(Tiểu luận) topic the case of exporting 100 containers of cashew nuts from vietnam to italy developments and lessons

Trang 1 FOREIGN TRADE UNIVERSITYSCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS---***---MODULE: INTERNATIONAL TRADE POLICYTOPIC: THE CASE OF EXPORTING 100 CONTAINERS OF CASHEW NUTS FROM V

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS

-*** -MODULE: INTERNATIONAL TRADE POLICY TOPIC: THE CASE OF EXPORTING 100 CONTAINERS OF CASHEW NUTS FROM VIETNAM TO ITALY: DEVELOPMENTS AND LESSONS

Instructor : PhD Vu Huyen Phuong

Group members:

Numbe

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Hanoi, May 2023 Abstract:

Keywords:

1 Introduction

1.1 Background information

Vietnam has transformed over the past 30 years from a nation that exported raw cashew nuts in modest amounts to the top exporter of cashew kernels worldwide Even during difficult times, Vietnam's cashew sector has consistently maintained its top spot for 15 years running, from 2006 to 2020 More than 90 nations and territories have received cashew kernel exports from the cashew industry, making up around 80% of global exports Exports of cashews brought in more than 31 billion USD That is a significant increase in the cashew business over the past 30 years since the Vietnam Cashew

Association was founded

Statistics from the International Trade Center were referenced by the Import-Export Department (Ministry of Industry and Trade) to demonstrate that Turkey's cashew imports increased by an average of 20% per year between

2016 and 2020, from 5.58 thousand tons in 2016 to 9.3 thousand tons in 2020

In this, from 762 tons in 2016 to 8.5 thousand tons in 2020, Turkey's cashew nut imports from Vietnam increased by an average of 88.1 %/year Due to the convoluted course of the Covid-19 outbreak in 2020, Turkey had to continually enact social segregation policies that forced individuals to stay at home and increased the demand for goods Cashew seeds rose significantly Turkey imported more cashews from Vietnam in the first two months of 2021 than it did from Mozambique Vietnam's cashew nut market share in all Turkish imports was 92.58% in the first two months of 2021, a significant increase from 86.65% in the same period in 2020 The cashew market in Turkey has been controlled by Vietnam In light of the increasingly severe competition in the EU's key markets, the fact that Vietnamese businesses successfully utilize the Turkish market is a step in the right way

Italy's entry into the EU occurred in 1957 The EU is one of the most significant export destinations for Vietnamese cashews The EU is expected to

be Vietnam's second-largest cashew nut export market in 2021, accounting for 23% of the industry's entire volume and 22% of its overall value in terms of exports In particular, cashew exports to the EU market were 135 thousand tons, valued at 816 million USD, an increase of 8% in value and 16.5% in volume over 2020

1.2 Research objective

In truth, Vietnamese enterprises frequently encounter fraud in the cross-border trade of commodities The Vietnam Trade Office and the Ministry of Industry and Trade frequently issue market warnings about this unforeseen phenomenon, which manifests in many different ways However, due to subjective psychology and a lack of knowledge about cross-border transactions, many Vietnamese firms continue to fall prey to criminals from other countries

A prime example and one from which important lessons regarding transactional prudence may be learned is the recent scam involving 100 containers of cashew nuts with a value of more than 20 million USD trading internationally

1.3 Research subject and scope

Consider the topic: “The case of exporting 100 containers of cashew nuts from Vietnam to Italy: developments and lessons” The brief information on the cashew nut containers of Vietnamese businesses allegedly defrauded in Italy is included in the study topic's scope Vietnamese businesses responded quickly to the predicament by figuring out how to handle it and limit the damages brought

on by the tragedy However, while undertaking commodities exchange and purchase operations with overseas partners, Vietnamese enterprises may learn a lot from the aforementioned situation

1.4 Methodology

In order to uncover Italy and Turkey's trickery and our nation's blunders and draw conclusions, we used qualitative methodologies to examine the causes and effects of the occurrence known as "The case of exporting 100 containers of cashew nuts from Vietnam to Italy: developments and lessons”

2 Literature review

2.1 Cashew nuts export process

According to figures from the General Department of Customs, Vietnam

is anticipated to export over 520,000 tons of cashew nuts valued at roughly 3.09 billion USD in 2022 For 16 years running, Vietnam has consistently held the

top place in the world for cashew kernel exports Vietnamese cashew nuts are mostly imported into the United States, China, and the Netherlands

Drawing lessons from the experiences of previous nations and leveraging its existing advantages, Vietnam has identified agricultural exports as one of its key export industries Notably, cashew nuts have emerged as the primary export commodity among various types of nuts

According to a research on Solutions to Promote Cashew Exports, each enterprise is advised to devise their own appropriate export process However,

in a broader sense, the procedures for exporting goods in general, or exporting cashew nuts in particular, predominantly include a set of fundamental stages Firstly, businesses need to conduct market research both domestically to assess the supply and internationally to enhance business efficiency, then formulate a detailed export business plan Secondly, businesses engage in trade activities, negotiation, and finalizing export contracts This is a critical step ensuring the establishment of mutually beneficial agreements Finally, businesses execute their export contracts by undertaking a series of essential tasks, including preparation of goods, conducting inspections, securing appropriate insurance coverage, selecting suitable transportation methods, facilitating customs clearance and preparing payment documentation (Vang, 2015)

Vietnam is not the only country implementing such an export process; countries like India also follow a similar approach Nevertheless, during the stage of identifying key markets and export destinations, businesses in India receive assistance and collaboration from The Cashew Export Promotion Council of India (CEPC) Furthermore, the CEPC plays an active role in resolving export or import-related complaints through peaceful means (Margabandhu, Sundararajan, 2015)

2.2 Similar cases

2.2.1.Vietnam's seafood export scam to Sri Lanka

The case of fraud in Vietnam's seafood export industry serves as a concrete example of the financial losses that exporting businesses may suffer when they fall victim to scams Several seafood exporters in Vietnam have been deceived when buyers request payment through unreliable means, such as transferring money through obscure intermediary companies or using unofficial payment methods

An instance of such deception occurred, when two shipments of basa fish, worth nearly $112,000, were exported from Ho Chi Minh City to Sri Lanka in the period 2021-2022 According to the initial contract, the delivery terms were CIF Colombo (delivery at the port of Colombo), and the payment condition was D/P 100%, with collection through banks upon presentation of the documents However, after delivering the goods and completing the documentation for the first shipment, the buyer cited high D/P payment fees and requested a change to payment via telegraphic transfer (T/T) The buyer also demanded that the Vietnamese company send one-third of the original bill of lading in advance

to facilitate customs clearance and import licensing Business representatives had expressed their hope that the relevant authorities in Vietnam would intervene and assist them

After receiving the complaints, the authorities in Vietnam have taken steps to investigate and resolve the issue Businesses reporting the deception have been provided with guidance on legal procedures and complaint processes However, the investigation findings have not been made public yet

Experts have advised businesses to carefully authenticate new clients, especially for high-value transactions They recommend establishing direct communication channels and drafting their own contracts to ensure clarity on terms, obligations, and regulations

2.2.2.6,000 tones rice of 20 Indian exporters was vanished

In an incident, a Dubai-based company vanished along with its owner and staff after placing orders for approximately 6,000 tonnes of rice from 20 Indian exporters

In response to questions, the Department of Economic Development (DED) stated that they are unable to discuss current investigations due to the need to safeguard the confidentiality of the parties concerned

The DED's Business Protection Division handles complaints related to commercial disputes within and outside the UAE, but they can only intervene when the complainant is a registered commercial entity in Dubai and the dispute

is solely of a commercial nature Disputes that have already been resolved or are under consideration by other competent judicial, legal, or administrative authorities are not within the jurisdiction of the DED

Businesses frequently choose not to report fraud Perhaps for one of the following: reputational damage, business interruption, etc Because consulting

fees are likewise highly exorbitant in the aforementioned case, Indian rice exporters also thought about taking the matter before the court

3 Theoretical framework

3.1 Documents against Payment - D/P

Definition: Documents against payment (D/P) Collection terms of payment

that require the drawee to pay a draft prior to receiving the accompanying documents Typically, such collections include a document that restricts possession or ownership, thereby forcing the drawee to honor the draft in order

to obtain the relevant goods While it is possible to protest for non-payment of sight drafts, the benefit is questionable, as the drawee will not have received the contract goods (Dictionary of International Trade - olegario llamazares) The required documents for importing and exporting goods:

Sales contract

Commercial invoice

Packing list

Bill of lading

Airway bill

Customs declaration

General documents

Certificate of Origin (℅)

Insurance certificate

Phytosanitary Certificate &Fumigation Certificate

Letter of credit (L/C)

Material Safety Data Sheet

The process flow for Document Against Payment (D/P) describes how payment and goods are exchanged between the buyer and the seller

1 Sales Contract: Exporter and importer sign sales contract defining the terms of payment against shipment of goods

2 Good dispatch: The exporter will dispatch of goods to importer based on the sales contract

3 Export Documents: Exporter will prepare export documents i.e., Bill of Exchange (at sight), Bill of lading, commercial invoice, packing list, import manifest, as and when goods are shipped All documents are required to be submitted to the exporter's bank i.e., remitting bank Basically exporters will rely on remitting banks

4 Documents to Collecting Bank: The remitting bank will check the entire set of documents and pass the instruction to the collecting bank or presenting bank who is in the importer's country The collecting bank or presenting bank can be a branch or associate of remitting bank The presenting bank can be separate or collecting bank and presenting bank can be same

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ANALYSIS OF

VIETNAM'S…

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ĐỀ CƯƠNG KINH TẾ Chính TRỊ

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04.07.2021 Final Test -TMAE302

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5 Payment from Importer: When the goods arrive, meanwhile, goods also arrive at the port Goods arrive at the port but not to importer The importer will get delivery of goods when he will present the documents The term of payment under Document against payment (D/P) is “at sight” that means importer has to pay first Importer will go with document against payment when he does not want credit period

6 Documents to importer: The collecting bank will present documents to importer post receipt of import payment

7 Goods received: After presenting corresponding documents to customs,

he will be able to release goods from port

8 Transfer of payment by the collecting bank to remitting bank: Post receipt

of goods collecting bank will transfer proceeds to remitting bank

9 Final settlement of export bill: On receipt of collection from collecting bank remitting bank will transfer the same to the exporter

At first glance, transactions involving D/P may appear secure for sellers, but

in reality, there are hazards entailed With the D/P method, there will be a constrain between payment and the receipt of goods by the buyer Accordingly, the bank will act on behalf of the seller to control the shipping documents if the buyer has not paid the money

Advantage: Easy to use because it does not require a credit limit from a

bank It is also convenient for both buyers and sellers in terms of procedure Using this payment method incurs significantly less cost and management fees compared to other methods such as documentary credit

Disadvantages: The D/P method poses risks for sellers as they have to

rely on a bank to control the right to dispose of the buyer's goods, but they cannot control the payment of the buyer

Definition: Payment made through international electronic funds transfer

via the system known as SWIFT (Society for Worldwide inter-bank Financial

telecommunications) offered by most major bank

SWIFT codes (also known as BIC codes) ensure safe and speedy

international payments through the SWIFT system When making an overseas transaction, a SWIFT code is used to verify the identity of the banks or financial institutions This safety measure helps ensure that funds are sent to the correct account

A SWIFT/BIC code consists of 8-11 characters and follows a format that identifies your bank, country, location, and branch

1 – Bank code (4 letters)

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The first four letters represent the bank and usually look like an abbreviated version of the bank name

2 – Country code (2 letters)

These two letters indicate the country where the bank is located

3 – Location code (2 letters or numbers)

These two characters designate the location of the bank’s main office

4 – Branch code (3 digits)

These 3 digits identify a specific branch ‘XXX’ is used for a bank’s head office

4 Evaluation/ Analysis

4.1 Case summary and related objectives

4.1.1.Related objectives:

Vietnamese enterprises - Exporters

Italian buyers - Importers

Vietnamese bank - Remitting bank

Italian bank - Collecting bank

Turkish bank - Collecting bank

Kim Hanh Viet Company - Brokerage company

4.1.1.Case Summary

The case of a shipment of nearly 100 containers of cashew nuts from Vietnamese enterprises exported to Italy in March 2022 with a value of tens of millions of dollars through the broker of Kim Hanh Viet Company "nearly" lost everything provides a great experience for businesses when entering into commercial contracts with foreign partners

Vietnam's businesses initially contracted with a brokerage company to export cashew nuts; however, after the goods were shipped, they discovered that another number of containers had been out of control There are signs of being scammed by buyers when the application for collection of money from a Vietnamese bank is sent to a Turkish bank

Even though the money has not been received, the buyer has obtained all the original documents of the goods above but has not yet paid for them Thanks

to Vietnamese and local authorities' active participation and timely intervention, Vietnamese businesses didn't lose a single container to the fraudsters in this incident Almost half a year after being held for settlement, all goods have been returned to Vietnamese enterprises

4.2 Case developments

On March 8, 2022, the Embassy together with the Vietnam Trade Office

in Italy and relevant agencies received an express dispatch from the Vietnam Cashew Association (VINACAS) to request urgent support and find out how to

solve 100 containers of cashew nuts exported to the EU are scammed and are at risk of losing goods

According to the report, cashew nut exporters in Vietnam had signed a contract through Kim Hanh Viet brokerage company to export 100 containers of cashew nuts worth 20 million USD to Turkey and Italy According to the contract, the payment method agreed and agreed by the two parties is "By collection with documents (D/P)" More specifically, after the enterprise completes the procedures and prepares the set of documents, the enterprise transfers the documents to the exporter's bank in Vietnam Then, the Vietnamese bank conducts express delivery of the documents to the importer's bank After that, when the buyer completes the payment to the bank of the importing country, the buyer will receive the original documents to receive the goods at the port Finally, the importer's bank will transfer the money to the Vietnamese bank

Problems started to arise when businesses sent the first containers of cashew nuts with the set of documents During the process of the Vietnamese bank’s sending the collection documents to the Turkish bank of the importing party according to the instructions, the SWIFT number of the importing party's bank (the unique code of each bank used in interbank transactions) worldwide) had changed, thereby representing inconsistencies in the importer's bank Thereafter, upon receipt of the original set of documents, the alleged importer's Bank informed that the importer was not its customer and returned the set of documents without clearly stating that it was returning the original documents

in which way The Vietnamese bank had repeatedly contacted but did not receive a reply As for the collection of documents sent to Italy, the bank here said that it had received the complete set of documents but only a copy, not the original Therefore, Vietnamese enterprises exporting cashew nuts to these two markets did not know where the original documents were and had to face the risk of losing some containers because anyone holding the original documents could go to the shipping company to receive the goods

After receiving the report and detecting signs of fraud, the Vietnam Cashew Association immediately coordinated with the Embassy, the Vietnam Trade Office, and relevant agencies to negotiate and complain to minimize the risk of damages The options offered include (i) immediate stop of un-delivered containers; (ii) stop shipping and return containers in transit at the port of Singapore, and at the same time request the document delivery unit not to deliver the documents to the importer's bank but return the Vietnamese enterprise; (iii) regain ownership of containers with lost original documents, brought to Vietnam or sold to customers in neighboring countries in need With active support, by June 16, 2022, Vietnamese enterprises had regained control