Chapter 1: Introduction
Introduction
This chapter portrays general introduction for the current study with which research problem, research objectives and research questions are provided as the rationale for this study An introdcution to the methodology to be used and the scope of the study is also addressed in this chapter At the end of the chapter, the structure of this study is provided The ouline of this chapter are as follows:
Research background
Scope and methodology of the study 1.6 Structure of the study payment forms an important part in promoting domestic financial markets integrating into the world
International payment arises from import and export activities and then it turns back to support and creates good conditions for foreign trade development It is an essential basis to the formation and development of international financial relations, circulation of goods and services, as well as money rotation It helps to promote and lubricate import and export activities, foreign investment, services, strengthens drawing overseas remittances and other financial resources
However, international payment is very sophisticated because the participating subjects differ in geography as well as in culture, economics and politics Therefore, the participants are always interested in finding out the most effective payment method which brings least risks for both importer and exporter In Vietnam, T/T, Collection, L/C are the most common methods selected in international payments, subject to the demand and agreement from the participants
In order to expand overseas market, enterprises should base on a reliable payment system One of safe and effective channel of payment so far is settling via commercial banks, and especially the vital role of Vietnamese overseas commercial counselors in providing valuable information for local banks and businesses
However, there is still another intermediary who can approach and control merchandise, monitor clearly and thoroughly cargo situation as well as routine and transit time in specific They are forwarding companies and logistics companies
While carrying out their business, they can know exactly the delivery date, the cargo and they even can act as a reliable representative on behalf of the importer or exporter in specific cases With remarkable advantages, forwarding and logistics companies can participate and perform very well the role of a key chain in international payments Settling via international freight forwarding and logistic companies is a remarkable payment method which is safer, quicker, cheaper, and especially suitable for small lots, samples, or shipment of particular goods
Telegraphic Transfer (T/T), Collection (D/A, D/P, D/OT…), Letter of Credit (L/C) are main methods of payment generally applied in Vietnam so far Each of them has its own advantages and disadvantages so the report will try to find out a new method which can harmonize and meet the needs of low value merchandises
It’s settling CAD/COD via forwarding and logistics companies
The report is supposed to analyze the current situation of international payment in Vietnam then to find out the new appropriate mode of international payment that is more suitable and convenient to local import and export enterprises, especially for small and medium entities This new method will save time and costs, also being safe for small and regular inbound and outbound merchandises, especially for small air cargo, scare and perishable goods, samples…
By getting feedback from customers who daily deal with overseas payments, the report will summarize particularities, limitations and conditions of this new method: i.e CAD/COD via international freight forwarding and logistics companies
1.5 Scope and methodology of the study
1.5.1 Scope of the study The research will approach the case study of forwarding and logistics companies in Vietnam All data will be got and collected from bank’s website, annual report, published studies from different local and foreign universities and articles from books and journals… Besides, an online survey to key staff of import export companies, email interview to the person in charges of overseas forwarders as well as direct interview with managers of local forwarders in Vietnam has been conducted in order to collect primary data
An online survey was posted at the link below: http://spreadsheets.google.com/viewform?formkeyFbElNUmJfaURBWnN3 VDJseEJOUVE6MA , it dispensed to 120 key staff of import export companies and there are a total of 82 executives, approximate by 68.33% of the participation, response to this survey
Due to geographical distance, we have conducted an e-mail interview to overseas international forwarding and logistics companies located in 15 main import export markets of Vietnam over the world such as in United States of America, France, Switzerland, Belgium, Australia, Korea, Hong Kong, China, Taiwan, Japan, Thailand, Indonesia, Malaysia, Pakistan, United Arab Emirates and luckily get 100% response from them 73.33% of participations accept this method of payment and willing to cooperate with Vietnamese correspondents, then settling payment without problem
The study consists of 6 main section:
This is a new method which has not been applied in Vietnam so far Hence, there is still deficiency of experience on its implementation Consequently, there will be unavoidable shortcomings in this report The valuable appraisement, contributions, judgment and suggestion from the Board of Examiners will be highly expected and grateful appreciated
Settling CAD/COD via Forwarding and logistics companies in Vietnam
Research objective
Scope and methodology of the study 1.6 Structure of the study payment forms an important part in promoting domestic financial markets integrating into the world
International payment arises from import and export activities and then it turns back to support and creates good conditions for foreign trade development It is an essential basis to the formation and development of international financial relations, circulation of goods and services, as well as money rotation It helps to promote and lubricate import and export activities, foreign investment, services, strengthens drawing overseas remittances and other financial resources
However, international payment is very sophisticated because the participating subjects differ in geography as well as in culture, economics and politics Therefore, the participants are always interested in finding out the most effective payment method which brings least risks for both importer and exporter In Vietnam, T/T, Collection, L/C are the most common methods selected in international payments, subject to the demand and agreement from the participants
In order to expand overseas market, enterprises should base on a reliable payment system One of safe and effective channel of payment so far is settling via commercial banks, and especially the vital role of Vietnamese overseas commercial counselors in providing valuable information for local banks and businesses
However, there is still another intermediary who can approach and control merchandise, monitor clearly and thoroughly cargo situation as well as routine and transit time in specific They are forwarding companies and logistics companies
While carrying out their business, they can know exactly the delivery date, the cargo and they even can act as a reliable representative on behalf of the importer or exporter in specific cases With remarkable advantages, forwarding and logistics companies can participate and perform very well the role of a key chain in international payments Settling via international freight forwarding and logistic companies is a remarkable payment method which is safer, quicker, cheaper, and especially suitable for small lots, samples, or shipment of particular goods
Telegraphic Transfer (T/T), Collection (D/A, D/P, D/OT…), Letter of Credit (L/C) are main methods of payment generally applied in Vietnam so far Each of them has its own advantages and disadvantages so the report will try to find out a new method which can harmonize and meet the needs of low value merchandises
It’s settling CAD/COD via forwarding and logistics companies
The report is supposed to analyze the current situation of international payment in Vietnam then to find out the new appropriate mode of international payment that is more suitable and convenient to local import and export enterprises, especially for small and medium entities This new method will save time and costs, also being safe for small and regular inbound and outbound merchandises, especially for small air cargo, scare and perishable goods, samples…
By getting feedback from customers who daily deal with overseas payments, the report will summarize particularities, limitations and conditions of this new method: i.e CAD/COD via international freight forwarding and logistics companies.
Structure of the study
payment forms an important part in promoting domestic financial markets integrating into the world
International payment arises from import and export activities and then it turns back to support and creates good conditions for foreign trade development It is an essential basis to the formation and development of international financial relations, circulation of goods and services, as well as money rotation It helps to promote and lubricate import and export activities, foreign investment, services, strengthens drawing overseas remittances and other financial resources
However, international payment is very sophisticated because the participating subjects differ in geography as well as in culture, economics and politics Therefore, the participants are always interested in finding out the most effective payment method which brings least risks for both importer and exporter In Vietnam, T/T, Collection, L/C are the most common methods selected in international payments, subject to the demand and agreement from the participants
In order to expand overseas market, enterprises should base on a reliable payment system One of safe and effective channel of payment so far is settling via commercial banks, and especially the vital role of Vietnamese overseas commercial counselors in providing valuable information for local banks and businesses
However, there is still another intermediary who can approach and control merchandise, monitor clearly and thoroughly cargo situation as well as routine and transit time in specific They are forwarding companies and logistics companies
While carrying out their business, they can know exactly the delivery date, the cargo and they even can act as a reliable representative on behalf of the importer or exporter in specific cases With remarkable advantages, forwarding and logistics companies can participate and perform very well the role of a key chain in international payments Settling via international freight forwarding and logistic companies is a remarkable payment method which is safer, quicker, cheaper, and especially suitable for small lots, samples, or shipment of particular goods
Telegraphic Transfer (T/T), Collection (D/A, D/P, D/OT…), Letter of Credit (L/C) are main methods of payment generally applied in Vietnam so far Each of them has its own advantages and disadvantages so the report will try to find out a new method which can harmonize and meet the needs of low value merchandises
It’s settling CAD/COD via forwarding and logistics companies
The report is supposed to analyze the current situation of international payment in Vietnam then to find out the new appropriate mode of international payment that is more suitable and convenient to local import and export enterprises, especially for small and medium entities This new method will save time and costs, also being safe for small and regular inbound and outbound merchandises, especially for small air cargo, scare and perishable goods, samples…
By getting feedback from customers who daily deal with overseas payments, the report will summarize particularities, limitations and conditions of this new method: i.e CAD/COD via international freight forwarding and logistics companies
1.5 Scope and methodology of the study
1.5.1 Scope of the study The research will approach the case study of forwarding and logistics companies in Vietnam All data will be got and collected from bank’s website, annual report, published studies from different local and foreign universities and articles from books and journals… Besides, an online survey to key staff of import export companies, email interview to the person in charges of overseas forwarders as well as direct interview with managers of local forwarders in Vietnam has been conducted in order to collect primary data
An online survey was posted at the link below: http://spreadsheets.google.com/viewform?formkeyFbElNUmJfaURBWnN3 VDJseEJOUVE6MA , it dispensed to 120 key staff of import export companies and there are a total of 82 executives, approximate by 68.33% of the participation, response to this survey
Due to geographical distance, we have conducted an e-mail interview to overseas international forwarding and logistics companies located in 15 main import export markets of Vietnam over the world such as in United States of America, France, Switzerland, Belgium, Australia, Korea, Hong Kong, China, Taiwan, Japan, Thailand, Indonesia, Malaysia, Pakistan, United Arab Emirates and luckily get 100% response from them 73.33% of participations accept this method of payment and willing to cooperate with Vietnamese correspondents, then settling payment without problem
The study consists of 6 main section:
This is a new method which has not been applied in Vietnam so far Hence, there is still deficiency of experience on its implementation Consequently, there will be unavoidable shortcomings in this report The valuable appraisement, contributions, judgment and suggestion from the Board of Examiners will be highly expected and grateful appreciated
Settling CAD/COD via Forwarding and logistics companies in Vietnam
Chapter 2: Literature Review
Introduction
The previous chapter introduces an overview of the study background, the rationale of the study, the research objective and the research question This chapter searches and reviews relevant theories in the literature The aim of this review is to develop CAD/COD via the commercial banks to CAD/COD via freight forwarding and logistics companies
2.2 CAD/COD in international payment
Whether it is a trade debt settlement, a unilateral funds transfer, a capital investment, or so on the reasons for such payments between countries, the methods of implementing and accounting for them are matters of concern to economists and national governments International debts are settled either from accumulated balances of foreign currency, claims on foreign currency, by loans from creditor lent to debtor, by drawing on the International Monetary Funds, or by utilizing the national gold reserves How a country balances its international accounts is one of the most important decisions for its balance of payments
Conclusion
Cash against documents is a type of transaction in which the importer, basing on the sales contract, requests the exporter’s bank open a trust account in order to settle payment to the exporter upon receiving all necessary documents as negotiated
Settling COD/CAD via post office has been implemented by Saigon Post before
1975 It also carried out by forwarders around the world, mostly in EU, USA, and some developing country nearby Vietnam, such as Thailand, Indonesia, Singapore, Hong Kong, Taiwan…
Many UEH Master Thesis major on international payment, especially focus on L/C method, such as Du Minh Sen, Perfecting operation skills in L/C method at Incombank, 1998; Nguyen Thi Ngoc Mai, Developing L/C method at Vietin Bank, Long An Branch, 2008; Hoang Thi Hai Yen, Developing L/C method in settling payment for import cargo at Vietin Bank, Hochiminh Branch, 2010, but there no topic major on CAD/COD was found in library database
This method of payment has been compilated on lectures in international payment of authors specialized in this field such as Dr Tran Hoang Ngan, International
Payment, Publisher of Statistic, 2001 (page 244-245), MSc Ho Thanh Tung, Lectures of International Payment, TDT University, 2009, with payment process are as follows:
Firgure 2.1 CAD/COD payment process
(1) Basing on the sales contract with an international customer, the importer requests the exporter’s bank open a trust account for 100% value of goods contracted This amount will be settled in favor of the exporter according to a memorandum between both sides
(2) The bank notifies to the exporter
(3) The exporter ships all merchandises to the importer as per the terms and conditions negotiated in the sales contract
(4) The exporter submits all necessary documents as required
(5) The bank carefully check all document against the memorandum, if they meet all requirements, the bank will disburse to the exporter from the importer’s trust account
(6) The bank then releases all documents pertaining to the transaction to the buyer and closes the trust account
Many banks charge fees for cashing against documentary transactions In some instances, the seller bears all bank charges However, it is more common for buyers to cover these charges at the end of each transaction Typically, the seller adds bank charges to the invoice value, as all bank charges are deducted from the trustee account upon payment
2.2.2 Condition for CAD/COD application
This method of payment should be applied in case both importer and exporter totally trust each other
Merchandises should be so precious and scarce
The transaction should be performed rapidly in a short period of time
It requires the importer’s representative in exporter’s country to attest cargo delivery
2.2.3 Advantages and disadvantages of CAD/COD
Further to Mr R N.Bose, Institute of Banking studies, Calcutta, West Bengaal, India, CAD/COD is safer than T/T, D/A, faster and more saving cost than L/C as well
Disadvantages to the Exporter: o There is no guarantee that the Importer will take delivery of the consignment No agreement or contract can force an Importer to accept the consignment o If Importer wishes to play truant and delays taking delivery, it may lead to demurrages and other incidental costs, compromising Exporter’s bargaining power o Legal remedy for breach of contract applies a long and costly process o In case of failure of the Importer, the Exporter would either have to pay the cost of carriage for bringing back the goods, or find out an alternate Importer at the same or a new destination – leading to additional costs o The trust account can be cancelled by the importer at any time Otherwise, it needs a multilateral agreement between importer – exporter and the bank for each transaction that is very convenient since it is not subject to any international customs or practices o Since the Importer also doesn't trust any prepaid payment without binding contract and consignment, both parties do not trust each other Even a contract signed by both parties will be too expensive when something goes wrong, i.e the Importer suddenly refuses to accept the goods or take the goods but doesn't pay at all Debt collector agency will add more cost A returned shipping costs even more All the risks will be borne by the Exporter's This gone worst in foreign trade which is subject to variety of laws or jurisdiction Each side is not empowered to court the other, except when you are a big trusted company or you are very rich This terms a bit one sided The consignee doesn't take the risk as much as the consignor o Exporter should arrange booking via reputation carriers or forwarders who have well handled and monitored on cargo tracking and tracing In case of coming up against difficulties, the exporters should urgently get in touch with Vietnamese Commercial Affairs for essential instructions and advices
Advantages to the Exporter o Simple payment procedure o The exporter can immediately receive the full value of goods as soon as merchandises have been delivered in good situation o Simple set of documents is required for settling payment
Disadvantages to the Importer: o Unless he has paid for the goods, he is unable to take possession and satisfy himself as to the correctness in terms of quality and quantity o Once payment has been made, he cannot reclaim the funds Refund only is possible upon the consent of the Exporter o Since merchandises and shipping papers are sent separately, there will be a delay for the Importer to receive the shipment from customs Shipping documents go out by courier on the working day following the cargo departure and take 2-3 business days to reach the bank o The importer must have their own representatives or branches in the exporter’s country in order to verify the goods prior to shipment o There will be no interest arisen for the bank deposit in case the exporter does not deliver cargo on time as agreed
Logistics activities in commerce were firstly applied and developed after the ending of World War II In Vietnamese history, the first two successful applications of logistics in military operations were the distinguished King Nguyen Hue in the operation towards the North at high speed, successfully destroyed the Qing army in
1789 and the second was the victorious campaign of Dien Bien Phu led by General
Through the flow of history, logistics and research had been applied to business In business, the term "logistics" is usually known as a supply chain or a physical distribution management in the enterprise
There are many different concepts of logistics in the world based on industry and research purposes of logistics services Some key concepts are as follows:
1 According to the United Nations (Training Course on International Multimodal Transport and Logistics Management, Foreign Trade University, October 2002): logistics activities are the management of materials transfer through stock, producing and delivery products to consumers as per their demand
2 According to Logistics Management Committee of the United States 1988, logistics is the process of planning, selecting the optimal method to manage, control raw materials, semi-finished and finished products with fastest transportation and most saving cost of storage, as well as transferring corresponding information from pre-production until the goods reach the final consumer to meet their requirements
3 The Vietnamese Commercial Law in 2005 (Article 233) stipulates: Logistics is a trading service, in which, traders implement one or more stages, including picking up the goods, transporting, storaging, demurring, declaring customs and other procedures, consulting, packing, coding, delivering or other services related to merchandises as agreed with the customer in order to get remuneration
2.3.2 Characteristics Experts’ studying on logistics services has summarized several basic characteristics of this service as follows:
Logistics is a combination of enterprise activities under 3 main aspects, which are existing logistics, operating logistics and system logistics o Existing logistics relates to basic needs of our life Existing logistics, as the name, derives from the instinct of human survival and in order to meet the needs of people: what, how much, when and where we need Existing logistics is the nature and the foundation of logistics activities in general; o Operating logistics is the development of existing logistics and associates with the whole enterprise production system Operating logistics relates to the transportation and storage of inputs raw materials , going into, passing and going out of the enterprise before penetrating into the distribution channels then reaching to final consumers; o System logistics help to maintain the operation of the system The elements of systems logistics are machinery, equipment, human resources, technology, infrastructure, workshops, warehouse Existing logistics, operating logistics and system logistics have very close relationship, and they all create the basis of a complete logistics system
Logistics supports business activities: It assists all the activities of the enterprise, even if the products have been out of production lines of business and reach final consumers A company can combine some factors of logistics together or with all factors depending on the logistics requirements of their business
Logistics also supports business activities through management in transportation and storage of raw materials going to enterprises and semi-finished products moving around in the business scale
Logistics is a high and complete development of transportation as well as forwarding services These services are parts closely connected to logistics
Along with its development, logistics have diversified the key concepts of traditional forwarding and transportation Forwarding and logistics companies not only act on behalf of customers to control separate steps such as arranging booking, preparing and packing goods, recycling, and performing customs clearance but also provide a Door-to-door service Not only they play the role of an agent, but a trustee is also becoming a main subject in forwarding and logistics activities, taking full responsibility in the field of laws and practices accordingly Today, in order to well and smoothly perform their operation, forwarding and logistics companies must control a comprehensive management system from the transportation, supplying of raw materials for production, maintaining storage of merchandises in inventory, distributing it to the right place, at the right time, using electronic information for monitoring and inspection, Therefore, the transportation agency will become a logistics delivery agency
Chapter 3: Methodology
Introduction
The previous chapter provides theoretical framework for the research This chapter provides an overview of business research and introduces research methodology used to build and assess the measurement scales, the statistical techniques employed to analyze the data, with chapter outline are as follows:
Business research
Business research is done to learn information that could make the study more objective Business research methods vary depending on scope, purpose of research, source and characteristics of data and the type of information needed A successful business research paper will demonstrate that the author understands a specific topic and has formulated opinions about it that go above and beyond its current use
Research design
Pilot test
Conclusion
Based on the purpose of research, researchers often use one of the three types: exploratory study, descriptive study, causal study
Basing on the characteristics of data needed and research purpose, researchers can choose either qualitative or quantitative approach or a combination of these two types
Data can be acquired via a variety of strategies such as experiment, survey, case study, grounded theory or action research
The first step in business research is to determine what objectives the researcher wants to achieve Research design then enables the researcher to select appropriate methods in order to meet the research objectives in the most efficient way
This report bases on qualitative methodology, approach descriptive study with online survey, email interview, telephone and direct interview This method was chosen because it allows the researcher to describe the customer’s attitude towards the settling COD/CAD via forwarders E-mail and online surveys are relatively new and little is known about the effect of sampling bias in internet surveys It is clearly the most cost effective and fastest method of distributing a survey Besides, the chosen interviewee’s profile represent the key person whose idea and attitude is vey important to the research
Data for this study was collected using a survey technique This technique
“provides a quick, efficient and accurate means of assessing information on a population, especially in the case of a lack of secondary data” (Zikmund, 1997)
Questionnaire research design proceeds in an orderly and specific manner Each item in the flow chart depends upon the successful completion of all the previous items Therefore, it is important not to skip a single step There are two feedback loops in the flow chart to allow revisions to the methodology and instruments
Design Methodology Determine Feasibility Develop Instruments Select Sample
Conduct Pilot Test Revise Instruments Conduct Research Analyze Data
The purpose of pilot test was to refine the questionnaire to help respondents to avoid problems in answering questions and to increase the quality of data recorded for the main survey
This phase was carried out by two steps In the first step, an exploratory study was made with the purpose of assessing the first draft of measurement scale The first draft of questionnaire was developed in Vietnamese It was then translated into English
Associate Professor Dr Le Thanh Lan, Vice Director of Vietin Bank, Branch No.5, who have much experience in international payment, was invited to give comment on the questionaire The purpose of this step is to examine the clarity the instrument and to be sure that all survey questions were clear in meaning and sufficient to cover the research matter in reality, from the perspective of professional Some amendments were made after suggestions from the consultant
The other discussions was conducted with some of key staff who work for import export companies such as Ms Pham Huong Nhu (Haili Co), Ms Nguyen Thi Bong (Viet Hung Co), Ms Tran Khanh Chi (Estec Vina)… They were invited to give their consultance and comments The purpose of this step was the same as that of the first discussion, but in this case from the customer’s perspective Some questions were adjusted on the recommendation of the participants, for example, to make the terms in the questionnaire more concrete and insensitive
The final version of questionnaire was made in Vietnamese and then was translated back into English (Appendix 1)
3.5 Main survey There are 3 main surveys has been conducted
The first survey is an online one, designed for managers and key staffs of import export companies Because An email of introduction with link of the survey at the address: http://spreadsheets.google.com/viewform?formkeyFbElNUmJfaURBWnN3 VDJseEJOUVE6MA was sent to 108 key person of import export companies located in Hanoi, Hochiminh City, Dong Nai and Binh Duong provinces Of these, 82 feedbacks was recorded, they are all useable, making effective response rate 75.92%, from which we wish to draw some conclusion According to Dr Le Van Huy (DUE, 2009), the minimum sample size is 50 Hence, 82 observers is acceptable to draw some conclusion
Second, we have conducted an email survey to interview operators in overseas forwarding and logistics companies located in only 15 main import export markets of Vietnam spread over the world such as the United States of America, France, Switzerland, Singapore, Australia, Korea, Hong Kong, China, Taiwan, Japan, Thailand, Indonesia, Malaysia, Pakistan, United Arab Emirates, making effective response rate 100%
Finally, we have taken 8 short interviews via telephone, and direct one with some key staffs of forwarding and logistics companies located in Hochiminh City and most of them are so interested in undertaking international payment and are willing to handle it Ms Thai Trang Nha (BEL Logistics), Ms Nguyen Ngoc Quy (SDV),
Ms Nguyen Hoang Dan Thanh (Worldwide Logistics), Ms Le Thi Thanh Nguyen (DAMCO) … would like to cover this step since it does not take much time but can bring more profits as well as serve their customers better
This chapter provides details of the research methodology and research design used in this study The focus of this chapter was on the development of the questionnaire and the analytical methods employed for assessment of the measurement scales and for data analysis as well The next chapter will provide the research results and the findings of the study.
Chapter 4: Settling CAD/COD via forwarding and logistics companies 33 1 Introduction
Forwarding and logistics in international payment, in reality
Encroaching of forwarding and logistics companies in international payment
Forwarding and logistics in international payment, in reality
Undertaking CAD/COD via forwarders
Customer behaviour toward settling CAD/COD via forwarders4.6 Petitions to authorities
As an international business, forwarding and logistics companies should operate their activities basing on a stable and extensive network with reliable and effective subsidiaries, branches and overseas agents These indispensable partners not only help them to expand the market share, increase the volume of transaction but also ensure all payments thoroughly monitored and settled
The most common method of international payment being used by forwarding and logistics company is T/TR (Telegraphic Transfer or Telex Transfer) which is fast, safe and convenient SWIFT messages are delivered to receiving bank right after dispatch Payment will be effective on value day, which, in terms of international banking practices, is two businesses days from transaction date The SWIFT system has a built-in security feature which makes it a safe, reliable method of transferring funds electronically The simplicity coupled with the efficiency and the security make tele-transmissions a convenient way of remitting funds internationally
- Door to Door Service including packing, picking up, clearing customs, door delivery… under EXW, DDU, DDP current Incoterms
- Data Management/ EDI clearing house
- Barcode scanning and Label Production
- System Track and Trace /Web base Visibility
- Fourth Party Logistics (FPL): consulting specialized in logistics, transportation, and supply chain management.
Encroaching of forwarding and logistics companies in international payment
Forwarding and logistics companies satisfy the necessary and sufficient conditions of an intermediary for entry into international payment such as: extensive worldwide area network of subsidiary companies, branches, representative offices, agents, partners… spread all over the world, significant financial potential, regular and high volume of overseas transactions Thus, balance amounts with overseas partners will be huge Frequently carrying out overseas money remittances, forwarding and logistics staffs have enough experiences in this area Besides, they also have close ties and are in good terms with their overseas colleagues and partners in daily work in order to ensure an efficient and thorough system For example, Schenker, a 125 years old logistics company with around 28,000 professional staff working at 1.000 offices all over the world with annual revenue at approximate 5.2 billion of Euro They are willing to serve day and night, across the entire globe and in your own language wherever you are
Frequently exchanging experiences with overseas partners, especially people living in developed countries with modern working environment, advanced knowledge, processes as well as working skills, forwarding and logistics staffs may easily become professional in communication, writing commercial letters and so on…
Besides, they may update valuable information regarding international laws and practices as well as social and economic environment from overseas partners
Furthermore, overseas transportation is a compulsory step in international trade In case the transporters, in other words, the forwarding and logistics companies, also collect money, i.e the value of delivery, information relating to payment has been noticed together with the cargo and shipping information will take shortcuts, hence, all transactions will be swiftly completed, so customer can save their time and their money
Working in service industry, accurate, safe, quick operations are vital factors strictly required in forwarding and logistics companies Most of them use worldwide integrated data network, from there, shipment with detailed information can be well followed up and monitored from any incorporated office or branch
Currently, international payment is a habitual activity of Accounting Department in every forwarding and logistics companies
4.4 Undertaking CAD/COD via forwarding and logistics companies
4.4.1 Procedure for settling CAD/COD via freight forwarders 4.4.1.1 Payment process
Firgure4.1: Payment process of undertaking CAD via forwarding and logistics companies
(1) A sales contract with all terms and conditions related to prices, details and nature of goods, delivery and so on has been signed by the Importer and the Exporter
(2) A Memorandum drafted by the Importer has been memorized by the forwarding and logistics company in the importer’s country
(3) The forwarding and logistics company will notice to their agent in the Exporter’s country
(4) The exporter hands over the goods to the forwarding and logistics company in their country and submit all required shipping documents to them as well
According to the trade terms stipulated in the contract, freight and insurance fees are born either by seller or buyer This company can check the cargo situation on behalf of Importer The forwarding and logistics company will check all shipping documents basing on the Memorandum
(5) The forwarding and logistics company notify the Importer prior to the arrival of the cargo at destination Then the Importer remit the carrier take in charge of the whole cargo with relating documents and deliver to the agent in the Importer’s country The Importer takes in charge of the customer clearance which should be supported by the company in a door-to-door service
(6) Then the Importer remit the delivery value along with collected fees to the forwarding and logistics company normally in cash or check or other financial papers such as bill of exchange or promissory note in favor of themselves
(7) The two forwarding and logistics companies will clear the balance periodically of course via the banking system
There are two alternatives of settlement The first one is settling daily to the exporters The advantage of this alternative is the safety Payment is affected as soon as delivering the goods or releasing the commercial documents But the organization of a competent team for debt settlement (either account payable or receivable) is not a simple matter Otherwise, banks consider forwarding and logistics companies as nice coordinators helping them in their operation
The second alternative is a combination between CAD and clearing method The forwarding and logistics companies collect the payment upon delivery of consignment to the importer and under advice to their correspondent in the Exporter’s country The latter, upon tested / authenticated notice pay the Exporter
The advantage of this way, funds collected in local currency are kept in place to pay eventual exporters The balance account should be cleared periodically no need to ask for foreign currencies for each transaction affected provided the local exchange control regulation (ECR) do not forbid In anyway, there is no risk of being unpaid as well as long delay in payment
4.4.1.2 Documents required There are some of popular shipping and relevant documents required in international trading, as follows:
Ocean / Marine Bill of Lading
Export quota Certificate / Export License
There’s should be a good relationship between the Importer and the Exporter; both should totally trust each other in terms of good credit rating
The merchandise traded is usually so scarce
Total value of the sales contract should not exceed $30,000 (we have conducted a survey to search for this value)
Small quantities, samples etc can be sent by post parcel or VPP (value payable post), small LCL, air cargo or samples will be suitable to this method of payment
The export environment should be fairly straightforward
4.4.2 Advantages of undertaking CAD via forwarding and logistics companies
Once he has paid for the goods, he takes possession and satisfy himself as to the correctness in terms of on board date and quantity of goods since everything has been controlled by the local forwarding and Logistics Company Everything is said to contain but by checking the real weight and volume of cargo, they can estimated the quantity in side the cartons
Before settling money, everything on the memorandum has been well checked by the local forwarding and Logistics Company, so it will cost less than settling a vendor or buying office on Exporter’s country
In case of non deliver, the Importer do not have to pay, vice versa, in case of nonpayment, the forwarding and logistics company takes care the sending or they can negotiate an interest for their deposit for the exporter
Upon notification from the correspondent in importer’s country via authenticated manage; the forwarding and logistics company pay the exporter, so there is no risks of delay a non-payment
With simple and swift procedures, they can get the money as soon as merchandise delivered
A simple set of shipping documents are required, and no need to be checked word by word
Goods are in his effective possession until Drawee/Buyer/Importer pays for them;
Since the bills may be on a sight basis, there is no time wasted The exporter immediately know whether the drawee is willing to pay or not The forwarding and logistics company could also be empowered to trace and collect usual bills
For the exporter, CAD is safer than D/A bills LC is even safer; but, it would cost more If you are reasonably sure that the goods will not be refused by the Importer (and therefore, you won’t have trouble in shipping the goods back, or finding out another Importer) and you want lower on bank charges, CAD/COD will be a decent option
4.4.3 Significances of applying CAD via forwarding and logistics companies
Customer’s behaviors towards settling payment via freight forwarders
Patern Fre Ex Im Method Mode
Patern Frequency Percent Valid Percent Cumulative Percent
Table 4.1: Respondents’ profile in patern
Fre Frequency Percent Valid Percent Cumulative Percent
Table 4.2: Respondents’ profile in pprequency
KMO and Bartlett's Test Kaiser-Meyer-Olkin Measure of Sampling Adequacy .727
Table 4.3: KMO and Bartlett's Test
Condition 1: KMO>0,5 (Hair and partner, 2006, cited by Huy, 2009)
Condition 2: Sig (Bartlett’s Test) 1, Eigenvalues Cumulative > 0.5 (50%) (Gerbing and Anderson,
- Eigenvalues Cumulative = 70.10%, so 70.10% of data variability is explained by 2 factors
With Eigenvalues > 1, Eigenvalues Cumulative = 70.10% ( > 0.5 (50%) (Gerbing and Anderson, 1988), so data variability is explained by 2 factors
- Sig (Bartlett’s Test) = 0.000
