UNIVERSITY OF FINANCE MARKETING FACULTY OF COMMERCE GROUP EXERCISE EXPORT IMPORT MANAGEMENT LECTURER: MAI XUÂN ĐÀO GROUP MEMBERS: PHAN ANH THI TRẦN THỊ KIM THƯ HUỲNH THỊ KIM LIÊN TRƯƠNG ĐÌNH ĐÌNH HO CHI MINH CITY: 05/2021 GARMENT PROCESSING CONTRACT Date: Dec 08th, 2012 No 12 TH-CH/2011 Page 1/2 BETWEEN: THE HUNG GARMENT CO., LTD 115 B, Lo Sieu street, Ward 8, District 11, Ho Chi Minh city, Vietnam Tel: 84 37611688 /Fax: 84 37611689 Represented by: Mrs TRUONG TU LIEN - Manager Hereinafter called as: “The Processor” AND: CHYEN YEEH ENTERPRISE CO., LTD 273 Go Chien Lane, Go Chien Li, Lu Kang Chen, Chang Hua, Taiwan Tel: 886 7716124/ Fax: 886 7717431 Represented by : Mr LIN SHIN CHUAN - Manager Hereinafter called as “The Orderer” The two parties agree to sign this contract covering the following terms and conditions: Article 1: COMMODITY - QUANTITY – UNIT PRICE The Processor has agreed to process garment products for The Orderer wit h details as follows: COMMODITY PANTS TOTAL QUANTITY (PCS) UNIT PRICE TOTAL AMOUNT (USD) 200,000 200,000 1.3 260,000 260,000 - In words: US Dollars Two hundred sixty thousand only - Details of styles no and unit price will be confirmed in next annex - The above unit price consists of cutting, sewing, packaging to complete products and included accessory labels, thread, carton will be purchased in Vietnam - Finished processing products use the appellation of origin is “Made In Vietnam” - Stages of processing: cutting, sewing, finishing and packing Article 2: PAYMENT TIME AND PAYMENT METHOD - All of materials will be received in installments based on CIF of Ho Chi Minh City Starting from 18/12/2012 to 18/06/2013 - Delivery of finished products will be delivered in installments based on FOB of Ho Chi Minh City (Tan Son Nhat airport and seaports) Starting from 18/02/2013 to 18/08/2013 - The place of delivery: Taiwan (area quota) The processor is not responsible for export quotas in areas outside Taiwan Article 3: THE SUPPLY OF MATERIALS - Origin of materials: Taiwan, China, Japan, and Hong Kong - Rate of materials loss: +2% (but rate of carton loss is 0%) - The materials will be calculated in norms sheet of materials - The surplus of materials will be decided by The Orderer after contract liquidation (transferred to another contract, re-export or pay tax in regulations), waste materials (if any) have to re-export to The Orderer or will be treated to the principles of Vietnam law - The Processor will purchase of raw material shortage in Vietnam (if any) and will be added with annex - The Proccesor will purchase the following materials in Vietnam (included the processing unit price ): No Name of materials Unit Quantity Unit price Amount Accessory label Thread Carton PCS CONES PCS 1,020,000 5,100.00 3,600 60 VNĐ 25,000 VNĐ 25,000 VNĐ 61,200,000.00 127,500,000.00 90,000,000.00 No 12 TH-CH/2011 Page 2/2 - The list, quality, price, and norms of raw material for processing will be detailed in norms attached Unit price will be detailed according to Invoice when importing Article 4: TECHNICAL SPECIFICATION AND QUALITY CONTROL PRODUCTS - Basing on master samples given by the Orderer, The Proccesor will make counter samples After the two parties approve the samples, the Processor will start the procesing operation - Before each shipment of finished products, the Orderer will check and confirm in writing about export quality products Article 5: PAYMENT TIME AND PAYMENT METHOD - Before 10 days the delivery date, the Orderer will settle 100% invoice value of each shipment T.TR in favor of The Processor, FC: 102010000176374 at Vietnam Joint Stock Commercial Bank for Industry and Trade Branch 11 Article 6: OBLIGATION OF THE ORDERER - Within days after the shipment, the Orderer will send to The Processor shipping documents including bill of lading, invoice, and detailed sheet of goods - The orderer will be responsible for the following: (A) In case there are discrepancies in weight, number of packages, name of goods etc which violate the regulations on import management of Vietnam State (B) Due to the fault of materials interrupt the processing operation more than days from the date to be advised - Product’s brand: The Orderer is legally responsible for name of products and for the right of using of all kinds of labels, logos, trade marks, printed on, embroidered on, accessories as well as on packing materials to any manner Name lables will be detailed including name, unit, quantity, unit price and total amount in annex Article 7: OBLIGATION OF THE PROCESSOR - The Processor will send shipping documents including bill, invoice, packing list the orderer - Right after receiving materials, The Processor will check quantity, quality of materials and will make a report in writing Article 8: GENERAL CONDITION - Machine and equipment imported for processing which provided by The Order to The Processing; if any, will be added with annex - The Proccesing will not be responsible for non-shipment in Art if The Orderer have no payment as defined in Art - In case of raw materials to delivery delay, the time limit will be re-scheduled accordingly - Any amendment or alterations of the terms to this contract must be mutually agreed previously and made in writting This contract is made into four (04) English originals with equal validity and comes into effect upon its signing date to 31/08/2013 Each holds two (02) for implementation BY THE ORDERER PROCESSOR BY THE Analyse and correct (if any) the above processing contract: Commercial processing means a commercial activity whereby a processor uses part or whole of raw materials and materials supplied by the processee to perform one or several stages of the production process at the latter’s request in order to receive remuneration From this processing contract, our group have some comments First of all, throughout the contract, it has some misspellings The contract provides sufficiently necessary terms and conditions but we should add some articles to make the processing contract more clearly and avoid misunderstandings such as Packing & Marking, Penalty, Force Majeure, Claim and Arbitration In the following part, we will analyse each article of the contract GARMENT PROCESSING CONTRACT Date: Dec 08th, 2012 No 12 TH-CH/2011 Page 1/2 BETWEEN: AND: THE HUNG GARMENT CO., LTD 115 B, Lo Sieu street, Ward 8, District 11, Ho Chi Minh city, Vietnam Tel: 84 37611688 /Fax: 84 37611689 Represented by: Mrs TRUONG TU LIEN Manager Hereinafter called as: “The Processor” CHYEN YEEH ENTERPRISE CO., LTD 273 Go Chien Lane, Go Chien Li, Lu Kang Chen, Chang Hua, Taiwan Tel: 886 7716124 Fax: 886 7717431 Represented by: Mr LIN SHIN CHUAN Manager Hereinafter called as “The Orderer” The two parties agree to sign this contract covering the following terms and conditions: In the Introduction, it gives information about the title (GARMENT PROCESSING CONTRACT), number of contract (12 TH-CH/2011), date of the contact (Dec 08 th, 2012), information of two parties (THE HUNG GARMENT CO., LTD is the Processor and CHYEN YEEH ENTERPRISE CO.,LTD is the Orderer) and the willingness to sign the contract but it does not mention the place to sign the contract We can add the place like “at Hung Garment office in Ho Chi Minh city” Article 1: COMMODITY - QUANTITY – UNIT PRICE The Processor has agreed to process garment products for The Orderer with details as follows: COMMODITY PANTS TOTAL QUANTITY (PCS) 200,000 200,000 UNIT PRICE TOTAL AMOUNT CMPT (USD) (USD/pcs) FOB Ho Chi Minh city port (Incoterms 2010) 1.3 260,000 260,000 - In words: US Dollars Two hundred sixty thousand only - Details of styles no and unit price will be confirmed in next annex - The above unit price consists of cutting, sewing, packaging to complete products and included accessory labels, thread, carton will be purchased in Vietnam - Finished processing products use the appellation of origin is “Made In Vietnam” - Stages of processing: cutting, sewing, finishing and packing This article has shown sufficiently required information but it is still lack of some details such as: - For term of Quantity, we need to add the tolerance (example: ± 5% at the Processor’s option) Unit price is lack of Incoterms rule (FOB Ho Chi Minh city port (Incoterms 2010)) The cost of Processor’s obligation must specified clearly at the Unit price in the table Article 2: SHIPMENT - All of materials will be received in installments based on CIF Ho Chi Minh city port (Incoterms 2010) Starting from 18/12/2012 to 18/06/2013 it’s better in ARTICLE - Delivery of finished products will be delivered in installments based on FOB Ho Chi Minh city port (Incoterms 2010) (Tan Son Nhat airport and seaports) Starting from 18/02/2013 to 18/08/2013 - The place of delivery: Taiwan (area quota) The processor is not responsible for export quotas in areas outside Taiwan There are some mistakes in Article 2: - Based on the content of this article, the title should be changed “PAYMENT TIME AND PAYMENT METHOD” “SHIPMENT” or “DELIVERY” because it does not have any information related to payment - It is not mentioned about partial or transhipment and notice of shipment - For the delivery term, “CIF of Ho Chi Minh City” & “FOB of Ho Chi Minh City” are needed to correct like CIF Ho Chi Minh city port (Incoterms 2010) & FOB Ho Chi Minh city port (Incoterms 2010) - Because all of materials and finished products will be delivered in installments, it must be specified when and how many installments that two parties have to deliver the goods until the contract finishes Article 3: THE SUPPLY OF MATERIALS - “The Oderer will supply main fabric, pocket fabric and non- woven material to the Processor.” - Origin of materials: Taiwan, China, Japan, and Hong Kong - Rate of materials loss: +2% (but rate of carton loss is 0%) (wastage allowance) - The materials will be calculated in norms sheet of materials - The surplus of materials will be decided by The Orderer after contract liquidation (transferred to another contract, re-export or pay tax in regulations), waste materials (if any) have to re-export to The Orderer or will be treated to the principles of Vietnam law (3 handling methods) - The Processor will purchase of raw material shortage in Vietnam (if any) and will be added with annex - The Processor will purchase the following materials in Vietnam (included the processing unit price): (supply method) No Name of materials Unit Quantity Unit price Amount (VNĐ) CIF Ho Chi Accessory label Thread Carton PCS CONES PCS 1,020,000 5,100.00 3,600 Minh city port (Incoterms 2010) 60 VNĐ 61,200,000.00 25,000 127,500,000.00 VNĐ 25,000 90,000,000.00 VNĐ - The list, quality, price, and norms of raw material for processing will be detailed in norms attached Unit price will be detailed according to Invoice when importing It has provided enough important information of this term such as supply method, kinds, wastage allowance, handling method, … it need to add some details like: - This article is not stated about what materials that the Orderer will supply for Processor We can correct by adding the content like “The Oderer will supply main fabric, pocket fabric and non- woven material to the Processor.” - In the table, “Amount” is lack of currency unit and Incoterms rule - For the shipment term of materials, it is in Article but it is also lack of Shipping documents For example, Shipping documents of material include: Signed Commercial Invoice in triplicate Full set original clean on board Bill of Lading marked “Freight prepaid” Certificate of origin Packing list in triplicate Shipping documents shall be sent to the Orderer within days after shipping date Article 4: TECHNICAL SPECIFICATION AND QUALITY CONTROL PRODUCTS - Basing on master samples given by the Orderer, the Processor will make counter samples within days from the date receiving master sample After the two parties approve the samples, the Processor will start the processing operation - Before each shipment of finished products, the Orderer will check and confirm in writing about export quality products For the term of Quality, it has shown information related to master sample, counter sample and inspection from the Orderer but it is not mentioned about technical stipulation- an integral aspect of Quality term Moreover, we can specify about the time that the Processor must finish their counter sample as “the Processor will make counter samples within days from the date receiving master sample” and technical stipulation to make it more clearly Some information should be added like: The Orderer shall provide the Processor with all technical conditions and approriated documents such as master samples, paper patterns, consumption rates, size specifications and color cards, … The Processor undertakes to respect the quality required by th Orderer and to base the production on samples approved by both parties In the event quality production is below the quality level which was agreed by both parties at the time of the contract, and, if the Processor remains in default to remedy the default within 15 days of their noting The Orderer shall have the right to terminate the contract all damages incurred in respect of the default Article 5: PAYMENT TIME AND PAYMENT METHOD - Before 10 days from the delivery date, the Orderer will settle 100% invoice value of each shipment T.TR in favor of The Processor, FC: 102010000176374 at Vietnam Joint Stock Commercial Bank for Industry and Trade Branch 11 This article has enough information about payment method, payment time but it is lack of payment currency and related documents There are some content that we can add to this article: - Currency of the contract shall be denominated in USD - Payment documents of finished goods include: Signed Commercial Invoice in triplicate Full set original clean on board Bill of Lading marked “Freight prepaid” Certificate of origin Packing list in triplicate Inspection Certificate issued by representative of the Orderer Payment documents shall be sent to the Orderer within 07 days after receiving B/L and Customs declaration Article 6: PACKING & MARKING As per the Orderer’s instruction Shipping mark: will be informed by the Orderer To make the contract more clearly and avoid misunderstanding, we can add this article Article 7: OBLIGATION OF THE ORDERER - Within days after the shipment, the Orderer will send to the Processor shipping documents including bill of lading, invoice, and detailed sheet of goods - The Orderer will be responsible for the following: (A) In case there are discrepancies in weight, number of packages, name of goods etc which violate the regulations on import management of Vietnam Custom (B) Due to the fault of materials interrupt the processing operation more than days from the date to be advised In general, Article does not have any mistake but “there are discrepancies in weight, number of packages, name of goods etc which violate the regulations on import management of Vietnam State” should be changed “import management of Vietnam State” “import management of Vietnam Custom.” Article 8: OBLIGATION OF THE PROCESSOR - The Processor will send to the Orderer shipping documents including bill, invoice, packing list - Right after receiving materials, The Processor will check quantity, quality of materials and will make a report in writing There is a grammar mistake in there Article 9: LABEL/ TRADEMARK The Orderer is legally responsible for name of products and for the right of using of all kinds of labels, logos, trade marks, printed on, embroidered on, accessories as well as on packing materials to any manner Name labels will be detailed including name, unit, quantity, unit price and total amount in annex Article is seperated from the Article “OBLIGATION OF THE ORDERER” of the above contract and named “LABEL/ TRADEMARK” to make the contract more approriate Article 10: PENALTY TO CANCELLATION OF CONTRACT: Cancellation of this contract is not acceptable If the Orderer or the Processor wants to cancel the contract, 1% total contract value will be charged as penalty to that party TO DELAY PAYMENT: In case delay payment happens, the penalty for delay interest will be based on annual rate 6% To make the contract more clearly and avoid misunderstanding, we can add this article Article 11: FORCE MAJEURE Neither the Processor nor the Orderer is responsible for any delay in or cancellation of shipment and/or delivery due to force majeure, such as: strikes, fire, floods, war, riots, embargoes, earthquakes, including but not limited to Acts of God, restriction or any condition beyond the seller's control Force majeure circumstances must be notified by each party to other within days by writing with a certificate of force majeure issued by Government authority Beyond this time, force majeure circumstances shall not be taken into consideration To make the contract more clearly and avoid misunderstanding, we can add this article Article 12: CLAIM AND ARBITRATION Claim and disputes, if there is any, should be settled amicably by consultation between the two parties In the execution course of this contract, all dispute not reaching at amicable agreement within 30 days from commencement of consultation, each party is entitled to submit the relevant claim or dispute to The Vietnam International Arbitration Center at the Chamber of Commerce & Industry of Vietnam, Ho Chi Minh City Branch, under the rules of The Commercial Law of The Socialist Republic of Vietnam whose awards shall be final and binding both parties Arbitration fees and other related charges shall be borne by the losing party, unless otherwise To make the contract more clearly and avoid misunderstanding, we can add this article Article 13: GENERAL CONDITION - Machinery and equipment imported for processing which provided by the Orderer to the Processor; if any, will be added with annex It is not clearly specified that the Orderer will lend or lease machinery and equipment to the Processor - The Processor will not be responsible for non-shipment in Article if The Orderer have no payment as defined in Article it is better in Article “OBLIGATION OF THE PROCESSOR” - In case of raw materials to delivery delay, the time limit will be re-scheduled accordingly - Any amendment or alterations of the terms to this contract must be mutually agreed previously and made in writting This contract is made into four (04) English originals with equal validity and comes into effect upon its signing date to 31/08/2013 (expiry date) Each holds two (02) for implementation The expiry date of the contract is seemed to be suitable for both parties BY THE ORDERER BY THE PROCESSOR ... of goods etc which violate the regulations on import management of Vietnam State” should be changed ? ?import management of Vietnam State” ? ?import management of Vietnam Custom.” Article 8: OBLIGATION... discrepancies in weight, number of packages, name of goods etc which violate the regulations on import management of Vietnam State (B) Due to the fault of materials interrupt the processing operation... after contract liquidation (transferred to another contract, re -export or pay tax in regulations), waste materials (if any) have to re -export to The Orderer or will be treated to the principles of