THE MINISTRY OF FINANCE UNIVERSITY OF FINANCE – MARKETING INDIVIDUAL ASSIGNMENT INTERNATIONAL COMMERCIAL TRANSACTION HO CHI MINH CITY 2022 INTERNATIONAL PROCESSING 1 Concept Processing trade refers to the business activity of importing all or part of the raw and auxiliary materials, parts and components, accessories, and packaging materials from abroad in bond, and re exporting the finished products after processing or assembly by enterprises within the mainland It includes processing with sup.
THE MINISTRY OF FINANCE UNIVERSITY OF FINANCE – MARKETING - - INDIVIDUAL ASSIGNMENT INTERNATIONAL COMMERCIAL TRANSACTION HO CHI MINH CITY - 2022 INTERNATIONAL PROCESSING Concept Processing trade refers to the business activity of importing all or part of the raw and auxiliary materials, parts and components, accessories, and packaging materials from abroad in bond, and re-exporting the finished products after processing or assembly by enterprises within the mainland It includes processing with supplied materials and processing with imported materials (Law on Commerce of Vietnam 2005) Under processing with supplied materials, the imported materials and parts are supplied by the foreign party also responsible for selling the finished products The business enterprise does not have to make foreign exchange payment for the imports and only charges the foreign party a processing fee Under processing with imported materials, the business enterprise makes foreign exchange payment for the imported materials and parts and exports the finished products after processing Forms of international outsourcing a In terms of payment methods for processing fees - Form of processing: means that the party setting up the company gives the receiver of the company a certain account for the receiving party to manage and account within that scope - Form of payment: the processing establishment party only pays the processing expenses paid by the processor Outsourcing costs in this form are calculated as labor wages b In terms of material ownership - Deliver materials, collect products and pay for processing - Definitive purchase: There is a transfer of ownership of materials during the processing stage This form is often applied when the outsourcing party has a high level of management and an accurate cost and cost accounting system c Based on the subject participating - Two-party processing: In which, only one-party orders and the other party receives the processing - Multi-party processing (also known as transitional processing): In which the outsourcing party is a number of enterprises where the processed products of the former are the subject of the latter's processing, and the ordering party can be only one and there can be more than one Advantages of international processing transactions a For the ordering party - Take advantage of labor resources with low labor costs and no cost and time to train this human resource - Factory rental costs are low and can be put into operation immediately Thanks to this transaction method, the processing requester does not have to spend a lot of money to build a workshop and wait a long time to start production b For the receiving party - This form of transaction has contributed to helping outsourcing businesses to gain a lot of international experience and employees to have access to modern machinery, equipment and technology as well as management methods advanced production - It is an opportunity to contribute to job creation, income generation as well as improving professional qualifications for workers - Export processing contributes to increase national income and foreign currency revenue - Producing processed goods is less risky because goods consumption is guaranteed - This is the form of all factors is used in the early stages of international economic integration and development of the domestic workforce into a powerful international workforce 4 Disadvantages of international processing transactions a For the ordering party - Difficult to control quality, reputation and brand issues - May create a future competitor b For the receiving party - The party accepting the outsourcing is usually a weak party in many aspects such as capital, technology, skills, etc., so they receive a low salary - High passivity: Because the entire operation of the processing enterprise depends on the outsourcing party, it depends on the market, product selling price, processing order price, raw materials, designs, and product brands so with large production enterprises, good product quality, with the form of outsourcing enterprises, it is difficult to develop strongly to the world market - Marketing capacity is poor, many businesses are outsourced by the ordering party to take advantage of the allocation quota to bring goods to the preferential market - Managing processing norms and liquidating processing contracts that are not good will be an opening to bring tax-evading goods into Vietnam, causing difficulties for domestic production and business The reality international processing transactions in Vietnam a General overview of the actual situation in Vietnam Nowadays, to develop the national economy, all countries have appropriate economic development strategies For countries with a developing economy like Vietnam today, an economic development strategy based on the available resources of the country is very necessary Vietnam is a country with a population of more than 97 million people, this is a very abundant labor source, so if it is well exploited, it will be a resource to accelerate the process of industrialization and modernization of the country With a relatively underdeveloped technology and technology background, besides investing in developing modern spearhead industries, proper attention should be paid to investing in developing labor-intensive industries is very necessary It allows to fully exploit the country's comparative advantages and attract a source of advanced technical technology to the country On the other hand, although the number of employees is high, the percentage of workers who have been retrained is very low, so far only about 26.1% of the workforce has received technical training Therefore, the problem is to invest in industries that use a lot of labor and not require too high quality of labor Our country's level of marketing and international business experience is still low Therefore, developing export processing is a step for Vietnamese enterprises to accumulate business experience in the international market b Contribution of international processing to Vietnam's economy According to the results of the 2017 Economic Census, in 2016 the whole country had 1,740 enterprises processing goods with foreign countries, of which there were 1,687 enterprises that received goods processing for foreign traders The value of imported raw materials serving the processing and assembly process of enterprises that process goods for foreign trader’s accounts for about 12% of Vietnam's total import turnover The total processing fee received by enterprises in 2016 was 8.6 billion USD Processing activities for foreign countries have brought social efficiency, contributing to creating jobs for more than million workers in enterprises in 2016, contributing to reducing the unemployment rate, increasing incomes for people In addition, processing activities also play a great role for businesses in learning from advanced management experiences of developed countries, enhancing business management capabilities, and helping businesses operate more efficiently The activity of receiving and processing goods for foreign countries has contributed to the import and export of Vietnamese goods In 2016, the export turnover of goods after processing of enterprises processing goods for foreign partners accounted for more than 18% (US$ 32.4 billion) of the total export turnover of the country At the same time, the import turnover of raw materials from foreign partners of these enterprises accounted for 11.5% (US$20.2 billion) of Vietnam's total import turnover Processing activities are concentrated mainly in foreign-invested enterprises with the value of processed goods reaching 25.6 billion USD, accounting for 78.9% of the total value of processed goods And the import of raw materials and auxiliary materials reached USD 16.3 billion, accounting for 80.5% of the total value of imported materials Meanwhile, the value of goods after processing of non-state enterprises reached 6.7 billion USD, accounting for 20.6% and imported raw materials reached 3.8 billion USD, accounting for 19%; the value of post-processed goods of state-owned enterprises reached a modest value of about 150 million USD, accounting for 0.5% and imported raw materials reached 99.6 million USD, accounting for 0.5% This shows that the processing activities of Vietnamese enterprises are still mainly employed by foreign partners, because Vietnamese enterprises only enjoy part of the fee (wage) from the processing and assembly Most input materials are provided by foreign partners c Processing industries account for a large proportion in Vietnam The two main processing industries of our country are textiles and garments and footwear, with the revenue from processing these two items accounting for the weight in the processing and assembling of goods for foreign traders in Vietnam According to the survey results, in 2016, the processing of goods with foreign- owned input materials brought Vietnam $8.6 billion in processing fees In which, foreign-invested enterprises accounted for the highest proportion with 81.7% (7 billion USD), non-state enterprises accounted for 17.4% (1.5 billion USD), state enterprises accounted for proportion of 0.9% (77 million USD) Processing activities of the textile and garment group ranked first with the amount of foreign currency earning 4.1 billion USD, accounting for 48% of the total processing fee; followed by footwear, earning $2.7 billion, accounting for 32% of total processing costs; assembling computer electronics earned 63 million USD, accounting for 0.7%; assembling phones earned 268 million USD, accounting for 3.1%; processing other goods earned 1.4 billion USD, accounting for 16.2% For garment and textile processing activities, Korea, Taiwan, the United States, Japan, China and Hong Kong are the main partners with $3.5 billion in processing fees, accounting for 85% of the total processing fees from this industry In which, traders from Korea ordered the most processing, with Vietnam's processing fee earning nearly as much as the remaining partners with nearly billion USD, accounting for 48.1% of the proceeds from processing textiles; followed by Taiwan, the United States, Japan, China and Hong Kong Garment export processing of Vietnamese textile and garment enterprises has made great contributions to the development of Vietnam's textile and garment industry today The position and role of Vietnam's textile and garment industry in the world is increasingly appreciated by the world, when Vietnam has become the largest textile and garment exporter in ASEAN and one of the largest textile and garment exporters in the CPTPP bloc, the third largest globally after China and Bangladesh In addition to key export markets such as the United States, EU, Japan, Korea, and China, Vietnam's garment also expands to markets such as ASEAN, Canada, Hong Kong, Taiwan, Russia, Australia, and Chile Footwear processing with input materials belonging to foreign partners ranked second with the revenue of 2.7 billion USD, accounting for 32% of the total processing fee The major partners ordering processing of this product are Korea $ 1.2 billion, accounting for 43.9%; Taiwan 678 million USD, accounting for 24.8%; China 322 million USD, accounting for 11.8%; Hong Kong 165 million USD, accounting for 6% and the United States 149 million USD, accounting for 5.4% In 2016, Vietnam processed footwear for the above major partners with the proceeds accounting for 92% of the total revenue from footwear processing Compared with the value of goods after processing, the amount of money Vietnam earned from processing goods with input materials provided by foreign owners accounted for 26.4% To be more complete, Vietnam needs to link together to create a value chain that supplies input materials for the processing and assembly process, in order to improve the localization rate In addition, the Government also needs to have appropriate policies to create conditions for businesses operating in the supply chain of input materials to serve the process of processing and assembling goods, creating momentum for businesses in developed countries REFERENCES [1] ĐỖ HUYỀN TRANG (NCS Trường Đại học Thương mại), “Thực trạng chất lượng dịch vụ gia công xuất sản phẩm may mặc doanh nghiệp dệt may Việt Nam”, Tạp Chí Cơng Thương, 24/12/2021 Truy cập ngày 4/2/2022 https://tapchicongthuong.vn/bai-viet/thuc-trang-chat-luong-dich-vu-gia-cong-xuat-khausan-pham-may-mac-cua-cac-doanh-nghiep-det-may-viet-nam-86098.htm [2] KIỂM SÁT (Cơ quan Viện Kiểm Sát Nhân Dân Tối Cao), “Bức tranh tổng thể gia cơng hàng hóa cho nước ngồi”, 18/12/2018 Truy cập ngày 4/2/2022 https://kiemsat.vn/buc-tranh-tong-the-ve-gia-cong-hang-hoa-cho-nuoc-ngoai-51392.html [3] NƠNG THỊ NHƯ MAI, Giáo trình mơn Giao dịch thương mại quốc tế, Trường Đại học Tài – Marketing, xuất 2018 [4] Mạc Hữu Tồn, “Gia cơng quốc tế gì? Có hình thức nào?”, Chia Sẻ Kiến Thức, 23/03/2016 Truy cập ngày 8/2/2022 https://masimex.vn/chia-se-kien-thuc/giacong-quoc-te.html#ftoc-heading-2 Student's signature ... early stages of international economic integration and development of the domestic workforce into a powerful international workforce 4 Disadvantages of international processing transactions a... this transaction method, the processing requester does not have to spend a lot of money to build a workshop and wait a long time to start production b For the receiving party - This form of transaction. .. and the ordering party can be only one and there can be more than one Advantages of international processing transactions a For the ordering party - Take advantage of labor resources with low