LOGO

Chapter 3

TRANSPORTATION, INSURANCE,
PAYMENT IN FOREIGN TRADE
 I

Transport in foreign trade

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 The definition and role of transport

• Definition: Transport in foreign trade is an operation of

means of transport to bring goods or people from one
location to another on an international scale.
• Objects of transport: people and goods
• Requirements: means of transportation (cars, airplanes, trains,
ships, pipelines, etc.)
• Modes of transportation: one method or multimodal method
• Transport costs: increase the value of goods

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 Roles of transport in foreign trade

Roles of
transport

Promote
international Increase
trade good’s value

Create
environment
and business
opportunities
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Transportation modes in foreign trades

Sea transport

Air transport

Road transport

Rail transport

Pipeline transport

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 1. Sea Transport

Pros Cons

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Modes of Sea Transportation

Shipping
Commodity
schedule

Single Liquid
voyage goods

Round
Dry goods
voyage

Consecutive Special
voyage goods

Lumpsum

Liner
charter
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Sea Transport Documents

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 Bill of Lading – B/L

▪ What is bill of lading?

▪ Roles of bill of lading?

▪ Types of bill of lading? Meaning of each type

of bill of lading?

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 Bill of Lading – B/L

▪ A type of sea transport documents issued to

shipper based on shipper’s requirements

▪ Carrier:
• Or the representative of carrier

▪ Issued when:
• shipped on board
• received for shipment

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 Roles of bill of lading

▪ Proof of cargo by sea is signed

▪ Receipt of goods by the carrier issued to the shipper
▪ Documents certifying the ownership of the goods
written in the bill of lading
▪ International payment documents
▪ Customs clearance for imported goods
▪ As the basis to sign insurance contracts for import and
export goods

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 Types of bill of lading

Legal aspect
• Straight B/L
• To order of B/L
• To bearer B/L
Note
• Clean B/L
• Unclean B/L

Time issued
• Shipped on board B/L
• Received for shipment B/L

Shipment method
• Through B/L
• Multimodal B/L
• Charter party B/L
Collection method
• Master B/L
• House B/L

Characteristic
• Original B/L
• Copy B/L 12
 Types of bill of lading

❖ Straight B / L: A bill of lading issued to a named consignee. Only the

undersigned on the bill of lading can receive the goods, the carrier will only
deliver the goods at the named port of destination to the person named in the
bill of lading, which cannot be transferred to others by endorsement.
❖ To order B / L: The bill of lading does not specify the name of the consignee
but states clearly it receives the order from whom; can be to order of shipper or
to order of Bank. This type of bill of lading can be transferred many times by
endorsement. This is a bill of lading commonly used in international trade and
transport.
❖ To bearer B / L: A type on which the consignee's name is not specified, the
captain will deliver the goods to whom submit a B / L and therefore this type is
transferred by hand delivery. 13
Straight Bill of Lading

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To order of Bill of Lading

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 Types of bill of lading

❖ Shipped or Laden on board B/L: is a B/L issued after loading into

the ship. On this B/L, the day, month, year of delivery is specified.
Buyer and issuing bank are required to present "Clean and Shipped
on board B/L"

❖ Received for shipment B/L: A type of transport document issued

before goods are loaded onto the ship (maybe goods are still in the
warehouse, port ...). On this B/L, it does not specify the date of
loading, but clearly stated that the goods were "received for
loading", it does not legally represent a proof of loading but acts as a
commitment by the carrier to transport those goods.

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 Types of bill of lading

❖ Through B / L: A bill of lading used in the case of transporting goods

(transhipment) along the way, ie changing ships and carriers but the
same mode of transport.

❖ Combined Transport B / L or Multi modal Transport Documents: is a

document used in transport by two or more different means of
transport and commonly used in container transport, Pallets.

❖ Charter party B / L or Congen B / L: Used in charter ship method.

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 Types of bill of lading

 Master B / L: is the bill of lading issued by the Effective Carrier to the

exporter or shipper providing freight forwarding services.
 House B / L: Issued by the forwarder, it is issued on the basis of the
Master B/L and is the legal basis to regulate the relationship between
the delivery service provider and the customer.
 Original B / L: The type used to receive goods, pay, transfer, claim,
sue ... issued by the carrier at the request of the shipper

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 Sea Transport documents

❖ Shipping note: This is the instruction of the shipper for the shipping
company and port authority, the loading and unloading company,
providing all the details about the goods sent to the port for loading
and instructions necessary.
❖ Mate’s receipt: A document issued by the ship mate to the shipper
and the owner confirms that the ship has finished delivery.
❖ Cargo manifest: This is a summary of the types of cargo loaded on
board to transport to different ports, established by agents at the port
of loading based on the waybill.
❖ Dock sheet & Tally sheet: A Dock sheet is a type of tally sheet that
records the number of goods delivered at the wharf. A tally sheet is a
type of tally sheet that the goods loaded onto the ship are recorded by
the tallying officer.
❖ Ship’s storage plan: This is a ship placement chart. 19
 INCOTERMS

 Incoterms stands for International Commercial Terms.

 Issued by the International Chamber of Commerce in
Paris
 Latest version 2020, effective from 01/01/2020
 Clarifying the division of responsibility, cost and risk in
the process of transferring goods from seller to buyer

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 INCOTERMS

 Scope
Only limited to issues related to the division of obligations, costs and
risks of the parties in contracts for the sale of tangible goods

 Legal value of Incoterms

Not mandatory international trade law
It must be shown in the purchase and sale contract to be legally
valid
Not the only commercial practice document in international trade

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 INCOTERMS

Incoterms 2000 Incoterms 2010

• E: EXW • All transport methods:

• F: FAS, FCA, FOB EXW, FCA, CPT, CIP,
• C: CFR, CIF, CPT, CIP DAP, DAT, DDP
• D: DAF, DES, DEQ, • Sea transport: FAS,
DDU, DDP FOB, CFR, CIF

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INCOTERMS 2010

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 2. Air Transport

❖ Characteristics of air transport

❖ Air transport often has a high and fast shipping speed. Air transport

requires a comprehensive technical equipment and transportation

facilities such as airports, meteorology and information.

❖ Air transport respond promptly in emergencies and in cases where

other vehicles cannot be used such as rescue, storm, earthquake.

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 Regulations and organizations of
international air transport

❖ Invented in the early 20th century but until the 30s of this century this mode was
truly developed.
❖ In 1944, the international civil aviation organization of the United Nations
abbreviated as ICAO was established. The second war broke out, causing the
operation of this organization to be delayed. In 1947, this organization actually
came into operation with 4 fundamental purposes including:
❖ Ensure civil aviation growth safely and orderly. Air transportation without flight
corridors is very dangerous and does not guarantee security for countries.
❖ Encouraging the development of flight systems, airports and air modes. Air transport is
required to have other means of service such as airport systems, beacons, air traffic,
transport vehicles, etc.
❖ Encourage the design and control of air transport for peaceful purposes. This
organization mainly operates for the purpose of developing civil aviation.
❖ Ensure civil aviation must meet regularly, effectively and economically 25
 Regulations and organizations of
international air transport

❖ In 1973 there were 125 member countries

❖ In 1988, 34 more countries joined, bringing the total number of members to 159.
❖ The International Civil Aviation Organization has drafted numerous international
conventions on aviation, such as the Geneva Convention in 1948 on the recognition of the
legality of international aircraft, the 1952 Roman Convention on damages in countries
where aircrafts fly through.
❖ Airlines have voluntarily established the International Air Transport Association (IATA).
The Association has more than 160 firms in member countries to cooperate and coordinate
on the regulations of air transport standards, types of fees and documents of aviation
procedures, etc.
❖ Accordingly, the air freight forwarders also meet together to form Freight International air
transport Association abbreviated FIATA. This organization aims to protect the rights and
promote the interests and responsibilities of the parties that deliver and receive
international air freight.
❖ Freight International air transport and the International Air Transport Association works
together to organize seminars on aviation training, transportation, automation development.

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 Regulations and organizations of
international air transport

❖ About geography:
❖ Aviation Area 1 is called the Regional Transport Association 1 including the
Americas, Greenland and Bermuda Region, Hawaiian Islands.
❖ Aviation Area 2, called the Region 2 Transport Union, includes Europe (taking into
account the Ural Mountains of Russia), Iceland, the Azores Islands, Africa and
adjacent islands, the Middle East and Iran.
❖ Aviation Area 3 called the Regional Transport Association 3 covers Asia (from
Pakistan), Australia and the Pacific Islands (except for Hawaiian islands).
❖ Flight time will be divided by 24 time zones, each time will be added or subtracted
compared to the standard time zone is GMT (Greenwich mean time). Therefore, for
one day, there will be an international boundary line that is symmetrical with the
GMT time line. The plane flying from west to east will be one day and vice versa.
❖ Airline pricing and procedures will be issued every two years, including an orange
book of general rules and procedures, and a blue and red book of pricing. The red
color shows the rates for North America and Canada, while the green color covers the
rest. Those regulations make it possible for aviation to be considered a high-tech
transportation industry.
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 Regulations and organizations of
international air transport

❖ General Cargo Rate- GCR: Applied to general cargo when it is necessary to travel
between two designated points without special value. This kind of charge will usually be
reduced gradually with a certain weight, which is usually 45 kg.
❖ Minimum –M: If this charge is lower, it won’t be profitable in transportation (including
handling charges) The minimum charge level of freight is decided by the IATA.
❖ Special Cargo Rate - SCR: This rate is lower than normal goods and depends on the
minimum weight, which is published according to the rates or depending on specific
conditions related to weight. Actually this is a competitive fee.
❖ Class Rate / Commodity Classification Rate - CR / CCR: This is the discount or increase
rate based on regular freight. This charge applies to certain items, in designated areas or
when there is no separate regulated charge for specific items such as live animals, goods
valued over USD 1,000 / piece, luggage like cargoes, corpses, remains ...

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 Regulations and organizations of
international air transport

❖ Freight All Kinds Rate - FKR: The general freight rate for all types of containers.
❖ Container Freight Rate - CFR: is a freight rate calculated based on a container
designed to be technically and certified.
❖ Other Freight Rate: This type of freight rate is applicable to special goods or to
transport in special circumstances without other freight rate regulations. This rate
includes the following types:
❖ Unit Load Device Rate - ULD: This is actually the cost of moving the Pallet, Igloo.
❖ Deferred payment Rate - DPR: is the freight rate for the goods that the time of
loading has not been determined. This type is cheaper than normal goods because
they often have to go behind due to the placement.
❖ Package Rate - PAR: applies to air transport. Airlines do so to avoid losing their
customers in case the sender wants to hire another airline to forward.
❖ Groupage Rate –GR: This rate is applied by aviation agents or professional
forwarding organizations when sending goods by container.

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 Air transport documents

1. Airway bill – AWB

2. Shipper's Letter of Instruction
3. Commercial invoice
4. Other documents if required
1) Shipper’s declaration about living animals
2) Shipper’s declaration about dangerous items
3) Shipper’s declaration about weapons and explosives

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 Airway bill

Airway bill is a document issued

by the air transport agency to the
shipper to confirm receipt of the
cargo for transport.

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Types of airway bill

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 Types of airway bill

❖ Master Airway Bill ([Link]): An airway bill that the airline issues directly
to the shipper through the airline agent.
❖ House Airway Bill ([Link]): An airway bill issued by air agents to
shippers when they perform consolidation services.
❖ AWB: An airway bill issued by an airline on which the carrier's
identification is displayed. This airway bill is used when the airline acts as
the carrier.
❖ Neutral AWB: A standard airway bill issued by IATA in 1986, with the
carrier's name on it, without the carrier's symbol, but with the words As
Carrier. FIATA recommends that forwarders use airway bill when they are
consolidating (acting as a transport contractor) or acting as an agent for an
actual carrier. This airway bill is intended to replace the consolidation bill
([Link]) because the consolidation bill does not meet the requirements of
UCP when paying by L / C.
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 How to fill an airway bill

1st original – 2nd original – 3rd original –

original 1 for issuing original 2 for issuing original 3 for issuing
carrier consignee shipper

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 How to fill an airway bill

Copy: 6-11 copies basing on what’s required

Copy 4 – Delivery receipt for airport of destination

Copy 5 - for Customs Declaration

Copy 6 - for receiving agent

Copy 7 - for Sales office

Copy 8,9,10,11 - extra copies

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 Roles of airway bill

Proof of contract of carriage

Proof of receipt for delivery
Billing receipt
Insurance certificate
Customs clearance documents
Documents instructing the airline staff to receive the goods,
check the payment of freight
Unlike seaway bill, airway bill does not have validity, which
means that cannot be bought and sold transfer and when
receiving the goods without presentation of the original (only
required to show the receipt and identification ID to receive
goods).

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 Other air transport documents

❖ Shipper’s Letter of Instruction for issued AWB)

❖ A type of document issued by the seller to the buyer or to the airline
in which it states full declaration of instructions related to the
shipment; Based on this document, the agent signs AWB to confirm
the content with the airline. In fact this acts as a guarantee,
commitment on goods.
❖ Commercial Invoice
❖ As the basis for customs in tax calculation, also the basis for all
consular documents.
❖ Other declarations
❖ Shipper’s Declaration for live Animals
❖ Shipper’s Declaration for Dangerous goods
❖ Shipper’s Certificate for Weapon and Demolition Explosive

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 Types of bill of lading

❖ Clean B / L: A type of B / L on which the carrier does not make any

bad notes about the goods or goods packaging; is the B / L type
issued to the shipper by the carrier after the goods have been loaded
"In apparent good order and condition"; is the evidence that the
seller has fulfilled his delivery obligation and may be one of the
evidences on the quality and packaging of the goods; is the B / L
type accepted by bank for goods payment.
❖ Unclean B / L: A type of B / L on which the carrier has any bad
notes about the external condition of the goods or the packaging
such as "Broken case" "Leaking case" "Wet case" "Empty case" ...;
this type of B / L is not accepted by the bank

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 3. Railway Transport

Inflexibility

Large carrying capacity

Continuous, regular, relatively safe
Less affected by the weather
Low cost
Requires lower packaging
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 Railway Transport Documents

❖ Original of the waybill: this copy follows the goods to the

arrival station and is delivered to the consignee with the
cargo;
❖ Copy of waybill: This copy is given to the sender after
loading the wagon
❖ Delivery note: This paper follows the goods to the arrival
terminal and stores it at the destination
❖ Notification of arrival: This paper follows the goods to the
arrival station and is delivered to the recipient

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Container used when transporting
goods

Using public container for multimodal transport (by sea,

railway, road and internal waterways)
❖ Characteristics:
Fixed shape, durable, usable many times
Special construction suitable for multimodal transport (goods
don’t need to be unloaded along the way)
Having a separate handling equipment (easily moving from one
transport tool to another)
Easily unloading goods in / out of the public
Minimum capacity of 1m3

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 Container B/L

▪ The carrier or the representative of the carrier signs

to the shipper after having received the container,
checked, sealed lead, for transport purposes.
▪ Receiving payment before loading = received for
shipment B / L
▪ Note: payment by L / C cannot be accepted if L / C
does not state clearly “received for shipment B / L
acceptable”
▪ Therefore: the shipper requires the carrier to add a
note on B / L as "container shipped on board on ..."
to be paid by L / C
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 Container Transport Rates

1. Commodity Box Rate – CBR

2. Freight All Kinds Rate – FAK

3. LCL or CFS charge

4. Time Volume Contract – TVC

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 4. Pipeline transport

• Commodity: gas, liquid

• Associated with the agreements signed by the
parties involved (transportation agreement)
• Large construction investment capital, time-
consuming
• Strict management standards, high operating
level
• But: convenient when forwarding

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 Modes of pipeline transport

❖ Transport by hoses:
▪ Short-distance, Irregularly, Highly flexible
▪ Unsustainable and less safety
❖ Transport by rigid pipe:
▪ Long distance, regularly, continuously
▪ Transporting large volumes
▪ High security
▪ But: complicated by long distances, across many
countries, requires high security and preservation.
❖ Others: underground pipes, floating pipes, domestic pipes,
offshore pipes ...

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 Pipeline transport rates

• Rate is usually included in the price of goods

(excluding the cost of construction of a pipeline)
• Countries participating in the construction and
transportation of pipelines are entitled to
discounted purchase rates at special prices.

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