An assessment of import activities at mbv ltd company

HCMC UNIVERSITY OF FOREIGN LANGUAGES AND INFORMATION TECHNOLOGY DEPARMENT OF INTERNATIONAL BUSINESS ADMINISTRATION GRADUATION PAPER TOPIC: AN ASSESSMENT OF IMPORT ACTIVITIES AT MBV Ltd COMPANY Student' name: Class Advisor LUONG NGUYEN NH! T CHINH KD01- 02 NGUYEN THANH LAN, MBA JULY 2005 ACKNOWLEDGEMENT To implementing this graduate paper, I have received invaluable help and encourages from my professor, my family as well as my friends I am very grateful to say thank you to: Dr Truong Quang Tuan, Dean of International Business Administration Department, who always advises also takes care carefully us about our study during four years in university He also gives us a chance to implement this graduate paper Advisor Nguyen Thanh Lan, who had spent more and more his time to advise and correct errors for me during implementing time of this graduate paper My paper would not be finished without his constructive comments, spiritual encouragement and invaluable guidance Once time again, I am thankful to you, my advisor Another lectures in International Business Administration Department • Mr Vo Quoc Ha, Logistics manager in Mercedes-Benz Vietnam Ltd., who accepted and trained me during my training time there All staffs in Logistics Department, who helped me get information for this paper and knowledge also experience for my job in the future My parents, who always besides encourage and supports for me Finally, I am indebted to my friends for their encouragement and valuable materials for me during the preparation of this paper I am very grateful and thankful again to everybody , l • I ADVISOR'S ASSESSMENT I Luong Nguyen Nhat Chinh is an ambitious and diligent student She is capable of studying independently and scientifically and she is also capable of combining theoretical and practical issues efficiently During the process of doing this research, she has always proved to be creative, wellorganized, and qualified enough for the duty delegated by the school Although at the outset of her research, she's got some problems with her academic English, gradually, this has been improved She has been sparing no endeavors to fulfill her work at her peak of efficiency As a result, she has made some progress and I hope that she will be able to make further progress in the future In general, Luong Nguyen Nhat Chinh is a capable student of doing academic research Hochiminh city 30 June, 2005 Advisor Nguy~n Thanh Uin 11 I • ABSTRACT Import activities also play important roles as export activities in the area of foreign trade Import activities help individual, businesses and organizations purchase materials, components, equipments and high technology from overseas to produce products in domestic market Then, these products will be sold for domestic demand or foreign demand To industries that require high, advance and modem technology, Vietnamese market cannot supply so this is a right time for import activities - Mercedes-Benz Vietnam Ltd Company is a famous company about producing luxury cars so it requires more and more high technology to ensure exactly quality of product in order to remain customer's belief To implementing this requirement, MercedesBenz Vietnam Ltd Company has carried out importing components and spare parts from mother-company and other branches I am very interested about export- import activities, especially Mercedes-Benz Vietnam Company gave me a chance to join inter-ship period at Logistics Department within two months All of reasons above are a main force for me to implement researching about import activities at Mercedes-Benz Vietnam Company iii LIST OF TABLES AND CHARTS Table 1: Top ten FDI import companies 2004 - Table 2: Imports Table 3: Vietnamese automobile imports 2000, 2001, 2002, 2003 - Table 4: Vietnamese automobile imports 2004 -1 Table 5: Comparable import value of components and parts -11 Table 6: Trend in import of car components 12 Table 7: Largest importers of components and parts for cars -13 - Table 8: Tax revision roadmap 14 Table 9: Import tax of automobile components and parts -15 Table 10: Selected goods imported into Vietnam 27 Table 11: Comparable imports value between MBV and Vietnamese market - 27 Diagram 1: General corporate structure - 21 Diagram 2: Logistics department structure 22 Diagram 3: Production department structure 22 Figure 1: Comparable import value 2000 between Vietnamese market and MBV Figure 2: Comparable import value 2001 between Vietnamese market and MBV Figure 3: Comparable import value 2002 between Vietnamese market and MBV Figure 4: Comparable import value 2003 between Vietnamese market and MBV Figure 5: Comparable import value 2004 between Vietnamese market and MBV iv Prepared by Luong Nguyen Nhat Chinh Graduation Paper TABLE OF CONTENTS Pages Contents Acknowledgement i Advisor's assessment ii Abstract iii List of tables, charts iv In tro d u cti n 05 Chapter ROLES OF IMPORTING ACTIVITIES TO VIETNAMESE ECONOMY I.I.Roles of general importing activities 07 1.1.1 Facts and figures 07 1.1.2 Comments on Vietnamese imports 08 1.2 The importance of automobile importation to Vietnamese market 09 1.2.1 Facts and figures 09 1.2.2 Comments on automobile importation 11 Chapter MERCEDES-BENZ VIETNAM'S PROFILE 2.1 General features 17 2.1.1 The foundation of MBV 17 2.1.2 Scope of operation 18 2.1.3 Stages of development 19 2.2 MBV's corporate structure 20 2.2.1 Corporate culture 20 2.2.2 Human resources 21 Graduation Paper Prepared by Luong Nguyen Nhat Chinh 2.2.3 Corporate structure and manag~;ent 21 2.3 Mercedes-Benz Vietnam's production list 23 Chapter MBV'S IMPORTING ACTIVITIES 3.1 Sources of importation 24 3.2 Facts and figures 24 3.3 Evaluating import activities at MBV 27 Chapter NEGOTIATING AND PERFORMING IMPORT CONTRACTS AT MBV 4.1 Negotiating purchase contracts 29 4.1.1 Preparing for negotiation 29 4.2 Negotiating contracts terms and conditions 30 4.2.1 Payment 30 4.2.2 Delivery 46 4.2.3 Risk, title and insurance 56 4.2.4 Term of Trade: Incoterms 2000 : 59 4.3 Performing import contracts at MBV 62 4.3.1 Obtaining necessary licence and quotas 63 4.3.2 Letter of Credit application 63 4.3 Naming vessels, booking space 66 4.3.4 Obtaining insurance 67 4.~ Taking delivery of imported goods 68 4.3.6 Inspecting the goods 68 4.3.7 Making customs clearance 69 I Graduation Paper • Prepared by Luong Nguyen Nhat Chinh 4.3.8 Making payment 70 4.3.9 Making claims 70 Con clusi n an d su ggestion 72 Graduation Paper Prepared by Luong Nguyen Nhat Chinh In this paper, the following abbreviations are used: , CKD: Complete Knocked Down Components SKD: Semi-knocked Down Components GDP: Gross Domestic Products VAT: Value Added Tax VAMA: Vietnam Automobiles Market MBV: Mercedes-Benz Vietnam Vidamco: Daewoo Automobile Vietnam Vina Star: Star Automobile manufacturing Vietnam VMC: Vietnam Motor Corporation Visuco: Vietnam Suzuki Corporation Vindaco: Daihatsu Vietnam-Indo Company - Prepared by Luong Nguyen Nhat Chinh Graduation Paper INTRODUCTION Vietnam is an agrarian society with 80% out of 76 million inhabitants living in the rural areas It has a GDP per head of $US 400 The most common transportation means in the country is motorbikes Automobiles remain a luxury means and are mainly for corporate use However the private sector, which contributes about 23% of total industrial GDP, is an emerging segment of automobile users The number of cars in use was 370,000 units up to the end of 2001, of which 87% were imported in whole form, the rest of 13% was supplied by local assemblers, using about 95% imported components Vietnam has become an important net importer of components and spare parts for automobile since few years because Vietnam is still a tiny market about automobile industry The local contents in assembling at domestic market is still low because Vietnamese technology cannot follow with the advance, modem and high technology in the developing countries now, so import activities of components and parts play important roles to automobile assembling Mercedes-Benz Vietnam is one of eleven foreign automobile assemblers at Vietnam All of components and spare parts are used to assemble at MBV that are imported from parent company at Germany and other oversea branches such as Singapore, Turkey, etc The main objective of the essay is to assess, provide information activities, import regulations about import and import trends in next years for automobile components and spare parts at MBV Prepared by Luong Nguyen Nhat Chinh Graduation Paper • 4.3.7 Making customs clearance All goods when moving through borders of any countries mustbe cleared at customs Upon receipt of their goods from a carrier, importers must make the good cleared on the three basic steps: Customs declaration, presenting goods imported, and Adhering the customs instructions Customs declaration Importers are required to declare all particulars in a customs declaration form so that the customs authority can check all the import documentary procedures All the particulars about the goods such as: name of goods, quantity, value, means of transportation, origin of the goods must be expressly stated Documents are required to attached to the Customs Declaration are: sales contract, import licence, commercial invoice, packing list, specifications, certificate of origin and so on Presenting the goods All goods must be orderly arranged to facilitate the process of customs inspection Importers must bear all costs in connection with the handling of the cases, boxes or bags as well as customs fees Adhering to the customs instructions After checking the goods against the documents, and finding no problems, a customs officer will clear the goods and the importer must bear all the fees for bonded warehouse There is one advantage for MBV is that they can bring the containers to their warehouse and not have to bear such fees w 69 r Prepared by Luong Nguyen Nhat Chinh Graduation Paper 4.3.8 Making payment Payment by Lie If payment is made by Lie, MBV is required to complete payment so that their bank can release the set of shipping documents MBV will deliver such documents to their forwarder to take delivery on their behalf Payment by collection If MBV is required to pay by DP, i.e Documents against Payment, they must pay immediately when receiving the documents from their bank However, if payment by DA, i.e Documents against Acceptance is agreed, they only sign the draft and receive the documents from their bank After 30 days or 60 days later, payment will be made Payment by TIT In case, MBV import goods from their parent company, the process of payment is very simple because there has been a high degree of trust between them Documents are sent directly to MBV for taking delivery Payment will be made later b telegraphic transfer 4.3.9 Making claims During the performance of a contract, if an importer discovers any loss of or damage to, shortage, missing of the goods they must immediately make a claim during the period of claim agreed in the contract In international trade, there are three parties responsible supplier, the carrier and the insurer 70 for settling claims: the Graduation Paper Prepared by Luong Nguyen Nhat Chinh The supplier is responsible for claims if the goods are not inconformity in quality and quantity with those agreed in a contract Sometimes poor packaging, late delivery, inconsistencies in quality, wrong delivery are major causes for an importer to raise a claim against the supplier The carrier is responsible for claims if the goods are damaged during the course of transportation caused by the carrier's faults or negligence If the goods are damaged by natural disasters, unforeseeable accident or by a third party, the claim is made against the insurer, especially when the goods are covered in such extent by the insurer Normally, claims made by an importer must attach some documents such as Survey report, COR (Cargo Outtums Report), ROROC, invoice, BIL, insurance policy as evidence for the damage to the goods 71 Prepared by Luong Nguyen Nhat Chinh Graduation Paper CONCLUSION AND SUGGESTIONS Generally speaking, MBV is an efficient firm in respect of the market share for vehicles products Their sales have been steadily increasing during the recent years The success they have gained due to three factors: firstly, MBV benefits much from Mercedes-Benz, a Multinational Corporation, whose name has stood in the international market for more than 100 years This is a huge advantage that MBV has over their competitors government, Secondly, thanks to the open policy of Vietnamese MBV has been able to diversify their products and increase their turnover in Vietnamese market Thirdly, their management is small but efficient and very dynamic in working out practical and feasible strategies However, there remain some problems for MBV, especially in terms of importing activities Firstly, there have not been close links between and among four Departments: Sales & Marketing, Production, Import and After-sales Service The Marketing department is responsible for market research so that they can anticipate the market demand precisely The production department, in tum, must provide the exact data of the quantity, quality and categories of the vehicle parts and components to the import department so that this department can arrange a timely importation of the necessary parts so as to timely put them into assembly line Late submission of the data makes it impossible for the Import department to arrange their due purchase of the goods and therefore it will delay their production schedule Sometimes, wrong calculation of the anticipated demand lead to the fact that the quantity is too big or too small, that entails higher storage or disrupt the production process because of shortage of parts or component Secondly, the after-sales service department sometimes sends late feedback from domestic customers about the imported vehicle parts, so the import department can make no claims against their suppliers because the defect liability period has expired Thirdly, the number of qualified import specialists is two small (only five persons are engaged in this business) When MBV at their peak season, the volume of imported is as big as, each week, they receive 20 containers In the situation, seasonal untrained and inexperienced employees are often recruited to meet the urgency Obviously, mistakes, and errors cannot be avoided in taking delivery of 72 Prepared by Luong Nguyen Nhat Chinh Graduation Paper CONCLUSION AND SUGGESTIONS Generally speaking, MBV is an efficient firm in respect of the market share for vehicles products Their sales have been steadily increasing during the recent years The success they have gained due to three factors: firstly, MBV benefits much from Mercedes-Benz, a Multinational Corporation, whose name has stood in the international market for more than 100 years This is a huge advantage that MBV has over their competitors government, Secondly, thanks to the open policy of Vietnamese MBV has been able to diversify their products and increase their turnover in Vietnamese market Thirdly, their management is small but efficient and very dynamic in working out practical and feasible strategies However, there remain some problems for MBV, especially in terms of importing activities Firstly, there have not been close links between and among four Departments: Sales & Marketing, Production, Import and After-sales Service The Marketing department is responsible for market research so that they can anticipate the market demand precisely The production department, in tum, must provide the exact data of the quantity, quality and categories of the vehicle parts and components to the import department so that this department can arrange a timely importation of the necessary parts so as to timely put them into assembly line Late submission of the data makes it impossible for the Import department to arrange their due purchase of the goods and therefore it will delay their production schedule Sometimes, wrong calculation of the anticipated demand lead to the fact that the quantity is too big or too small, that entails higher storage or disrupt the production process because of shortage of parts or component Secondly, the after-sales service department sometimes sends late feedback from domestic customers about the imported vehicle parts, so the import department can make no claims against their suppliers because the defect liability period has expired Thirdly, the number of qualified import specialists is two small (only five persons are engaged in this business) When MBV at their peak season, the volume of imported is as big as, each week, they receive 20 containers In the situation, seasonal untrained and inexperienced employees are often recruited to meet the urgency Obviously, mistakes, and errors cannot be avoided in taking delivery of 72 Graduation Paper Prepared by Luong Nguyen Nhat Chinh the goods and naturally, this will result in loss of profits or loss of contracts Finally, suppliers of MBV are limited in traditional sources, import prices tend not to be so competitive and reasonable This, therefore, will make prime costs higher In view of the above-mentioned reasons, and in order to make the import activities more effective, I would suggest following solutions: Combination between and among departments There should be closer and better combination between and among the departments In particular, the marketing department must collect exact data and figures about the domestic demand both in short and long terms These figures must be carefully and professionally analyzed before sending to the production department This department is then list the exact number of parts or components required for production Finally, when the figures and data reach the import department, they will place orders with their suppliers and negotiate timely delivery for the goods Such good combination will enable MBV to avoid possible delay in production Moreover, in addition to the process of inspection after shipment of the goods by the import department to check the quality of the imported parts for any defects or inherent vice, the after-sale service must fully cooperate with the import department when receiving any complaints or claims from domestic clients These claims must be sent to the production department for analyzing If they are justified, the import department must immediately send claims to the suppliers to get some remedies such as: replacement, repair, or compensation Failure to have such combination and cooperation between and among the departments, MBV's rights cannot be protected Staff training • As said, import activities are rather complicated because of the differences in language, legislation, customs and practice Lack of knowledge in this field will well result in loss of time, money The current number of people in the import department 73 Graduation Paper Prepared by Luong Nguyen Nhat Chinh of MBV is obviously inadequate Of the five staff, there are only two qualified import specialists, the remaining people have not been well trained in import techniques In order to make the import process smooth, more staff (at least 4) should be permanent recruited for this department Specific job description and responsibility should be delegated to each of them MBV should strengthen their staffs capacity in this field by offering necessary training courses English is also a matter of consideration The average level of staff in import department now is equivalent to Intermediate level, which is not enough for dealing with business correspondence in English In general, both knowledge of foreign trade techniques and language should be highly focused on Looking for more sources of suppliers In order to have a wider choice of suppliers, MBV should think of more importation sources in neighboring countries like Malaysia, Singapore, China and so on Although imported parts in MBV are rather specialized, it does not mean that no other manufacturers produce the same parts Some companies in Malaysia did send their offers to MBV, but because some conservative-minded leaders in this company not find it as an opportunity to have more competitive prices In my opinion, beside the essential parts which must be supplied by parent company, other parts can be imported from other sources That is why MBV should widen their source of suppliers to make them less dependent on traditional sellers and to enable the company to lower their prices, which is deemed as an important factor to increase their market share in Vietnamese market 74 Graduation Paper References Busto, C 1994 ICC guide to Documentary Credit operations ICC Publishing S.A (Paris) Doan, Thi Hong Van 2002 Foreign Trade techniques (Vietnamese version) Statistics Publishing House Hoang, Van Chau 2003 International Transportation and Forwarding imports and exports (Vietnamese version) Technical and Scientific Publishing House ICC 2000 Incoterms 2000 ICC Publishing S.A (Paris) Pinnells, J.R.1994 Exporting and the export contract Prodex Vu, Huu Tuu 2002 Foreign Trade techniques (Vietnamese version) Education Publishing House 75 I I Ta KHAI HANG HOANHAP KHAU ~IQUANV~TNAM - Ban luu ngl{m khai Rai q~an TO' khai 56: ••:1H~~.JNKI ,T6NG CVC HAl QUAN • > i Chi CI)CHlii quan: $.R.P L Can bQ d~ng ky (Ky, ghi rO hC;>len) • !.~:.!!9 ~!:i:!.~.~~ Ngay Cl)c Rai quan HQI2002-NK g~.~.~! d~ng ky: 0510512005 56 Imrng phI) Il)c to- khai : Ok, A PHAN nANH CHO N.GU61 KHAI HAl QUAN icE KHAI VA TiNH ntl: t.E4 I Lo,li hinh: I Ngum nhap kh~u Hqp dong lJ KD DT GC Giay phep (neu c6) Sh';~~l.KHX'K 13 QUA~G TRUNG, Q GO YAP, TP HC1\! 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