In an export sales contract, shipment terms set out the delivery arrangements. They are an important part of the agreement and should be negotiated clearly and in detail.
Key elements of shipment terms
The parties should agree on the following main areas:
Delivery arrangements
The delivery arrangement is central to the shipment clause, with other terms negotiated around it. Several choices need to be addressed:
One shipment or partial shipments
This depends on quantity and the exporter's supply capacity. Where all goods are available, a single shipment may suit the business. If the order is too large to produce or assemble at once, the seller should negotiate partial shipments.
Road, sea, or air transportation
The exporter also considers the transport mode. Sea freight is common for Vietnamese exports. For ocean shipments, the contract needs to specify the chosen delivery term, including examples such as:
FOB —delivery on board: the seller brings the goods to the vessel and delivers them on board. The source uses the older ship's rail wording when describing risk transfer.
CIF —the seller arranges and pays for freight and insurance to the named destination port. The source also assigns destination-unloading risk to the seller, a point requiring editorial review rather than treating cost allocation as risk transfer.
The source also lists DES, Delivered Ex Ship; DEQ, Delivered Ex Quay; and FAS, Free Alongside Ship. The intended edition of the terms needs to be specified.
Direct shipment or transshipment
The parties should state whether transshipment is permitted. Availability may depend on the route and the shipping line's network rather than solely on buyer and seller preference.
Transshipment can lower costs but may extend transit and increase handling exposure. The buyer and seller should therefore agree on its acceptability.
Read more: Nguyen Logistics transportation services
Shipment timing
Timing should be addressed through agreed notice arrangements. The article explains that exact vessel or flight schedules may not yet be confirmed when the sales contract is signed because the booking follows afterward.
It therefore gives examples of advance-notice clauses:
- Before shipment: the booking party notifies the exporter a specified number of days before the vessel's expected departure from the loading port.
- Shipment notice: the booking party notifies the importer within the agreed number of days in relation to departure.
Delivery location
The delivery location should be clearly identified. For port-to-port or airport-to-airport shipments, specify:
- Port of loading and port of discharge.
- Departure airport and destination airport.
For EXW or DDP arrangements, provide more detailed place information, including the collection point, relevant gateways, and final delivery location as applicable.
Read more: Nguyen Logistics end-to-end customs services
How shipment and payment terms are related
Shipment and payment clauses are closely connected. Payment timing is often linked to a delivery stage to balance the parties' interests:
Payment before shipment: favors the seller, while the buyer may negotiate a lower price in return for providing funds earlier and accepting greater exposure.
Payment on receipt: described in the source as a common arrangement intended to balance the parties' interests.
Deferred payment: the seller extends credit to the buyer and may negotiate a higher price, but assumes greater payment risk.
We hope these points help businesses negotiate shipment clauses that clearly reflect their responsibilities and commercial interests.