CHAPTER 1: MODES OF

INTERNATIONAL TRADE MATERIALS

TRANSACTIONS □ Chapter 1, Textbook “International Trade Transactions”
(Pham Duy Lien, 2012)
□ UN Convention on Contracts for the International Sale of
Goods;
□ Civil Code (2015);
□ Commercial Law (2005);
□ Law on Tendering (2023);
□ Decree No. 69/2018/NĐ-CP

□ Related newspapers and magazines.

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OVERVIEW ON MODES OF OVERVIEW ON MODES OF

INTERNATIONAL TRADE TRANSACTIONS INTERNATIONAL TRADE TRANSACTIONS

Mode of transaction means the method through Commercial Law 2005, commercial activities
which a transaction is conducted include:
- Sales of goods
No unified classification (unlike trade in services) - Provisions of services
- Trade promotion
Direct vs. indirect transactions - Commercial intermediary activities
- Other specific commercial activities: processing,
auction, bidding, franchising, logistics…
Ordinary vs. special transactions
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INTERNATIONAL TRADE TRANSACTIONS INTERNATIONAL SALES OF GOODS
□ International sales of goods: □ Art.1, CISG 1980:
- Direct import/export - “parties whose places of business are in
- Re-exportation
- Countertrade
different States”
- Import and export through commercial intermediaries - Nationality?
- Import and export through commodity exchanges □ Art. 27, Commercial Law 2005:
□ Other modes of transaction: - No definition
- International processing
- International auction
- Forms of international sales of goods
- International bidding - What element determines “international sales”?
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□ Art. 2, CISG 1980, this Convention does not apply to sales: 1. Direct import/export
- of goods bought for personal, family or household use; 1. Definition
- by auction;
Sellers and buyers in different countries territories or
- on execution or otherwise by authority of law customs areas directly negotiate and conclude contracts.
- of stocks, shares, securities, negotiable instruments or money;
2. Features:
- of ships, vessels, hovercraft or aircraft;
- Most widely-used
- of electricity.
□ Art. 3, Commercial Law 2005, goods include:
- Conditions: legally allowed to and can conduct the
- All types of movables, including those to be formed in the future; transaction without the assistance of third parties
- Things attached to land; - Either a complete or part of a commercial activity
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Art. 28, Commercial Law 2005: CISG 1980 vs. Commercial Law 2005:
- Civil or commercial sales of goods?
1. Export of goods means the bringing of goods out of the
territory of the Socialist Republic of Vietnam or into special - Traders?
zones in the Vietnamese territory, which are regarded as Commercial Law 2005, Art. 6 and 16: Traders include
exclusive customs zones according to the provisions of law. “lawfully established economic organizations and individuals
2. Import of goods means the bringing of goods into the that conduct commercial activities in an independent and
territory of the Socialist Republic of Vietnam from foreign regular manner and have business registrations.”
countries or special zones in the Vietnamese territory, “Foreign traders mean traders established and making their
which are regarded as exclusive customs zones according to business registrations according to the provisions of foreign
the provisions of law. laws or recognized by foreign laws.”
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INTERNATIONAL SALES OF GOODS INTERNATIONAL SALES OF GOODS

2. Re-exportation 3. Classification
1. Definition
1. Temporary import for re-export
Re-exportation is the transaction in which profit is gained by
exporting the goods in the same state as previously imported. Money: Goods:
2. Features
- Gain more foreign currency than that spent; RE-EXPORT COUNTRY
- Goods do not undergo processing; (Completion of importing and
exporting customs procedures)
- Involve 3 parties (triangular transaction ), 2 separate contracts;
- Goods of great supply/demand & varying price;
EXPORT IMPORT
- Enjoy customs and tax preferences. COUNTRY COUNTRY
 Re-exportation vs. transit of goods?
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Art. 29, Commercial Law 2005: - Re-export goods must carry out both import and
export customs procedures;
Temporary import of goods for re-export means the
bringing of goods into Vietnam from foreign countries
- Re-export goods cannot be retained in Vietnam
or special zones locating in the Vietnamese territory, which territory for more than 60 days.
are regarded as exclusive customs zones according to the - Traders can request to prolong (no more than 2 times,
provisions of law, with the completion of the procedures no more than 30 days each tim);
for importing such goods into Vietnam, then procedures - Import tax collected when temporarily imported and
for exporting the same goods out of Vietnam. refunded when re-exported
 Temporary export for re-import?  See more at Chapter 3, Decree 187/2013/ND-CP.

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INTERNATIONAL SALES OF GOODS INTERNATIONAL SALES OF GOODS

2.3.2. Transfer of goods through border-gates Forms of transfer of goods through border-gates:
a. Goods are transported directly from the export to the
Art. 30, Commercial Law 2005:
import country without going through VN border-gates;
Transfer of goods through border-gates means  No customs procedures.
purchase of goods from a country or territory for sale b. Goods are transported from the export to the import
to another country or territory outside the Vietnamese country through Vietnamese border-gates without carrying
territory without carrying out the procedures for out the procedures for importing them into Vietnam and the
importing such goods into Vietnam and the procedures for exporting them out of Vietnam;
procedures for exporting such goods out of Vietnam.  Goods have to undergo customs control until being actually

re-exported.
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c. Goods are transported from the export to the import country 2.4. Implementation of re-exportation transaction
through VN border-gates and brought into bonded warehouses - Sign contracts: 2 separate contracts with intimate linkage;
or areas for trans-shipment of goods at VN ports without
carrying out the procedures for importing them into VN and the - Measures to assure the implementation: Deposit, penalty,
procedures for exporting them out of VN. back-to-back L/C.
 Carry out customs procedures to bring the goods into and out of
bonded warehouses, areas for trans-shipment of goods. EXPORTER IMPORTER
Note:
(a) is considered to be “open” while (b) and (c) are “secret”. ORIGINAL L/C
BACK TO BACK L/C
 What do the re-exporters want to keep secret?

 Can origin of goods be changed legally?

RE-EXPORTER

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3. Countertrade 3.2. Features
1. Definition - Exporter is also importer;
- Counter-trade includes transactions with a linkage
 Similar to re-exportation?
between the export and the import of goods or services
in addition to, or in place of, financial settlements. - Counter-traders care more about use value (worth)
than exchange value (value) of goods;
- Counter-trade means exchanging goods or services which
are paid for, in whole or part, with other goods or
- Money is mainly used for calculation purpose;
services, rather than with money. However, monetary - Require balance in use value, exchange value, weight,
valuation can be used for accounting purposes. delivery terms…
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3.3. Reasons for development
3.4. Classification
- Lack of money, lack of faith in money, lack of acceptability of
money as an exchange medium; No unified classification
- Maintain positive balance of trade, reduce trade imbalances - Barter
(commodity that is being bought is equaled with that being - Offset
sold); - Compensation
- Gain competitive advantage over other nations/ companies
selling or trading the same products:
- Counter-purchase
+ A mechanism to gain entry into new markets;
- Buyback
+ Providing counter-trade services helps traders differentiate their - Switch trading
products from competitors’.  http://www.witiger.com/internationalbusiness/countertrade.htm
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Barter: Exchange of goods or services directly for other Offset: The agreement by one country to buy a product from
goods or services without the use of money as means of another, subject to the purchase of some or all components
purchase or payment. and raw materials from the buyer, or the assembly of such
Ex.: Trade relationship between China and Thailand where product in the buyer’s country.
fruits are traded by Thailand for buses made by China.

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Counter-purchase:Sale of goods/services to another country Buyback: Suppliers of capital, plant, equipment agree to be
with the commitment to make a future purchase of specific paid by the future output of the investment concerned.
products from that country. Ex.: Japan sets up an automobile factory in Laos. They take
Ex.: The trade between Congo and China where computers part of the total output as they have set up the industry,
are traded for the supply of metals. provided technology & training.

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Switch trading: One country sells to another its obligation to 4. Import/Export Through Intermediary
make a purchase in a given country 1. Definition
Ex.: Brazil has a trade surplus with Poland. Then, UK’s Mode of transaction in which the relationship between
exports to Brazil could be financed from the sale of Polish the seller and the buyer is established through a third
goods to the UK or elsewhere. party – the commercial intermediary.
Art. 3, Commercial Law 2005:
“Commercial intermediary activities mean activities
Surplus Country Deficit Country carried out by a trader to effect commercial transactions
for one or several identified traders […].”
 Commercial intermediaries are traders who carry out
Third Country
(Export to SC) commercial intermediary activities.
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4.2. Features □ Advantages
- Commercial intermediaries connect sellers and - Increase sales and reduce risks in newly penetrated markets;
buyers; producers and consumers; - Save direct investment and transport cost;
- Commercial intermediaries work under entrustment; - Take advantages of intermediaries’ services;
□ Disadvantages
- Commercial intermediaries and traders who entrust
- Lose direct contact with the market;
them are interdependent;
- Share profit with intermediaries;
- Profit is shared between commercial intermediaries
- Take risk if wrongly choose bad intermediaries;
traders who entrust them.
- Intermediaries may have so many requirements.
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□ Usage 4.3. Classification
- Penetrate into a new market;
- International
- Introduce new products; + Brokerage
+ Agency
- Required by market practice; - Vietnam
- Establishment of trade relationship is restricted by political, Art. 3, Commercial Law 2005:
diplomatic reasons;
+ Representation of traders
□ Requirements to become commercial intermediaries + Commercial brokerage
- Lawful traders operate in registered fields; + Goods sale or purchase entrustment
- Meet certain requirements of the relevant field. + Commercial agency
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1. Brokerage 4.3.1.2. Features
1. Definition - Brokers are not representatives of principals;
Art. 150, Commercial Law 2005: - Brokers do not sign contracts and take part in the
Brokerage is a commercial activity in which a performance of contracts between principals, except
trader acts as an intermediary (the broker) when authorized by the principals
between parties selling and purchasing goods or  Representation of traders?
providing services (the principals) in the course of - Brokers are responsible for the legal status, but not for the
negotiations and entering into contracts for sale and solvency, of the principals;
purchase of goods or provision of services and shall - Brokers often operate under short-term authorization for
be remunerated under a brokerage contract. each single transaction.
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2. Agency b. Vietnamlaw
1. Definition Art. 166, Commercial Law 2005:
a. EU law Commercial agency means a commercial activity
Agents are self-employed intermediaries who have whereby the principal and the agent agree that the
continuing authority to negotiate the sale and purchase agent, in its own name, sells or purchases goods
of goods on behalf of the principals, or to negotiate for the principal or provides services of the
and conclude the contracts for sale and purchase of
principal to customers for remuneration.
goods on behalf of and in the name of the principals.
 Goods sale or purchase entrustment?
 Representation of traders in VN Law.

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4.3.2.2. Features 4.5.2.3. Types of agents
- Agents may sign and carry out contracts; - “Mandatory agent”: Operate under the principal’s name
- Agents often operate under long-term authorization; and costs.
- “The principal is the owner of goods or money - “Commission agent”: Operate under his own name and
delivered to the agent” (Art. 170, CL 2005) the principal’s costs;
 Brokerage vs. Agency - “Merchant agent”: Operate under his own name and
 Self-reading: http://www.ecolaw.vn/vi/node/253 costs.
 Similar to which type of commercial intermediary in

http://luatsuquangthai.vn/thong-tin-luat-hop-dong/cac-hinh-thuc- Vietnam Commercial Law?

 Mandatory agent can sign the contract under his name?

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5. Import/Export through the Commodity Exchange Art. 63, Commercial Law 2005:
1. Definition “[…] commercial activities whereby the parties agree
Art. 6, Decree 158/2006/NĐ-CP: to purchase and sell a defined quantity of goods of a
- Commodity Exchange is a legal entity, established and defined type through the Commodity Exchange
operate as a limited liability company or joint-stock under the standards of the Commodity Exchange, at
company, according to the provisions of the Enterprise
Law a price agreed upon at the time the contract is entered
 Commodity Exchange is a special market at which, into, and with the time of goods delivery determined
through intermediaries nominated by the Commodity to be a specific point of time in the future.”
Exchange, traders purchase and sell generic goods of  Does the definition cover all the transactions?
large volume and of interchangeable quality.
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5.2. Features 5.3. Classification
- Transactions are conducted at specific time and place; - International:
- Goods: generic, large volume, commercially interchangeable; + Spot transaction
- Transactions are conducted by brokers nominated by the + Forward transaction
Commodity Exchange; + Hedging transaction
- Purchase and sale goods must follow the Commodity Exchange’s + Option transaction
requirements and standards; - Vietnam:
- Goods Exchange connects supply and demand of a certain Art. 64, Commercial Law 2005:
product, at a certain time and in a certain area, therefore, shows
the fluctuation of price; Contracts for purchase and sale of goods through the C.E
include forward contracts and option contracts.
- Most of the transactions are “short-sale” ones.
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5.3.1. Spot transaction - Forward transactions are mainly “short-sale” ones, conducted
- In a spot transaction, delivery and payment are made at by speculators;
the moment of signing contract - Bull speculator: Always anticipates a rise in the price (the buyer);
- Price is called “spot price” or “spot quotation” - Bear speculator: Always anticipates a fall in the price (the seller;
- This type of transaction accounts for about 10% - Traders can flexibly postpone purchasing or buying by paying
5.3.2. Forward Transaction offset to the other party;
- In a forward transaction, price is agreed at the moment of - Clearing House’s role in forward transaction: the seller and the
signing contract, but the delivery and payment are carried buyer negotiate the contract, but fulfil their obligations through
out after a certain period of time. Forward transaction the Clearing House.
allows traders to benefit from the change in price.  Futures Contract and Forward Contract?
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□ Example: 5.3.3. Hedging transaction
- January 1st: The seller and the buyer sign a contract for - In a hedging transaction, traders conduct “short-sale”
sale of 1000 MT of goods X, at the price of USD
500/MT; delivery shall be made 1 month later. transactions at the Commodity Exchange beside actual
- February 1st: The market price of X falls to USD transactions in the real market to avoid risks caused by the
400/MT. fluctuation of price;
 The seller (bull) gains USD 100,000; - Hedging is a self-insurance measurement, and itself does
 The buyer (bear) loses USD 100,000; not help traders gain profit;
 The buyer may choose to receive the goods or pay the - When conducting hedging transaction, a trader must
purchase offset of USD 100,000 to the seller through choose a proper strategy based on his information on
Clearing House.
prices, costs...
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□ Example 1: □ Example 2:
- January 1st: Mr. Smith signs a contract in the real market, agreeing to - January 1st: Mrs. Smith signs a contract in the real market,
selltheconsignmentX onemonthlater. His expectedpriceis USD agreeing to deliver the consignment X one month later at the
500/MT; fixed price of USD 500/MT.
- To avoid a fall in price in the future, Mr. Smith at the same - As Mrs. Smith has not had the goods yet, she has to collect it
time sells the consignment through the C.E at the price of (buy) in the real market. At the same time she buys a similar
USD 500/MT; consignment through the C.E at USD 500/MT.
- February 1st: The price of X falls to USD 400/MT. - February 1st: The price of X rises to USD 600/MT.
 He loses USD 100/MT in the real market (the actual price is  She loses USD 100/MT in the real market (the cost for
lower than his expectation); collecting is higher than the contract price);
 He gains USD100/MT in his “short-sale” at the C.E.  She gains USD 100/MT in her transaction at the C.E.
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 INTERNATIONAL SALES OF GOODS INTERNATIONAL PROCESSING
5.3.4. Option transaction 1. Definition
Art. 64, Commercial Law 2005: Art. 178, Commercial Law 2005:
Call option or put option contract means an agreement Commercial processing means a commercial activity
whereby the purchaser has the right to purchase or sell a whereby a processor uses part or whole of raw materials
specific goods at a pre-fixed price level (executed price) and and materials supplied by the processee to perform one or
must pay a certain sum of money to buy this right (option several stages of the production process at the latter's
money). The option purchaser may opt to effect or not to request in order to receive remuneration.
effect such purchase or sale of goods. International processing:
 The trader actually buys the right to effect the transaction; he - Processor and processee: in different countries/customs
has no obligation to effect it. areas;
 In any case, he always loses the option fee. - Materials, semi-products, products: across border.
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INTERNATIONAL PROCESSING INTERNATIONAL PROCESSING

 International processing is a commercial activity in which 3. Classification
one party (the processor) imports materials, semi-products 1. In terms of material ownership
from the other party (the processee) to process into 1. Provide materials, returnproducts
complete products, return them to the processee and
receive remuneration (processing fee).
- The processee provides the processor with materials/semi-
products;
2. Features - After the processing period, the processor shall return
- Remuneration is proportional to labour power; products and gets remuneration;
- Ownership of materials, semi-products often belongs to - During the processing period, the ownership of material
the processee; still belongs to the processee.
- Enjoy tax and customs preference.  Ownership: possession, use, and disposal.
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3.1.2. Buymaterials, sell products b. Materials from other sources
a. Materials from the procesee - The procesee provides samples and assissts the processor
- The processee sells materials to the processor; with technical equipments/documents;
- After the processing period, the processor sells products to - The processor independently prepare materials (import
the processee; from the processee or not);
- In each step, payment is actually arranged = > consideredtobe2 - After the processing period, the processor sells complete
separate contracts;
products to the processee;
- Ownership is considered to pass from the processee to the
 The contract often stipulates that the processee is
processor;
- Unless otherwise stipulated, the procesee still holds the right responsible for the consumption of the complete products.
to control completeproducts.  (a) and (b) are often combined.

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3.2. In terms of processing pricing 3.3. In terms of number of parties involved
- Cost plus pricing: The processor will remunerate all - Two-party processing: Simple processing
reasonable costs and the processing fee; - Multi-party processing: Transitional processing
- Target pricing: A target price is defined for each complete + Processee: Only one company;
item, which includes target cost and target processing fee; + Processor: Several companies. Products of the 1st phase
- Examples of processing pricing: become materials for the 2ndphase.
+ CMT: Cutting, Making, Trimming Art. 33, Decree 187/2013/ND-CP, :
Processed products under a processing contract in one phase
+ CMP: Cutting, Making, Packing
shall, under the instructions of the supplier, be provided for
+ CMQ: Cutting, Making, Quota the purpose of the processing contract of the following phase.

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 INTERNATIONAL AUCTION INTERNATIONAL AUCTION
1. Definition 2. Features
Commercial Law 2005, Art. 185: - Publicly organized at a definite time and place;
Auction of goods means a commercial activity whereby - Buyers are allowed to check before buying and free to compete
sellers themselves conduct or hire auction organizers to - Auction organizer: the seller or a trader who is mandated by
conduct public sale of goods to select purchasers that offer
the highest price. the seller
International auction:
- Goods: Often of great value, precious and rare; difficult to
- Sellers and buyers: different countries/ customs areas; standardize;
- Products: move across border.
- Seller dominate the transaction: single seller, many buyers.
 Can goodsin need of liquidation be auctioned?
 Note: Role of price in auction transaction.
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3. Classification 4. Steps to organize auction
1. In terms of auction purpose Step 1: Preparation
- Business auction - Sign an organizing contract
- Non-business auction - Prepare auctioned goods
3.2. In terms of organizing method - Prepare auction regulations
- Voiced auction:
+ Upward bidding (English auction): Participants bid openly against
- Publicize information
one another, each subsequent bid higher than the previous bid; Step 2: Displaying auctioned goods
+ Downward bidding (Dutch auction):The auctioneer begins with a Step 3: Conducting the auction
high price which is lowered until a participant is willing to accept
the auctioneer's price; Step 4: Drafting auction documents
- Voiceless auction: A variant of the English auction in which bids  Self-reading: Commercial Law 2005, Chapter VI, Section 2
are written on a sheet of paper.
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1. Definition
2. Features
Art. 214, Commercial Law 2005:
Bidding for goods or services means a commercial activity
- Applied for both goods and services;
whereby a party purchases goods or services through bidding - Bidding packages are often of great value;
(referred to as bid solicitor) in order to select, among traders
participating in the bidding (referred to as bidders), a trader - Bid solicitors: investors or organizations fully capable and
that satisfies the requirements set forth by the bid solicitor and experienced, and employed by investors to organize biddings.
is selected to enter into and perform a contract (referred to as
bid winner).
- Bounded by regulations of capital loan and use;
Art.4, Bidding Law 2005: - Buyers dominates the transaction: One buyer vs. many
International bidding means the process of selecting sellers/suppliers
contractors that satisfy the requirements of bid solicitors, with 
participation of both foreign and domestic contractors. Role of pricein bidding transaction.
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3. Types of bidding 3.2. In terms of organizing method
1. In terms of number of bidders - One-stagebidding:
- Open bidding: The number of participating bidders is not limited (with + one-dossier-bag: technical & financial proposals;
or without pre-qualification)
- Restrictivebidding: + two-dossier-bag: technical & financial proposals separately
+ At the request of foreign donors of capital sources;
submitted;
+ For particular technical requirements;
- Two-stage bidding:
+ At least 5 contractors identified as fully capable and experienced must + Stage 1: Bidders shall submit technical proposals and
be invited; financial plans without bidding prices;
- Appointment of contractors: Force majeure, at the request of foreign + Stage 2: Based on the bidding dossiers for 2nd stage, bidders
donors; urgent projects for national interests, the requirement of that have participated in the 1st stage shall be invited to
compatibility. submit bids for the 2ndstage, which shall cover technical
 Self reading: Bidding Law 2005, Art. 18, 19, 20. proposals and financial proposals, including bidding prices.
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3.3. In terms of bidding object 4. Steps to organize bidding
- Goods procurement bidding; - Preparing bidding
- Service provision bidding; - Pre-qualifying
3.4. In terms of forms of contract
- Guiding, explaining to bidders
- Receipt of bidding dossier
- Packagecontracts:quantity/volume has already been clearly
defined - Opening bids
- Unit price-basedcontracts:quantity/volume cannot be exactly
- Inspecting and assessing bidding plans
defined. - Classifying and selecting bidder
- Time-based contract: complicated research, design consultancy, - Informing results and signing contracts
construction supervision, training or refresher training - Bid winner submits deposit or contract performance security
measurements
- Percentage-based contracts: common and simple consultancy
 Self reading: Chapter III, Bidding Law 2005.

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THE END

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