob-o-nuoc-ta-nhu-the-nao. [Truy cập ngày 10/05/2020] 
[3] The International Trade Administration, Know Your Incoterms, xem tại: 
https://www.trade.gov/know-your-Incoterms Truy cập ngày 10/05/2020