Negotiation and implementation of the international sale contracts’ terms of burwitz refractory company

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MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING
VIETNAM MARITIME UNIVERSITY
STUDENT NAME: TRINH THI LAN ANH
DISSERTATION
GLOBAL STUDIES AND MARITIME AFFAIRS
NEGOTIATION AND IMPLEMENTATION OF THE
INTERNATIONAL SALE CONTRACTS’ TERMS OF BURWITZ
REFRACTORY COMPANY:
PROBLEMS AND SUGGESTIONS
HAI PHONG – 2015
MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING
VIETNAM MARITIME UNIVERSITY
STUDENT NAME: TRINH THI LAN ANH
CLASS: GMA 02
DISSERTATION
GLOBAL STUDIES AND MARITIME AFFAIRS
NEGOTIATION AND IMPLEMENTATION OF THE
INTERNATIONAL SALE CONTRACTS’ TERMS OF BURWITZ
REFRACTORY COMPANY:
PROBLEMS AND SUGGESTIONS
Supervisor: Nguyen Viet Hoang Son
Division: Basic Economics
Faculty: Economics
HAI PHONG – 2015
PREFACE
I certify that all the materials in this dissertation that is not my own work has
been identified, and that no materials is included for which a degree has previously
been conferred on me.
The contents of this dissertation reflect my own personal views, and are not
necessarily endorsed by the University.
Signature
TRINH LAN ANH
Date of completion: 10th November 2015
TABLE OF CONTENT
Preface...................................................................................................................i
Table of contents..................................................................................................ii
List of figures......................................................................................................iv
List of tables.........................................................................................................v
Introduction..........................................................................................................1
1. Necessity......................................................................................................1
2. Research Object............................................................................................2
3. Research Scope............................................................................................6
4. Research Findings........................................................................................7
Chapter 1: Literature Review................................................................................9
1. Theoretical Background.................................................................................9
2. Drafting contracts process............................................................................10
3. The international sale contracts’ terms of Burwitz Refractory Compnany...13
Chapter 2: Brief introduction of the company....................................................19
1. Functions and Structure..............................................................................19
2. The products and partners of Burwitz Refractory Comapany.....................23
3. Business results..........................................................................................29
4. Potential problems in the international sale contracts’ terms of Burwitz
Refractory Compnay...........................................................................................32
Chapter 3: Recommendation for improvement...................................................36
Conclusion..........................................................................................................39
Annex.................................................................................................................41
References..........................................................................................................63
ABBREVIATION LIST
[1]. B/L: Bill of Lading
[2]. B.O.M: Broad of Management
[3]. BRC: Burwitz Refractory Company
[4]. C.E.O: Chief Executive Officer
[5]. CIF: Cost-Insurance-Freight (Incoterm)
[6]. D/P: Document against payment (payment term)
[7]. ICC: International Chamber of Commerce
[8]. ISO: International Standard Organization
[9]. FOB: Free-on-board (Incoterm)
[10]. TT: Telegraphic transfer/ Telex Transfer (payment term)
[11]. VND: Vietnam Dong
LIST OF FIGURES
Figure 1: BEROA Deutschland, Gmbh 's International Projects..............................4
Figure 2: Contracts drafting process.........................................................................7
Figure 3: The article of commodity details in Burwitz’s sales contracts.................15
Figure 4:The value of International sales contracts from January to September 2014 and
2015......................................................................................................................... 28
Figure 5:The Burwitz Vietnam's total revenue from 2012 to 2015 (billion VND). .29
Figure 6:The Burwitz Vietnam's Profit after tax (PAT) from 2012 to 2015............30
LIST OF TABLES
Table 1: Major products of Burwitz Refractory Company......................................23
Table 2: Linings industry customers’ list.................................................................25
Table 3: Other customers.........................................................................................26
Table 4: Business results of Burwitz Refractory Company from 2012 to 2015.......31
Table 5: Comparison in terms of workers and salary monthly before and after adding
new terms of packing conditions…………………………………….…….37
Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
INTRODUCTION
1. Necessity
It is no exaggeration to say that practice always plays an indispensable
pattern to plenty of aspects, especially study. Without applying theories into reality,
the learners cannot mature and get valuable experiences for their field. There are
three major justifications for giving students’ practice opportunities by corporations
and companies.
To start with, the essential roles of internship are undeniable. Firstly, it is no
little doubt that it is a strong support to develop students’ background knowledge. In
our contemporary life, learners have to deal with plenty of information flows
without applying in practicing. As a result, their recognitions are vulnerable and
unstable, being easily to forget or misunderstanding. Thus, thanks to a number of
valuable internship, students have a fabulous opportunity to apply their own
knowledge to practice, contributing to the higher - level working skills among
learners in the near future. It is obvious that students in general and teachers in
particular can take advantages of those internships.
In the second analysis, because of working in the practical environment,
students can build up their own experience. It is common knowledge that
corporations and companies require candidates having two - year experience or
more, guaranteeing that potential worker can work right after recruitment process.
Thus, should companies give opportunities to senior students, they will shortage the
recruitment and keep the potential professional candidates. From students’
perspective, it is also a valuable chance to show up their abilities, impressing the
future recruiters. From students and corporations points of view, this is a win-win
situation.
Regarding to the justifications for choosing Burwitz Refractory Company
(BRC), it is undeniable that the international company like BRC has strong and
thorough experience in international business. The company involves in plenty of
multinational businesses in the field of refractory linings’ raw materials. In
contemporary period, BRC has variety of prolong and truthful relationships with
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Negotiation and implementation of the international sale
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Suggestions
numerous of providers such as China, Germany, Japan and so forth. On the other
hand, I had an opportunity to do the second internship in BRC with the topic
“International Sale Contracts between Burwitz Refractory Company and Chinese
Partners”. Therefore, in the third and also the final internship, I aim to conduct
further study in this field and to give feasible suggestions to existed problems.
Thus, thanks to this internship at BRC, I have an excellent opportunity to
continue not only apply theoretical knowledge, especially in international trade but
also develop my study regarding to company’s existed issues. Being close to
experienced staffs of BRC via the second internship, I have been received glorious
guilds to catch up with the real circumstance of not only company itself but also
Vietnamese corporations. Finally but yet importantly, this environment may indeed
nurture and improve my knowledge and working skills.
In a word, for aforementioned viewpoints, it is no exaggeration to conclude
that internships are an important part with both companies and students due to its
benefits and roles. It may indeed be true to say that internships are the bridge
connecting enterprises and students, creating the close relationship. Therefore, it is
common knowledge that internships is now and will be done annually. Moreover, it
is no exaggeration to say that the internship in BRC is a value and glorious
opportunity in my care.
2. Research Object
The research has been conducted at the Burwitz Refractory Company, also
known as BRC Vietnam. Being a subsidiary of BEROA Deutschland GmbH,
Burwitz Refractory Company has been established in 2004, basing on the
technology of Burwitz Feurungsbau, GmbH (1949).
 BEROA Deutschland GmbH
For more details, Burwitz Feurungsbau, GmbH is a famous branch name,
under the umbrella of one of the most giant corporations in terms of refractory
linings and chimneys - the BEROA Germany Limited Corporation as known as
BEROA Deutschland, Gesellschaft mit beschränkter haftung (BEROA
Deutschland , GmbH). It has been created a massive international network,
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
representing by 50 companies in over 20 countries. Having over 95 years of
experience, the BEROA Group has a confidence toward their products and
customers’ strong belief. Under BEROA Group umbrella, there are plenty of well-
respected brands such as Karrena (Germany, 1914), Burwitz (Germany, 1949),
Bierrum (England, 1928), CPT-Themique (France, 1926), YLA Pty Limited
(Australia, 1974) and many more[ CITATION BER14 \l 1033 ][ CITATION
BER141 \l 1033 ].
Mergers and acquisitions of BEROA Deutschland GmbH not only increase
the revenue of the group but also help this international network run more workable.
Developing based on “act-local-think-global” orientation, the corporation is not
only remaining the primitive brand names but also standardize those brand images
by using internationally the BEROA’s logo [ CITATION BER11 \l 1033 ]. BEROA
Group serves international customers, doing across - boundary projects. There are
plenty of BEROA’s successful projects in recent years, including:
 “Blast furnace shaft lined with shotcrete” in Slovakia of Refratechnik Steel
(picture A)
 The most modern lignite fired power station in the world “Refractory lining”
(2011) of HITACHI (picture B)
 The largest secondary ammonia reformer in the world (2005) of Uhde
(picture C)
 The project in 2010 of Andritz Energy & Environment as known as
“Refractory lining of a circulating fluidized bed plant, combustion chamber
with full masonry, thermal capacity 150 MW” at Eisenhüttenstadt CHP
plant, Germany (picture D)[ CITATION BER14 \l 1033 ].
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
(A) (B)
(C) (D)
Figure 1: BEROA Deutschland, Gmbh 's International Projects.
Copyright 2014 by BEROA Deutschland, Gmbh . Reprinted with permission
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
Although owning numerous of brands, the BEROA Group still remain the
primitive brand names, letting them develop in their strong points. Thus, it is
definitely the justification for a range of BEROA Technology Group subsidiaries
with different brand names across the world. One of them, which have to be
mentioned, is the Burwitz Refractory Company – a Burwitz subsidiary in Vietnam.
 Burwitz Refractory Company – BRC Vietnam
The company’s manufacture locates in Kinhmon town, Kinhmon district,
Haiduong with their agents being held in LILAMA Buildings at Hanoi and
Haiduong. In fact, the company primarily provides Vietnamwse market, starting to
explore the African and Middle eastern markets[CITATION Bur \l 1033 ].
Below is some general information of Burwitz Refractory Company.
 Hanoi’s agent: floor 18 LILAMA Building, 124 Minh khai, Hai Ba Trung,
Ha noi.
 Haiduong’s agent: floor 1 LILAMA Building, 313 Dien Bien Phu, Haiduong.
 Factory: Kinh mon town, Kinh mon district, Haiduong city,Haiduong
province
 Hotline: +84 913 231 331
 Tel: +84 3203 838 599
 Fax: +84 3203 838 839
 Email: [email protected]
 Website: brcvietnam.com
As a joint venture of LILAMA 69-3 and Burwitz Group, it is easy to understand
the basic structure of Burwitz Vietnam. There are three parties jointed capital in the
company included Fit-engine Vietnam Corporation, Vietnam Germany commercial
investment limited company and Burwitz representative: Mr. Nguyen Trong Cu.
Thus, it is no exaggeration to say that the Burwitz Refractory Company is a result of
the cooperation between the German technology from Burwitz Group and the
professional experience of LILAMA 69-3 Joint Stocks Company, which is a
subsidiary of Fit-engine Vietnam Corporation. Maintaining the core values of the
BEROA Group, the company develops and produces in the refractory linings
industry and other related materials and services. Applying the international
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
standard ISO – 2008 in the product’s quality management process, Burwitz
Vietnam’s products and services embrace the European standard inside domestic
market. In contemporary period, the company’s productivity is 100 tons refractory
linings per day, not only have met the domestic market’s demand but is also
adequate to fulfill other foreign markets. Therefore, it is no little doubt to
understand the company’s strategy, which is starting to access the African and
Middle Eastern markets [ CITATION Bur15 \l 1033 ].
Interestingly, Burwitz Vietnam is the very first high quality refractory linings
manufactory in Vietnam, being a key factory to reduce the fixed cost of numerous
industries such as metallurgy, cement, pottery, normal and refractory glass, crude
oil extraction and so forth [ CITATION Vie \l 1033 ]. Working with the slogan “For
You We Go Through Fire !”, Burwitz Vietnam defines that their primary value is
always the customers’ belief [CITATION Bur1 \l 1033 ]. At Burwitz Vietnam, the
company’s aim is to develop to be the Vietnamese first class refractory linings and
services provider. Remaining a close relationship with mother – company and
improving products and services’ quality, Burwitz Vietnam try to satisfy the
demands and control the risks in order to providing the best benefit to
customers[CITATION Bur2 \l 1033 ]. Not eliminating the company’s mission in
monetary values, the company never stop renews itself. This means making a
friendly working environment, improving professional workforce’s skills, and
applying the new technology and quintessence in the next products generations
[ CITATION Bur151 \l 1033 ].
Although the Burwitz Vietnam has started the business for ten years, it can
conclude without hesitance that Burwitz Vietnam will get plenty of successes, and
rewards in the future due to its products and services quality, and also their
recognition toward customers.
3. Research Scope
Being an extraonary corporation, it is easy to understand there are many
fields and subjects, which needs to be studied carefully and improved in the future.
Thus, in this dissertation, the write focuses only on the international commercial
contracts between Burwitz Refractory Company and their partners. In those
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
contracts, BRC Vietnam always plays the role as the buyers, when they need to
import the massive amount of raw materials to support for their produce activities.
First and foremost, to study the international sales contracts between Burwitz
Refractory Company (Burwitz Vietnam) and Chinese providers, we need to
understand the drafting contracts’ process before analyzing the sales contracts
themselves. The relationships between the company and its Chinese partners
determine not only the structure of the process of drafting the contracts’ process but
also the tenor of the international contracts. Secondly, based on the founded
information, the researcher starts to analyze and figure out the potential problems.
In a word, the scope of this dissertation focuses on the negotiation and
implementation of the international sale contracts’ terms of Burwitz Refractory
Company.
4. Research Findings
Being witnessed as the first class company in refractory industry, Burwitz
Refractory Company is the truthful partner of other cement manufacture companies
like Uong Bi Thermal or Tam Diep Cement Company. Being a joint venture
between BURWITZ Group and LILAMA Corporation, Burwitz Vietnam has both
the European technological manufactured system and experience in the domestic
market. Therefore, the Burwitz Vietnam can feel proud to say that the company is
the market leader in refractory linings industry.
Established from 2005, after 10 years, Burwitz Vietnam is a partner of more
than 20 customers with 14 of them belonged to cement manufactured industry. The
company owns the variety of products and services. It includes refractory anchors
and wedges; pottery rolls, refractory bricks, insulating materials and refractory
linings and chimneys services. As time goes by, the company is spreading their
activities besides improving their primarily product quality – refractory linings.
Besides, because the company has established in a short period of time, company’s
organization is still simple, having three major levels included top level decided the
macro – strategy of company, middle level realized the company’s strategy as a
number of plans and a bottom level completed these planes. Although the company
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
is still new and young, their business results are truly impressed, increasing
dramatically through years.
In term of their operation process, it is no little doubt that the company has to
involve in plenty of international trading business. As a result, drafting international
sales contracts become an indispensable pattern in the development of company’s
operation in general and business activities in particular. Besides other nations,
China outstands as a primary provider of raw materials in terms of quantity and
contract’s value. In fact, it accounts for more than 60 percent in terms of value and
50% regarding to total number of contracts. Analyzing those international sales
contracts, it is obvious that they are still existed plenty of limitations, which can
influence negatively to the not only the benefit but also the development of
company. There are four major issues, including buying products under CIF term,
packing conditions, cultural influence and the dominance of Chinese products.
There are numerous of justification for the existence of these limitations.
However, finding the feasible solutions and applying in reality may indeed improve
the company’s successful in the future.
CHAPTER 1: LITERATURE REVIEW
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
1. Theoretical Background
As the main purpose of this research is to overcome the limitation of
international contracts between Burwitz Refractory Company and its partners, it is
necessary to understand the key words also the necessity to study this topic. Thus, it
may indeed help the readers to get a basic knowledge, and further deep
understanding about subject.
To start with, the term “contract” is the first one which has to been defined
clearly. In fact, there are many types of contract like commercial contract or
working contract. However, in this research, the writer just focuses on and study
only the purchase contract, especially Burwitz Refractory Company’s contracts. The
contract, first and foremost, is the mere agreement between the seller and the buyer,
aim to avoid damage or harm for parties(Fried, 2015; European Union, 2012; The
Unidroit Principles of International Commercial Contracts, 2010; Kline & Quiggin,
2014; Wang, Wong, & Wang, 2014; Kolarz, Marszałek, Kozlak, & Zabinska,
2012).
First of all, culture is one of the influence factor. Culture, which includes
language and religion, has impacted on business in many aspects like understanding
of a situation, access to people, reaction between people and so forth. Thus,
commercial contracts as a part of business have been influenced by culture (Thai,
2012; Thai, Globalization of Culture: Business Communication across Culture,
2012). As a consequence, although it has its own pros, parties have to face with its
cons. However, in each circumstance, it is necessary for parties to find the solution
to deal with problems caused by cultural conflicts.
In the second analysis, the dominance of supplier may be a threat with the
buyer like Burwitz Refractory Company. First and foremost, it increases the
supplier’s power of bargaining with customers(Porter, n.d). Thus, the suppliers can
influence the activities of company. Secondly, there are many example in the past
that shown the negative impact of overly dependent on the suppliers to
manufactures. It can name the case of Nokia Corp of Finland and Telefon AB L.M
Ericsson of Sweden(Latour, 2001). In fact, the burn of Albuquerque, N.M in just ten
minutes had shifted the power balance between two electronic giants.
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
In fact, there are limited number of researches and books studied about the
link between the change of contract’s condition and company efficiency. However,
it can be denied that the good terms can gain a lot of benefit for company. It can be
witnessed through the fact that parties’ representatives have to spend a huge amount
of time just for negotiation. Therefore, in this research, the writer has studied the
Burwitz Refractory Company’s international contracts to find out its limitation.
Thus, from that results, the researcher hope to give a suitable solution for each
problems, leading to the boost in company efficiency.
2. Drafting contracts process
Regarding to drafting the contracts, the whole process includes seven major
stages, which are offer of orders, counter-offer of orders, drafting and signing
contracts, performing contracts, adjusting contracts’ term (if necessary), completing
contracts, and filing the contracts’ documentary. Based on the relationship between
Burwitz Vietnam and the partner, due to different suppliers, the process can be
modified as convenient as possible for both parties. For more detail, it also means
that the drafting contracts’ process may ignore some stages thank to the close
relationship of parties. Firstly, the research is going to define and study the drafting
contracts’ process. Given is the graph below describing the seven stages of drafting
contracts’ process.
Send offer
Stage 1
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Reveive counter- offer
Negotiation and implementation of the international sale
Draft and sign
contracts’ terms of Burwitz Refractory contracts Problems and
Company:
Stage 3
Suggestions
Perform contracts
Stage 4
Adjust contracts' term
Stage 5
Complete contracts
Stage 6
File contracts' document
Stage 7
Figure 2: Contracts drafting process
Copyright 2015 by BRC Vietnam. Reprinted with permission
 Sending offer
Burwitz Vietnam contacts with the Chinese providers whenever the company
need the raw materials to manufacture the products. Usually, the orders are made
via email between both sides, containing the company’s information such as name
of company, address, contact number, types of raw materials, quantity, arrival time
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
Suggestions
and so forth. Because Chinese providers are acquainted partners, the basic
information of Chinese partners like address, contact information or representative
does not require checking the truthfulness.
In fact, company works is seasonal. Thus, the placing orders has been booked in
the April, May, June and July.
 Receiving counter - offer
After the orders have been placed, the negotiation process starts. Thanks to the
close relationship between both side, the negotiation primarily focuses on the means
of raw materials, quantity and arrival time. Other terms and terms are based on the
previous contracts between parties. This stage is also done via email.
 Drafting and signing contracts
The international sales contracts will be drafted based on the model sample. The
contracts will be modified to meet the requirement of parties as a part of
negotiation.
The Chinese partners have to sign the contracts firstly before faxing to Burwitz
Vietnam. Then, the representative of Burwitz Vietnam, Burwitz Vietnam’s CEO -
Mrs. Vu Thi Van will sign the contracts.
 Performing the contracts
According to contracts’ terms and terms, the Chinese partners take responsibility
to complete the contract. Because of their close relationship, the Burwitz Vietnam,
in fact, does not require the Chinese partners to send raw materials’ sample to
inspect the materials’ quality.
The third party like 3PL companies will take responsibility for the middle activities.
Based on the term of payment in sales contracts, the company either endorses a
document promising it will pay within a certain time or has to pay in advance at
least 80% of contract value. The company, then, receive the packing list,
commercial invoice, arrival notice, bill of lading, and so on to be able to bring raw
materials to company’s warehouse from destination port.
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Negotiation and implementation of the international sale
contracts’ terms of Burwitz Refractory Company: Problems and
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 Adjusting contracts’ terms and terms
In some cases, the buyer and seller need negotiation to deal with certain changes
in circumstances, occurring after contract has been signed. In this situation, the
additions must be a concurrence between both sides, and must be in writing. This
may be the weather condition, pressure from the government and so forth. In
addition, this stage has been done only when has an unexpected event happened.
And, in the trading history between Chinese partners and the company, it never
happen. Thus, with Chinese partners, in most case, this stage has been ignored.
 Completing contracts
Based on the term of payment in sales contracts, the Burwitz Vietnam has to pay
in an allowed period. In some circumstance, the time can be up to 30 days.
 Filing contracts’ document
The document related to sales contracts have been filed by Accounting
Department of Burwitz.
In the second analysis, the research will concentrate on the analysis of the
structure of international sales contracts between Burwitz Vietnam and Chinese
exporters. Overall, it is going to define and study the common points and the
dissimilar ones among contracts. Moreover, the international sales contracts of
Burwitz Vietnam based on the model sample, including nine articles.
3. The international sale contracts’ terms of Burwitz Refractory
Company
Regarding to the core structure of international sales contracts, it has been
created by nine articles, which are the information of seller and buyer, description
of products, packing and marking, shipment, term of payment, inspection, force
majeure (acts of god) arbitration and additional condition. All the contracts have
been written in English, applying the International Chamber of Commerce (ICC)
model contract.
 Information of seller and buyer
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