TABLES AND FIGURESImage 1 Bamboo Bob Logo...Image 2 Description of goods...Image 3 Shipping Rates from Da Nang to Ho Chi Minh City...Image 4 Container 40HC...Image 5 Export tax rate...Im
INTRODUCTION
Rationale and Purpose
The rationale lies in the need to propose and analyze international freight transportation routes that integrate multiple modes of transport The primary objective is to scrutinize the costs and advantages/disadvantages associated with various transportation methods Through this analysis, the study aims to identify the most optimal transport method that not only ensures cost efficiency but also guarantees the safe and effective shipment of coffee products.
Optimizing shipping routes is crucial for businesses due to the importance of international trade and supply chain complexities By studying the export operations of Bamboo Bob Cafe from Vietnam to India, valuable insights can be gained about international cargo transportation This case study delves into the specifics of this coffee export scenario to provide practical examples and lessons that can be applied to a broader context.
Additionally, the purpose of this report extends beyond the individual case study.
This article aims to provide practical solutions and recommendations to optimize cargo transportation processes for businesses and government entities within the supply chain By addressing inefficiencies, reducing costs, and prioritizing safety, the objective is to enhance the overall movement of goods, with a particular focus on the export of coffee from Vietnam to India This endeavor seeks to contribute to a more efficient, cost-effective, and secure transportation system, ultimately benefiting all stakeholders involved in the global supply chain.
Corporate information
Bamboo Bob specializes in supplying and exporting coffee to international markets. Coffee beans are carefully cultivated and harvested from farms, handpicked by Bamboo Bob to deliver the finest products to customers both domestically and internationally
Currently, Bamboo Bob Coffee has expanded its presence to countries such as the United States, Canada , receiving positive feedback from tourists and coffee enthusiasts worldwide
2 Ground coffee 50x28x24 80% Arabica - 20% Robusta 24 packs
3 Ground coffee 50x28x24 65% Arabica - 35% Robusta 24 packs
The shipment is transported using a combination of two shipping methods from Danang to Indachennai Port, India.
- Exporter: BAMBOO BOB COMPANY LIMITED
Address: 8 Hung Hoa 7, Hoa Cuong Nam Ward, Hai Chau District, Da Nang City, Vietnam
Address: 3-3-76/31, Chaitanya Vilas Colony Hyderguda, Hyderabad
Address: ONEOPERA DANANG Hotel, 8/F Unit 812 115 Nguyen Van Linh St., Hai Chau Dis.
9th floor, room H, Danang Software park, 2 Quang Trung st., Hai Chau dist., Danang city, S.R Vietnam
Bill of Lading type: House Bill of Lading
T&M Forwarding Ltd is authorized by the carrier issued the Bill of lading to shipper(BAMBOO BOB COMPANY LIMITED)
Cost of exporting coffee bags to India
The average exchange rate in November 2021 is: 1 USD = 22.694 VND.
4.1 Road Freight Charges from Da Nang to Cat Lai, Ho Chi Minh City 4.1.1 Charges
The company's coffee shipment is compact and lightweight (with a weight of less than 200 kg per cubic meter), so the company opts for shared transportation services Therefore, for a shipment with a total weight of 559kg – 1,90 cubic meters, the transportation cost from Da Nang to Ho Chi Minh City by road is calculated as follows: 1,90 cubic meters x 450,000 VND = 855,000 VND(excluding VAT) The specific details are provided in the price table below:
Image 3 Shipping Rates from Da Nang to Ho Chi Minh City
In November 2021, the company will be subject to a VAT rate of 7% for the transportation services as specified in Resolution 406/NQ-UBTVQH15 issued by the Government of Vietnam.
After applying the 7% VAT, the cost that the company needs to pay for the transportation fee is 855.000 VND x 107% = 914.850 VND.
The coffee shipment falls under the standard cargo category, weighing less than one ton at 559 kg As per the labor leasing price list from Truong Phat, the company is required to pay a total of 300,000 VND (150,000 VND for both loading and unloading) for these services.
Image 4 Loading and unloading fee
4.2 Sea freight charges from Cat Lai Port to India Chennai Port (EX MADRAS), INDIA.
BAMBOO BOB COMPANY LIMITED use LCL shipping to transport a smaller quantity of coffee to India via sea, This shipping method allows the company to optimize space in the container, which is economically and environmentally advantageous.
In term of LCL cargos
⇒ 1 ton = (1000 x 1,9)/559 = 3,4 CBM (> 3 CBM ) the weight of 1 ton of goods takes up a lot of space so it will be calculated according to the volume corresponding to the CBM price list.
● Export tax = 0% based on Article 9 of Circular No 219/2013/TT-BTC dated December 31, 2013 of the Ministry of Finance guiding on value added tax regulating the tax rate of 0%
Source: Thư viện pháp luật
=> Sea Freight = Volume x Unit price = 1,9 x 85 = 161,50 USD = 3.665.081 VND
4.2.2 Surcharges a Terminal Handling Charge (THC)
THC (Terminal Handling Charge) is a charge imposed on ocean cargo for operating containers In the case of container cargo, it is levied on each container, and in the case of LCL (Less Than Container Load), it is imposed based on CBM (Cubic Meter) THC covers the costs of various terminal services, such as the use of cranes and other equipment to move containers, the cost of labor to load and unload containers, and the maintenance and upkeep of terminal facilities The amount of THC charged can vary depending on factors such as the size and weight of the container, the location of the terminal, and the type of cargo being transported.
Container type 40HC (High Cube), when referenced against the price list provided by the Wanhai shipping company, the Terminal Handling Charge(THC) that the company must pay is 4.120.000 VND This charge covers the handling activities for the specified type of container at the port.
Image 8 Terminal Handling Charge b Container Freight Station (CFS)
According to the defined cost structure, it is a type of import-export fee when goods enter or leave the warehouse After the CFS performs tasks such as lifting or lowering goods and moving them with forklifts to the port, the next step involves loading the goods into the container.
When referenced against the price list of Cát Lái Port, the company will incur CFS charges, including cargo handling service fees and warehouse storage service fees, amounting to 196.350 VND It's worth noting that there is no storage fee for a duration of less than 5 days
Image 10 Storage fee c Bill of lading
The Bill of Lading is a crucial document in international shipping, serving as a receipt for the goods and a document of title.
The Bill of Lading (B/L) will be provided by the Wanhai shipping company to the company, and the cost for issuing the Bill of Lading is 900.000 VND
Image 11 Bill of lading fee d Rate Restoration Container (RR)
Rate Restoration Container refers to a container return fee This fee emerged during the COVID-19 pandemic, particularly when goods were transported from Asia to Europe, but the containers couldn't be returned promptly due to disruptions in global logistics This situation led to a shortage of containers in Asian countries The RR fee is implemented to address the challenges and costs associated with the return of containers during these extraordinary circumstances. According to Wan Hai Lines Ltd, the Rate Restoration for containers loaded from Cat Lai port to Intra-Asia ports is 1.361.640 VND (60 USD) for 40’ containers carrying dry cargo. e LSS - Low Sulphur Surcharge
This is understood as a surcharge for reducing sulfur emissions, and it is applied in both maritime and air transportation for the carriage of imported and exported goods.
According to Wan Hai Lines Ltd, the Low Sulphur Surcharge (LSS) for exports to India is applied at the rate of 3.699.122 VND (163 USD).
Image 12 Low Sulphur Surcharge (LSS) for exports to India f Handling
The handling charge is an important fee in the field of logistics established by shipping lines or forwarders to collect shipper or consignee fee to offset the cost of taking care of your shipment
Image 13 The handling charge g Customs
Customs clearance costs are the amount of money import-export businesses must pay for preparing documents, import-export transportation fees or other small costs incurred during the process procedure.
• Declaration registration fee: 20.000 VND/declaration (According to Circular
No 14/2021/TT-BTC dated December 18, 2021 of the Minister of Finance).
Image 14 Schedule of customs fees and charges on goods and vehicles in transit h Pallet
According to the quotation, the company only needs to use 1 pallet, and the fee for 1 pallet is 453.880 VND (20 USD).
Not all items require fumigation certification, but only certain items as regulated by various countries For example, some types of items include:
- Organic commodities such as rice, tea, coffee, pepper, cashews, etc.
- Handicrafts made from wood, furniture, decorative items made from rattan, bamboo, palm leaf, etc., without surface treatment If these items are not fumigated, they may be susceptible to infestation, mold, or pests during transportation.
Since the company's exported goods are coffee, it is mandatory to have fumigation certification.
Fumigation cost: 300.000-500.000 VND/pallet The goods include 1 pallet only so the fumigation fee is 453.880 VND (20 USD) according to the quotation of the forwarding company. j Insurance
Bamboo Bob Company Limited exports coffee using CIF (Cost, Insurance, and Freight) terms, and the insurance fee is determined by the subsequent formula:
According to Commercial invoice, the CIF price is equal to:
Under the CIF (Cost, Insurance, and Freight) incoterm, buyers are obligated to maintain a minimum level of insurance coverage as stipulated in Clause (C) of the Institute Cargo Clauses This insurance coverage must amount to at least 110% of the goods' value as outlined in the sales contract This provision ensures that the goods are adequately protected against risks and potential losses during the transit process.
According to CIF terms, insurance will be purchased under the "C" condition, and the insurance premium rate for containerized cargo is 0.05%.
I = 110% x 3.591,36 x 0,05% = 1,975248 USD = 44.826,28 k Verified gross mass - VGM
Verified Gross Mass is a confirmation document for the total weight of an international shipping container According to SOLAS regulations, the shipper must provide the VGM before the cargo can be loaded onto the vessel This is to ensure that the shipping line is aware of the container's weight, enabling them to control the load and carry out loading and unloading operations effectively The following are the container weighing rates at Cat Lai Port, inclusive of VGM issuance.
Image 18 The rates for container weighing and the issuance of the bill of lading at Cat Lai Port
Therefore, the company transported the cargo container to Cat Lai Port using SNP's reach-stacker Consequently, the cost of weighing and issuing VGM at Cat Lai Port for a 40’ dry container that the company has to bear is 305.000 VND. l Seal fee
The Seal Fee is the charge for using a container seal, which is used to seal the container before exporting goods abroad to ensure the quantity and quality of the cargo inside the container The fee for each seal is 250.000 VND (according to the price list of Wan HaiShipping Line).
Image 19 Seal fee m Lift on - Lift off tariff
The container lifting fee is determined by the ports, not the shipping lines, and this fee is collected by the port from the shipper during customs procedures Therefore, Bamboo Bob Limited Liability Company will be responsible for paying this fee to Cat Lai Port The following is the price list for container lifting at Cat Lai Port:
Image 20 Lift on - Lift off tariff
The company's shipment is packed in a 40' container Therefore, the container lifting fee that the company is required to pay at the port is 250.000 VND. n Demurrage - Detention
- Demurrage: Container storage fee at the port yard.
- Detention: Container storage fee at the customer's private warehouse.
Two shipping routes from Da Nang to Chennai
Road (Vietnam) - Sea freight (India):
Total Road freight = Road transportation Charges + Loading fee + Unloading Fee
STT Types of cost Cost (VND)
14 Lift on - Lift off tariff 250.000
The total cost = Total Road freight + Total Sea freight
Rail (Vietnam) - Sea freight (India):
Rail freight = Transportation cost + Surcharge
The total cost = Rail freight + Sea freight
After analyzing the transportation cost of the two options, it can be seen that the cost of the first route (771,21 USD) is more optimal compared to the second one(1284,88 USD).
Comparing Road and Rail Transportation
Cost The transportation costs for road transportation are generally low.
However, the costs can be higher for transporting bulky or oversized cargo.
Rail transportation typically has lower transportation costs compared to other modes of transportation
It offers cost savings, especially when transporting bulk cargo or large shipments that are not bulky or oversized.
Suitable for Door - to - Door delivery
Rail transportation is not suitable for direct delivery as rail routes are fixed and shipments can only be delivered to railway stations or terminals If direct delivery is required, it would need to be combined with other modes of transportation.
Distance Relatively short distance Rail transportation can be used for both long-distance and short-distance shipments However, due to its ability to carry large volumes and quantities of goods, it is more economically beneficial for long-distance transportation.
The road system is diverse and is increasingly expanding and developing
Fixed railway system, vehicles run on pre- installed tracks.
Because construction costs are quite high and it only serves a single vehicle, this type of transportation is rarely developed and expanded.
Delivery speed is fast because of the flexibility in time and schedule during the transportation process
Delivery speed is quite fast but it is difficult to be flexible in terms of time and schedule during the shipping process
Safety Safety for goods is ensured when using this mode of transportation because there is no need for frequent handling and multiple transfers between different vehicles.
The safety of goods during rail transport is diminished due to the frequent handling and multiple transfers, especially when switching to road transport This increased handling significantly elevates the risk of damage or breakage to the cargo, making it a less secure mode of transportation compared to alternatives that minimize handling and transfer points.
Flexibility Rail transportation offers a high degree of flexibility because during the transportation process, goods are not bound by fixed schedules and time constraints.
Delivery times and locations can be negotiated between the buyer and seller Additionally, there is the ability to choose the mode of transportation, the specific route, and the quantity of goods to be transported according to the specific requirements.
The flexibility in the transportation of goods is not high in rail transportation because this mode of transport operates on existing rail networks with fixed routes and schedules The options for choosing different routes or schedules are limited compared to other modes of transportation.
Rail transportation is dependent on weather conditions, although not as much as other modes of transportation However, adverse weather conditions can still impact rail operations, such as during natural disasters like storms, hurricanes, or floods.
Less affected by weather conditions, climate, traffic jams, and road damage
Table 2 Comparing the Advantages and Disadvantages of Transportation
Reason to choose road freight
Road transportation between Da Nang and Cat Lai Port is cost-effective for short-medium distances Trucks provide flexibility and can be customized to meet specific requirements The direct route minimizes manual handling and preserves cargo quality Road transport offers convenience, flexibility, and adaptability to terrain, reducing costs and simplifying procedures Compared to other modes, road transportation is advantageous due to its efficiency, speed, and affordability.
Reason to choose sea freight
For the transportation of goods on long-distance routes, such as from Cát LáiPort, Vietnam, to Chennai Port, India, especially for commodities like coffee — extended shelf life, and no urgent need for rapid transportation—opting for sea freight proves to be a more favorable choice compared to air freight Airfreight is impractical for heavy cargo, and it involves significantly higher transportation costs Maritime transportation, with its capability to handle substantial cargo loads and offer cost-effective freight charges, is particularly well-suited for transporting agricultural products like coffee Chennai Port is one of the key ports in India, located in the state of Tamil Nadu on the southeastern coast It boasts modern facilities and advanced infrastructure for efficient cargo handling.Chennai Port holds a strategic position with robust connectivity to both road and rail networks, facilitating the smooth distribution of goods to inland areas.
Choosing Chennai Port as the destination provides favorable conditions for the consumption of goods, such as coffee, in potential nearby regions Currently,various shipping lines operate sea transportation routes from Cat Lai Port,Vietnam, to Chennai Port Some noteworthy examples include CMA (APL),ONE, Evergreen, Hapag-Lloyd, and Maersk Line.
RECOMMENDATIONS
Proposal base
Vietnam currently does not have any multimodal transport corridors It is necessary to promptly identify a more efficient model for freight transshipment,such as between road and seaports/airports, between road and railways, between barges and trucks, etc.
Solutions
Research on policies to encourage Multimodal Transport Operators (MTOs), amending licensing procedures, customs regulations, etc., with preferential terms to incentivize shippers and transporters to adopt this method
Reevaluate current domestic multimodal transport regulations to align them with the actual conditions in our country
Enhance transparency in vehicle load regulations to help transport businesses and shippers implement these practices more effectively.
- For businesses and cargo owners
There is a need for trust and support for domestic transporters and logistics service providers in the adoption of multimodal transportation Companies operating in the transportation sector should strengthen alliances, partnerships, and diversify services to enhance competitive capabilities in meeting the increasing demands of manufacturers and consumers.
The post-service and multimodal transport services need to develop under a market mechanism Rapid changes in market conditions require service providers to have quick and timely responses Private enterprises tend to provide these types of services more effectively than public entities Therefore, the government needs to create an environment to attract the participation of private providers.
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