Recommendations to improve export activity of coffee beans at dong tai global logistics and trading co., ltd

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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
PREFACE
I declare that this report is my own unaided work. It has not been submitted
before.
If violated, I am solely responsible for and bear the punishments of the Institution and
University.
Student Name and Signature
Đặng Minh Anh
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
Table of contents
PREFACE......................................................................................................................1
List of table..................................................................................................................... 4
List of figure................................................................................................................... 4
List of abbreviations.......................................................................................................6
Introduction.................................................................................................................... 8
Necessity...................................................................................................................... 8
Dissertation Methodology............................................................................................8
Dissertation Scope........................................................................................................8
Duration Time..............................................................................................................8
Research Result............................................................................................................8
Chapter 1: Literature Review........................................................................................10
1.1 Concept of export............................................................................................10
1.2 The role of export........................................................................................10
1.3 Types of export...............................................................................................11
1.3.1 Direct export................................................................................................11
1.3.2 Indirect export..............................................................................................11
1.4 International payment......................................................................................19
1.4.1 Overview of international payment..............................................................19
1.4.2 Current form of International payment........................................................20
1.5 Vietnam exporting coffee beans situation.......................................................22
Chapter 2: The Activity of Exporting Coffee Beans.....................................................27
2.1 Introduction of Dong Tai Global Logistics And Trading Co., Ltd..................27
2.1.1 The establishment of the company...............................................................27
2.1.2 Organization................................................................................................27
2.2 The Activity of Exporting Coffee Beans.........................................................31
2.2.1 Sending fix offer..........................................................................................32
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
2.2.2 Receiving and analyzing acceptances..........................................................33
2.2.3 Choose partner and making contract............................................................50
2.2.4 Checking L/C...............................................................................................59
2.2.5 Delivering to CY yard..................................................................................59
2.2.6 Generating document...................................................................................64
2.2.7 Payment.......................................................................................................70
Chapter 3: Evaluation and Recommendations..............................................................72
3.1 Evaluation.......................................................................................................72
3.1.1 Advantages..................................................................................................72
3.1.2 Disadvantages..............................................................................................72
3.2 Recommendations to enhance export activity of coffee beans at Dong Tai
Global Logistics And Trading Co.,LTD.....................................................................73
3.2.1 Recommendation about analyzing market and choosing partner.................73
3.2.2 Recommendation about receiving and delivering process...........................73
3.2.3 Recommendation about payment process....................................................74
Conclusion....................................................................................................................75
References....................................................................................................................76
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
List of table
Table 1: Freight forwarder cost
45
(VND)
Table 2: Customs declarations fee
46
(VND
Table 3: Payment (VND) 47
Table 4: Freight forwarder cost
48
(VND)
Table 5: Total payment (VND) 49
Table 6: Coffee beans production
49
export by Vietnam (tons)
Table 7: Coffee beans production
export by Dong Tai Global
50
Logistics and Trading Co.,LTD
(tons)
List of figure
Figure 1: Global coffee production by two coffee 22
products
Figure 2: Global coffee production by countries 23
Figure 3: Global coffee exporting by country, 24
November 2014.
Figure 4: Vietnam’s coffee value chain process 25
Figure 5: Organization of Dong Tai Global Logistics 27
And Trading CO.,LTD
Figure 6: The activity of exporting coffee beans 30
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
List of abbreviations
AFTA ASEAN Free Trade Area
ASEA Association of Southeast Asian Nations
N
B/L Bill of Lading
B/E Bill of Exchange
C/O Certificate of Origin
CEPT Common Effective Preferential Tariff
EU European Union
EVFTA Free Trade Agreement between Vietnam and the
European Union
FCA Free Carrier – (name place)
FTA Free Trade Agreement
GPA Government Procurement Agreement
ILO International Labour Organization
KITA Korea International Trade Association
L/C Letter of Credit
NTBs Non-Tariff Barriers
NTMs Non-Tariff Measures
PCA Partnership and Cooperation Agreement
SMEs small and medium-sized enterprises
TBT Technical Barriers to Trade
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
UK United Kingdom
US United State
WMS Warehouse Management System
WTO World Trade Organization
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
Introduction
Necessity
Vietnam is ranked as second largest coffee production and second largest exporting in
the globe. There are a big gap between Vietnam and the largest country Brazil in this
industry. The major problem in production value of Vietnam coffee industry is
determined as major weakness and it reduces the sustainable competitive edge of
export firms in global market. This study is about how to improve the exporting
activity in Vietnamese coffee firms.
Dissertation Methodology
Method of analysis: the dissertation is composed based on the real process collected
information of handling paperwork for import-forwarding for FCL cargoes being
implemented. The dissertation also gives an analysis of advantages and disadvantages
of the procedure and makes some recommendations based on those points. Statistical
methods of data are also applied to given statistics in this dissertation. The data is
collected from the company accounting and operation departments of Dong Tai Global
Logistics and Trading Co.,LTD.
Logical methods points out the various criteria to assess the exporting performance. In
addition, the difficulties in implementation process are also analyzed and reported
shortcomings consequences for a specific shipment.
Dissertation Scope
The dissertation is implemented in order to analysis and evaluate current situation of
exporting coffee beans. The dissertation focus on the detail steps of the exporting
coffee beans process procedure for understanding the real exporting activities. In
addition, dissertation also gives some suggestions to improve the efficiency of export
procedure.
Duration Time
The dissertation’s statistics and samples are collected within the 3-month internship.
During this period, I had chance to get in export activities job and gain knowledge and
experience to complete this dissertation.
Research Result
This study is aim to demonstrate the nominated good exporting procedure of Dong Tai
Global Logistics and Trading Co.,LTD. Meanwhile, by applying observation method,
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
the implementation of the procedure shall be evaluated and compared with the
requirements of the company procedure. So that, advantages and disadvantages of this
procedure implementation are figured. Finally, some recommendations are built based
on the above analysis.
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Recommendations to improve export activity of coffee beans at Dong Tai Global
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Chapter 1: Literature Review
1.1 Concept of export
The term export means shipping the merchandises and services out of a country’s port.
The foreign buyer is known as an importermeanwhile the seller of such merchandises
and services is considered as an exporter. It is obvious that merchandises that are
manufactured in one nation are shipping to another nation for future trade or sale. The
sale of such merchandises adds to the producing nation’s gross output.
Export is not separate trade, it is purchase system which is regulated by law of
countries all over the world. Countries, which are involved this system, must follow
nations law and international law. For all nations around the world, exporting plays an
important role to improve countries economy, reflect the relationship between country
and country.
In the current globalization world, exporting activities of any nations is necessary in
order to develop all aspects of country. The different of countries such as location,
natural resources, humans, create strength and weakness of their own. So that it creates
the balance of the production and consumption.
1.2 The role of export
Simply to understand, it creates money to help country buy facility, equipment,
technology so as to help in improving nation industrialization. One of the advantages
of exporting is that export promotes domestic production catch up world trends.
Another benefit cannot be denied is the consumption of domestic exuberancy products.
Export requires companies to keep innovating and perfecting corporate governance and
business.
Exporting country is a nation in which can reduce employment rate because thousands
of work is created to meet the demand of production huge of goods. In additional, the
relationship between countries in the world is developing through the purchase
(import-export) across the barrier of nation.
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Recommendations to improve export activity of coffee beans at Dong Tai Global
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1.3 Types of export
1.3.1 Direct export
Direct export is a situation in which a firm sells its merchandises directly to customers
in another nation without using another organization or person to make arrangements
for them. In this situation, firm take responsible for handling documentation, pricing
policies and physical delivery. Selling directly to clients will prevent other businesses
taking a share of your margin. Nevertheless, this approach requires a large commitment
of human and financial resources. It takes time to build relationships and make
contacts, understanding the market and carry out marketing, negotiate deals.
1.3.2 Indirect export
Selling to or through an intermediary is a comparatively cheap and become a direct
way to enter a new market. Intermediaries are typically distributors or sales agents
based in your target export market who sell your goods or services to end users.
A good intermediary will have much experience in the market, contacts as well as
reputation. Using intermediary can be considered as a quick way to get your goods and
services to the end customers. They will generally require a level of support in the
overseas marketing and selling of your product.
Indirect export includes: agent, export management company, export trading company,
freight forwarder company.
1.3.2.1Agent
Party has authority to act for the principal in order to bring the principal
into contractual relationships with other parties. An agent is obligated to the principal,
and binds the principal with his or her acts. Additional powers are assigned to agent
under the legal concept of 'apparent authority.' The agent, however, does not
have title to the principal's merchandises in his or her possession, except where agent's
lien is applicable. Generally, advertising agencies do not fall under this definition of an
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
agent, because they act as principals for the services they buy on behalf of their clients.
See also general agent, special agent, and universal agent.
1.3.2.2 Export management company
Independent private company operates as an export department for several non-
competing producers and manufactures. Export management firms can be quite varied;
they can be either foreign-owned or local, and act on either a commission or a fee
basis. An enterprise may solicit orders from foreign purchasers on behalf of
its clients or take possession and title of their merchandises for direct export. The
enterprise also has the ability to choose sales representatives in importing countries,
promote merchandises and services , arrange for transportation, extend importer credit,
provide guaranties and after-sales-service.
1.3.2.3 Export trading company
A public owned or private company that specializes in export services for international
enterprises. Supporting services may include warehousing, shipping, billing and
insurance. Sometimes, an export trading enterprise may help locate potential buyers for
manufactures. Group of international enterprises may create their own export trading
company.
1.3.2.4 Freight forwarder company
According to FIATA, Freight Forwarding Services means services of any kind relating
to the carriage, consolidation, storage, handling, packing or distribution of the Goods
as well as ancillary and advisory services in connection therewith, including but not
limited to customs and fiscal matters, declaring theGoods for official purposes,
procuring insurance of the Goods and collecting or procuring payment or documents
relating to the Goods. (FIATA Model Rules for Freight Forwarding Services).
Freight Forwarding and Logistic Services means services of any kind relating to the
carriage (performed by single mode or multimodal transport means), consolidation,
storage, handling, packing or distribution of the Goods as well as ancillary and
advisory services in connection therewith, including but not limited to customs and
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Logistics And Trading Co., LTD
fiscal matters, declaring the Goods for official purposes, procuring insurance of the
Goods and collecting or procuring payment or documents relating to the Goods.
Freight Forwarding Services also include logistical services with modern information
and communication technology in connection with the carriage, handling or storage of
the Goods, and de facto total supply chain management. These services can be tailored
to meet the flexible application of the services provided.
a. Commercial role of a forwarder
- Customs clearance
The freight forwarder provides all necessary documentation for the import and export
of goods having regard to legal and customs requirements and the terms of the sales
contract. Freight forwarder performs this function as an agent of the customer. In order
to perform this service, forwarder must obtain all necessary certificate approved by
competent organizations
- Agency
The freight forwarder acts as a bridge between Shipper and Carrier as an agent for
either one or both of them. He or his agent is not responsible for carrying cargos but
finding the third party for this transaction provided that he does this task diligently.
- Transshipment and On-carriage
Forwarder is responsible for contact the most suitable, effective and cheap haulers/
carriers who dealing with transport cargo to the specific point of unloading or loading
cargo as request of the customers. Forwarder also supports and discharges cargoes
from one vessel and loading to another one or vice versa.
- Warehousing
The freight forwarder might arrange for packing, warehousing and distribution of
cargo. He keeps the goods in storage before export and after import while waiting for
transportation. The freight forwarder can use his own warehouse or rent other
warehouse to perform these functions. A contract of carriage can extend to storage
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Logistics And Trading Co., LTD
services before and after discharge of the cargo awaiting customs clearance if so agreed
by all parties.
- Transportation relating services
As performing his functions, a freight forwarder is enabled to do other carriage-related
services such as:
o Arranging insurance purchase base on Customer’s expenses.
o Assisting customer to obtain required documents for export such as
Bill of Lading, and Certificate of Origin.
o Consulting customer about transportation and distribution, market and
other legal issues.
- Collecting cargo and inform tariff
In the present age, collecting cargo is one of the most important role of a forwarder. In
order to perform this function, he collects the separated goods from anumber of
customers. After that, the forwarder classifies them according to type of cargo, point of
destination. Then, he consolidates all the cargo which has something in common into a
big one to maximize the economy of scale. He also contracts suppliers for inland
haulage and sea transport. The forwarder inform tariff for each mean of transportation.
- Carrier
In multimodal transportation, a forwarder could be a carrier which means he signs
contract of carriage with the customers. In this case, he shall responsible for cargo until
the destination.
b. Forwarder liability and responsibility
- Forwarder liability
o Freight forwarder shall perform his obligations with appropriate interest
in a reasonable time unless there is a written agreement for the
customers’ benefits.
o Freight forwarder performs all the instructions of the customer. In case,
he finds reasonable cause for the benefit of clients and implements
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
differently to the instructions of the customer, the forwarder does not
incur any liability as well as any other costs as a result of this kind of
action.
- Forwarder responsibility
o Freight forwarder shall be liable, if he neither works diligently nor uses
reasonable measures to perform forwarding tasks. In this case the
forwarder must compensate customers for the loss or damage of the
goods, as well as financial damages for breach of the obligation to
provide services.
o Forwarder is not responsible for acts and omissions of third parties such
as carrier, warehouse, port authority, handling company and other freight
forwarder, unless he fails to guide and monitor carefully that third party.
- Forwarder right
o Forwarder shall be paid fees and other expenses incurred under the
contract for the benefits of the customer as tariff and the method
prescribed in the contract.
o Forwarder shall have the right of lien of the goods and documents
relating to the goods as security for the debt until paid.
o Forwarder has the right to be paid the commission paid to freight
forwarders.
c. Full Container Loaded Cargo
FCL stands for a “Full Container Load” used in the international shipping industry for
importing and exporting sea-freight cargo. This term is commonly used to describe an
international sea freight service that is designed for ocean freight shipments of cargo
where an exporter or importer has exclusive use of a dedicated sea freight container
(normally a 20ft or 40ft container).
- Full Container Loaded Cargo Characteristics
FCL cargoes are stuffed and un-stuffed under the risk and account for one shipper and
only one consignee, in practice it means whole container is intended for one consignee.
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FCL container shipment costs lower freight rates than an equivalent weight of cargo in
bulk. The cargoes being stuffed into one container is allowable to reach maximum
weight or full measurement that being regulated by International Maritime
Organization (IMO) for standard weight of a container with full loaded cargo.
- Loading FCL cargoes
Container loading is a quite difficult procedure, and during the loading it is necessary
to pay attention in order to avoid cargo damage. Following there are some rules shipper
should know in order to save goods in proper condition:
The container (usually 20’or 40’ dry or reefer containers) for loading cargo should be
inspected carefully before loading on ships under the management and supervision of
the legal authorities.
The cargo must be lashed/ stuffed by the best appearance inside the container.
The container must be loaded the admitted weight.
Cargo should be packed in the proper way, it’s necessary to use special packing for sea
or air shipment.
During the loading you have to use suitable equipment, do not use heavy forklifts into
the container during loading/discharging, it follows risks of damaging the container
floor.
- Delivery FCL cargoes
FCL cargoes are usually loaded and sealed at origin by shippers’ employees or port’s
employees under the supervising and managing of Customs authorities and Port
authorities. Then the cargoes are transported by rail or truck or ship or by a
combination of sea, rail and/or road to the final destination. The vessels which
transport FCL cargo/ LCL cargo or cargo packaging in container need to be specialized
to make sure that cargo is not broken or damaged in the process of physical movement
domestically or internationally.
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The FCL cargoes can be only cut seal and opened until it reaches the destination point
of customers’ warehouse if cargo belongs to1 stcategory cargo that free from check
paper and physical examination or 2nd category cargo that will be free from physical
examination, or the physical examination location according to the requirements and
regulation of destination nations (usually the local is port or bonded warehouse).
d. Related documents in freight forwarding for importing FCL cargoes
International ocean freight bill of lading in the International shipping ocean freight
industry also referred as a B/L or BOL. This shipping document used for shipping
freight overseas by sea issued by an International ocean freight carrier acknowledging
that specified goods have been received on board as cargo for conveyance to a
named place, for delivery to the consignee. Besides other points, the international
ocean freight bill of lading serves the following purposes:
- It is an evidence of a contract of carriage between ocean freight carrier and
shipper;
- It is a receipt for goods;
- It is a document of title on shipped goods.
A commercial invoice is a bill for the goods from the seller to the buyer. These
invoices are often used by governments to determine the true value of goods when
assessing customs duties. Governments that use the commercial invoice to
control imports will often specify its form, content, and number of copies, language to
be used, and other characteristics.
Export Packing List considerably more detailed and informative than a standard
domestic packing list, an export packing list lists seller, buyer, shipper, invoice
number, date of shipment, mode of transport, carrier, and itemizes quantity,
description, the type of package, such as a box, crate, drum, or carton, the quantity of
packages, total net and gross weight (in kilograms), package marks, and dimensions, if
appropriate. Both commercial stationers and freight forwarders carry packing list
forms. A packing list may serve as conforming document. It is not a substitute for a
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Recommendations to improve export activity of coffee beans at Dong Tai Global
Logistics And Trading Co., LTD
commercial invoice. In addition, U.S. and foreign customs officials may use the export
packing list to check the cargo.
Pro Forma Invoice is an invoice prepared by the exporter before shipping the goods,
informing the buyer of the goods to be sent, their value, and other key specifications.
It also can be used as an offering of sale or price quotation.
The Certificate of Origin (CO) is required by some countries for all or only certain
products. In many cases, a statement of origin printed on company letterhead will
suffice. The exporter should verify whether a CO is required with the buyer and/or an
experienced shipper/freight forwarder or the Trade Information Center.
Insurance certificate states the type and amount of coverage. This instrument is
negotiable between the sellers and the buyers. Cargo list is document that shows the
detail information of the cargo being packing in container and loading on the ship.
Arrival notice is issued by an ocean freight carrier to consignee to inform about the
arrival of the containers.Arrival notice provides shipments details, charges and
documents required to enable the consignee to arrange pickup and delivery the
shipments.
Delivery order (abbreviated D/O) is a document from a consignor, a shipper, or an
owner of freight which orders the release of the transportation of cargo to another
party. Usually the written order permits the direct delivery of goods to aware
houseman, carrier or other person who in the course of their ordinary business
issues warehouse receipts or bill of lading.
e. Legal basis
- National law
The first Vietnamese Law regulating forwarding business activities is Commercial Law
2005 (from article 233 to article 240) and Decree number 140-2007 NĐ-CP date
05.09.2007. The second one is Common law: Civil 2005, Enterprise Law 2005,
Investment Law 2005, Competition Law 2005, and other related laws. There are also
Professional Laws which define clearly legal basis in each activity.
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- International law
The first international law regulates forwarding business is Vienna Convention for
International Trade in 1980. The Convention for transportation such as the
International Convention to unify some rules on Bills of Lading signed at Brussels on
August 25th 1924, it also known as the Hague Rules. This Convention has two
amendments, the first one was the Visby Protocol named in 1968 in Visby, and the
second amendment was in 1979, called the SDR Protocol. The second law is the
United Nation Convention on the carriage of goods by sea that was signed in Hamburg
on 03/31/1978, often referred to as the Convention Hamburg or Hamburg Rules 1978.
Another international regulation is Inco-terms2010 standard interpretation of trade
terms of the International Chamber of Commerce. This basis defines clearly the rights,
the obligations and the risk of the buyer and the seller in international trade.
1.4 International payment
1.4.1 Overview of international payment
International payment is one of the bank's operations in the payment for the value of
the shipment between the buyer and the seller in the foreign trade fields. The
international payment method is currently the most popular:
+ Transfer by TTR (Telegraph Transfer Remittance) or MTR (Mail Transfer
Remittance): forwarding documents and telegraphs between units incurring
international transactions and international settlement department of the payment
center are implemented on T24 Browser.
+ C.A.D: A payment arrangement in which an exporter instructs a bank to hand
over shipping and title documents (see document of title) to the importer when
the importer fully pays the accompanying bill of exchange or draft. Also called
documents against payment.
+ Collection: A payment method that after delivering or supplying services the
sellers (the exporter) entrust their serving bank to present the buyer (the importer)
documents by the agent bank in order to be paid, accept the draft or agree other
conditions or terms.
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+ L/C: is an agreement, in which, as the request of the customer (who requests to
open L/C) a bank (Issuing Bank) will issue a certificate, called a letter of credit.
Accordingly, the issuing bank is committed to pay or accept the draft for the 3 rd
party if they present issuing bank the payment documents matching with
conditions and provisions of the L/C.
1.4.2 Current form of International payment
1.4.2.1 Transfer by TTR or MTR
- Nowadays, the Bank in general and SeABank in particular rarely uses the transfer
form of TTR because of out-of-date and wasting of time receiving document;
therefore, MTR is popular to use in a fast and convenient manner. Telegraph
Transfer lies in the payment "By Remittance - By Transfer". The bank on behalf of
the buyer will compose the telegraph to its agent bank overseas paying to the seller.
MTR has two forms of payment namely prepaid and postpaid.
- In case of Prepaid MTR, it takes following steps:
+ Step 1: The Buyer goes to the Buyer's bank order money transfer to pay for the
Seller.
+ Step 2: The Buyer's bank send a debit notice to the Buyer
+ Step 3: The Buyer's bank remits to the Seller's bank
+ Step 4: The Seller's bank sends received notice to the Seller
+ Step 5: The Seller delivers good and set of documents to the Buyer
- In case of Postpaid, it is also implemented in 5 phases:
+ Step 1: The Seller delivers good and set of documents to the Buyer
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