An assessment of exporting activities at hung vuong company (2001 2005)

" HCMC UNIVERSITY OF FOREIGN LANGUAGES AND INFORMATION TECHNOLOGY DEPARTMENT OF INTERNATIONAL BUSINESS ADMINISTRATION GRADUATION PAPER TOPIC: • AN ASSESSMENT OF EXPORTING ACTIVITIES AT HUNG VUONG COMPANY (2001 - 2005) Student's name: DUONG THl BICH PHUONG Class : KD0203 Advisor : NGUYEN THANH LAN, MBA JULY 2006 " ACKNOWLEDGEMENT This research could not have been completed without the precious support of my Professors for their advice, my family for creating a comfortable home environment and friends for encouragement I am grateful to all the teachers of the International Business Administration Department of HUFLIT for sharing their knowledge and helping me with my four-year studies I wish to express my appreciation to my advisor, Mr NGUYEN THANH LAN, for his great effort in correcting my essay His assistance makes the research more precise, without his help, the research would have been impossible I am also in debt to Mr LE VAN HUNG, Company, who gave me the necessary Director company of Hung Vuong information He was enthusiastic and willing to spend a long time helping me with my research Finally, my family always gave me what I required research Moreover, I also received a lot of encouragement in completing this from my friends I could not imagine how my research would be possible if I did not get such assistance Once again, thank you for your kindness DUONG TH! BicH PHUQNG - ADVISOR'S COMMENT t Ms Duong Thi Sich Phuong has proved to be a good student during the preparation time for this Thesis In particular, she has the following strengths and weaknesses: Strengths: - Good knowledge of foreign trade techniques - Scientific way of study with independent manner - Diligent and ambitious Weaknesses: - Not so qualified in academic writing - Inadequate practical knowledge Ho Chi Minh City July, 2006 Advisor Nguyen Thanh Lan ABSTRACT Exporting products offers businesses a wider choice of buyers, more profits, and more competitiveness It also brings back many challenges as the business becomes more complicated and involves more risk Understanding both benefits and drawbacks, Hung Vuong Co has their own way of entering this field Having been established for nearly 19 years trading in seafood export, they have a lot of experience Nevertheless, they still face obstacles The trading markets are not the same as they used to be, they have changed over the time The business practices of Hung Vuong Co, over the last five years, will be the subject of analysis and evaluation in this essay Vietnam is soon to be a full member of the WTO, which gives the country and its businesses opportunities and challenges Chapter discusses such issues Chapter refers to the company's three stages from establishment 2005 The organization assessed structure, Business undertaking business undertaking is analyzed to and comprises of the two projects and export results from 2001 to 2005 Finally, the last part will show the export process of Hung Vuong Co, including market research, contract signing process, the terms in an international documents contract (special relating to export, the export procedures, enforceability Then, and evaluating the of a Hung Vuong's contract complete the chapter Worthy of special note, the last part is prepared documents focus on payment) This is really challenging carefully with the practice set of to the writer, who hopes that each page in this research will bring the readers interest iii LIST OF TABLE AND FIGURES Table 1: Business Activities Results from 2001 to 2005 21 Table 2: Hung Vuong's Products Lines 25 Table 3: Vasep's Calculation of Profits 27 Table 4: Investment Results 30 Table 5: Allocation of Profits 30 Table 6: The Company Assets and Liabilities 32 Figure 1: Hung Vuong Co's Organization Diagram 18 Figure 2: Export markets before code revoked 23 Figure 3: Export markets after code revoked 24 Figure 4: Investment Expenditures 26 Figure 5: The Two Model of the Trade Center 28 Figure 6: The sum profit of the two projects 31 Figure 7: Issuing a Letter of Credit 44 Figure 8: Presenting a Letter of Credit .44 Figure 9: Telegraphic Transfer 49 Figure 10: Documentary Collection 51 Figure 11: Open Account 53 Figure 12: Clean Collection 53 Figure 13: International Commercial Terms Diagram 58 Figure 14: Hung Vuong manufacturing process 67 iv TABLE OF CONTENTS Acknow ledgment i Advisor's Comment ii Abstract iii List of Tables and Figures iv INTRODUCTION CHAPTERl OPPORTUNITIES & CHALLENGES WHEN VIETNAM BECOMES A FULL MEMBER OF WTO 1.1 The W orId Trade Organization 1.2 Potential Opportunities for Vietnam 1.3 Potential Challenges for Vietnam CHAPTER HUNG VUONG'S BUSINESS HISTORY AND ACTIVITIES 2.1 Historical review 14 2.1.1 The stage of corning into existence and development (1987-1990) 14 2.1 The stage of decline (1991-2000) 15 2.1.3 The stage of equitization (2001-2005) 17 2.2 Corporate functions 18 2.2.1 Organization chart 18 2.2.2 Department functions 18 v 2.2.3 General comments on the organization 2.3 Hung Vuong export activities from 2001 to 2005 20 22 2.3.1 Export turnover 21 2.3.2 Export market and products 22 2.4 Two projects in 2005 25 2.4.1 Moving the factory to the new premise in Blnh Chanh district 26 2.4.2 Building the trade centre 27 2.4.3 The sum profits of the two projects 31 2.5 Equitization 31 2.6 General comments on the business activities 33 CHAPTER EXPORT CONTRACTS PERFORMANCE A T HUNG VUONG Co 3.1 Market research 34 3.1.1 Secondary data 35 3.1.2 Primary data 36 3.2 Hung Vuong contract signing process 37 3.3 Articles of an international contract 38 3.3.1 Commodity 38 3.3.2 Quality 39 3.3.3 Quantity 40 3.3.4 Price 40 3.3.5 Payment 41 vi a Documentary Credits (Letters of Credit) 43 b Telegraphic Transfer (TIT) 48 c Cash in Advance (CID) 50 d Documentary Collection 51 e Open Account 52 f Clean Collection 53 3.3.6 Delivery 54 3.3.7 Settlement of Disputes 59 3.4 Export Documentations 3.6.1 Documentations 60 related to the goods 60 3.6.2 Customs Documentations 62 3.6.2 Transport Documents 64 3.5 Export procedures at Hung Vuong Co 65 3.5.1 The Pre-Payment Stage 66 3.5.2 Preparing the goods for export 66 3.5.3 Export goods checked by authority agency 68 \ 3.5.4 Customs Declaration 69 3.5.5 Booking vessels 70 3.5.6 Delivering the goods to the carrier 70 3.5.7 Obtaining insurance for exports 70 3.5.8 Preparing payment documents 71 3.5.9 Making claims 71 3.6 Evaluating the enforceability of a Hung Vuong's contract 72 Conclusion and suggestions 79 RE FE REN CES 82 vii INTRODUCTION Research paper objectives International business consists Primary types of international of transactions across national business are import-export borders trade and direct foreign investment This research aims to focus on export activities only Many countries, by the nature, are rich of capital, natural resources, labour, etc while others poor of those things The best way of exploring all resources of a country is coordinating such resources Each country should specialize in a product that it produces at the lowest cost and exchange it for goods cheaper in price than produced at home This is the Theory of Absolute Advantage by Adam Smith Vietnam has an advantage of the coastline It is about 3,444km (excludes islands) We clearly have an edge of marine claims, with 200 nautical miles of exclusive economic zone Fishermen can catch fish of all kinds in the exclusive economic zone and also live by aquaculture Hence, Vietnam is one of the top 30 countries in exporting seafood products Hung Vuong Food Processing Export Company is the state owned enterprise trading in seafood exports since the early date of the Open Door Policy They used to be among one of the five biggest companies Nonetheless, their operation declined for some reasons which are analyzed later in this research They are also well-known for the company managers' malpractices Recently, they have not appeared in the media or newspapers Some people thought that they had died; in fact, they still operate And the purposes of this research is to analyze their business activities and contracts, which will answer the doubt by giving information relevant to this company 1 .- Scope of the Research Export activities are complex with the involvement of foreign partners, banks, and the legal systems of the two countries Especially, how contracts are performed research in a business is different from company to company This would like to concentrate on analyzing and assessing the export activities at Hung Vuong Co HUNG VUONG FOOD PROCESSING EXPORT COMPANY 765 HONG BANG STREET, DISTRICT.6 ,HOCHIMINH CITY, VIETNAM COMMERCIAL INVOICE No.llEX/2006 Date OXAPR 200!i From: HOCHIMINH,VIETNAM To :MOSCOW,RUSSIA Shipped by the undersigned per MIV YONG WANG Applicant: PRIME-SEA INTERNATIONAL VIA ST.I'ETERSBURG V.056S INC RM1201, SIGMA TOWER, 7-19 SHINCHEONDONG, SONGPA-GU,SEOUL,KOREA Contract No 07EX/2006 Date: 25 MARCH, 2006 COMMODIty NUMBER OF QUANTITY CARTONS (KGS) UNIT PRICE MI'IOUNT (USD) (USD/ KG FOB IIOClIIl\IINII,VIETNAl\I) DRIED YELLOW STRIPE TRA VELL Y TOTAL PACKING: 8,200 8,856.000 8,200 8,856.00 18GR X GO/CARTON, CARTON IN ONE IlUNDLE 5.918 52,409.81 - 5'")J.or; -, 81 ( ORIGIN OF VIET NAl\'1 Total umount FOB HOCHIMINH VIETNAM: US DOLLARS FIFTY TWO THOUSAND FOUR HUNDRED AND NINE AND EIGHTY ONE CENTS .HUNG VUONG FOOD PROCESSING EXPORT COMPANY 765 HONG BANG STREET, DISTRICT ,HOCHIMINH CITY, VIETNAM PACKING LIST No.1l EX/2006 Date 08 APR, 2006 From: HOCHIMINH,VIETNAM To: MOSCOW,RUSSIA VIA ST.PETERSBURG Shipped by the undersigned per MIV YONG WANG V.056S Applicant: PRIME-SEA INTERNATIONAL INC RM1201, SIGMA TOWER, 7-19 SHINCHEONDONG, Contract No 07EX/2006 Date: 25 APR ,2006 NUMllER OF COMMODITY SONGPA-GU,SEOUL,KOREA CARTONS PACKING OF NET WEIGHT CARTON (KGS) (KGS) CROSS WEIGHT (KGS) DRIED YELLOW STRIPE TRA VELL Y H,200 1.08 8,856.00 12,300.00 I TOTAL PACKING: 8,200 •.J 8,856.00 12,300.00 IllCR X GO/CARTON, GCARTON IN ONE BUNDLE ORIGIN OF VIET NAM Say: EIGHT THOUSAND TWO HUNDRED CARTONS ONLY ' 4- I COMMERCIAL CONTRACT (HOP DONG MUA BAN) No: 07EX/2006 Date: 25 MARCH ,2006 BETWEEN: Seller( Party A): HUNG VUONG FOOD PROCESSING EXPORT COIVIPANY 765 Hong Bang Blvd, Dist 6, HoChiMinh City, Viet Nam Tel: 9693493-9693494 - Fax: 848-9606062 Acount's: 6364639 at ASIA COMMERCIAL BANK - BRANCH CHOLON SWIFT CODE ASCB.VNVX REPPESENTED Buyer(Party BY: Mr LE VAN HUNG - DIRECTOR B); PRIME.SEA INTERNA TIONAL INC RM1201, SIGMA TOWER ,7-19 SHINCHEONDONG,SONGPA-GU,SEOUL,KOREA Tcl: 82-2-419-7557; Fax 82-2-419-9736 REPPESENTED BY: Mr S K NAM After carefully discussion the both partics have agreed to sign this contract under following terms and condition: (Sau bim bt;lc,hai ben dbng I y kY ke't h(Jp dbng voi cdc ddu ki~n ,diJu khoan sau) Commodity - Cartons - Quantity - Price Ten himg - so'lhUng - srIlu(Jng - Dan gid COMMODITY DRIED YELLOW STRIPE TREVALLY NUMBER OF CARTONS QUANTITY (Kgs) 8,200 8,856.00 AMOUNT UNIT PRICE (USD) USD/KG Fon HOCHlMINH 5.918 52,409.81 (KhrJ cd chi wIng) TOTAL 8,200 8,856.00 Say: Total Amount USD Fifty Two Thousand Four Hundred Nine and Eighty One cedts - Quantity and Amount 05PCT More or Less are Allowed - (so' IU(!IJgva so' idn dU(JcUlng giam 05%) 2/ DELIVERY: (Giao Hang) 52,409.81 - Time of Shipment / delivery: Latest date of shipment 15 APR ,2006 (Thili gian giao hang: Ch4m niult ngdy J lIlting 04 IJ(Im2006) • Loading Port (Cang xep hang) : HoChiMinh City-Vietnam • Discharging Port ( Cang aen ) : Moscow, Russia via St Petersburg 3/ PAYMENT: By Irrevocable LlC at sight to the AIC No 6364639 at ASIA COMMERCIAL BANK - BRANCH CHOLON -SWIFT CODE ASCB.VNVX ; Add: 765 Hongbang Street, District 6,HoChiMinh City,Vielnam (Thanh toan bhng tin d~ng thutd khong huyngang vila tai khoan s6 6364639 t"i Ngiln n;,ng ACE-: Chi nh:inh Chd Lon -SWIFT CODE ASCI3.VNVX - Dja chi: 765 HBng Bang , QlI~n 06 , TP- HI) Chi Minh, Vi~[ Nam) 4/ DOCUMENTS Health Certificate REQUIRED: Bill Of Lading, Commercial Invoice, Packing List.CO, (ChUng til kem thea: V(ln dmz, Hoei dan lhuang /1l(li, Bang ke chi li6 Gia), elizlilg nh(7!: n::'! giClY Chung nhcJn V9 sinh ih{/c phrlm ) 51- GENERAL ,\If, ENGAGEMENT: The both parties engaged to carry out fully the above mentioned tcrms, all arHt:ndmc:ltl: 'ust be discussed and agreed by both parties and be clarified by writing, a 11disputes shal1 be amicably setlcd at The International Arbitration Center at Vietnam, This COlilract is \'.'