International Trade Principles of Finance and Law

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law[ Facilitator Name : Hamidreza Ghaffarzadeh Education: Ph. D Urban Development Studies (Univ Aberdeen) ; M. A Economics ( Univ Essex); Diploma Economics ( Univ Lancaster), B. A Economics ( Univ Tehran ) Work : Contracts Sn. Officer , Mins of Energy & Heavy Industries (1980 - 1986); Programme Officer, Economist, Manager, UN( 1986 - 2009); Lecturer ( full time 2009 till now) , Official Translator (1981 till now ) , Contracts and Commerce Consultant ( 1982 till now ) Contact details: hamid. ghaffarzadeh@gmail. com; phone 09123715908

International Trade: Principles of Finance and Law Points to Observe : • Power points in English but teaching in Farsi • Participation in and contribution to the discussions is strongly encouraged. • Mutual respect desired : no late arrivals ; no mobile phone talks permitted; no private chats ; no leaving of class without prior permission • Strict attendance record observed.

International Trade: Principles of Finance and Law Structure of the Course • Economic importance of the trade • An introduction to theoretical basis • Major elements of the institutional setting • Major elements of the legal setting • International Commercial Terms ( INCOTERMS) • An introduction to the mechanisms of payment • An introduction to International contracts

International Trade: Principles of Finance and Law Reading materials • ﺣﻘﻮﻕ ﺗﺠﺎﺭﺕ ﺑیﻦ ﺍﻟﻤﻠﻞ , ﻋﺒﺪﺍﻟﺤﺴیﻦ ﺷیﺮﻭی, ﺳﺎﺯﻣﺎﻥ ﻣﻄﺎﻟﻌﻪ ﻭ ﺗﺪﻭیﻦ کﺘﺐ ﻋﻠﻮﻡ ﺍﻧﺴﺎﻧی ﺩﺍﻧﺸگﺎﻩ ﻫﺎ ” ﺳﻤﺖ“ • ﺣﻘﻮﻕ ﺗﺠﺎﺭﺕ ﺑیﻦ ﺍﻟﻤﻠﻞ, کﻼیﻮ ﺍﻡ ﺍﺷﻤیﺘﻮﻑ , ﺗﺮﺟﻤﻪ ﺍﺧﻼﻗی ﻭ ﺩیگﺮﺍﻥ , ﺍﻧﺘﺸﺎﺭﺍﺕ ”ﺳﻤﺖ“ • ﺗﺠﺎﺭﺕ ﺑیﻦ ﺍﻟﻤﻠﻞ , ﺳﺎﻟﻮﺍﺗﻮﺭﻩ , ﺗﺮﺟﻤﻪ ﺍﺭﺑﺎﺏ , ﻧﺸﺮ ﻧی • ﻣﺎﻟیﻪ ﺑیﻦ ﺍﻟﻤﻠﻞ , ﺳﺎﻟﻮﺍﺗﻮﺭﻩ , ﺗﺮﺟﻤﻪ ﺍﺭﺑﺎﺏ, ﻧﺸﺮ ﻧی • ﺍییﻦ ﺗﻨﻈیﻢ ﻗﺮﺍﺭﺩﺍ ﺩﻫﺎی ﺑیﻦ ﺍﻟﻤﻠﻞ , ﺭﺿﺎ پﺎکﺪﺍﻣﻦ , ﺍﻧﺘﺸﺎﺭﺍﺕ ﺧﺮﺳﻨﺪی • ﺍیﻨکﻮﺗﺮﻣﺰ 0102 , ﺗﺮﺟﻤﻪ ﻃﺎﺭﻡ ﺳﺮی , ﻣﻮﺳﺴﻪ ﻣﻄﺎﻟﻌﺎﺕ ﻭ پژﻮﻫﺶ ﻫﺎی ﺑﺎﺯﺭگﺎﻧی • ﺍﻋﺘﻨﺒﺎﺭﺍﺕ ﺍﺳﻨﺎ ﺩ ی

International Trade: Principles of Finance and Law Economic Importance of Int. trade

International Trade: Principles of Finance and Law Magnitude of International Trade • Int. trade constitutes a considerable portion of the int. GDP , estimated by WB at 53% in 2012. Except for the ‘closed economies ‘ the ratio is high in ‘many national GDPs. • Services constitute a healthy 21 % share of the trade with travel playing a major role. Volume of Trade in 2014 (trillions $) Merchandise Services Total export 18, 682 4, 972 23, 654 import 18709 4, 898. 9 23, 589

International Trade: Principles of Finance and Law Int. Trade in goods • The volume of int. trade has been on the increase since the WWII with 2014 figure being times its 1948 value. year Value in $ (trillions) 48 53 63 73 83 93 03 11 13 14 59 84 158 579 1, 838 3, 676 7, 377 17, 816 23, 382 23, 654 • Figures point to a an unprecedented opening of markets to trade: 266% from 63 to 73, 217% from 73 to 83, 100% from 83 to 93 and again % 100 from 93 to 2003 and %35 from 20013 to 2013. The rate in recent years has again picked up. • World merchandise exports and GDP have recorded positive growth since the 2009 economic crisis, but their rates have declined steadily. Merchandise exports growth declined from 14. 0 per cent to 2. 0 per cent between 2010 and 2012 while GDP fell from 4. 0 per cent to 2. 0 per cent over the same period.

International Trade: Principles of Finance and Law Importance of the Int. trade • The growth in int. trade has been often larger than int. GDP. From 2003 to 2006 growth in trade was twice as much of growth in world production. In 2013/14 production growth has however been larger than world trade. % Rate of Growth for Int. Trade vis –a- vis Global GDP Export Import GDP 2005 -2011 3. 5 2 2010 14 14 4 2011 5 5 2012 ( 2. 5) 2. 5

International Trade: Principles of Finance and Law OECD World Trade Picture in 2015 • Int trade in first six months of 2015 has fallen by % 13 in terms of value in USD. Long term average has been + % 7. Chinese export has fallen by 5% Korean by 15%. • In terms of volume the int trade shows an annual growth of % 1. 7 which is much lower than the long term average of % 5. • Essentially we see a fall in int trade for the foreseeable future.

International Trade: Principles of Finance and Law OECD World Trade Picture in 2015 The fall in int trade is attributed to a number of factors: a) Transitional factors including : – – Increase in value of $ Strike and long winter in USA Long recession in Europe with r. o. g being %. 8 fro 2012/14 Fall in Chinese demand for raw materials b) Structural changes including: – slow trade liberalization – Shale oil production which has reduced US oil import by close to 2 Millions barrel a day – Fall in trade /income elasticity in USA and China with lower demand for import

International Trade: Principles of Finance and Law OECD View of Int Trade

International Trade: Principles of Finance and Law Composition of Int. trade( Tr. $) • The trade in goods still dominated by the manufactured items reflecting in part the relative prices for the minerals and agricultural goods. Agriculture Fuel and Minerals Manufactured Others Total Goods(2011) 1, 660 (9. 1) 4, 000 (22. 4) 11, 511(64. 6) ……. 17, 816 Travel Transport Other Services …………. Services(2011) 1, 065(25. 5) 860(20. 6) 2, 240(53. 7) 4, 170

International Trade: Principles of Finance and Law Real GDP Growth

International Trade: Principles of Finance and Law Trade /GDP ratio for selected countries

International Trade: Principles of Finance and Law Trade/GDP and CA /GDP ratio for selected countries in 2012 UK USA Iran Singapore Belarus UAE China Japan Sierra Leone Qatar Trade/GDP 47. 2 25 37. 4 286. 9 146 136 47 28. 3 - CA/GDP -3. 79 -2. 71 4. 95 18. 60 -2. 88 17. 34 2. 35 1. 01 -36. 65 32. 40

International Trade: Principles of Finance and Law Leading countries In Int trade of Services • World exports of commercial services rose only by 2 per cent, to US$ 4, 350 billion, in 2012 largely due to a decline in European trade. Export Import share growth share Growth US UK Germany China France 13. 9 6. 6 6. 1 4. 4 4 9 11 9 7 15 10 7 7. 3 10 6 23 4. 3 6 3. 6 9 Iran insignificant insignificant

International Trade: Principles of Finance and Law Leading countries In Int trade of Goods Export Share Import Growth Share Growth China US Germany Japan Netherland 10. 4 8. 1 4. 5 3. 6 US 12. 3 15 China 9. 5 25 Germany 6. 8 19 Japan 4. 6 23 France 3. 9 17 Iran ( 33 rd) 0. 7 Iran(62 nd) . 03 -4

International Trade: Principles of Finance and Law China –blue – to overtake US –red- by 2024 as the world largest economy

International Trade: Principles of Finance and Law The trade picture in Iran • Data to be handled with a pinch of salt : CBI and Ministry of Commerce data conflict • Smuggling not reflected in data. Smuggling estimated be considerable and flowing both ways mostly due to subsidies , illicit traffic of narcotics and organizational strength of parastates • Smuggling is estimated around $ 20 -25 Billions plus some $ 20 Billions nacttice. • Smuggling includes ‘conventional’ smuggling , ‘formal ‘ smuggling including low tariffs/ value declaration , CKD import s and imports by certain governmental bodies. • Iran is an ‘trade open’ country with high trade/GDP ratio- 37. 4 % ( 49. 6 % in 2012) and a positive CA /GDP of 4. 95% (2012) which is markedly dependent on oil and presently sliding down. •

International Trade: Principles of Finance and Law The trade picture in Iran • Export /GDP rate has increased from % 13. 6 to 38. 8 % (2009) in a decade reflecting the high but fluctuating share of the oil revenues. Non oil exports share has hovered around % 10 • Import /GDP share has risen from % 15. 3 in 1998( 1377) to % 31. 6 in 2009 falling back to % 25. 9 in 2010 and 2011. • The merchant class and government including the para-statals play major roles in the economy. The sanctions have made trade an expensive and risky undertaking for the private sector • Trade is mostly done with the immediate neighbors and China mostly as result of political factors.

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law

Economy of Iran

Economy of Iran

Economy of Iran Export and Import 1 st Quarter 1393

International Trade: Principles of Finance and Law Export and Imports • UAE has a % 28. 6% share in exports to Iran reflecting the challenges Iran faces in purchasing ion the international markets. A total of 10 countries have close to % 75 of exports to Iran. These alternately include UAE, China , Iraq , India , Japan, Italy, Afghanistan, Germany , S. Arabia, Turkey , Korea , Azerbaijan. • Most of our exports are destined to Asia with Iraq as a major importer of our goods. China and India and emerging economies followed by neighboring Turkey, Afghanistan and Pakistan can be potential markets. • Some % 60 to % 70 of our exports are destined to only ten countries reflecting a low diversity for our non oil exports. • Export of services is remarkably influenced by ‘ transport and insurance’ services reflecting the importance of transit. These show an % 18 pa rate of growth.

International Trade: Principles of Finance and Law Export & Import of Goods in Iran

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law Major Features & Challenges • Enhanced international trade has led to increasing interdependence which is partly captured by figures on the trade/GDP ratio. • The interdependence is much greater in case of strategic items such as food and medicine , fuel and high tech. At times it is difficult to ascertain what produced item in any country is the product of that country- cars in US almost 40% foreign parts. • The interdependence is also seen in the movements of goods, services and capital following fiscal and monetary changes in any of the major economies. A recent major case is the 2007 financial crisis in the US which began in mortgage market and spread to the entire globe. • Iran is an interesting case of such inter being reliant on oil revenue dependence on one hand on the import of food , medicine and industrial parts on the other. • Int. trade is seriously impacted by the lack trade security and by the protectionism at the national and regional levels.

International Trade: Principles of Finance and Law Major Features & Challenges • Lack of trade security is caused /helped by : – Political instability and ideologies take a heavy tool on economic growth and trade, e. g. 7/11, Arab Spring, US interventionism , Iran aspirations , terrorism etc. – Unstable currency rates including fall in USD following collapse of the Breton Woods and failure of Euro to emerge as a substitute slow down the int. trade. – Government heavy hand in setting/changing legislations / regulations without consultation wit the traders. – Unfair and inequitable competition from government , monopolies and para- statals – Lack of clarity and uniformity of laws and regulations pertaining to trade. – Insufficiency of relevant, accessible timely information

International Trade: Principles of Finance and Law Major Features & Challenges • Protectionism is applied through Tariff and non tariff barriers. It has led to a drive for self- sufficiency in many countries , the failure of Uruguay and Doha Rounds , formation of trade blocks etc. • Protectionism has resulted in the regional trade within trade blocks e. g. EC, BAFTA etc overrun global trade. • A number of reasons for the protectionism include : – China and the emerging economies are capturing int. trade – arguably based on cheap labor and under-valued currencies, poor working standards, neglect of environment. The rise is threatening US and Europe as well as the developing countries unable to cope.

International Trade: Principles of Finance and Law Major Features & Challenges – Slow economic growth of Europe – a structural unemployment rate of more than 10%- and the near stagnation of the Japanese economy are dragging the world growth down. There is s strong resistance to the needed substantial changes in both economies. – Financial crisis in market based economies keep occurring often when the repayments of short terms loans become due. Mexico crisis of 94/5, Tiger economies in 1997, Russia an 1999, Turkey and Argentine and Brazil in early years of the millennium, USA and EU in 2007 onwards. Every crisis severely impacts the trade. – Structural reforms in the economies in transition mostly in eastern Europe impacted the trade and can lead to reemergence of crisis in future. – Poverty of the developing countries- more than one Billion with less than 1 $ a day- especially in Sub Sahara Africa put a dent in in the volume of int. trade , lead to unequal trade deals and breed unrest and terrorism.

International Trade: Principles of Finance and Law Major Features & Challenges • Expansion of the int. trade is tied with globalization and how the countries accept and deal with the trend. : – Is globalization beneficial to the global economy and the national economies? What do theories and paratactic tell us ? – How do we create an ‘environment’- political , legal and financial conducive to the trade ?

International Trade: Principles of Finance and Law An introduction to theoretical basis

International Trade: Principles of Finance and Law Early Modern Paradigm: Mercantilism • Mercantilism argues that a nation benefits by accumulating monetary reserves through a positive balance of trade, especially of finished goods. Mercantilism dominated Western European economic policy and discourse from the 16 th to late-18 th centuries. • Mercantilism was the dominant school of thought in Europe throughout the late Renaissance and early modern period (from the 15 th to the 18 th century). Mercantilism encouraged the many intra-European wars of the period and arguably fueled European expansion and imperialism – both in Europe and throughout the rest of the world – until the 19 th century or early 20 th century • Islamic approach to trade and development in middle ages – and even present time- may be considered as mercantilism

International Trade: Principles of Finance and Law Mercantilism • High tariffs, especially on manufactured goods, are an almost universal feature of mercantilist policy. Other policies have included: – – – – – • Building a network of overseas colonies; Forbidding colonies to trade with other nations; Monopolizing markets with staple ports; Banning the export of gold and silver, even for payments; Forbidding trade to be carried in foreign ships; Export subsidies; Promoting manufacturing with research or direct subsidies; Limiting wages; Maximizing the use of domestic resources; Restricting domestic consumption with non-tariff barriers to trade. Mercantilism still alive in form of tariffs and non tariff barriers set up against free flow of trade !

International Trade: Principles of Finance and Law Comparative Absolute Advantage (CAA) • Adam Smith , the first Classic, argues that two countries should trade on the basis of the ‘comparative absolute advantage’ -CAA- ensuring ‘mutually beneficially trade”. This indicates division of labor and specialization. • This implies that if country A produces commodity X more efficiently in comparison with county B - has absolute then both countries will benefit if they specialize in the production and export of the commodity for which they have CAA. This will lead to the optimum and effective allocation of resources and higher level of production of both commodities. • This view point leads to the call for lassie faire and call for small government- except for security related production. • The ratio of benefit each country enjoys will not be equal but both will benefit. • Situation of the CAD is rare , perhaps only in trade between the Developed and Developing countries.

International Trade: Principles of Finance and Law Comparative Relative Advantage (CRA) • The CRA, developed by Ricardo in 1871, is an undisputed and major applied economic law till today. In brief it deals with cases when a country does not have absolute advantage in the production of anything but it has relative comparative relative advantage in production of one vis-a-the other. . • In such cases if country A produces both commodity X and commodity y less efficiently in comparison with county B but the efficiency in the production of commodity x is higher than the efficiency in the production of Y then both countries will benefit if country A specialize in the production and export of the commodity for which it has better efficiency i. e. commodity x. This will lead to the optimum and effective allocation of resources and higher level of production of both commodities. • This principle holds if the absolute disadvantage is not equal for both commodities and therefore there is an incentive for trade.

International Trade: Principles of Finance and Law Comparative Relative Advantage (CRA) • It should be noted that the trade in such cases if beneficial for both if the price for the commodity X is also lower taking into account the cost of production - in classical terms the wages – and the parity rate is also favorable. In other words the wages should be low enough and /or the currency cheap enough to allow for beneficial trade. • It should be further noted that the CRA assumes : – – – – • Two countries and two commodities Free trade Free movement of capital and labour Fixed production cost Zero transport cost No technological progress Labour theory of value The Labour theory of value assumes that labour is the only source of value and it is homogenous. These assumption are doubtful to say the least.

International Trade: Principles of Finance and Law Opportunity Cost : Comparative Relative Cost • This is a new interpretation of the RCA. According to this viewpoint the production cost of any product is what the quantity of the other product one must forgo. The cost here is not solely the cost of labour and includes other expenses. • In each country a theoretical Production feasibility Curve for the two commodity could be calculated. Opportunity cost for each country is the ratio of production costs. i. e Px/Py Country B PFC Country A PFC X X Y Y

International Trade: Principles of Finance and Law Opportunity Cost : Comparative Relative Cost • Each country should therefore focus on the production of products for which it has comparative cost advantages, i. e. less opportunity cost . The total production will increase and total consumption will increase. Both countries will benefit although their share is not equal. • Note that theory is based on the fixed opportunity cost. It also ignores the demand. • If the Demand curve is added to the discussion then depending on the strength of the demand for the exchangable products it would be possible that a small country might reap all the benefits – significance of being insignificant ! • Studies show that the Ricardo theory can to a reasonable extent explain the world trade. Studies also show that exports of the countries have a clear negative relation with the comparative cost of labor.

International Trade: Principles of Finance and Law Opportunity Cost : Comparative Relative Cost • In cases where the marginal cost of production increases then the marginal opportunity cost of trade also increases. In other words the Marginal rate of Transformation ( MRT) , the gradient of the Production Feasibility Curve will increase. • The reasons for the increasing MRT include: – Heterogeneous factors of production – Factors of production are not used infixed proportion in all products Production Feasibility Curve

International Trade: Principles of Finance and Law Opportunity Cost : Comparative Relative Cost • The impact of the increasing MRT are manifold: – Neither of the trading countries fully specialize in one product, i. e. both produce both products till MRT equals the relative prices. Data shows that countries produce most of the goods but have comparative advantage in some as reflected by difference between the export and import ratios of the goods to the total export and import – Both countries benefit from trade – Trade would impact the Social Indifference Curve (SIC) shifting it or changing its gradient similar to the impact of the technological change or income change. – The implication of the change in the SIC is change in the welfare of the exporters and importers: some lose some win through change in sales , prices and employmenet. This is why some call for the Compensation Funds ! l

International Trade: Principles of Finance and Law Hecksher –Ohlin Theory • The Heckscher–Ohlin model (H–O model) was developed by Eli and Berti Ohlin in the 30’s. • It builds on theory of comparative advantage but tries to explain reasons for a country having comparative advantage overt the other in production of a commodity. It further tries to discern the impact of trade on the income of the factor of production. • Essentially it attempts to relate the patterns of commerce and production to the factor endowments ; in other words the relative abundance of the factors of production in different countries.

International Trade: Principles of Finance and Law Hecksher –Ohlin Theory • The O-H model essentially says that countries will export products that use their abundant and cheap factor(s) of production and import products that use the countries' scarce factor(s). Assumption s include: – – – – – Two countries two goods Similar technology Commodity x being capital intensive and commodity being labour intensive Fixed return to scale Perfect competition similar tastes Free move of capital and labour Zero transport Free trede Imperfect allocation of resources

International Trade: Principles of Finance and Law Hecksher –Ohlin Theory • The O-H Theory argues that relative endowments of the factors of production determine a country's comparative advantage. Countries have comparative advantages in those goods for which the required factors of production are relatively abundant locally. • Profitability of goods is determined by input costs. Goods that require inputs that are locally abundant will be cheaper to produce than those goods that require inputs that are locally scarce. • The exports of a capital-abundant country will be from capital-intensive industries, and labour-abundant countries will import such goods, exporting labour intensive goods in return. Competitive pressures within the H–O model produce this prediction fairly straightforwardly. Conveniently, this is an easily testable hypothesis. • This is called the O-H Theorem.

International Trade: Principles of Finance and Law Hecksher –Ohlin Theory • Modern econometric estimates have shown the O-H model to perform poorly, however, and adjustments have been suggested, most importantly the assumption that technology is not the same everywhere. This change would mean abandoning the pure H–O model. • In 1954 an econometric test of the H–O model by V. Leontif found that the US, despite having a relative abundance of capital, tended to export labor intensive goods and import capital-intensive goods. This problem became known as the Leontief paradox. • Alternative trade models and various explanations for the paradox have emerged as a result of the paradox. One such trade model, the Linder hypothesis, suggests that goods are traded based on similar demand rather than differences in supply side factors (i. e. , H–O's factor endowments).

International Trade: Principles of Finance and Law Imperialism& Trade • This view is attributable to Lenin and Kaotesky. • To Lenin there was difference between the competitive capitalism of Marx era and the monopoly capitalism of the early 2 th century. To him the growth of the monopoly capitalism leads to the imperialist domination of the poorer countries by the rich and hence there is international class conflict between the rich and the poor. • In this view international trade essentially is seen as means of domination through Imperialism.

International Trade: Principles of Finance and Law Dependency Theories : Imperialism redefined • Paul Baran incorporated Lenin views of Imperialism in his theory of growth and recession. He argues that capitalism in LDCs is not endogenous and essentially is due to transfer of monopolies, business activities and trade from abroad. To him any coalition of national progressive forces will eventually be radicalized and polarized and would move towards riots and revolution. International trade is seen, naturally, as a vehicle of capitalist domination to be treated with suspicion and caution, to say the least. • According to Celso Furtado from the 18 th century and following global changes in demand a new international division of labour has taken place in which the ‘peripheral countries’ in Asia, Africa and Latin America specialize in producing primary products in ‘ enclaves ‘ controlled by foreigners while importing ‘consumer goods’ that are e produced by ‘ central countries’ of the west equipped with modern technology. The increased productivity and the new consumption patterns in the peripheral countries have given rise to a small ruling class and its allies who cooperate with the DCs towards modernization. The result is the ‘ peripheral capitalism’ which is unable to generate innovations and is dependent on the decisions from outside for transformation.

International Trade: Principles of Finance and Law Dependency Theories : Imperialism redefined • Andre Gundar Frank argued that the contemporary underdeveloped countries did not resemble the early years of the now developed countries which were never underdeveloped. Underdevelopment does not mean ‘traditional economic, social and political institutions’ but the subjection of an LDC to the colonial rule and the domination of foreign powers. Development is hindered by dependence. The LDcs become satellites of the DCs- case of Brazil. LDCs cities are satellites of the Dcs. The less dependence means more development – case of Japan is telling. • To him more development in DCs slows down developments in LDCs. Transfer of capital , values and institutions from the developed to the underdeveloped is not the solution to under development. The reasons for being underdeveloped are therefore local enterprise being replaced by modern multinationals; unskilled workers in industry and agriculture while the educated are placed in post colonial positions ; migration to cities that are dominated by west; markets are open to imperialist forces. • He sees the solution in moving out of the capitalist world. Trade with the west is not favoured.

International Trade: Principles of Finance and Law Major elements of the institutional setting

International Trade: Principles of Finance and Law UNCITRAL • United Nations Commission on International Trade( UNCITRAL) was established in 1966 with the General Assembly to promote the progressive harmonization and unification of international trade law. • It is the core legal body of the United Nations system in the field of international trade law. UNCITRAL carries out its work at annual sessions held alternately in New York and Vienna • UNCITRAL's original membership comprised 29 states, and was expanded to 36 in 1973, and again to 60 in 2004. Member states of UNCITRAL are representing different legal traditions and levels of economic development, as well as different geographic regions. The Commission member States are elected by the General Assembly. Membership is structured so as to be representative of the world's various geographic regions and its principal economic and legal systems. Members of the commission are elected for terms of six years, the terms of half the members expiring every three years. •

International Trade: Principles of Finance and Law • UNCITRAL It is a legal body with universal membership – including Iran- specializing in commercial law reform worldwide. UNCITRAL's business includes: – – – Conventions, model laws and rules which are acceptable worldwide Legal and legislative guides and recommendations of practical value Updated information on case law and enactments of uniform commercial law Technical assistance in law reform projects Regional and national seminars on uniform commercial law • UNCITRAL contributions are legislative, contractual and explanatory

International Trade: Principles of Finance and Law UNCITRAL • The methods of work are organized at three levels: – UNCITRAL as the Commission , which holds an annual plenary session. – The intergovernmental working groups which is developing the topics on UNCITRAL's work program. Texts designed to simplify trade transactions and reduce associated costs are developed by working groups comprising all member States of UNCITRAL, which meet once or twice per year. Non-member States and interested international and regional organizations are also invited and can actively contribute to the work since decisions are taken by consensus, not by vote. – The International Trade Law Division of the United Nations Office of Legal Affairs provides substantive secretariat services to UNCITRAL, such as conducting research and preparing studies and drafts. This is the third level, which assists the other two in the preparation and conduct of their work.

International Trade: Principles of Finance and Law UNCITRAL conventions Include : • • • the Convention on the Limitation Period in the International Sale of Goods (1974) the United Nations Convention on the Carriage of Goods by Sea (1978) the United Nations Convention on Contracts for the International Sale of Goods (1980) the United Nations Convention on International Bills of Exchange and International Promissory Notes (1988) the United Nations Convention on the Liability of Operators of Transport Terminals in International Trade (1991) the United Nations Convention on Independent Guarantees and Stand-by Letters of Credit (1995) the United Nations Convention on the Assignment of Receivables in International Trade (2001) the United Nations Convention on the Use of Electronic Communications in International Contracts (2005) the United Nations Convention on Contracts for the International Carriage of Goods Wholly or Partly by Sea (2008

International Trade: Principles of Finance and Law UNCITRAL Model Laws • • • UNCITRAL Model Law on International Commercial Arbitration (1985) Model Law on International Credit Transfers (1992) UNCITRAL Model Law on Procurement of Goods, Construction and Services (1994) UNCITRAL Model Law on Electronic Commerce (1996) Model Law on Cross-border Insolvency (1997) UNCITRAL Model Law on Electronic Signatures (2001) UNCITRAL Model Law on International Commercial Conciliation (2002) Model Legislative Provisions on Privately Financed Infrastructure Projects (2003) UNCITRAL also drafted the: UNCITRAL Arbitration Rules (1976) (—revised rules will be effective August 15, 2010; prereleased, July 12, 2010 UNCITRAL Conciliation Rules (1980) UNCITRAL Arbitration Rules (1982) UNCITRAL Notes on Organizing Arbitral Proceedings (1996)

International Trade: Principles of Finance and Law UNCITRAL CLOUT and Legislative Guides • CLOUT (Case Law on UNCITRAL Texts )is a collection of court decisions and arbitral awards interpreting UNCITRAL texts. It includes case abstracts in the six United Nations languages on the United Nations Convention on Contracts for the International Sale of Goods (CISG) (Vienna, 1980) and the UNCITRAL Model Law on International Commercial Arbitration (1985).

International Trade: Principles of Finance and Law UNCITRAL Legislative Guides • Legislative Guides aims to provide a detailed analysis of the legal issues in a specific area of the law, proposing efficient approaches for their resolution in the national or local context. Legislative guides do not contain articles or provisions, but rather recommendations. Legislative Guides are developed by the UNICTRAL Working Groups and subsequently finalized by the UNCITRAL Commission in its annual session. • UNCITRAL has adopted the following legislative guides: – – UNCITRAL Legislative Guide on Privately Financed Infrastructure Projects (2000) UNCITRAL Legislative Guide on Insolvency Law (2004) UNCITRAL Legislative Guide on Secured Transactions (2007) UNCITRAL Legislative Guide on Secured Transactions: Supplement on Security Rights in Intellectual Property (2010)

International Trade: Principles of Finance and Law The United Nations Convention On Contracts for the International Sale of Goods (CISG; the Vienna Convention)

International Trade: Principles of Finance and Law Background • CISG is a treaty, that is a uniform international sales law. • It was developed by the UNCITRAL , was signed in Vienna in 1980 and came into force on 1 January 1988, after being ratified by 11 countries. As of September 2014, it has been ratified by 83 countries accounting for significant world trade. • The CISG is a success for the UNCITRAL, and the "most successful international document so far“ , being accepted by 81 states from "every geographical region, every stage of economic development and every major legal, social and economic system“.

International Trade: Principles of Finance and Law Goals • The CISG allows exporters to avoid Choice of Law issues, as it offers "accepted substantive rules on which contracting parties, courts, and arbitrators may rely. • Unless excluded by the express terms of a contract the CISG is deemed to be incorporated into (and supplant) any otherwise applicable domestic laws w. r. t to a transaction in goods between parties from different Contracting States. • It success is in part due to its flexibility in allowing Contracting States the option of taking exception to certain specified articles. This was instrumental in convincing states with disparate legal traditions to subscribe to an otherwise uniform code. 56 out of 81 have made no reservations.

International Trade: Principles of Finance and Law Application and Major Features • The CISG applies to contracts of the sale of goods between parties whose places of business are in different States, when the States are Contracting States. • The CISG also applies if the parties are situated in different countries (which need not be Contracting States) and the conflict of law rules lead to the application of the law of a Contracting State. • The CISG is intended to apply to commercial goods and products only. With some limited exceptions, the CISG does not apply to personal, family, or household goods, nor does it apply to auctions, ships, aircraft, or intangibles and services. • The position of computer software is ‘controversial’ and will depend upon various conditions and situations. • .

International Trade: Principles of Finance and Law Application and Major Features • Parties to a contract may exclude or vary the application of the CISG. Interpretation of the CISG is to take account of the ‘international character’ of the Convention, the need for uniform application, and the need for good faith in international trade. • An offer to contract must be addressed to a person, be sufficiently definite – that is, describe the goods, quantity, and price – and indicate an intention for the offeror to be bound on acceptance. • CISG does not appear to recognise Common Law unilateral contracts but, subject to clear indication by the offeror, treats any proposal not addressed to a specific person as only an invitation to make an offer.

International Trade: Principles of Finance and Law Application and Major Features • The seller must deliver the goods, hand over any documents relating to them, and transfer the property in the goods, as required by the contract • Similarly, the buyer is to take all steps ‘which could reasonably be expected to take delivery of the goods, and to pay for them. • Generally, the goods must be of the quality, quantity, and description required by the contract, be suitably packaged and fit for purpose. • The seller is obliged to deliver goods that are not subject to claims from a third party for infringement of industrial or intellectual property rights in the State where the goods are to be sold. • The buyer is obliged to promptly examine the goods and, subject to some qualifications, must advise the seller of any lack of conformity within ‘a reasonable time’ and no later than within two years of receipt.

International Trade: Principles of Finance and Law Application and Major Features • The CISG describes when the risk passes from the seller to the buyer although in practice most contracts define the ‘seller's delivery obligations quite precisely by adopting an established shipment term such as FOB and CIF • Remedies of the buyer and seller depend upon the character of a breach of the contract. If the breach is not fundamental, then the contract is not avoided and remedies may be sought including claiming damages, specific performance, and adjustment of price. • The CISG excuses a party from liability to a claim of damages where a failure to perform is attributable to an impediment beyond the party’s, or a third party sub-contractor’s, control that could not have been reasonably expected. • Where a seller has to refund the price paid, then the seller must also pay interest to the buyer from the date of not of the buyer's right to claim damages. In a mirror of the seller’s obligations, where a buyer has to return goods the buyer is accountable for any benefits received.

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law WTO and Predecessors • The World Trade Organization (WTO) is an organization that intends to supervise and promote international trade through its liberalization. • Essentially it is a rethink of the International Trade Organization (ITO) which was planned to be established same time 1947 as WB and IMF after the WWII but failed to materialize after the US opposition- based on its broad terms of reference and presumed conflict with national sovereignty. • ITO and latter the GATT and WTO were the world response to the trade restrictions of the 30’s which restrained world trade and growth. Free trade based on comparative advantage on balance was to be to the benefit of all. • Simultaneously a group of 23 countries negotiated and agreed on the General Agreement on Tariffs and Trade (GATT) which as a precaution included provisions that it would be partly replaced by ITO if it were formed but otherwise would continue to be applicable.

International Trade: Principles of Finance and Law WTO and Predecessors • GATT was signed by US administration which was not legally obliged send it to the Congress for endorsement. It became legally binding for the signatories in 1948. • In practice GATT although an agreement worked as an organization with a small secretariat in lieu of the ITO for some 48 years until it was replaced with the WTO. • During its life time GATT organized a number of Rounds of Multilateral Negotiations including Geneva , Annecy 49, Torquay 51, Dillon 60 -62, Kennedy 62 -67, Tokyo 73 -79 and Uruguay 86 -94 resulting in – reduced tariffs , – anti dumping , – additional agreements concerning intellectuals property and services, dispute resolution – and finally the WTO.

International Trade: Principles of Finance and Law • WTO and Predecessors The organization officially commenced in 1995 under the Marrakesh Agreement, replacing the General Agreement on Tariffs and Trade (GATT) which had commenced in 1948. • Most of the issues that the WTO focuses on derive from previous trade negotiations, especially from the Uruguay Round (1986– 1994 ) • It deals with regulation of trade between participating countries; it provides a framework for negotiating and formalizing trade agreements, and a dispute resolution process aimed at enforcing participant's adherence to WTO agreements, which are signed by representatives of member governments and ratified by their parliaments.

International Trade: Principles of Finance and Law WTO and Predecessors • Although it was designed to serve multilateral agreements, during several rounds of GATT negotiations , particularly the Tokyo Round, plurilateral agreements created selective trading and caused fragmentation among members. • In 1993, the GATT was updated (GATT 1994) to include new obligations upon its signatories. WTO was created. The 75 existing GATT members and the EC communities became the founding members of the WTO on 1 January 1995. The other 52 GATT members rejoined the WTO in the following two years. • Since the founding of the WTO, 21 new non-GATT members have joined and 29 are currently negotiating membership. There a total of 157 member countries in the WTO, with Russia and Vanuatu being new members as of 2012. • WTO is yet to fully complete the Duha Development Round launched in 2001 with an explicit focus on addressing the needs of developing countries.

International Trade: Principles of Finance and Law WTO and Predecessors • The conflict between free trade on industrial goods and services but retention of protectionism on farm subsidies to domestic agricultural sector (requested by developed countries) and the substantiation of the international liberalization of fair trade on agricultural products (requested by developing countries) remain the major obstacles. • These points of contention have hindered any progress to launch new WTO negotiations beyond the Doha Development Round. As a result of this impasse, there has been an increasing number of bilateral free trade agreements signed. • In December 2013 WTO negotiations in Indonesia resulted in a successful agreement reduce tariffs while allowing for food subsides and other concessions to the developing countries. The was estimated to add one trillions USD to the world trade.

International Trade: Principles of Finance and Law WTO and Predecessors • The GATT still exists as the WTO's umbrella treaty for trade in goods, updated as a result of the Uruguay Round negotiations. • GATT 1994 is not however the only legally binding agreement included via the Final Act at Marrakesh; a long list of about 60 agreements, annexes, decisions and understandings was adopted. The agreements fall into a structure with six main parts: – The Agreement Establishing the WTO – Goods and investment – the Multilateral Agreements on Trade in Goods including the GATT 1994 and the Trade Related Investment Measures (TRIMS) – Services — the General Agreement on Trade in Services – Intellectual property – the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) – Dispute settlement (DSU) – Reviews of governments' trade policies (TPRM]

International Trade: Principles of Finance and Law WTO and Predecessors WTO, most important functions are : • Overseeing the implementation, administration and operation of the covered agreements. • Being a forum for negotiations and for settling disputes. • Reviewing and propagating the national trade policies, and to ensure the coherence and transparency of trade policies through surveillance in global economic policy-making. • Assistance to the developing, least-developed and low-income countries in transition to adjust to WTO rules and disciplines through technical cooperation and training. • Economic research and analysis: regular assessments of the global trade picture • Cooperation with IMF and the World Bank

International Trade: Principles of Finance and Law WTO and GATT Principles of the trading system • Five principles are of particular importance in understanding both the pre-1994 GATT and the WTO: Non-discrimination. 1. It has two major components: the Most Favoured Nation (MFN) rule, and the National Treatment policy. 1. The MFN rule requires that a WTO member must apply the same conditions on all trade with other WTO members, i. e. a WTO member has to grant the most favorable conditions under which it allows trade in a certain product type to all other WTO members. 2. National treatment means that imported goods should be treated no less favorably than domestically produced goods (at least after the foreign goods have entered the market) and was introduced to tackle non- tariff barriers to trade(e. g. technical standards, security standards et al. discriminating against imported goods).

International Trade: Principles of Finance and Law Reciprocity. • It reflects both a desire to limit the scope of free riding that may arise because of the MFN rule, and a desire to obtain better access to foreign markets. • A related point is that for a nation to negotiate, it is necessary that the gain from doing so be greater than the gain available from unilateral liberalization; reciprocal concessions intend to ensure that such gains will materialise.

International Trade: Principles of Finance and Law Binding and enforceable commitments. The tariff commitments made by WTO members in a multilateral trade negotiation and on accession are enumerated in a schedule (list) of concessions. These schedules establish "ceiling bindings": a country can change its bindings, but only after negotiating with its trading partners, which could mean compensating them for loss of trade. If satisfaction is not obtained, the complaining country may invoke the WTO dispute settlement procedures. Transparency. The WTO members are required to publish their trade regulations, to maintain institutions allowing for the review of administrative decisions affecting trade, to respond to requests for information by other members, and to notify changes in trade policies to the WTO. These internal transparency requirements are supplemented and facilitated by periodic country-specific reports (trade policy reviews) through the Trade Policy Review Mechanism (TPRM). The WTO system tries also to improve predictability and stability, discouraging the use of Quotas and other measures used to set limits on quantities of imports

International Trade: Principles of Finance and Law Safety valves. In specific circumstances, governments are able to restrict trade. The WTO's agreements permit members to take measures to protect not only the environment but also public health, animal health and plant health. There are three types of provision in this direction: • articles allowing for the use of trade measures to attain non-economic objectives; • articles aimed at ensuring "fair competition"; members must not use environmental protection measures as a means of disguising protectionist policies • provisions permitting intervention in trade for economic reasons Exceptions to the MFN principle also allow for preferential treatment of developing countries, regional free trade areas and customs unions

Iran and WTO • Art 104 of 5 th Plan explicitly calls for actions to facilitate joining WTO. • Iran first request to join WTO was submitted in 1996. The request was not warmly received • In 2006 Iran was accepted as an Observer. • In 2015 the Ministry of Commerce advised that it has formed a Special Team to facilitate the entry of Iran in WTO. The team is now looking at the trade regime. • Best estimate of entry in 2019

WTO and Iran • Barriers to entry are : – Art 44 of Constitutions – Govt Monopoly of Trade – Subsidies , various taxes and levies – Support to local production – Lack of intellectual property rules – Art 139 of Constitutions re settlement of disputes – Tariffs and non tariffs barriers to free trade

International Trade: Principles of Finance and Law International Chamber of Commerce (ICC) • ICC is the largest, most representative business organization in the world. Its hundreds of thousands of member companies in over 130 countries have interests spanning every sector of private enterprise. • It was founded in 1919 to serve world business by promoting trade and investment, open markets for goods and services, and the free flow of capital. The organization's international secretariat was established in Paris and the ICC's International Court of Arbitration was created in 1923. • A world network of national committees keeps the ICC International Secretariat in Paris informed about national and regional business priorities. More than 2, 000 experts drawn from ICC’s member companies feed their knowledge and experience into crafting the ICC stance on specific business issues. • UN, the WTO and many other intergovernmental bodies, both international and regional, are kept in touch with the views of international business through ICC. The ICC was the first organization granted general consultative status with the UN ECOSOC.

International Trade: Principles of Finance and Law • ICC services include 1. 2. 3. 4. 5. Dispute Resolution through the ICC International Court of Arbitration ICC policies, rules and standards are prepared by specialized working bodies. Code of Advertising and Marketing Communication which sets ethical standards Events organized worldwide ranging from large topical conferences to training sessions ICC Publications providing business with essential resources in three broad categories: ICC rules and guidelines, practical commentaries, and reference works. 6. ICC Commercial Crime Services (CCS) providing a centralized crime-fighting body. It draws on the worldwide resources of its members in the fight against commercial crime on many fronts. 7. Special projects and initiatives 8. Business Action to Stop Counterfeiting and Piracy

International Trade: Principles of Finance and Law Trading Blocks • An intergovernmental agreement, often part of a regional intergovernmental organization, where regional tariff and non-bariff barriers to trade are reduced or eliminated among the participating states. • Trade blocs can be stand-alone agreements between several states (such as the North American Free Trade Agreement (NAFTA) or part of a regional organization (such as the European Union). • Depending on the level of economic integration, trade blocs fall into different categories: – Preferential Trading Areas, – Free Trade Areas, – Customs Unions, Common Markets and – Economic and Monetary Unions • .

International Trade: Principles of Finance and Law TBs continued • TBs usually share four common features traits: – similar levels of per capita GNP, – geographic proximity, – similar or compatible trading regimes, and – political commitment to regional organization. • Trade blocks have a long history going back to middle ages • Advocates of free trade are generally opposed to trading blocs since they encourage regional as opposed to global free trade leading to a more fragmented world economy.

International Trade: Principles of Finance and Law Preferential Trade Area (PTA) • PTA is a TB that gives preferential access to certain products from the participating countries. This is done by reducing tariffs but not by abolishing them completely. • A PTA can be established through a Trade Pact. It is the first stage of Economic Integration. • The line between a PTA and a Free Trade Area (FTA)is not clear , as most PTA aim to become a FTA in accordance with the GATT. • These tariff preferences have created numerous departures from the free trade principles advocated by the WTO. • ECO is an example of the PTA

International Trade: Principles of Finance and Law Free Trade Area(FTA) • FTA is a TB whose member states have signed a free-trade agreement (FTA), eliminating tariffs , import quotas , and preferences on most (if not all) goods and services traded between them. It may complemented with free movement of people within the area and hence an Open Border Area. • FTAs are considered the second stage of economic integration. • Countries choose this kind of economic integration if their economic structures are complementary. If their economic structures are competitive, it is likely there will be a full FTA, • North America Free Trade Agreement ( NAFTA ) and WTO are examples of FTA.

International Trade: Principles of Finance and Law Customs Union • Customs Union is the third stage of economic integration • Customs Union is a type of Trade Block , established through trade pacts , and composed of a Free Trade Area with a common external tariff. • The participant countries in a Customs Union set up common external trade policies and commom cometition plocies , but may in some cases use different import approaches including quotas. • The apparent purpose for establishing a customs union normally is increased economic efficiency and enhanced trade. • Establishing closer political and cultural ties between the member countries is also a reason - pressure by Russia on Ukraine to form a Customs Union with Russia being a clear recent example.

International Trade: Principles of Finance and Law Common Market • A single market is a type of TB which is composed of an FTA with common policies on product regulation, and free move of labor , capital, enterprise and services. • The goal is that the free movement of capital, labour, goods, and services between the members is as easy as within them. The physical, technical and fiscal barriers among the member states are removed to the maximum extent possible. • A common market is a first stage towards a single market, and may be limited initially to a free trade area with relatively free movement of capital and of services. • Transition to a single market can have short term negative impact on some sectors of a national economy due to increased international competition. Enterprises that enjoy national protection and subsidies may struggle to survive against their more efficient competitors. The consequence may be unemployment or migration. • The European Economic Community is the first example of a both common and single market.

International Trade: Principles of Finance and Law Economic and Monetary Union • An economic and monetary union is a type of TB composed of an economic union with a monetary union. • A currency or money union is where two or more countries share the same currency without necessarily having any further economic integration. There are three types of currency unions : a) Informal – unilateral adoption of a foreign currency; b) Formal though adoption of a foreign currency by virtue of bilateral or multilateral agreement and c) Formal with common policy – establishment by multiple countries of common monetary policy and issuing authority for their common currency efficiency. • This is the fifth stage of economic integration. EMU is established through a currencyrelated trade pact. An intermediate step between pure EMU and a complete economic integration is the fiscal union.

International Trade: Principles of Finance and Law European Union : An example of an TB • With a population of 509, 365, 627 (July 2013 est. ) EU is the world ‘third largest country ‘including 28 countries. • A number of European leaders in the late 1940 s became convinced that the only way to establish a lasting peace was to reconcile the two chief belligerent nations - France and Germany - both economically and politically. • In 1950, France proposed an eventual union of all Europe, the first step of which would be the integration of the coal and steel industries of Western Europe. In 1951 the European Coal and Steel Community (ECSC) was set up when six members, Belgium, France, West Germany, Italy, Luxembourg, and the Netherlands, signed the Treaty of Paris. • In 1957, envisioning an "ever closer union, " the Treaties of Rome created the European Economic Community (EEC) and the European Atomic Energy Community (Euratom) and the six member states undertook to eliminate trade barriers among themselves by forming a common market.

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law European Union : An example of an TB • In 1967, the ESCS , EEC and the Euroatom were formally merged into the European Community (EC), creating a single Commission, a single Council of Ministers, and the European Parliament. • In 1973, the first enlargement of the EC took place with the addition of Denmark, Ireland, and the United Kingdom. The 1980 s saw further membership expansion with Greece joining in 1981 and Spain and Portugal in 1986. • The 1992 Treaty of Maastricht laid the basis for further forms of cooperation in foreign and defense policy, in judicial and internal affairs, and in the creation of an economic and monetary union - including a common currency. • This further integration created the European Union (EU), at the time standing alongside the European Community. In 1995, Austria, Finland, and Sweden joined the EU/EC, raising the membership total to 15.

International Trade: Principles of Finance and Law European Union : An example of an TB • A new currency, the euro, was launched on 1 January 1999; it became the unit of exchange for all EU member states except Denmark, Sweden, and the United Kingdom. • Ten new countries joined the EU in 2004 - Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia. Bulgaria and Romania joined in 2007 and Croatia in 2013, bringing the current membership to 28. • An effort to establish a "Constitution for Europe, " growing out of a Convention held in 2002 -2003, foundered when it was rejected in referenda in France and the Netherlands in 2005. • A subsequent effort in 2007 incorporated many of the features of the rejected Constitution while also making a number of substantive and symbolic changes. The new treaty, referred to as the Treaty of Lisbon , again invoking the idea of an "ever closer union, " came into force on 1 December 2009 and the European Union officially replaced and succeeded the European Community.

International Trade: Principles of Finance and Law European Union : An example of an TB • Although the EU is not a federation in the strict sense, it is far more than a free-trade association such as ASEAN, NAFTA. • EU has certain attributes associated with independent nations: its own flag, currency (for some members), and law-making abilities, as well as diplomatic representation and a common foreign and security policy in its dealings with external partners. • Such a large number of nation-states to cede some of their sovereignty to an overarching entity is unique. • EU has practically evolved from a Preferential Tariff Area to Free Trade Area, Customs Union , Common Market a full Economic and Money Union. • EU is however under external – e. g. Russia , US – and internal – UK, Greece , Portugal , Spain pressure.

International Trade: Principles of Finance and Law International Contracts

Contracts What is a contract ? • Contract is an agreement between two or more persons which creates an obligation to do or not do a particular thing. • Essential components of a contract are: – – – Competent parties Subject matter A legal consideration , Mutuality of agreement Mutuality of obligation ( Black’s Law Dictionary )

Contracts Definitions • ﻗﺮﺍﺭﺩﺍﺩ ﻭ ﻋﻘﺪ ﺩﺭﻗﻮﺍﻧیﻦ ﻣﺎ ﻣﺘﺮﺍﺩﻓﻨﺪ ﺍکﺮچﻪ پﺎﺭﻩ ﺍی ﻣﺤﺘﻤﻼ ﺑﻪ ﻏﻠﻂ ﻣﻌﺘﻘﺪﻧﺪ ﻭﺍژﻪ ﻋﻘﺪ ﻣﺨﺼﻮﺹ ﻋﻘﻮﺩ ﺧﺎﺹ ﻭ ﻗﺮﺍﺭﺩﺍﺩ ﻣﺨﺘﺺ ﻋﻘﻮﺩ ﺑﺪﻭﻥ ﻧﺎﻡ. • ﻣﻌﺎﻣﻠﻪ ﻧیﺰ ﺑﺎ ﻗﺮﺍﺭﺩﺍﺩ ﻣﺘﺮﺍﺩﻑ ﺍﺳﺖ ﺍﻣﺎ ﺑﺮﺍی ﻋﻘﻮﺩ ﻣﺎﻟی ﻭ ﻣﻌﻮﺽ ﺑکﺎﺭ ﻣیﺮﻭﺩ. • ﻣﺎﺩﻩ 381 ﻗﺎﻧﻮﻥ ﻣﺪﻧی : ”ﻋﻘﺪ ﻋﺒﺎﺭﺕ ﺍﺳﺖ ﺍﺯیﻦ کﻪ یک یﺎ چﻨﺪ ﻧﻔﺮ ﺩﺭ ﻣﻘﺎﺑﻞ یک یک یﺖ چﻨﺪ ﻧﻔﺮ ﺩیگﺮ ﺗﻌﻬﺪ ﺑﺮ ﺍﻣﺮی ﻧﻤﺎیﻨﺪ ﻭ ﻣﻮﺭﺩ ﻗﺒﻮﻝ ﺍیﺸﺎﻥ ﺑﺎﺷﺪ. “ پﺲ ﻋﻘﺪ ﺑﺮ ﻣﺒﻨﺎی ﺩﻭ یﺎ چﻨﺪ ﺍﺭﺍﺩﻩ ﺍﺳﺖ ﺑﺮ ﺧﻼﻑ ﺍیﻘﺎﻉ کﻪ ﺑﺮ ﻣﺒﻨﺎی یک ﺍﺭﺍﺩﻩ ﺍﺳﺖ. ﺩیگﺮ ﺍﻧکﻪ ﻫﺪﻑ ﺍﺯ ﻋﻘﺪ ﺍیﺠﺎﺩ ﺗﻌﻬﺪ ﺍﺳﺖ – ﺍگﺮچﻪ ﻋﻘﺪ ﺗﻨﻬﺎ ﻣﻨﺒﻊ ﺍیﺠﺎﺩ ﺗﻌﻬﺪ ﻧیﺴﺖ. • ﻋﻘﺪ ﺗﻮﺍﻓﻖ ﺩﻭ یﺎ چﻨﺪ ﺍﺭﺍﺩﻩ ﺍﺳﺖ کﻪ ﺑﻤﻨﻈﻮﺭ ﺍیﺠﺎﺩ ﺍﺛﺎﺭ ﺣﻘﻮﻗی ﺍﻧﺠﺎﻡ ﻣیﺸﻮﺩ

Contracts Freedom of Contract • ﺍﺻﻞ ﺑﺮ ﺍﺯﺍﺩی ﺍﺳﺖ. ﻣﺎﺩﻩ 01 ﻗﺎﻧﻮﻥ ﻣﺪﻧی “ﻗﺮﺍﺭﺩﺍﺩﻫﺎی ﺧﺼﻮﺻی ﻧﺴﺒﺖ ﺑﻪ کﺴﺎﻧی کﻪ ﺍﻥ ﺭﺍ ﻣﻨﻌﻘﺪ ﻧﻤﻮﺩﻩ ﺍﻧﺪ , ﺩﺭ ﺻﻮﺭﺗی کﻪ ﺧﻼﻑ ﺻﺮیﺢ ﻗﺎﻧﻮﻥ ﻧﺒﺎﺷﺪ , ﻧﺎﻓﺬ ﺍﺳﺖ“. – – ﺩﺭ ﻣﻮﺍﺭﺩ ﺳکﻮﺕ یﺎ ﺍﺟﻤﺎﻝ ﻗﺎﻧﻮﻥ ﺍﺭﺍﺩﻩ ﻃﺮﻓیﻦ ﺷﺮﻁ ﺍﺳﺖ ﻋﻘﺪ ﺑﺎ ﺗﺮﺍﺿی ﺍﺳﺖ ﻭ ﺷﺮﻁ ﺧﺎﺹ ﻧﺪﺍﺭﺩ ﻃﺮﻓیﻦ ﻋﻘﺪ ﻣﻠﺰﻡ ﺑﻪ ﺍﺟﺮﺍی ﺍﻧﻨﺪ. ﺍﺛﺮ ﻋﻘﺪ ﻣﺤﺪﻭﺩ ﺑﻪ ﻃﺮﻓیﻦ ﺍﺳﺖ. • ﺍیﻦ ﺍﻣﺮ ﻫﻢ ﺭیﺸﻪ ﺩﺭ ﺗﺮﺟﻤﻪ ﺍﺯ ﻗﻮﺍﻧیﻦ ﺍﺭﻭپﺎیی ﺩﺍﺭﺩ ﻫﻢ ﺩﺭ ﻓﻘﻪ ﺍﻣﺎﻣیﻪ.

Contracts ﺍﺯﺍﺩی ﻗﺮﺍﺭﺩﺍﺩ • ﻋﻮﺍﻣﻞ ﻣﺤﺪﻭﺩ کﻨﻨﺪﻩ ﻋﺒﺎﺭﺗﻨﻨﺪ ﺍﺯ ﻗﺎﻧﻮﻥ , ﻧﻈﻢ ﻋﻤﻮﻣی ﻭ ﺍﺧﻼﻕ ﺣﺴﻨﻪ. • ﺩﺭ ﻣﻮﺭﺩ ﻗﺎﻧﻮﻥ ﺍﻣﺮ ﻣﻬﻢ ” ﺍﻣﺮی “ ﺑﻮﺩﻥ ﺍﺳﺖ. ﻣﺨﺎﻟﻔﺖ ﺑﺎ ﻗﻮﺍﻧیﻦ ﺗکﻤیﻠی ﻣﻄﺮﺡ ﻧیﺴﺖ. ﺗﺸﺨیﺺ ﺍﻣﺮی ﺑﻮﺩﻥ ﻗﺎﻧﻮﻥ ﻫﺎ ﺩﺷﻮﺍﺭ ﺍﺳﺖ ﻭ ﺑﻪ ﻟﻔﻆ ﻗﺎﻧﻮﻥ, ﻣﺼﺎﻟﺢ ﻋﻤﻮﻣی ﻭ ﺣﻮﺯﻩ ﻗﺎﻧﻮﻥ ﺑﺴﺘگی ﺩﺍﺭﺩ. • ﻗﺎﻋﺪﻩ ﻣﺸﺨﺼی ﺩﺭ ﻣﻮﺭﺩ ”ﻧﻈﻢ ﻋﻤﻮﻣی ” ﻭﺟﻮﺩ ﻧﺪﺍﺭﺩ. ﻃﺒیﻌی ﺍﺳﺖ کﻪ ﺍﻧچﻪ ﺑﺎ ﻧﻈﻢ ﺩﻭﻟﺘی ﻭ ﺍﺩﺍﺭی, ﻧﻈﻢ ﻗﻀﺎیی , ﻧﻈﻢ ﺷﻐﻠی ؛ ﻧﻈﻢ ﺩﺭ ﺍﺣﻮﺍﻝ ﺷﺨﺼی , ﻧﻈﻢ ﺍﻗﺘﺼﺎﺩی , ﺳﻼﻣﺖ ﻭ ﺍﺳﺘﻘﻼﻝ ﺍﻧﺴﺎﻧﻤﻐﺎیﺮﺕ ﺩﺍﺭﺩ ﺑﺎﻃﻞ ﺍﺳﺖ. • ﺍﺧﻼﻕ ﺣﺴﻨﻪ ﻭ ﻧﻈﻢ ﻋﻤﻮﻣی ﻫﻤپﻮﺷﺎﻧی گﺴﺘﺮﺩﻩ ﺩﺍﺭﻧﺪ ﺍﻣﺎیکی ﻧیﺴﺘﻨﺪ. ﺗﺸﺨیﺺ ﺟﺰ ﺩﺭ ﻣﻮﺍﺭﺩی کﻪ ﻗﺎﻧﻮﻥ ﺻﺮﺍﺣﺘﺎ ﻣﻌیﻦ کﺮﺩﻩ ﺑﺎ ﺩﺍﺩﺭﺱ ﺍﺳﺖ.

Contracts ﺷﺮﺍیﻂ ﺻﺤﺖ ﻗﺮﺍﺭﺩﺍﺩ • ﻣﻄﺎﺑﻖ ﻣﺎﺩﻩ 091 ﻗﺎﻧﻮﻥ ﻣﺪﻧی ﺑﺮﺍی ﺻﺤﺖ ﻫﺮ ﻣﻌﺎﻣﻠﻪ ﺷﺮﺍیﻂ چﻬﺎﺭگﺎﻧﻪ ﺫیﻞ ﺍﺳﺎﺳی ﺍﺳﺖ : • 1 ﻗﺼﺪ ﻃﺮﻓیﻦ ﻭ ﺭﺿﺎیﺖ ﺍیﺸﺎﻥ • • • • • ﻣﻮﺿﻮﻉﺍﺭﺍﺩﻩ ﺑﺎیﺪﺍیﺠﺎﺩ ﺣﻘﻮﻗیﺑﺎﺷﺪ یﻌﻨیﺍﻧﺸﺎییﺑﺎﺷﺪ ﻧﻪ ﺧﺒﺮ ﺍﺯ ﺍﻥ ﺍﺛﺮ ﻋﻘﺪ ﺻﻮﺭیﺑﺎﻃﻞﺍﺳﺖ ﺍﻧچﻪﻭﺍﻗﻊﻣیﺸﻮﺩﻗﺼﺪﻭﺍﻗﻌیﺍﺳﺖ ﻧﻪ ﺍﺑﺮﺍﺯی ﺑیﺎﻥ ﻭﺍﻋﻼﻥﺍﺭﺍﺩﻩکﺎﻓیﺍﺳﺖ ﻭ ﻧﻪ ﺍﺑﻼﻍ ﺍﻥ ﻣگﺮ ﺍﻥ کﻪ ﻻﺯﻣﻪ ﺗﺮﺍﺿیﺑﺎﺷﺪ ﺩﻻﻟﺖ ﺑﺮﻗﺼﺪﻣﻤکﻦﺍﺳﺖ ﺿﻤﻨیﺑﺎﺷﺪ ﻗﺒﻮﻝﺍیﺠﺎﺏ ﻣﻄﻠﻖﺑﺎﺷﺪ ﺑﺎیﺪ ﺗﻮﺍﻓﻖ ﺑﺎ ﻫﻢ ﺩﺭ ﻧﻮﻉﻋﻘﺪ ﻫﻢ ﻣﻮﺿﻮﻉ ﺑﺎﺷﺪ ﻭ یﺪ ﻣﻌﺎﻣﻠﻪ ﺑﺮﺍی ﺷﺨﺺﺍﺳﺖ ﺧﻮﺩ ﺍﺷﺘﺒﺎﻩ ﻭﺍکﺮﺍﻩﻣﻮﺟﺐﻧﻔﻮﺫﻣﻌﺎﻣﻠﻪﻧیﺴﺖ ﺷﺨﺼیﺖﻃﺮﻑ ﻋﻠﺖﻋﻤﺪﻩﻋﻘﺪﺑﺎﺷﺪ. ﺍﺷﺘﺒﺎﻩ ﺷﺨﺺ ﺑﻪﺻﺤﺖﻣﻌﺎﻣﻠﻪﻟﻄﻤﻪﻧﻤیﺰﻧﺪ ﻣگﺮ ﺍﻧکﻪ ﺩﺭ

Contracts • 2 ﺍﻫﻠیﺖ ﻃﺮﻓیﻦ ﻫﻢﻣیﺘﻮﺍﻧﺪﻋﺎﻡﺑﺎﺷﺪ یﺎﺧﺎﺹ • ﻋﺪﻡﺍﻫﻠیﺖ ﺩﺭﺍﻓﺮﺍﺩ ﺍﻫﻠیﺖﻣﻨﻮﻁ ﺑﻪﻋﻘﻞ , ﺑﻠﻮﻍ ﻭﺭﺷﺪﺍﺳﺖ. • • ﺍﺳﺎﺳﻨﺎﻣﻪ ﻭیﺎﻗﻮﺍﻧیﻦﺧﺎﺹﺑﺎﺷﺪ ﺍگﺮچﻪ ﺩﺭﻋﻤﻞ ﻣﻄﺎﺑﻖ ﻣیﺒﺒﺎیﺴﺖ ﺣﻘﻮﻗیﺍﺳﺎﺳﺎ ﺍﺷﺨﺎﺹ • ﺍﻫﻠیﺖ ﺣﻘﻮﻗی ﻣﺪﻭﺩیﺖﺍﻫﻠیﺖ ﺭﻭﺑﺮﻭﻧیﺴﺘﻨﺪ. ﺑﺎ ﺍﺳﺎﺳﻨﺎﻣﻪﻫﺎﺍﻓﺮﺍﺩ ﺑﻪ ﻋﻠﺖﻋﺪﻡ ﺗﻀییﻖ ﺩﺭ ﻣﻮﺿﻮﻉ ﺣﻘﻮﻗی ﺑﺎﺗﻔﻮیﺾ ﺍﻧﻌﻘﺎﺩ ﻃﺮیﻖﻭکﺎﻟﺘﻨﺎﻣﻪ ﺍﺳﺎﺳﻨﺎﻣﻪﺍﻫﻠیﺖ ﺭﺍ ﺩﺭ ﻣﻮﺿﻮﻉ ﻭیﺎ ﺍﺯ ﺣﻖ • ﺍﺷﺨﺎﺹ ﻣیﺪﻫﻨﺪ ﺣﻘیﻘیﺍﻧﺘﻘﺎﻝ ﻣﻌیﻦ ﺍﺷﺨﺎﺹ ﺑﻪ • ﺍﻫﻠیﺖ ﻣیﺘﻮﺍﻧﺪ ﺑﺮ ﺍﺳﺎﺱ ﻗﻮﺍﻧیﻦ ﺧﺎﺹ ﻣﺤﺪﻭﺩ ﺷﻮﺩ ﻣﺜﻼ ﻗﺎﻧﻮﻥ ﻣﻨﻊ ﻣﺪﺍﺧﻠﻪ کﺎﺭکﻨﺎﻥ ﺩﻭﻟﺖ

Contracts • 3ﻣﻮﺿﻮﻉ ﻣﻌیﻦ ﻣﻮﺭﺩ ﻣﻌﺎﻣﻠﻪ • • • ﻣﻮﺭﺩ ﻣﻌﺎﻣﻠﻪ ﺑﺎیﺪ ﻣﺎﻝ یﺎ ﻋﻤﻞ ﺑﺎﺷﺪ کﻪ ﻃﺮﻓیﻦ ﺗﻌﻬﺪ ﺗﺴﻠیﻢ یﺎ ﺍیﻔﺎی ﺍﻥ ﺭﺍ ﺩﺍﺭﻧﺪ ﻣﻮﺭﺩ ﻣﻌﺎﻣﻠﻪ ﺑﺎیﺪ ﻣﺎﻟیﺖ ﺩﺍﺷﺘﻪ ﺑﺎﺷﺪ ﻭ ﻣﺘﻀﻤﻦ ﻣﻨﻔﻌﺖ ﻋﻘﻼیی ﻣﺸﺮﻭﻉ ﺑﺎﺷﺪ. ﻣﺎﻟیﺖ ﺑﺎیﺪ ﺩﺭ ﻧﻈﺮ ﻣﺘﻌﺎﻣﻠیﻦ ﺍﺳﺖ ﻭ ﻧﻪ ﻟﺰﻭﻣﺎ ﺩﺭ ﻋﺮﻑ ﻣﺎﻝ ﻣﻌﺎﻣﻠﻪ ﻣﻮﺭﺩ ﺍگﺮ ” ﻋیﻦ ﻣﻌیﻦ“ ﺍﺳﺖ ﺑﺎیﺪ ﻫﻨگﺎﻡ ﻣﻌﺎﻣﻠﻪ ﻣﻮﺟﻮﺩ ﺑﺎﺷﺪ ﺍگﺮ ﻣﻮﺿﻮﻉ ﻣﻌﺎﻣﻠﻪ کﻠی ﺍﺳﺖ ﺗﻌییﻦ ﻣﻘﺪﺍﺭ ﻭ ﺟﻨﺲ ﻭ ﻭﺻﻒ ﺍﺳﺎﺳی کﺎﻓی ﺍﺳﺖ. ﻣﻮﺭﺩ ﻣﻌﺎﻣﻠﻪ ﻧﺒﺎیﺪ ﻣﺒﻬﻢ ﺑﺎﺷﺪ ﻣگﺮ ﺩﺭ ﻣﻮﺍﺭﺩ ﺧﺎﺻی کﻪ ﻗﺎﻧﻮﻥ ﻣﻌیﻦ ﻣیکﻨﺪ کﻪ ﺩﺭ ﺍیﻦ ﻣﻮﺍﺭﺩ ﻋﻠﻢ ﺍﺟﻤﺎﻟی کﺎﻓی ﺍﺳﺖ • • 4ﻣﺸﺮﻭﻋیﺖ ﺟﻬﺖ ﻣﻌﺎﻣﻠﻪ ﺫکﺮ ﺣﻬﺖﻣﻌﺎﻣﻠﻪ ﺯﻡﻧیﺴﺖ ﺍﻣﺎ ﺍگﺮ ﺗﺼﺮیﺢﺷﻮﺩ ﺑﺎیﺪﻣﺸﺮﻭﻉﺑﺎﺷﺪ. ﻻ

Contracts Clauses Common to Most Contracts • • Preamble and Whereas ﻣﻘﺪﻣﻪ Purpose of the Contract ﻫﺪﻑ ﺍﺯﻗﺮﺍﺭﺩﺍﺩ Parties * ﻃﺮﻓیﻦ Definitions ﺗﻌﺎﺭیﻒ General Affirmations & Obligations, ﺗﺎییﺪﺍﺕ ﻭ ﺗﻌﻬﺪﺍﺕ کﻠی ﻃﺮﻓیﻦ Proper Business Practice& Conduct; High standards of performance; Best available technology ; Good Faith; Refrain from Competition; Spirit of Cooperation; Confidentiality; Indemnification and Patent Indemnification; Personal profit and Bribery ; Affidavit ; Non assignment; Off-sourcing and subletting Subject of Contract * ﻣﻮﺿﻮﻉ ﻗﺮﺍﺭﺩﺍﺩ Contract Documents ﺍﺳﻨﺎﺩ ﻗﺮﺍﺭﺩﺍﺩ Contract period / Time Schedule *ﻣﺪﺕ ﻗﺮﺍﺭﺩﺍﺩ ﻭ ﺟﺪﻭﻝ ﺯﻣﺎﻥ ﺑﻨﺪی Price * ﻗیﻤﺖ

Contracts Clauses Common to Most Contracts Taxes, Duties and Levies, Banking Expense, Miscellaneous Costs ﻣﺎﻟیﺎﺕ , ﻋﻮﺍﺭﺽ ﻭ ﺣﻘﻮﻕ , ﻫﺰیﻨﻪ ﻫﺎی ﺑﺎﻧکی ﻭ ﻫﺰیﻨﻪ ﻫﺎی ﻣﺘﻔﺮﻗﻪ ● Delay Penalty ﺟﺮیﻤﻪ ﺗﺎﺧیﺮ ● Limit of Liability ﻣﺤﺪﻭﺩیﺖ ﻣﺴﻮﻟیﺖ ● Monitoring Visits Tests and Inspections ﻧﻈﺎﺭﺕ , آﺰﻣﺎیﺶ ﻫﺎ ﻭ ﺑﺎﺯﺭﺳی ● Mechanism and Terms of Payment ﻣیکﺎﻧیﺴﻢ ﻭ ﺷﺮﺍیﻂ پﺮﺩﺍﺧﺖ Documentation: Reports, Information, Drawings, Manuals and Guidelines ● ﺍﺳﻨﺎﺩ ﻭﻣﺪﺍﺭک: گﺰﺍﺭﺵ ﻫﺎ, ﺍﻃﻼﻋﺎﺕ , ﻧﻘﺸﻪ ﻫﺎ , ﺩﺳﺘﻮﺭﺍﻟﻌﻤﻞ ﻭ ﺭﺍﻫﻨﻤﺎ ﻫﺎ ● Force Majeure ﻓﻮﺭﺱ ﻣﺎژﻮﺭ ● Training ﺍﻣﻮﺯﺵ ● Warrantee ﺗﻀﻤیﻦ ●

Contracts Clauses Common to Most Contracts • Premature Termination ﻓﺴﺦ ﻗﺮﺍﺭﺩﺍﺩ • Settlement of Disputes ﺣﻞ ﺍﺧﺘﻼﻓﺎﺕ • Concluding Clauses ﻣﻮﺍﺩ ﻧﻬﺎیی • • • Right of the owner/buyer to increase or decrease the scope of supply and/or work by a certain amount ; Post –Final Delivery Cooperation between parties regarding supply of spare parts, fielding of experts , supply of information etc; Domicile and addresses of the parties. Language of the Contract Effective date • Signature

Contracts Additional/Modified Clauses for a Purchase Contract • Titles and definitions to reflect the type of the contract , i. e. Buyer/Seller, Equipment, Spare Parts , Carrier , Insurance , Inspector etc need to be defined • Packing : specific packaging/ labeling instructions if required • Cooperation & exchange of information : with the buyer , Inspector, consultant and the shipping agent and others if any • Delivery : Delivery to the Carrier • Shipping documents: Bill of Lading , Packing List , Certificate of Origin, Inspection Certificate etc as the case may require • INCOTERMS: Application and exemption particularly with regards to transfer of responsibility • Review of wording to reflect the type of the contract

Contracts Additional Clauses for a Purchase Contract • In cases where a purchase contract is combined with the seller’s responsibility to carry out the installation , commissioning and provisional and final delivery it is best for the buyer to have a turn key contract and only assign shipping to a shipping agent. • In cases where a purchase contract is combined with the seller’s responsibility to supervise over the installation , commissioning and provisional and final delivery the following issues need to be taken care of: 1. Terms of supervision : number; qualifications; approval procedure; taxes, insurance , work permit: security issues; facilities to be provided by each party ; costing and reimbursement 2. Period and Degree of responsibility : Sellers wish to exempt themselves from responsibility of actions beyond their control , i. e. delays in shipping construction and installation and press for trigger mechanisms for the start and end of the warrantee period. They also press to limit their responsibility to the ‘ and sufficiency of the advice.

International Trade: Principles of Finance and Law International Commercial Terms( Incoterms) • Incoterms form part of the sales contract when referred to. • The Incoterms rules are a series of pre-defined commercial three-letter terms published by the ICC “ and registered trademark of the ICC, that are widely used in International commercial transactions or procurement processes. • Incoterms rules are intended primarily to clearly communicate the tasks, costs, and risks associated with the transportation and delivery of goods. They are intended to reduce or remove altogether uncertainties arising from different interpretation of the rules in different countries. As such they are regularly incorporated into sales contracts worldwide. • The Incoterms rules are accepted by governments, legal authorities, and practitioners worldwide for the interpretation of most commonly used terms in international trade. • First published in 1936, the Incoterms rules have been periodically updated, with the eighth version—Incoterms 2010—having been published on January 1, 2011.

International Trade: Principles of Finance and Law Incoterms • EXW – Ex Works (named place of delivery): Seller makes the goods available at his/her premises. The buyer is responsible for uploading. • FCA – Free Carrier (named place of delivery) : Seller delivers goods, cleared for export, to the buyer-designated carrier at a named and defined location. • CPT – Carriage Paid To (named place of destination): Seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier at place of shipment in the country of export. This term is used for all kind of shipments. • CIP – Carriage and Insurance Paid to (named place of destination): The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.

International Trade: Principles of Finance and Law Incoterms • DAT – Delivered at Terminal (named terminal at port or place of destination): Seller delivers when the goods, once unloaded from the arriving means of transport, are placed at the Buyer‘s disposal at a named terminal at the named port or place of destination. • DAP – Delivered at Place (named place of destination): Can be used for any transport mode, or where there is more than one transport mode. The seller is responsible for arranging carriage and for delivering the goods, ready for unloading from the arriving conveyance, at the named place. • DDP – Delivered Duty Paid (named place of destination) : Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. The seller is not responsible for unloading. • FAS – Free Alongside Ship (named port of shipment): Seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport.

International Trade: Principles of Finance and Law Incoterms • FOB – Free on Board (named port of shipment): Seller to load the goods on board a vessel designated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel. • CFR – Cost and Freight (named port of destination): Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel. Insurance for the goods is NOT included. This term is formerly known as CNF (C&F, or C+F). Maritime transport only. • CIF – Cost, Insurance and Freight (named port of destination): Exactly the same as CFR except that the seller must in addition procure and pay for the insurance. Maritime transport only.

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law Means of Payment

International Trade: Principles of Finance and Law Letter of Credit • A letter of credit is a document issued by a financial institution e. g. a bank, or a similar party, at the request of the buyer, assuring payment to a seller of goods and/or services provided certain documents, that prove that the seller has performed the duties under an underlying contract e. g. shipping documents have been presented to the bank. • The letter of credit serves as a guarantee to the seller that it will be paid regardless of whether the buyer ultimately fails to pay. In this way, the risk that the buyer will fail to pay is transferred fr. om the seller to the letter of credit's issuer. • Letters of credit are used primarily in international transactions between a supplier in one country and a customer in another. Most letters of credit are governed by rules promulgated by the International Chamber of Commerce known as Uniform Customs and Practice for Documentary Credits

International Trade: Principles of Finance and Law • The payment obligation under LCs are independent from the underlying contracts of sale or any other contract in the transaction. Thus the bank’s obligation is defined by the terms of the letter of credit alone, and the sale contract is irrelevant. • LCs operate with the documents and not the actual fullfilment of the contractual obligations • Documents that can be presented for payment include – Financial Documents such as Bill of Exchange, – Commercial Documents such as invoice , Packing List – Official Documents such as License, Embassy legalization, Origin Certificate, Inspection Certificate, – Transport Documents such as Bill of lading , Airway bill, Lorry/truck receipt, railway receipt, – Insurance documents such as Insurance policy, or Certificate

International Trade: Principles of Finance and Law • Different types of letters of credit include: Irrevocable LC In this type of LC, Any changes (amendment) or cancellation of the LC (except it is expired) is done by the Applicant through the issuing Bank. It must be authenticated by the Beneficiary of the LC. Confirmed LC An LC is said to be confirmed when another bank adds its additional confirmation (or guarantee) to honor a complying presentation at the request or authorization of the issuing bank. Transferrable LC A Transferable Credit is the one under which the exporter has the right to make the credit available to one or more subsequent beneficiaries Deferred / Usance LC It is kind of credit that won't be paid and assigned immediately after checking the valid documents but paying and assigning it requires an indicated duration which is accepted by both of the buyer and seller. In reality, seller will give an opportunity to the buyer to pay the required money after taking the related goods and selling them.

International Trade: Principles of Finance and Law Bill of Exchange • Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today. • Bill of Exchange or “Draft“is a written order by the Drawer to the Drawee to pay money to the Payee. The draft needs to be accepted by the drawee to make him/her a coresponsible party for the payment. • Bills of exchange are used primarily in international trade, and are drawn by the Sellers , the Drawer, on the Buyer, the Drawee, upon whose acceptance he become committed to pay and may in written order his bank to pay the bearer a specific sum on a specific date. • Drafts are independent of the ‘corresponding” contractual arrangements. • Banks when involved only deal in documents.

International Trade: Principles of Finance and Law • The parties to an agreement may choose to designate a bank as the Drawee. This will increase the certainty of payment. • Drafts can be Sight Draft which should be payable upon acceptance or time or Deferred Drafts which become payable after a specified date after the sighting. • A common type of bill of exchange is the Cheque , defined as a bill of exchange drawn on a banker and payable on demand. • Drafts can be Clean or Documentary. In the Clean case only a Clean Draft is issued while in the latter case a set of agreed documents such as Shipping Documents need to be attached to the Draft

International Trade: Principles of Finance and Law Other Common Means of International Payment • Promissory Note is often an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the payee, or at fixed or determinable future time, certain in money, to order or to bearer. Bank Note is frequently referred to as a promissory note, a promissory note made by a bank and payable to bearer on demand.

International Trade: Principles of Finance and Law SWIFT : An Explanatory Note • The Society for Worldwide Interbank Financial Telecommunication (SWIFT) , founded in Brussels in 1973 is not a mean of payment or a clearing system. • It is essentially a secure , centralized , standard and reliable messaging network used by financial institution to communicate financial transactions. • SWIFT provides a centralized store-and-forward mechanism, with some transaction management. For bank A to send a message to bank B with a copy or authorization with institution C, it formats the message according to standard and securely sends it to SWIFT guarantees its secure and reliable delivery to B after the appropriate action by C. SWIFT guarantees are based primarily on high redundancy of hardware, software and people.

International Trade: Principles of Finance and Law SWIFT • Swift does not facilitate funds transfer; rather, it sends payment order, which must be settled by correspondent accounts that the institutions have with each other. • Each financial institution, to exchange banking transactions, must have a banking relationship by either being a bank or affiliating itself with one (or more) so as to enjoy those particular business features. • Majority of international interbank messages use the SWIFT network. As of September 2010, SWIFT linked more than 9, 000 financial institutions in 209 countries and territories, who were exchanging an average of over 15 million messages per day.

International Trade: Principles of Finance and Law Barter • Barter is a system of exchange by which goods and services are directly exchanged for other goods or services without using a medium of exchange such as money or with the use of a fictional medium of exchange such as an ‘accounting ‘ money. • It is usually bilateral but may be multilateral i. e. , mediated through barter organizations) and usually exists parallel to monetary systems in most developed countries, though to a very limited extent. • Barter usually replaces money as the method of exchange in times of monetary crisis, such as when the currency may be either unstable or simply unavailable for conducting commerce. • It is argued that the inefficiency of barter in archaic society has led to the emergence of money, the economy, and hence the discipline of economics itself.

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law

International Trade: Principles of Finance and Law Buyback • ﺑﺪﻟیﻞ ﻣﺤﺪﻭﺩیﺖﻫﺎی ﻗﺎﻧﻮﻧی ﻣﻮﺟﻮﺩ ﺩﺭ ﺳﺮﻣﺎیﻪگﺬﺍﺭی ﺧﺎﺭﺟی ﻭ کﻤﺒﻮﺩ ﻣﻨﺎﺑﻊ ﻣﺎﻟی، ﻣﺘﺪﺍﻭﻝﺗﺮیﻦ ﺭﻭﺵ ﻋﻘﺪ ﻗﺮﺍﺭﺩﺍﺩﻫﺎ ﺩﺭ کﺸﻮﺭ ﺩﺭ ﺻﻨﺎیﻊ ﻧﻔﺖ ﺑیﻊ ﻣﺘﻘﺎﺑﻞ ﺑﻮﺩﻩ ﺍﺳﺖ. • ﺑیﻊﻣﺘﻘﺎﺑﻞ ﻧﻮﻋی ﻗﺮﺍﺭﺩﺍﺩ ﺍﺳﺖ کﻪ ﺩﺭ ﺍﻥ یکی ﺍﺯ ﻃﺮﻓیﻦ ﺷﺮکﺖ ﺳﺮﻣﺎیﻪگﺬﺍﺭ ﺧﺎﺭﺟی کﻠیﻪ ﻭﺟﻮﻩ ﺳﺮﻣﺎیﻪگﺬﺍﺭی ﻭ ﻫﻤچﻨیﻦ ﻧﺼﺐ ﺗﺠﻬیﺰﺍﺕ ﻭ ﺭﺍﻩﺍﻧﺪﺍﺯی ﻭ ﺍﻧﺘﻘﺎﻝ ﺗکﻨﻮﻟﻮژی یک پﺮﻭژﻪ ﺭﺍ ﺑﺮﻋﻬﺪﻩ ﻣیگیﺮﺩ ﻭ پﺲ ﺍﺯ ﺭﺍﻩﺍﻧﺪﺍﺯی، ﺑﻪ ﻃﺮﻑ ﺩیگﺮ – ﺧﺮیﺪﺍﺭ ﻭﺍگﺬﺍﺭ ﻣیکﻨﺪ • ﺑﺎﺯگﺸﺖ ﺳﺮﻣﺎیﻪ ﻭ ﻫﻤچﻨیﻦ ﺳﻮﺩ ﺳﺮﻣﺎیﻪ گﺰﺍﺭ ﺍﺯ ﻃﺮیﻖ ﻓﺮﻭﺵ ﻣﺤﺼﻮﻻﺕ ﻧﺎﺷی ﺍﺯﺍﺟﺮﺍی پﺮﻭژﻪ ﺑﺪﺳﺖ ﻣیآیﺪ. •

International Trade: Principles of Finance and Law ﻣﻬﻤﺘﺮیﻦ ﻭیژگیﻫﺎی ﻗﺮﺍﺭﺩﺍﺩﻫﺎی ﺑیﻊ ﻣﺘﻘﺎﺑﻞ: • ٫ﺷﺮکﺖﻫﺎی ﺧﺎﺭﺟی ﻧﻘﺶ پیﻤﺎﻧکﺎﺭ ﺭﺍ ﺍیﻔﺎ ﻣیکﻨﻨﺪ ﻭ ﻭﻇیﻔﺔ آﻨﻬﺎ ﺗﺎﻣیﻦ ﻫﻤﺔ ﺳﺮﻣﺎیﻪ ﻣﻮﺭﺩ ﻧیﺎﺯ پﺮﻭژﻪ ﺍﺳﺖ • کﻠیﻪ ﻣﺨﺎﺭﺝ ﻭ ﻫﺰیﻨﻪﻫﺎیی کﻪ پیﻤﺎﻧکﺎﺭﺍﻥ ﻣﺘﺤﻤﻞ ﻣیﺷﻮﻧﺪ، ﺑﻪﻫﻤﺮﺍﻩ ﺑﻬﺮﺓ ﺳﺮﻣﺎیﻪﻫﺎی ﺑﻪکﺎﺭ گﺮﻓﺘﻪ ﺷﺪﻩ ﻭ ﻧﺮﺥ ﺳﻮﺩ ﺗﻮﺍﻓﻖ ﺷﺪﻩ، ﺍﺯ ﺩﺭآﻤﺪ ﺣﺎﺻﻞ ﺍﺯ ﻓﺮﻭﺵ ﻣﺤﺼﻮﻻﺕ، ﺑﺎﺯپﺮﺩﺍﺧﺖ ﻣیگﺮﺩﺩ. • ﻧﺮﺥ ﺑﺎﺯﺩﻩ ﺳﺎﻻﻧﻪ ﺳﺮﻣﺎیﻪگﺬﺍﺭی، ﻣﺘﻨﺎﺳﺐ ﺑﺎ پﺮﻭژﻪ، ﻣﺘﻐیﺮ ﺍﺳﺖ • پﺲ ﺍﺯ پﺎیﺎﻥ ﺩﻭﺭﻩ ﻋﻤﻠیﺎﺕ ﺍﺟﺮﺍیی پﺮﻭژﻪ، ﺭﺍﻩﺍﻧﺪﺍﺯی، ﺗﻮﻟیﺪ ﻭ ﺷﺮﻭﻉ ﺗﻮﻟیﺪ، ﺧﺮیﺪﺍﺭ کﻨﺘﺮﻝ ﻋﻤﻠیﺎﺕ ﺭﺍ ﺑﺮﻋﻬﺪﻩ ﺧﻮﺍﻫﺪ گﺮﻓﺖ ﻭ ﻣﺴﺆﻮﻝ ﺗﺄﻤیﻦ ﻫﺰیﻨﻪ ﻋﻤﻠیﺎﺕ ﺟﺎﺭی ﺧﻮﺍﻫﺪ ﺑﻮﺩ. • پﺮﻭژﻪﻫﺎ ﻣﻌﻤﻮﻻ ﻓﺎﻗﺪ ﺧﻄﺮپﺬیﺮیﺴﺮﻣﺎیﻪ گﺰﺍﺭی ﺍﻧﺪ چﻪ پﺮﺩﺍﺧﺖ ﻭﺟﻮﻩ ﻣﻮﺭﺩ ﺗﻮﺍﻓﻖ ﺩﺭ ﺗﻀﻤیﻦ ﺧﺮیﺪﺍﺭ ﺍﺳﺖ. • ﺍﻧﺘﻘﺎﻝ ﺗکﻨﻮﻟﻮژی ﻣﻮﺭﺩ ﺗﺮﺩیﺪ ﺍﺳﺖ • ﻗﺮﺍﺭﺩﺍﺩﻫﺎ پیچیﺪﻩ ﻭ ﻣﺘﻀﻤﻦ ﺗﻌﻬﺪﺍﺕ ﺩﻭﻟﺖ ﻣیﺰﺑﺎﻥ ﻋﻼﻭﻩ ﺑﺮ ﺧﺮیﺪﺍﺭ ﺍﺳﺖ