REPORT OF IMPORT BUSINESS PROCESS ANALYSIS case cars importation

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS REPORT OF IMPORT BUSINESS PROCESS ANALYSIS Case of Vietnam’s cars importation Group Phạm Nguyễn Tuệ Minh 1915550014 Trần Thị Thúy Nga 1915550016 Dương Hoàng Ngân 1915550715 Lê Phương Thảo 1915550027 Hanoi, September 17, 2021 TABLE OF CONTENTS INTRODUCTION Overview of import of cars and main mode of international transaction in Vietnam Sales contract of importing cars Car importing process and core activities 3.1 Car importing process 3.2 Core activities and stakeholders involving importing cars 11 Analysing and some recommendations for import process 15 4.1 Advice for car importing companies 15 4.2 Proposed innovation of payment term 16 Impact of COVID 19 on the export/ import performance of Vietnamese businesses 17 CONCLUSION 18 REFERENCES 19 TABLE OF FIGURES Figure Top 10 countries exporting cars to Vietnam (March 3, 2021) Figure Preliminary information about CBU cars of all kinds registered with the Customs in June 2021 Figure Car importing process INTRODUCTION For many countries in the world, the automative industry is one of the important economic sectors with a long history of development The automotive industry is considered as one of the leading industries, which has a big impact on the development of other industries Therefore, the strong growth of the automotive industry is said to be a positive factor in enhancing the process of industrialization and modernization of the country Meeting the demand for using modern products with good quality and safety assurance, cars will be the priority means of transport, and at the same time used as a direct resource for the circulation of goods and promoting trade In Vietnam, the development of the automotive industry as well as the car business is still a new and nascent field This activity only started to take shape when our Party carried out renovation and transformation from a centralized, bureaucratic and subsidized economy to a market economy, especially since the Foreign Direct Investment Law took effect Vietnam is a country with over 96 million people, a developing economy, so the demand for cars is increasing enough for many car enterprises to invest in large-scale production However, the domestic market capacity has not been developed compared to its potential, because the Vietnamese car industry has not yet met the market conditions as well as other factors to develop like other countries As a result, Vietnam tends to import CBU cars from abroad to meet domestic demand Although up to now, part of the demand has been met by domestic production, the number of imported cars has increased continuously with many models, designs, from plenty of different brands all around the world In order to import cars from abroad, businesses must establish sales contracts Contracts have become increasingly detailed these days, and every effort is made to make all possibilities and eventualities clear, especially in sale contracts Therefore, in this report, we will provide a specific view of the current situation of the car import industry, a detailed sales contract, an analysis of the export/import process based on BPA methodology, and the impact of the Covid 19 pandemic on the export/import performance of Vietnamese businesses Overview of import of cars and main modes of international transaction in Vietnam In 2019, Cars were the world's 2nd most traded product, with a total trade of $777B Between 2018 and 2019 the exports of Cars decreased by -0.82%, from $784B to $777B Trade in Cars represents 4.29% of total world trade Vietnam ranks 41st of Cars Importing Countries in 2019 - 2020 According to the Trade Competitiveness Map, Vietnam import value of vehicles other than railway, tramway (HS Code: 87) is 6,440,933, accountings for 3.22% of world total imports More than 1.1 billion USD was spent on importing 49,360 completely built-up (CBU) vehicles in the four months of 2021 in Vietnam, a surge of 55.2 percent in volume and 57.2 percent in value over the same period last year, the General Statistics Office (GSO) has reported Cars are registered for customs procedures imported into Vietnam mainly originating from many countries with a diversity of types Vietnam auto market in the first months of 2021, according to data of the General Department of Customs, shows a stable increase, which is indicated in the following figure: No Exporting Country Quantity (units) Total cost (million dollars) Thailand 19.305 372,3 Indonesia 8.946 111,6 China 3.945 145,4 Japan 764 37,5 South Korea 517 23,7 Russia 469 31 U.S 276 12,4 Germany 271 19,7 England 88 10 India 50 0,485 Figure Top 10 countries exporting cars to Vietnam (March 3, 2021) In June 2021, CBU cars of all kinds registered for customs procedures imported into Vietnam mainly originate from main markets, namely from Thailand with 7,264 units; from Indonesia with 4,729 pieces and from China with 2,077 pieces This table illustrates preliminary data on CBU cars of all categories that were registered with Customs in June 2021: Growth/decrease June 2021 Targets compared to the Proportion (%) previous month (%) Quantity Value Quantity Value Quantity Value (unit) (%) (%) (%) (%) 189,382,106 0.6 -2.0 67.6 56.5 68 2,043,855 38.8 23.8 0.4 0.6 3,768 88,076,017 12.2 4.2 24.6 26.3 1,133 55,896,793 -40.6 -40.7 7.4 16.7 15,316 335,398,771 -1.8 -10.2 100.0 100.0 (USD) Cars with seats or 10,347 less Cars over seats Transport cars Others Total Figure Preliminary information about CBU cars of all kinds registered with the Customs in June 2021 With a preferential import tax of 0% under the ASEAN Trade in Goods Agreement (ATIGA), cars from Indonesia and Thailand have led the way in volume exported to Vietnam since 2018 and maintained until now In the first quarter of 2021, cars exported from these two countries accounted for about 80% of the market share In which, cars from Thailand increased by 56%, Indonesian cars decreased by 26% over the same period in 2020 For imported cars, companies such as Toyota, Mitsubishi, Honda, Ford, Suzuki, and Mazda mainly import from the two markets above to sell in Vietnam Some imported cars are selling well such as Mitsubishi Xpander from Indonesia, Toyota Corolla Cross, Ford Rander from Thailand The main mode of transaction of car in Vietnam is direct import which means Vietnam firms usually take care of importing activities and are in direct contracts with the exporters in the foreign target markets, Vietnamese buyers often directly buy cars to an international market, either through intermediaries – such as sales representatives, distributors, or foreign retailers Sales contract of importing cars SALE CONTRACT No.9064/HDVN-LHCN Date: 11/09/2021 Between Northern Car Import Export And Trading Joint Stock Company Address: 10 Alley Dinh Nguyen Temple Street, Tho An Commune, Dan Phuong District, Hanoi, Vietnam Tel: 0108 268 041 Represented by Mr Dang Van Dinh Hereinafter called The Buyer And: Ford Thailand Manufacturing (FTM) Address: 500/103 Moo Tambol Tasit, Amphur Pluakdaeng, Hemaraj Eastern Seaboard Industrial Estate, Rayong 21140, Thailand Tel: +66 38950510 Fax: +66 38950510 Represented by Mr Kel Kearns - President Hereinafter called The Seller It has been mutually agreed to the sale and purchase of rice on the terms and conditions as follows: Commodity: Ranger Wildtrak 2.0L AT 4X4 Specification: - Color: Chilli Orange - Number of seats: seats - Overall dimensions DxRxC (mm): 5362 x 1860 x 1830 mm - Wheelbase: 3220 mm - Engine: Bi Turbo Diesel 2.0 i4 TDCi - Diesel: fuel type - Maximum power: 160 – 213 Hp - Maximum torque: 385 – 500 NM - Transmission : 10 speeds AT - Wheel size 16 - 17 - 18" Quantity: units Price: - Unit price: USD 40000 per unit CIF Hai Phong Port, Hai Phong, Vietnam, Incoterms 2020 - Total amount: USD 200000 - In word: Two hundred thousand US dollar Packing: as per manufacturer standard packing, and safety for long-sea transportation Shipment and Delivery: - Time of shipment: 15 - 20 days after L/C opening date - Port of Loading: Laem Chabang Port, Bangkok, Thailand - Port of Discharge: Haiphong Port, Haiphong City, Vietnam Retention of Title: The goods shall remain the property of the Seller until the complete payment of the price Inspection: - The Seller shall make a free prior- delivery inspection - During the period until Ford Ranger is shipped, the vehicle will fully meet the company's stringent quality standards under the supervision of FTM and Vehicle Evaluation Center (VEC) in Thailand Payment: By Confirmed Irrevocable Letter of Credit at sight Buyer shall open an irrevocable letter of credit at sight L/C, to be opened through Bangkok Commercial Bank, in favor of Vietcombank Hanoi, 15 days before the shipment, valid for 30 days, in favor of the seller for the total value of the good to be shipped - Partial shipment: Not Allowed - Transhipment: Not Allowed 10 Documents - Full set (3/3) originals Ocean Clean on Board Bill of Lading, marked "Freight to collect" - Signed Commercial Invoice: 03 originals - Detailed Packing list: 03 originals - Certificate of Quality and Quantity issued by The Seller : 03 originals - Certificate of Origin issued by Thailand Chamber of Commerce: original and copies - All banking fees and charges shall be paid as follows: The Buyer and Seller bear their own banking charges 11 Force Majeure: The sides are released from the liability for partial or full non fulfillment of the obligations hereunder if such occurs as the result of force majeure circumstances, namely fire, flood, earthquake, war and pandemic The side should immediately inform the other side of the beginning and cessation of the above mentioned circumstances The certificates issued by the Chamber of Commerce of the Seller’s country or the Buyer’s country respectfully shall be sufficient proof of the existence and the cessation of the above mentioned circumstances 12 Penalties conditions 12.1 Shipment and Delivery in clause 6.0 is approximate and has only +/- one week tolerance In case of any delay of this tolerance period, the Seller accepts to pay penalty of daily 0.5% of the total value of concerned shipment 12.2 In case of any delay of shipment not reasoned by Force Majeure, the Buyer will charge the cost of his production lost to the Seller 12.3 In case the quality of the product does not match with the clause 2.0, it will be returned back to the Seller after agreement of both parties and all expenses incurred after the approval date of the contract and cost of product will be charged to the Seller, before return back the product to the Seller, the Seller should pay all expenses and cost of goods to Buyer If the quality problem continues, the Buyer can cancel this contract 12.4 The price abatement for retained non-conforming goods shall not exceed: 10% of the price of such goods Any action for non-conformity of the must be taken by the Buyer not later than 10 days from the date of arrival of the goods at destination 13 Applicable Law: Any questions not covered by CISG will be governed by the law of the Socialist Republic of Vietnam 14 Resolution of Disputes: ICC Arbitration is applied 15 Others Any amendment of the terms and conditions of this contract must be agreed by both sides in writing All commercial terms used for this contract will be interpreted according to the publication “Trade Terms” (Author: Michael B Smith & Merrit R Blakeslee – National Politics Publishing House – 2001) This sales contract is done in Vietnam on 11 September 2021 in 04 (four) English originals, 02 (two) for each side Made in Hanoi Capital, on 11 September 2021 FOR THE SELLER FOR THE BUYER Car importing process and core activities 3.1 Car importing process Figure Car importing process Northern Car Import Export And Trading Joint Stock Company and Ford Thailand Manufacturing have already agreed the delivery term is CIF Haiphong Port, Incoterms 2020, so the delivering of cars to the specific port of departure, bearing settlement charges for carriage and insurance till the designated port is the responsibility of the exporter - Ford Thailand Manufacturing So Northern Car Import Export And Trading Joint Stock Company signs the contract with a Forwarder to help them prepare and submit important documents to customs authotities, arrange the release of goods, optimize the warehouse receiving process Outsourcing these activities takes up more costs, but a Forwarder is more professional and knowledgeable about importing procedures , so they can these activities easier and less time-consuming than Northern Car Import Export And Trading Joint Stock Company has to these activities themselves Importer Contract (Northern Car) Buy Exporter (The FTM) During shipment After shipment 2.1 Obtain import permission 3.1 Inspection Documents Inspection Northern Car Ministry of Industry Importer Goods shipped and Trade from forwarder Importer license 2.2 Handling Payment Process 3.2 Claim and dispute resolution Application for opening L/C Northern Car Make a claim Vietcombank L/C Thailand Commercial Exporter/ carrier / underwriter ord Manufacturing Bank 2.3 Get the Delivery Order Documents Forwarder Importer Shipping Line Delivery Order 10 2.4 Custom Clearance Customs declaration and documents Forwarder Sub-Department of Customs Physical Inspection Tax, fees and charges Forwarder Sub-Department of Customs Decision on customs clearance 2.5 Taking delivery of import Goods Haiphong Port orthern Car’s Warehouse 3.2 Core activities and stakeholders involving importing cars Output Activities Process Participants Input criteria to Activities and criteria enter business associated documentary exit process requirements to the business process Buy - Exporter - Importer has a - Importer sends Offer Importer and - Importer list of cars according to Purchase exporter have potential sellers Order concluded and is eligible to trade import car contract and terms During Shipment 11 2.1 - Ministry of Northern Car Northern Car Joint Stock The Import Obtain Industry and Joint Stock Company prepares: license of Car import Trade Company and importer's license, license permit - Northern Ford Thailand for warranty and Car Import Manufacturing maintenance of imported Export And have already cars to the Ministry of Trading Joint concluded a Stock trade contract Company and terms Industry and Trade and Ford Thailand Manufacturin g 2.2 Northern Car Northern Car Vietcombank opens LC L/C issued by Handling Import Joint Stock and transfer it to the Vietcombank payment Export And Company Bangkok Commercial process Trading Joint prepare Bank Stock documents: Company Financial and issuing documents and bank application for Vietcombank opening L/C 2.3 Get - The The company - The Forwarder goes to - The the importer receives Arrival the shipping line to Forwarder Delivery - Forwarder Notice from the receive the Delivery Order goes to the FTM from the owner of the ship shipping line with the documents to receive the - It includes: Referral, Delivery Arrival notice, Copy of Bill Order from of Lading with the owner of endorsement and stamp the ship with or Original Bill of Lading - the with endorsement and documents Order (D/O) 12 stamp of the bank, ID Card 2.4 Customs Declarance 2.4.1 - Forwarder The Fowarder - The Forwarder uses the Forwarder Declare - Sub - prepares the electronic customs receives and Department necessary declaration software and request of submit the of Customs documents to fills in customs inspection customs open the declaration declaratio declaration - After checking that the n and goods are the same as document stated in the declaration s in the and related documents, customs the customs officer dossier presses the customs seal on the container and makes notes - Import customs dossier including: + Customs declaration and customs value declaration + Commercial invoice + Transport documents + Contracts for sales of goods + Import license (if any) + Certificate of Quality CQ + Certificate of Origin (C / O) + Other documents 2.4.2 - The The Forwarder Bringing Forwarder has submitted all Customs uses the CKO 13 - The Sub-Department of The declaration is goods and - Sub- the necessary operation to inform the sent to the means of Department documents and customs declarant about Forwarder transport of Customs received enquiry the location, form and to the of inspection extent of physical specified from Sub- inspection of goods place for Department of - CEA operation is used to physical Customs complete inspection of the customs dossier and inspection actual goods - IDA01 is used to text requirements procedures, modify the content of the declaration, tax assessment and send to the customs declaration 2.4.3 Pay - The The delacration The Forwarder pays VNACCS will taxes and Forwarder and inspection taxes, fees and charges issue a fulfill other - The Sub- steps are done immediately and the decision on financial Department VNACCS system has customs received information clearance of about the payment of goods obligations of Customs taxes and fees 2.5 - Port of The financial Forwarder arranges The cars are Taking discharge obligations are shipment from Haiphong taken to delivery of - Forwarder fulfilled Port to Northern’s Northern’s import/ - Transport warehouse warehouse discharge vehicles the import After shipment 3.1 - Forwarder The cars are Importer check the quality The Inspection - Importer taken to of the cars received from inspection of Northen’s forwarder whether they importer is 14 warehouse by keep the maintenance or finished to the forwarder’s not make a means of decision transporation whether to make a claim or not 3.2 Claim Importer The goods + Exporter: If the exporter The importer and Exporter not conform with fails to perform the makes a dispute Carrier the contract obligations in the contract claim resolution Underwriters for sales of goods without any reasonable reasons, (if any) the importer could rely on the contract to make a claim + Carrier: If the goods are deficient in quantity compared to the B/L or there is a loss occurring during transportation, the carrier is not exempt from liability + Underwriters: When the goods are damaged due to the insured perils, it is necessary to rely on the insurance certificate to make a claim Analysing and some recommendations for import process 4.1 Advice for car importing companies Those companies who are engaged in importing goods into Vietnam should be wise and efficient to save the time and cost involved in trade by identifying the business processes that can be performed simultaneously For example, the business 15 processes related to import declaration and D/O can be carried out simultaneously Partnership with acting service providers (such as customs broker, freight forwarder) will be necessary, for certain tasks can be done more cost-efficiently by the entrusted service providers than by the exporter him/herself Importers still need to actively track down the outsource process to promptly solve any problems that are likely to happen The forwarding agent will prepare and present the documentation required for the importation of the freight, take care of the paperwork with customs agents to ensure that the items and documents comply with customs regulations and coordinate the arrival from port to warehouse This will simplify the process and administrative procedures which further offers efficiency, security, cost-effectiveness and simplicity Another problem that the importer has to face is that they have to deal with several products relevant documents under the purpose of importing The ERP system is highly recommended for the importer to simplify and manage those papers Enterprise resource planning helps companies store, use, and share data regarding their regular processes Not only can the importer manage all the maintained documents but they can also keep track of their progress, preventing from making mistakes and falling behind the schedule 4.2 Proposed innovation of payment term For decades, L/C has been considered a popular payment method in international trade finance activities However, In the era of technology 4.0, businesses need to apply technology to work processes to maximize efficiency, which can also apply to the import and export sector The most disadvantage of L/C is that it is not an absolutely secure form of payment, as payment is based on the transaction of written documents The payment based on written documents leads to the following limitations: expensive document costs; many errors during manual testing; the lack of connection between the funding and payment chains, As a result, BPO (Bank Payment Obligation) payment term was considered an effective alternative regarding the demand of the modern world Both the L/C and the BPO can: act as a means of mitigating risk; provide the exporter assurance of payment; act as a form of collateral for financing Unlike an L/C, the BPO does not require trade documents to be presented and routed through the banks, it is based on the electronic submission and matching of data; trade 16 documents are directly sent by the Seller to the Buyer without the involvement of the banks Especially, BPO is designed based on technology: the messages sent or received must use the standard ISO 20022 electrical format The messages will be automatically matched through the “Transport Matching Application” (TMA) TMA can be a SWIFT Commercial Service Application (TSU) platform or any other alternative capable of handling ISO 20022 electrical power in accordance with the required cycle Impact of COVID 19 on the export/ import performance of Vietnamese businesses Since the outbreak of Covid-19 pandemic, the car market in Vietnam has been severely affected Although the last months in 2020, the number of car consumption sharply increased, the growth rate for the whole year still decreased by 8% compared to 2019 In 2021, according to the latest data from the General Department of Customs, the number of cars imported to Vietnam increased by 11% in volume but decreased by 0.9% in value of turnover in July Specifically, according to the latest data from the General Department of Customs, in July 2021, the number of CBU cars imported was estimated at 17,000 vehicles, with a turnover of 332 million USD On average, each car imported to Vietnam in July 2021 is worth about 19,500 USD (equivalent to 450 million VND) However, in August according to the report of the General Statistics Office, our country imported about 8,500 complete cars with a value of 216 million USD Compared to last month, this value and quantity compared to July 2021 has decreased sharply In fact, the time of August every year is also a quiet period for the auto market This year, the market received even less positive information when the epidemic broke out in many localities, causing many places to apply social distancing according to Directive No 16/CT-TTg Besides, car sales of the market in the past few months have also decreased 17 CONCLUSION In conclusion, as the country is developing day by day, the mobility needs of Vietnamese people are also rising and need to be met by the almost advanced and modern means of transport with different designs, models and technologies Along with the self-assembled production capacity of domestic enterprises, importing CBU cars is still an optimal choice to meet the demand of Vietnamese’s citizen, as well as contribute to the growth of the field import and export With the assessment of the current situation of car import into the country, the contracts involved, and its process for importing CBU cars from Thailand to Vietnam, we have had a closer look into the state of this industry, how it should be done thus able to understand the requirements in order to develop this particular industry We also see if there are some changes that can be made in the process or the contract of importing cars, from which we will understand what should be recommended to amend the situation Upon finishing the report, we hope that the readers will have a brief insight into the car importing in Vietnam, specifically from Thailand, and how this process is done by both parties and enterprises We would like to express our sincerest thanks to Dr Phan Thi Thu Hien for giving us the opportunity to learn about this field and for assisting us in the process of completing the essay If there are any mistakes in the report, we are open to receiving any comments and corrections with gratitude 18 REFERENCES vnexpress.net 2021 10 nước xuất ôtô nhiều vào Việt Nam [online] Available at: vnexpress.net 2021 10 nước xuất ôtô nhiều vào Việt Nam [online] Available at: 3.Tradecompetitivenessmap.intracen.org 2021 TP_IP_CI [online] Available at: exporters, T., America, C., America, N., East, M., America, S and products, T., 2021 Car Imports by Country 2020 [online] Worldstopexports.com Available at: VietnamPlus 2021 More than 1.1 billion USD spent on car imports in four months | Business | Vietnam+ (VietnamPlus) [online] Available at: Linh, G., 2021 Ơ tơ nhập ạt Việt Nam dù vướng đại dịch Covid-19 [online] VOV.VN Available at: Đỗ, L., 2021 Lượng xe ô tô nhập Việt Nam giảm mạnh ảnh hưởng đại dịch Covid-19 [online] https://www.qdnd.vn Available at: Ngọc Lam, P., 2021 Lợi so sánh phương thức toán L/C với nghĩa vụ toán ngân hàng [online] TapChiTaiChinh Available at: 19 ... OF CONTENTS INTRODUCTION Overview of import of cars and main mode of international transaction in Vietnam Sales contract of importing cars Car importing process. .. the impact of the Covid 19 pandemic on the export /import performance of Vietnamese businesses Overview of import of cars and main modes of international transaction in Vietnam In 2019, Cars were... Therefore, in this report, we will provide a specific view of the current situation of the car import industry, a detailed sales contract, an analysis of the export /import process based on BPA