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International Trade
Transactions(4 credits)
Tran Bich Ngoc
FOREIGN TRADE UNIVERSITY
Aug 2009
Aug-09 INTERNATIONAL COMMERCIAL TERMS 2
Aug-09 INTERNATIONAL COMMERCIAL TERMS 3
The Trade Dilemma
International trade must work around afundamental dilemma: Imagine an importer and an exporter who
would like to do business with one another Because of the distance between the two, it is
not possible to simultaneously hand overgoods and receive payments in person
How do participants in international trademitigate the risks associated with conductingbusiness with a stranger?
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 4
Aug-09 INTERNATIONAL COMMERCIAL TERMS 5
Introduction
After the course, students should be
able to:
Find out partners
Draft the terms of contracts
Negotiate and sign the contract
Implement the contract
Aug-09 INTERNATIONAL COMMERCIAL TERMS 6
Vu Huu Tuu, Ky Thuat Nghiep Vu
Ngoai Thuong 2006
ICC, Incoterms 2000
UN Convention on Contract for the
International Sale of Goods (CISG)
Commercial Law of Vietnam
Sample contracts
Shipment
Textbook and references
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 7
Overview
Chapter 1: INTERNATIONAL COMMERCIAL TERMS
Chapter 2: CONTRACTS FOR INTERNATIONAL SALEOF GOODS
Chapter 3: MODE OF INTERNATIONAL
TRANSACTIONS
Chapter 4: PREPARATION FOR INTERNATIONAL
TRANSACTIONS
Chapter 5: CONTRACTS IMPLEMENTATION
Aug-09 INTERNATIONAL COMMERCIAL TERMS 8
CHAPTER 1INTERNATIONAL COMMERCIAL TERMS
Definitions
ICC and Incoterms
Incoterms 2000
Most common terms
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 10
Definition of Internationalcommercial terms
Short basic delivery terms used in foreign trade
practice in order to assign between the parties
+responsibility,
+Cost and expense
+and risk of damage
to the contractual commodities in the course of
transit from the seller to the buyer
Aug-09 INTERNATIONAL COMMERCIAL TERMS 11
Several Interpretation of
International Commercial terms International Law Association
Warsaw Rules 1928
Warsaw-Oxford Rules 1932
USA
The U.S. Export Quotations and Abbreviations- 1919
Revised American Foreign trade definition 1941
Uniform Commercial Code (UCC-1952)
International Chamber of Commerce (ICC)
International Commercial terms 1936
Revised Incoterms 1953, 1967, 1976, 1980, 1990, 2000
Aug-09 INTERNATIONAL COMMERCIAL TERMS 12
Incoterms
set of uniform rules for
interpretation of
INternational COmmercial TERMS
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Scope of Incoterms
Matters relating to
the right and obligationof the parties
to the contract with
respect to
the delivery of tangiblegoodssold
14
Development of Incoterms
1953: 9 termsEXW /FOR/ FAS FOB DES DEQ /DDU/
/FOT/ CFR /DDP/
CIF
1980: 14 termsEXW /FOR/ FAS FOB DES DEQ /DDU/
/FOT/ FCA CFR /DDP/
FOA CPT CIFDAF CIP
15
Development of Incoterms
1990, 2000: 13 termsEXW FAS FOB DES DEQ DDU
FCA CFR
CPT CIF DDP
CIP
DAF
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INCOTERMS 2000
13 terms are represented in order of increasing
responsibilities, costs and risks for the seller
Each term is written in 3 letters, followed by namedplace of delivery
Each term expresses respectively 10 obligations of the
two parties
Aug-09 INTERNATIONAL COMMERCIAL TERMS 17
13 terms in order of increasing
responsibilities, costs and risks forthe seller
SellerBuyer
EXW
FCA
FAS
FOB
CFR
CIF
CPT
CIP
DAF
DES
DEQ
DDU
DDP
Aug-09 INTERNATIONAL COMMERCIAL TERMS 18
Place at the Frontier
Port of Destination
Place of Destination
9 DAF Delivered at Frontier
10 DES Delivered Ex ship
11 DEQ Delivered Ex quay
12 DDU Delivered Duties Unpaid
13 DDP Delivered Duties Paid
D Group
Arrival
Port of Destination
Place of destination
5 CFR Costs and Freights
6 CIF Costs, Insurances & Freights
7 CPT Carriage Paid To8 CIP Carriage & Insurances Paid to
C Group
Main carriage
paid
Place of delivery
Port of Shipment
2 FCA Free Carrier
3 FAS Free Alongside Ship
4 FOB Free On Board
F Group
Main carriage
unpaid
The sellers premises1 EXW Ex worksE Group
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 19
The seller and buyers obligation
Other obligationsB10Other obligationsA10
Inspection of goodsB9Checking, packing and markingA9
Proof of delivery, transport
document or equivalent electronicmessage
B8Proof of delivery, transport
document or equivalent electronicmessage
A8
Notice to the sellerB7Notice to the buyerA7
Division of costB6Division of costA6
Transfer of risksB5Transfer of risksA5
Taking deliveryB4DeliveryA4
Contracts of carriage and insuranceB3Contracts of carriage and insuranceA3
Licences, authorization andformalities
B2Licences, authorization andformalities
A2
Payment of the priceB1Provision of goods in conformity
with the contract
A1
THE BUYERS OBLIGATIONsTHE SELLERS OBLIGATIONs
Aug-09 INTERNATIONAL COMMERCIAL TERMS 20
Incoterms diagram
Aug-09 INTERNATIONAL COMMERCIAL TERMS 21
Incoterms diagram 2
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 22
Suitable Mode of transportation
Any mode of transportDelivered at FrontierDAF
Any mode of transportCarriage & Insurances Paid toCIP
Any mode of transportCarriage Paid ToCPT
Maritime and inland waterway onlyCosts, Insurances & FrieghtsCIFMaritime and inland waterway onlyCosts and FreightsCFR
Any mode of transportDelivered Duties PaidDDP
Any mode of transportDelivered Duties UnpaidDDU
Maritime and inland waterway onlyDelivered Ex quayDEQ
Maritime and inland waterway onlyDelivered Ex shipDES
Maritime and inland waterway onlyFree On BoardFOB
Maritime and inland waterway onlyFree Alongside ShipFAS
Any mode of transportFree CarrierFCA
Any mode of transportEx worksEXW
MODE OF TRANSPORTTERMS
Aug-09 INTERNATIONAL COMMERCIAL TERMS 23
24
INCOTERMS 2000 in details
Student should master the following details for
each term
Division of obligations between parties
Division of costs and expenses between parties Transfer of risk of or damage to the goods
Implications for uses of term
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1) EXW: EX WORKS (named place)
The Seller delivers when he places the goods at
the disposal of the buyer at the place of delivery
The Buyer bears all cost and risk involved in
taking the goods
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
EXW
PLACE OF DELIVERY
Aug-09 INTERNATIONAL COMMERCIAL TERMS 26
EXW(...named place),Incoterms 2000
Place of delivery: At the sellers premise(Factory, warehouse, plantation, mine,...)
The Seller must:
Provide the goods in conformity with thesale contract
Provide Packing and marking
Document: commercial invoice only
No obligation: loading, export clearance,
other documentations
Aug-09 INTERNATIONAL COMMERCIAL TERMS 27
WAREHOUSE
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 28
EXW(...named place),Incoterms 2000
The Buyer must:
Take delivery, Bear all cost, risk with respectto Pre-mature delivery
Load the goods on to the vehicle
Export clearance
Arrange transportation
Import clearance
Aug-09 INTERNATIONAL COMMERCIAL TERMS 29
EXW(...named place),Incoterms 2000
Implications for use of EXW:
All mode of transportation
Apply only if
The Buyer is able to fulfill export clearance
The Buyer is experience in booking carriage,
insurance
The seller dominates the market power
Aug-09 INTERNATIONAL COMMERCIAL TERMS 30
EXW(...named place),Incoterms 2000
Question 1:
Whether the Seller as per EXW terms bears
the loading charge? In which case?
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 31
EXW(...named place),Incoterms 2000
Question 2:
Whether the Buyer as per EXW terms canchoose the place of delivery outside the
sellers premise?
Aug-09 INTERNATIONAL COMMERCIAL TERMS 32
EXW(...named place),Incoterms 2000
Question 3:
The Buyer as per EXW terms fails to inform
the seller the time and place of delivery.
The seller must keep the goods in storage
but can not prevent the quality of goods
from decreasing. Who will bear this loss
and damage?
Aug-09 INTERNATIONAL COMMERCIAL TERMS 33
EXW(...named place),Incoterms 2000
Question 4:
After signing the sale contract as EXW
terms. The government suspends the
goods from export. Whether the Buyer isexempted from the contract obligations?
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 34
EXW(...named place),Incoterms 2000
Question 5:
Sanitary Inspections by Government's body
is required for export of foodstuff inVietnam. As per EXW terms, who will pay
the cost and risk of this inspection?
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2) FCA:FREE CARRIER (named place)
The Seller must arrange the export clearance
The Buyer nominated the carrier
And the Seller delivers the goods to the carrier
nominated by the buyer
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
FCA
PLACE OF DELIVERY
Aug-09 INTERNATIONAL COMMERCIAL TERMS 36
FCA (...Named place),Incoterms 2000
Place of delivery At the Sellers premise
Outside the sellers premiseRoadway: Roadway terminal
Airway: AirportInland waterway: ferry station
Railway: Railway station, freight stations
Seaway: Sea port
Postal service: Post office
Forwarder:
Less than Container load (LCL): Container FreightStation (CFS)
Full Container load (FCL): Container Yard
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 37
Container at port
Aug-09 INTERNATIONAL COMMERCIAL TERMS 38
FCA (...Named place), Incoterms2000
FCA
Free Carrier The seller delivers the
goods, cleared for export, to the carrier
nominated by the buyer at the named place.
Sellers premises: the seller is responsible
for loading.
Any other place: the seller is not responsible
for unloading.
Terminal Terminal
Aug-09 INTERNATIONAL COMMERCIAL TERMS 39
FCA (...Named place), Incoterms2000
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 40
FCA (...Named place),Incoterms 2000
The Seller must:
Provide the goods, packing and marking.Inspections, Export clearance
Deliver the goods: If place of delivery is the sellers premise, when the
goods have been loaded on the buyers means oftransport
If place of delivery is not the sellers premise, whenthe goods are handled over the nominated carrier onthe sellers mean of transport not unloaded
Provide usual proof of delivery
Aug-09 INTERNATIONAL COMMERCIAL TERMS 41
FCA (...Named place),Incoterms 2000
The Buyer must:
Take delivery and pay the price
Arrange the carrier, Inform the seller of the
time & Place of delivery, nominated carrier
Bear all risks and costs related to the goods
since the goods are delivered
Aug-09 INTERNATIONAL COMMERCIAL TERMS 42
FCA (...Named place),Incoterms 2000
Implication for uses:
All mode of transportation, especially
container transportation
Pay attention to the Divisions of loading/
unloading charge
Use FCA instead of FOB if the seller cannot
handle the goods over the ships rails
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 43
FCA (...Named place),Incoterms 2000
Question 1
Distinguish the FCA terms with EXW+export clearance terms
Aug-09 INTERNATIONAL COMMERCIAL TERMS 44
FCA (...Named place),Incoterms 2000
Question 2
After delivery as per FCA terms, the seller
only get the Cargo receipt. Whether the
seller fulfills his obligations?
Aug-09 INTERNATIONAL COMMERCIAL TERMS 45
FCA (...Named place),Incoterms 2000
Question 3
How the division of loading/unloading
charges are stipulated as per FCA
Incoterms 2000
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3) FAS : FREE ALONGSIDE SHIP
(named port of shipment)
The Seller must arrange the export clearance
The Seller delivers when the goods are placed
alongside the vessel at the named port of shipment.
The Buyer bear all cost and risk of lost of or damage
to the goods since the goods are delivered
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
FAS
PLACE OF DELIVERY
Aug-09 INTERNATIONAL COMMERCIAL TERMS 47
FAS (...Named Port of Shipment),Incoterms 2000
Implication for uses:
Marine transportation only,
The seller finds difficult in collect evident
document of delivery
FAS is not popular in Vietnam
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4) FOB : FREE ON BOARD
(named port of shipment)
The Seller delivers when the goods pass the
ships rail at the named port of shipment
The Buyer bear all cost and risk of loss of or
damage to the goods from that point
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
FOB
PLACE OF DELIVERY
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 49
Fob, pass the ships rail
FOB
Free on board Seller delivers when the goods,
cleared for export, pass the ships rail at the named
port of shipment.
If parties do not intend to deliver the goods across the ships rail,
the FCA-term should be used.
TerminalTerminal
Aug-09 INTERNATIONAL COMMERCIAL TERMS 50
4) FOB, Cont.
What happen if the
goods fall out, hit
against the ships
rail, break into 2
parts:
+ one falls on board
of the ship
+ another falls into
the sea
Aug-09 INTERNATIONAL COMMERCIAL TERMS 51
Container at port
-
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 52
FOB (...Named port of shipment),
Incoterms 2000
Implication for uses
One of the most popular terms in VietnamApply to maritime and inland waterway
transportations
Clearly mention to FOB as per Incoterms
2000, because there are many other
interpretations for FOB terms
Aug-09 INTERNATIONAL COMMERCIAL TERMS 53
FOB (...Named port of shipment),Incoterms 2000
The Seller must:
Provide the goods in conformity with the salecontract
Export clearance
Pay loading charge
Deliver the goods and provide deliver evidence: Ships/ docks tally sheet
Mates receipt
Bill of Lading
Notice the buyer of shipment
Aug-09 INTERNATIONAL COMMERCIAL TERMS 54
FOB (...Named port of shipment),Incoterms 2000
The Buyer must:
Book a vessel to carriage the goods and
notice the seller of nominated vessel
Take delivery of goods, bear the cost and
risk of goods
Pay the price,
Import clearance
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 55
FOB (...Named port of shipment),
Incoterms 2000
Question 1
Which term of FCA and FOB will give theSeller the best advantage
Aug-09 INTERNATIONAL COMMERCIAL TERMS 56
The seller arrange the vessel and the
Buyer bear the cost and risk of goods in
transit
FOB Shipment todestination
The seller load the goods into the vessel
cabin and trim the bulk cargo
FOB Trimmed-FOB.T.
The seller deliver the goods into the
vessel cabin & bear the loading charges
FOB Stowed-FOB.S.
the seller only put the goods to the
range within reach of vessels tackle,
and later loading charges are born by
the buyer
FOB under tackle (FOB
freight includes the cost of loading and
discharging from the vessel
FOB Liner terms (FOB
berth terms)
FOB variants
Aug-09 INTERNATIONAL COMMERCIAL TERMS 57
Fob Liner termsLoading, discharging containers
Liner termsfrom ships tackle till ships tackle
FOB
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 58
FOB Stowed
Aug-09 INTERNATIONAL COMMERCIAL TERMS 59
STOWAGE OF GENERAL
CARGO IN PALET, Stow the goods in to the ship hold
60
5) CFR : COST AND FREIGHT
(named port of destination)
The Seller charters a vessel or books shipping space
The Seller delivers when the goods pass the ships railat the named port of shipment
After the goods are on board, the seller pay the freight
All other charges and risk to the goods will be born bythe buyer.
SELLERS COST BUYERS COSTBUYERS RISKSELLERS RISK
CFR
PLACE OF DELIVERY
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 61
CFR price formations
CFR= FOB+ F
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) CIF : COST,INSURANCE AND FREIGHT
(named port of shipment)
Similar to CFR, But the Seller must insure the
goods at minimum cover of the Institute Cargo
Clauses
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
CIF
PLACE OF DELIVERY
Aug-09 INTERNATIONAL COMMERCIAL TERMS 63
CIF price formations
CIF= FOB+ F+I
= CFR+I
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 64
CIF
CIF
Cost, Insurance and Freight Seller delivers
when the goods pass the ships rail in the port
of shipment.
Seller must clear the goods for export and pay
the costs and freight necessary to bring the
goods in the named port of destination.
TerminalTerminal
Seller is obliged to insure
If parties do not intend
to deliver the goods
across the ships rail, the
CIP-term should be
used.
Aug-09 INTERNATIONAL COMMERCIAL TERMS 65
Interest rate included in the quoted priceCIF and i (CIF.i), (i= interest)
Exchange fee included in the quotedprice.CIF and e (CIF.e), (e= exchange)
CIF.c and i
Commission to the sellers intermideateincluded in the quoted price
CIF and c (CIF.c), (c=
commission)
The seller bear the cost of unloading the
goods into the quayCFR Quay (CFR d hng ln cucng)
The seller deliver the goods when goodslanded in port of destination. The seller
bear the cost and risk of lighter hire and
other charge at the port of destination
CFR Landed (CFR d hng ln
b)
freight includes the cost of loading anddischarging from the vessel
CFR Liner terms
2) CFR & CIF variants
Aug-09 INTERNATIONAL COMMERCIAL TERMS 66
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Aug-09 INTERNATIONAL COMMERCIAL TERMS 67
The goods delivered when the goods is
in reach of tackle at port of destinationCIF under ships tackle
Goods are on board when the contract is
signedCIF afloat
The seller deliver the goods when goodslanded in port of destination. The seller
bear the cost and risk of lighter hire andother charge at the port of destination
and import clearance
CIF landed Duty Paid
Particular average premium included inthe quoted price
CIF and WA (CIF with
Particular Average)
War risk premium included in the quoted
priceCIF and w (CIF and war risk
insurance)
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7) CPT:CARRIAGE PAID TO
(named place of destination)
The Seller arranges carriage and clear the goods forexport.
The Seller delivers when you pass the goods to thefirst carrier
The seller pay the cost of carriage to nameddestination
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
CPT
PLACE OF DELIVERY
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8) CIP : CARRIAGE AND INSURANCE
PAID TO (named place of destination)
Similar to CPT, But the Seller must insure the
goods at minimum cover of the Institute Cargo
Clauses
a im chuyn giaoSELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
CIP
PLACE OF DELIVERY
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9) DAF : DELIVERED AT FRONTIER
(named place)
The seller must contract for carriage to the name point
at frontier
The seller deliver the goods when goods are placed at
the disposal of the Buyer on the arriving means of
transport, cleared for export but not cleared for import
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
PLACE OF DELIVERY
DAF
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10) DES: DELIVERED EX SHIP
(named port of destination)
The seller delivers the goods when the goods
are placed at disposal of the Buyer, on board
the ship not cleared for import at port of
destination
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
PLACE OF DELIVERY
DES
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11) DEQ : DELIVERED EX QUAY
(named port of destination)
The seller delivers the goods when goods are
placed at the disposal of the buyer on the quay
not cleared for import at port of destination
SELLERS COST BUYERS COSTBUYERS RISKSELLERS RISK
PLACE OF DELIVERY
DEQ
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12) DDU: DELIVERED DUTY UNPAID
(named place of destination)
The seller delivers the goods to the buyer not
cleared for import not unloaded from arriving
means of transport at place of destination
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
PLACE OF DELIVERY
DDU
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13) DDP : DELIVERED DUTY PAID
(named place of destination)
The seller delivers the goods to the buyer cleared
for import and not unloaded from arriving
means of transport at place of destination
SELLERS COST BUYERS COST
BUYERS RISKSELLERS RISK
PLACE OF DELIVERY
DDP
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ecommen e uses o
Incoterms 2000
+ Incoterms only relate to the contract for sales of tangiblegoods
+ If parties agree on one of these 13 terms, the contractshould be clearly refer to the term
+ Incoterms only deal with number of obligations butThey do not fully cover the contract.
+ The parties could increase or lift some obligations butthese amendment shoud not change the basic meaning ofthe terms
+ The parties should not coporate the transportation termsin to the incoterms
+ Where goods is delivered by container, lighter, thearties should use the FCA, CPT, CIP
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