Midterm Test - Group 6 - Report of Import Business Process Analysis PDF

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FOREIGN TRADE UNIVERSITYSCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESSREPORT OF IMPORT BUSINESS PROCESS ANALYSISCase of Vietnam’s cars importationGroup 6 Phạm Nguyễn Tuệ Minh 1915550014 Trần Thị Thúy Nga 1915550016 Dương Hoàng Ngân 1915550715 Lê Phương Thảo 1915550027Hanoi, September 17 , 2021TABLE ...

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FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS

REPORT OF IMPORT BUSINESS PROCESS ANALYSIS Case of Vietnam’s cars importation

Group 6

Phạm Nguyễn Tuệ Minh

1915550014

Trần Thị Thúy Nga

1915550016

Dương Hoàng Ngân

1915550715

Lê Phương Thảo

1915550027

Hanoi, September 17, 2021

TABLE OF CONTENTS INTRODUCTION ........................................................................................................ 3 1. Overview of import of cars and main mode of international transaction in Vietnam ..................................................................................................................... 4 2. Sales contract of importing cars......................................................................... 6 3. Car importing process and core activities ......................................................... 9 3.1. Car importing process ................................................................................... 9 3.2. Core activities and stakeholders involving importing cars...................... 11 4. Analysing and some recommendations for import process .......................... 15 4.1. Advice for car importing companies .......................................................... 15 4.2. Proposed innovation of payment term....................................................... 16 5. Impact of COVID 19 on the export/ import performance of Vietnamese businesses.............................................................................................................. 17 CONCLUSION ......................................................................................................... 18 REFERENCES......................................................................................................... 19

TABLE OF FIGURES Figure 1. Top 10 countries exporting cars to Vietnam (March 3, 2021) ...................... 4 Figure 2. Preliminary information about CBU cars of all kinds registered with the Customs in June 2021................................................................................................ 5 Figure 3. Car importing process ................................................................................. 9

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INTRODUCTION For many countries in the world, the automative industry is one of the important economic sectors with a long history of development. The automotive industry is considered as one of the leading industries, which has a big impact on the development of other industries. Therefore, the strong growth of the automotive industry is said to be a positive factor in enhancing the process of industrialization and modernization of the country. Meeting the demand for using modern products with good quality and safety assurance, cars will be the priority means of transport, and at the same time used as a direct resource for the circulation of goods and promoting trade. In Vietnam, the development of the automotive industry as well as the car business is still a new and nascent field. This activity only started to take shape when our Party carried out renovation and transformation from a centralized, bureaucratic and subsidized economy to a market economy, especially since the Foreign Direct Investment Law took effect. Vietnam is a country with over 96 million people, a developing economy, so the demand for cars is increasing enough for many car enterprises to invest in large-scale production. However, the domestic market capacity has not been developed compared to its potential, because the Vietnamese car industry has not yet met the market conditions as well as other factors to develop like other countries. As a result, Vietnam tends to import CBU cars from abroad to meet domestic demand. Although up to now, part of the demand has been met by domestic production, the number of imported cars has increased continuously with many models, designs, ... from plenty of different brands all around the world. In order to import cars from abroad, businesses must establish sales contracts. Contracts have become increasingly detailed these days, and every effort is made to make all possibilities and eventualities clear, especially in sale contracts. Therefore, in this report, we will provide a specific view of the current situation of the car import industry, a detailed sales contract, an analysis of the export/import process based on BPA methodology, and the impact of the Covid 19 pandemic on the export/import performance of Vietnamese businesses.

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1. Overview of import of cars and main modes of international transaction in Vietnam In 2019, Cars were the world's 2nd most traded product, with a total trade of $777B. Between 2018 and 2019 the exports of Cars decreased by -0.82%, from $784B to $777B. Trade in Cars represents 4.29% of total world trade. Vietnam ranks 41st of Cars Importing Countries in 2019 - 2020. According to the Trade Competitiveness Map, Vietnam import value of vehicles other than railway, tramway (HS Code: 87) is 6,440,933, accountings for 3.22% of world total imports. More than 1.1 billion USD was spent on importing 49,360 completely built-up (CBU) vehicles in the four months of 2021 in Vietnam, a surge of 55.2 percent in volume and 57.2 percent in value over the same period last year, the General Statistics Office (GSO) has reported. Cars are registered for customs procedures imported into Vietnam mainly originating from many countries with a diversity of types. Vietnam auto market in the first 3 months of 2021, according to data of the General Department of Customs, shows a stable increase, which is indicated in the following figure:

No

Exporting Country

Quantity (units)

Total

cost

(million dollars) 1

Thailand

19.305

372,3

2

Indonesia

8.946

111,6

3

China

3.945

145,4

4

Japan

764

37,5

5

South Korea

517

23,7

6

Russia

469

31

7

U.S

276

12,4

8

Germany

271

19,7

9

England

88

9

10

India

50

0,485

Figure 1. Top 10 countries exporting cars to Vietnam (March 3, 2021)

In June 2021, CBU cars of all kinds registered for customs procedures imported into Vietnam mainly originate from 3 main markets, namely from Thailand with 7,264 units; 4

from Indonesia with 4,729 pieces and from China with 2,077 pieces. This table illustrates preliminary data on CBU cars of all categories that were registered with Customs in June 2021:

Growth/decrease June 2021

Targets

compared

to

the Proportion (%)

previous month (%) Quantity Value

Quantity

Value

Quantity Value

(unit)

(%)

(%)

(%)

(%)

189,382,106 0.6

-2.0

67.6

56.5

68

2,043,855

38.8

23.8

0.4

0.6

3,768

88,076,017

12.2

4.2

24.6

26.3

1,133

55,896,793

-40.6

-40.7

7.4

16.7

15,316

335,398,771 -1.8

-10.2

100.0

100.0

(USD)

Cars with 9 seats

or 10,347

less Cars over 9 seats Transport cars Others

Total

Figure 2. Preliminary information about CBU cars of all kinds registered with the Customs in June 2021

With a preferential import tax of 0% under the ASEAN Trade in Goods Agreement (ATIGA), cars from Indonesia and Thailand have led the way in volume exported to Vietnam since 2018 and maintained until now. In the first quarter of 2021, cars exported from these two countries accounted for about 80% of the market share. In which, cars from Thailand increased by 56%, Indonesian cars decreased by 26% over the same period in 2020. For imported cars, companies such as Toyota, Mitsubishi, Honda, Ford, Suzuki, and Mazda mainly import from the two markets above to sell in Vietnam. Some imported cars are selling well such as Mitsubishi Xpander from Indonesia, Toyota Corolla Cross, Ford Rander from Thailand. The main mode of transaction of car in Vietnam is direct import which means Vietnam firms usually take care of importing activities and are in direct contracts with the 5

exporters in the foreign target markets, Vietnamese buyers often directly buy cars to an international market, either through intermediaries – such as sales representatives, distributors, or foreign retailers. 2. Sales contract of importing cars SALE CONTRACT No.9064/HDVN-LHCN Date: 11/09/2021 Between Northern Car Import Export And Trading Joint Stock Company Address: 10 Alley 8 Dinh Nguyen Temple Street, Tho An Commune, Dan Phuong District, Hanoi, Vietnam Tel: 0108 268 041 Represented by Mr Dang Van Dinh Hereinafter called The Buyer

And: Ford Thailand Manufacturing (FTM) Address: 500/103 Moo 3 Tambol Tasit, Amphur Pluakdaeng, Hemaraj Eastern Seaboard Industrial Estate, Rayong 21140, Thailand Tel: +66 38950510 Fax: +66 38950510 Represented by Mr Kel Kearns - President Hereinafter called The Seller It has been mutually agreed to the sale and purchase of rice on the terms and conditions as follows: 1. Commodity: Ranger Wildtrak 2.0L AT 4X4 2. Specification: -

Color: Chilli Orange

-

Number of seats: 5 seats

-

Overall dimensions DxRxC (mm): 5362 x 1860 x 1830 mm

-

Wheelbase: 3220 mm.

-

Engine: Bi Turbo Diesel 2.0 i4 TDCi

-

Diesel: fuel type

-

Maximum power: 160 – 213 Hp 6

-

Maximum torque: 385 – 500 NM

-

Transmission : 10 speeds AT

-

Wheel size 16 - 17 - 18"

3. Quantity: 5 units 4. Price: -

Unit price: USD 40000 per unit CIF Hai Phong Port, Hai Phong, Vietnam, Incoterms 2020

-

Total amount: USD 200000

-

In word: Two hundred thousand US dollar

5. Packing: as per manufacturer standard packing, and safety for long-sea transportation 6. Shipment and Delivery: -

Time of shipment: 15 - 20 days after L/C opening date

-

Port of Loading: Laem Chabang Port, Bangkok, Thailand

-

Port of Discharge: Haiphong Port, Haiphong City, Vietnam

7. Retention of Title: The goods shall remain the property of the Seller until the complete payment of the price. 8. Inspection: -

The Seller shall make a free prior- delivery inspection.

-

During the period until Ford Ranger is shipped, the vehicle will fully meet the company's stringent quality standards under the supervision of FTM and Vehicle Evaluation Center (VEC) in Thailand.

9. Payment: By Confirmed Irrevocable Letter of Credit at sight Buyer shall open an irrevocable letter of credit at sight L/C, to be opened through Bangkok Commercial Bank, in favor of Vietcombank Hanoi, 15 days before the shipment, valid for 30 days, in favor of the seller for the total value of the good to be shipped. -

Partial shipment: Not Allowed

-

Transhipment: Not Allowed

10. Documents -

Full set (3/3) originals Ocean Clean on Board Bill of Lading, marked "Freight to collect".

-

Signed Commercial Invoice: 03 originals 7

-

Detailed Packing list: 03 originals

-

Certificate of Quality and Quantity issued by The Seller : 03 originals

-

Certificate of Origin issued by Thailand Chamber of Commerce: 1 original and 2 copies.

-

All banking fees and charges shall be paid as follows: The Buyer and Seller bear their own banking charges

11. Force Majeure: The sides are released from the liability for partial or full non fulfillment of the obligations hereunder if such occurs as the result of force majeure circumstances, namely fire, flood, earthquake, war and pandemic. The side should immediately inform the other side of the beginning and cessation of the above mentioned circumstances. The certificates issued by the Chamber of Commerce of the Seller’s country or the Buyer’s country respectfully shall be sufficient proof of the existence and the cessation of the above mentioned circumstances. 12. Penalties conditions 12.1. Shipment and Delivery in clause 6.0 is approximate and has only +/- one week tolerance. In case of any delay of this tolerance period, the Seller accepts to pay penalty of daily 0.5% of the total value of concerned shipment. 12.2. In case of any delay of shipment not reasoned by Force Majeure, the Buyer will charge the cost of his production lost to the Seller 12.3. In case the quality of the product does not match with the clause 2.0, it will be returned back to the Seller after agreement of both parties and all expenses incurred after the approval date of the contract and cost of product will be charged to the Seller, before return back the product to the Seller, the Seller should pay all expenses and cost of goods to Buyer. If the quality problem continues, the Buyer can cancel this contract. 12.4. The price abatement for retained non-conforming goods shall not exceed: 10% of the price of such goods. Any action for non-conformity of the must be taken by the Buyer not later than 10 days from the date of arrival of the goods at destination 13. Applicable Law: Any questions not covered by CISG will be governed by the law of the Socialist Republic of Vietnam. 14. Resolution of Disputes: ICC Arbitration is applied 15. Others

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Any amendment of the terms and conditions of this contract must be agreed by both sides in writing All commercial terms used for this contract will be interpreted according to the publication “Trade Terms” (Author: Michael B. Smith & Merrit R. Blakeslee – National Politics Publishing House – 2001) This sales contract is done in Vietnam on 11 September 2021 in 04 (four) English originals, 02 (two) for each side. Made in Hanoi Capital, on 11 September 2021 FOR THE SELLER

FOR THE BUYER

3. Car importing process and core activities 3.1. Car importing process

Figure 3. Car importing process

Northern Car Import Export And Trading Joint Stock Company and Ford Thailand Manufacturing have already agreed the delivery term is CIF Haiphong Port, Incoterms 2020, so the delivering of cars to the specific port of departure, bearing settlement 9

charges for carriage and insurance till the designated port is the responsibility of the exporter - Ford Thailand Manufacturing. So Northern Car Import Export And Trading Joint Stock Company signs the contract with a Forwarder to help them prepare and submit important documents to customs authotities, arrange the release of goods, optimize the warehouse receiving process. Outsourcing these activities takes up more costs, but a Forwarder is more professional and knowledgeable about importing procedures , so they can do these activities easier and less time-consuming than Northern Car Import Export And Trading Joint Stock Company has to do these activities themselves.

Importer

Contract

(Northern Car)

1. Buy

Exporter (The FTM) 2. During shipment

3. After shipment

2.1. Obtain import permission

3.1. Inspection

Documents

Inspection

Northern Car

Ministry of Industry

Importer

Goods shipped

and Trade

from forwarder

Importer license 2.2. Handling Payment Process

3.2. Claim and dispute resolution

Application for opening L/C Northern Car

Make a claim

Vietcombank L/C

Thailand Commercial

Exporter/ carrier / underwriter

ord Manufacturing Bank

2.3. Get the Delivery Order Documents Forwarder

Importer

Shipping Line Delivery Order

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2.4. Custom Clearance Customs declaration and documents Forwarder

Sub-Department of Customs

Physical Inspection Tax, fees and charges Forwarder

Sub-Department of Customs

Decision on customs clearance 2.5. Taking delivery of import Goods Haiphong Port

orthern Car’s Warehouse

3.2. Core activities and stakeholders involving importing cars Output

Activities

Process Participants

Input criteria to Activities

and

criteria

enter business associated documentary exit process

requirements

to the

business process

1. Buy

- Exporter

- Importer has a

- Importer sends Offer

Importer and

- Importer

list of cars

according to Purchase

exporter have

potential sellers

Order.

concluded

and is eligible to

trade

import car.

contract and terms

2. During Shipment

11

2.1.

- Ministry of

Northern Car

Northern Car Joint Stock

The Import

Obtain

Industry and

Joint Stock

Company prepares:

license of Car

import

Trade.

Company and

importer's license, license

permit

- Northern

Ford Thailand

for warranty and

Car Import

Manufacturing

maintenance of imported

Export And

have already

cars to the Ministry of

Trading Joint concluded a Stock

trade contract

Company

and terms

Industry and Trade.

and Ford Thailand Manufacturin g 2.2.

Northern Car Northern Car

Vietcombank opens LC

L/C issued by

Handling

Import

Joint Stock

and transfer it to the

Vietcombank

payment

Export And

Company

Bangkok Commercial

process

Trading Joint prepare

Bank

Stock

documents:

Company

Financial

and issuing

documents and

bank

application for

Vietcombank opening L/C 2.3. Get

- The

The company

- The Forwarder goes to

- The

the

importer

receives Arrival

the shipping line to

Forwarder

Delivery

- Forwarder

Notice from the

receive the Delivery Order

goes to the

FTM.

from the owner of the ship

shipping line

with the documents

to receive the

- It includes: Referral,

Delivery