1、1目录1. Introduction .12. Trade terms.12.1 The meaning of trade terms.12.2 The forming process of final uniform international trade term .12.3 The main contents of trade terms.23. The function of trade terms in international transaction.23.1 Trade terms have important function for both seller and buye
2、r to have a pleasant business negotiation.23.1.1 Procedure.23.1.2 Expenses .23.1.3 Risks.33.2 Trade terms have the important function on both seller and buyer to account the prices and costs of goods.33.3 Trade terms can help to resolve the dispute during an international transaction.43.4 Trade term
3、s are convenient for other relevant institution to carry out business activities .54. Choosing the right terms and avoiding avoidable risk.54.1 Trade terms and goods loss risk aversion .54.2 Choosing right trade terms reduce collection risks.65. Conclusion .7References:.721. IntroductionAs a graduat
4、or major in English business direction, in order to develop my own self-learning ability, understanding ability and practical ability, I go to a foreign trade company in Zhejiang Province and worked as a internship there from August, 2012 to January, 2013. This work experience made me learn a lot ab
5、out the process of the international transaction and made me know how to operate the process in a real business transaction in a comprehensive, system specifications way and know how to grasp the main operational skills when engage in international import and export trading.Since China join WTO, the
6、 whole world is becoming an integrated global market, economic communication among all countries become frequently. Thus, all walks of life are mentioned that to stay in line with international practice and set industry standards in accordance with international practice. Therefore, trade terms are
7、produced upon this situation. During my internship, I found that the trade terms can help us to simplify the negotiations process and the contents of the contract, save the time of conversation during the international trade for both parties. Trade terms really play an important role in internationa
8、l transaction, which should not be underestimated.Therefore, this paper mainly discuss about the function of trade terms in international transaction and how to choose right terms to avoid potential risks.2. Trade termsWith the development of economy, the whole world is becoming a integrate market a
9、nd the international trade is becoming more and more frequently. In order to simply the process of business negotiation between both the buyers and the sellers, the trade terms are produced upon this situation. I will analysis the trade terms in the following aspects.32.1 The meaning of trade termsT
10、rade terms also called price terms or delivery terms. It used to specifiy the obligations of the buyers and sellers by several short letters abbreviation. Every commercial transaction is based upon a sales contract, and the trade terms used in the contract have the important function of naming the e
11、xact point at which the ownership of the merchandise is transferred from the seller to the buyer. The trade terms also defined the responsibilities and expenses of both the seller and the buyer. 2.2 The forming process of final uniform international trade termBecause of the cultures different, the q
12、uestions understanding ability is different, so in different countries might have different interpretations of trade terms, misunderstandings occurred frequently. In order to clear up the confusion, some international organizations have made quite a few rules and explanations to determine the buyers
13、 and sellers, cost, risk responsibility division in the long-term of international trade practice. There are mainly three influential international trade practices: Warsaw Oxford Rules 1932, Revised American Foreign Trade Definitions 1941 and International Commercial Terms (INCOTERMS). Incoterms2000
14、 are the most widely used and acceptable among these three international trade practice.2.3 The main contents of trade termsTrade term represents the terms of trade, and trade terms mainly divided into two aspects: first, the price of the goods and include the cost outside of the main affiliate cost
15、, like freight and insurance. Second, determine the delivery conditions, namely divide buyers and sellers responsibility of the cost and risk in the transfer of goods. In the INCOTERMS 2000 mainly have 13 kinds of trade terms. The international trade terms use short concept and English abbreviated l
16、etters to express complicate meaning. In order to facilitate understanding, the trade terms are grouped into four different categories, respectively group E, group F, group C and group D. 3. The function of trade terms in international transactionTrade terms define the obligations, risks, and costs
17、of seller and buyer for the delivery of goods. For example: at what point in the delivery process do obligations, risks, and costs shift to the buyer? As a seller, where do you want them shift to the buyer? From the meaning of each trade terms, we can know that what is more preferable trade terms fo
18、r the sellers or buyers? Thus, understanding trade terms meaning well is benefit for both the parties to do in international transaction. Now let us analysis the functions of trade terms in the following four aspects.43.1 Trade terms have important function for both seller and buyer to have a pleasa
19、nt business negotiationBecause of each trade term has its special meaning. Therefore, as long as both parties agreed to under what trade terms and clinch to a deal. This can clear each others responsibility and risk in the transfer of goods. Trade terms simplify the transaction procedures, shorten t
20、he negotiation trading time, so as to facilitate the buyers and sellers negotiation quickly and conclude a contract. The business negotiation mainly deal with the following three problem.3.1.1 ProcedureIn a international trade, there are many problems to be deal with. Its procedures are very complic
21、ated which is mainly include the following aspects, when and where to delivery, Who is responsible for customs transit, documents need to transfer and who handle the transportation insurance. When the buyers and sellers chose one certain trade term, all the related procedure are sure to deal with by
22、 the relatively agencies.3.1.2 ExpensesAnother problem which is trade terms deal with is the expenses. In a complete international trade practice, there are many place need cost. The mainly expenses are customs transit tariffs and the cost of the transportation insurance .The certain trade terms det
23、ermine who should pay these expenses. So in the negotiation we should save time to negotiation more important information.3.1.3 Risks Trade terms also specify when and where risks transfer from the sellers to the buyers. Each trade terms has its special risk transfer point. For example, when the two
24、 parties sign a contract under FOB trade terms, the risk of loss of or damage to the goods is transferred to the buyer after the goods pass over the ships rail at the named port of shipment. Because in an international trade process, peoples main communication way is sending email, and different cou
25、ntries in the world are often have jet lag. Thus, one day sales usually can only communicate with their customers with an email, so that the salesmen conclude a contract usually needs a few months or more. Thus, it requires each email to talk about more valuable information, if every time you have t
26、o communicate with the customer freight, insurance premium of pay and so on, conclude an order may be need one year or more longer time. During my internship, I continuously groped for release products on Alibaba in an effective way. One day, I got an enquiry from Saudi Arabia. The client said that
27、he is very 5interested in our products and hope that we can give him a quotation. Such an inquiry made me confused, because this enquiry was too general, so I gave an email back to the customer and hope that he can provide me more information like product size, quantity he need and the price under w
28、hat kind of trade condition. The next day, the customer reply to my questions, but what kind of trade terms he was also not clear. His reply made me very surprised. In the following communication, I learned that it is the first time he do import and export business. He even didnt know the process of
29、 foreign trade and the payment terms. So in the coming decades emails, I told him the meaning of each items and the responsibilities, the risks and the cost that the two parities should responsible for by illustrating FOB, CIF, CNF several common trade terms. Due to this is the first time the custom
30、er to do import and export business in China. Thus, he has no familiar forwarding company in China, then the customer choose the CIF quotation. It takes a months time. The time has pasted three months, the order is still in negotiation, if the customer knew trade term meaning well, then we can save
31、a lot of time to talk about the more valuable, more important information, which can help us quickly enter into concluding contract.Trade terms simplify the negotiation process, save negotiation time for both buyer and seller. Help both of the parties to quick enter into a contract.3.2 Trade terms h
32、ave the important function on both seller and buyer to account the prices and costs of goodsDue to the trade terms different, price formation factors are different. Therefore, both the buyer and seller must consider what affiliate fees be contained in the trade terms, when they determine the transac
33、tion prices. It is benefits to both parties to do cost account and price comparison.As is known to all, FOB and CFRs difference is that CFR freight is paid by the seller. So in the price, the seller shall bring freight stand in the cost of goods. So CFR price is usually higher than the FOB price.In
34、the company where I do practice, about 80% of the orders choose FOB trade terms. When I just join this company, I received an enquiry on Alibaba international website which was from Singapore. The client want we give them CFR Singapore port price. This was my first inquiry, although in school I have
35、 learned the difference between FOB and CFR, but in practice work I still make them mixed and just regarded FOB Ningbo as CFR Singapore and give the quotation to the client directly. A few days later, I received the clients reply, and he asked for my instant online chat address, then he added my MSN
36、. We chat online ,the customer ask again whether Im sure the offer is CFR Singapore port or not? I give him an affirm reply, then the client very happy and give me their DHL courier account to do freight collect and hope we can send him some samples to check quality. Few days later, the client email
37、ed me and told me that he received the samples 6and he is very satisfied with the quality of our products. He want me send him a PI and place this order to me. When my manager teach me how to make PI for clients, he find that I misregard FOB Ningbo price as CFR Singapore port price, that is, I did n
38、ot add freight price in the quotation. Then I realized that just because my mistake, so our price have an superior advantages than the other manufacturers, and at the same time ,samples still have good quality, and delivery time also can meet the customers the requirement. Thus, the client wants to
39、confirm the order soon. If we clinch this deal, the price is far below our cost of production. So I had to apologize to customer and tell him that I just start to work and I am not familiar to the business process. From this we can see that different trade terms have different price structure. Be su
40、re to understand the connotation of the trade terms is benefit for the buyers and sellers to do price and cost accounting.On December 15, 2012, I got an enquiry which is from Ecuador on Alibaba. The inquiry was a high quality inquiry, because the buying tend is very clear and the quantity is fit for
41、 a twenty feet container. Due to the customers asked the delivery time and packing data in the inquiry directly .So I asked the manager about the delivery time, the manager helped me look into the email and he think this is a good inquiry, also hope that we can sell more good before the Chinese New
42、Year. So he advise me give our bottom price to the client, based the bottom price gave a $200 of preferential. The second day I received the customers demands to make a Proforma Invoice to him. This is really a very smooth order. The Proforma Invoice and bank account information has been send to the
43、 client and soon I received customers reply that he wants change the trade terms into CIF Guayaquil. Then I have to ask the documentation specialist the freight price for a 20ft container from Ningbo to Guayaquil. My collegue told me that now forwardings given price is $1500, but delivery time aroun
44、d January 15th is close to the Chinese New Year, then, many Chinese suppliers hope to export more goods to foreign countries. At that time, the sea freight may be rise highly. So I cant give customers CIF price due to freight not sure. At this time, I find it hard to accounting cost, and give a prof
45、itable price and quotation. Because the customer wants CIF Guayaquil, so the client make final decision that he will place this order after the Chinese New Year. From this we can see that different trade terms have different price form factor. So choosing certain trade terms can be convenient for people to accounting cost.3.3 Trade terms can help to resolve the dispute during an international transactionWhen buyers and sellers sign a contract, there maybe some places consideration is not comprehensive. This will make some matters shall
