subject international commercial transactions topic processing of international commodities and relate the case invietnam

Cons...5 Trang 5 LIST OF TABLE Trang 6 LIST OF CHARTSChart: 1 EXPORT...7Chart: 2 IMPORT...8Chart: 3 The ratio of processing fees to the total value of goods after processing...11Chart:

UNIVERSITY OF FINANCE – MARKETING

SUBJECT INTERNATIONAL COMMERCIAL TRANSACTIONS

Topic:

Lecturer: MAI XUAN DAO

Group 1:

PROCESSING OF INTERNATIONAL COMMODITIES AND RELATE THE CASE IN

VIETNAM

7) Phan Anh Tú 2221002776

EVALUATE THE LEVEL OF WORK COMPLETION

work

Some current regulations of Vietnam on international processing

90%

The main form of international processing

Power Point

100%

TABLE OF CONTENTS

EVALUATE THE LEVEL OF WORK COMPLETION i

TABLE OF CONTENTS ii

LIST OF TABLE iv

LIST OF CHART v

ACKNOWLEDGMENT vi

REFERENCES vii

I CONCEPT 1

II SOME CURRENT REGULATIONS OF VIETNAM 1

1 Commercial processing 1

2 Processing contracts 1

3 Goods for processing 1

4 Rights and obligations of processees 2

5 Rights and obligations of processors 2

6 Processing remuneration 3

III CHARACTERISTICS 3

IV THE MAIN FORMS OF INTERNATIONAL COMMODITIES PROCESSING 4

1 In term of title to materials: 4

2 In term of processing remuneration: 4

3 In term of processing relation: 4

V PROS AND CONS OF INTERNATIONAL PROCESSING 4

1 Pros 4

2 Cons 5

VI PROCESSING TRADE IN VIET NAM 5

1 Overview of the Processing Situation in Vietnam 5

2 Overview of receiving goods processing for foreign traders: 6

3 Compare with outsourcing in other countries to clearly see the difference : .12CONCLUSION 16

LIST OF TABLE

Table 1: Struture of export and import of processed goods of enterises in 2016 9Table 2: Processing activities by product group in 2016 10

LIST OF CHARTS

Chart: 1 EXPORT 7

Chart: 2 IMPORT 8

Chart: 3 The ratio of processing fees to the total value of goods after processing 11

Chart: 4 Ratio of value of imported raw materials to value of processed goods 12

First of all, let me send my sincere thanks to the Faculty of Commerce, University ofFinance and Marketing for creating favorable conditions for me in the learning process.First of all, I want to send my deep thanks to Ms Mai Xuan Dao - Lecturer ofInternational Trade Transactions She has worked hard to impart knowledge and guide

me during the exam process The valuable knowledge that you have imparted is avaluable source of material for me to successfully complete this essay

With the useful knowledge of the past subject, we tried our best to apply it But due tolimitations in time and knowledge, it will be difficult to avoid shortcomings We hope toreceive your comments and additions to make our essay more complete

Thank you very much!

1 Banik, A a (2014) Assessing the Barriers to Trade in Services in South Asia Global Business Review

2 Duong, P N (2022) International Commercial Transactions.

3 English for logistics by Oxford (n.d.).

4 Gaonkar, N a (08/09/2022) E-logistics : Trend And Opportunities The Logistics Institute- Asia Pacific,

5 General Statistics Office of Vietnam (2023).

6 Ha, L T (n.d.) English for Export – Import and Logistics.

7 Hạnh, H (2021) Thực trạng phát triển ngành may mặc Trung Quốc sau kế hoạch 5 năm lần thứ 13 Retrieved from https://vinatex.com.vn/thuc-trang-phat-trien-nganh-

may-mac-trung-quoc-sau-ke-hoach-5-nam-lan-thu-13/

8 Lowe, D (n.d.) The Dictionary of Transport and Logistics.

I CONCEPT

Processing trade refers to importing all or part of the raw and auxiliary, parts andcomponents, accessories and packaging materials from abroad in bond, and re-exportingthe finished products after processing or assembly by enterprises within the mainland Like buying and selling goods internationalization, the international nature ofinternational goods processing activities is reflected in the fact that the ordering party isusually enterprises in developed countries In contrast, the receiving party is oftenenterprises in developing countries

Processing enterprise is a manufacturing enterprise with legal status that processesand assembles imported materials and components for business enterprises or factoriesestablished by business enterprises

It includes processing with supplied materials and processing with importedmaterials (Law on Commerce of Vietnam 2005)

II SOME CURRENT REGULATIONS OF VIETNAM

Commercial processing is stipulated in article 128 to article 138 of Law onCommerce of Vietnam 2005

1 Commercial processing

Commercial processing means a commercial activity whereby a processor uses part

or whole of raw materials and materials supplied by the processee to perform one orseveral stages of the production process at the latter's request to receive remuneration

2 Processing contracts

Processing contracts must be made in writing or other forms of equivalent legalvalidity

Group 1 – CLC22DTM04 9

3 Goods for processing

Goods of all types can be processed, except for goods banned from business

In case of processing of goods for foreign traders for overseas consumption, goodsbanned from business and goods banned from export or import may be processed if sopermitted by competent state agencies

4 Rights and obligations of processees

To hand over part or whole of raw materials and materials for processing inaccordance with processing contracts or transfer money for purchase of materials withagreed quantities, quality and at agreed prices

To take back all processed products, leased or lent machinery and equipment, rawmaterials, auxiliary materials, supplies and discarded materials after the liquidation ofprocessing contracts, unless otherwise agreed

To sell, destroy, donate or give as gifts on the spot processed products, leased or lentmachinery and equipment, raw materials, auxiliary materials, redundant supplies, faultyproducts and discarded materials according to agreements and provisions of law

To send their representatives to examine and supervise processing activities atprocessing places, to assign experts to guide production technology and inspect quality ofprocessed products according to agreements in processing contracts

To be responsible for the legality of the intellectual property rights over processedgoods, raw materials, materials, machinery and equipment for processing handed over toprocessors

5 Rights and obligations of processors

To supply a part or whole of raw materials and materials for processing as agreedupon with processees in terms of quantities, quality, technical standards and prices

To receive processing remunerations and other reasonable expenses

Group 1 – CLC22DTM04 10

In case of processing for foreign organizations and individuals, to be entitled toexport on spot processed products; leased or borrowed machinery and equipment, rawmaterials, materials, redundant supplies, faulty products and discarded materials underthe authorization of processees.

In case of processing for foreign organizations and individuals, to be exempt fromimport tax on machinery, equipment, raw materials, auxiliary materials and supplies, thatare temporarily imported for the performance of processing contracts according to theprovisions of tax law

To be responsible for the legality of goods processing activities in cases where goodsbeing processed are those banned from business, export or import

III CHARACTERISTICS

First, in some countries, companies operating in the field of export processing areoften exempt from import tax on raw materials for processing as well as exempt fromexport tax on processed finished products

Second, the processing party and the ordering party both play two roles: exporter andimporter For the ordering party, it is the export of raw materials and import of processedfinished products On the contrary, for the processing party, it is importing raw materialsfor processing and exporting processed finished products

Third, the remuneration provided by processing activities is insignificant and does notcontribute much to bringing in foreign exchange revenue for the country and improving

Group 1 – CLC22DTM04 11

the state of the international balance of payments However, outsourcing plays a vital role

in the economic development policies of developing countries because processing isaccompanied by technology transfer

IV THE MAIN FORMS OF INTERNATIONAL COMMODITIES PROCESSING

1 In term of title to materials:

- Processee hands over part or whole of raw materials and materials, unfinishedproducts for processing and pay processing remunerations

- Processee sell materials and then buys finished products from processor

- Processor supplies main materials and processor supplies auxiliary materials

2 In term of processing remuneration:

- Target price: parties define target price for each product (target cost and targetremunerations)

- Cost plus contract: processee must pay processor real costs and proccessingremuneration

3 In term of processing relation:

- Two - party processing: there are only processor and processee For example,Japan supplies spare parts for Hanel company to manufacture TV

- Multi-party processing: is a type of processing that finished processed products ofthis unit are materials of later unit

For example: Korea supplies fabric for company A, cotton for company B Company

B produces thread from cotton Company A uses thread of company B to make clothes

V PROS AND CONS OF INTERNATIONAL PROCESSING

1 Pros

a) For processor:

Group 1 – CLC22DTM04 12

- Create jobs, increase income for laborer, which will stabilize the social politicalsituation

- Receive new technology and manufacturing methods, and managementexperience of foreign countries

- Have less or no risks in consuming goods but low interest

- Have chances to use domestic materials

b) For processee:

- Prices of finished products are low because of cheap labor

- Unfavorable industries can be moved to foreign countries

2 Cons

a) For processor:

- Low labor price Especially in traditional processing industries such as sewingwearing and tanning This is also a sophisticated form of exploitation by foreigncapitalists Through paying low processing fees, they can optimize their profits

- Technology received is out of date For receiving countries, technology transfer inprocessing is not always positive Without strict legal regulations, there is apossibility that processing countries may have to receive "junk" equipment or oldoutdated technologies from outsourcing partners

b) For processee:

- The product quality will be low, which will make it difficult to consume

- Model and trademark can be stolen

VI PROCESSING TRADE IN VIET NAM

1 Overview of the Processing Situation in Vietnam

To provide a comprehensive picture of processing activities in Vietnam's exports, theGeneral Statistics Office for the first time collected information on processing goods forforeign partners in 2016 as part of the 2017 Economic Census This data focused on

Group 1 – CLC22DTM04 13

processing activities where all input materials were entirely owned by the country placingthe processing order.

Key Findings:

Number of Enterprises Engaged in Processing Activities: In 2016, there were

1,740 enterprises engaged in processing goods for foreign partners Of these, 1,687enterprises processed goods for foreign traders, while 52 Vietnamese enterprises sent rawmaterials abroad for processing

Contribution of Processing to Vietnam's Import-Export Ratio: In 2016, the value

of imported raw materials used in the processing and assembly activities of 1,687enterprises accounted for approximately 12% of Vietnam's total import turnover Theexport turnover of processed products by these enterprises accounted for approximately18% of Vietnam's total export turnover

Economic Benefits: In 2016, the 1,031,017 workers employed by the 1,687

enterprises engaged in processing goods for foreign partners generated USD 8.6 billion inprocessing fees for Vietnam

Overall Assessment:

The results highlight Vietnam's position as a country that primarily processes goodsfor foreign partners, with limited outsourcing to other countries (52 enterprisesgenerating USD 8.2 million)

2 Overview of receiving goods processing for foreign traders:

a) Contribution of goods processing activities to foreign countries in the export and import of goods of Vietnam:

The export turnover of goods after processing to foreign countries accounted for 18% (32.4 billion USD) of the total export turnover of the country (176.6 billion USD)

Group 1 – CLC22DTM04 14

phones and accessories; 27.1

Textiles; 18.8

Computers, electronic products and components; 14.9 Footwear; 10.2

Chart: 1 EXPORT

The import turnover of raw materials from foreign partners of these enterprisesaccounted for 11.5% (20.2 billion USD) of Vietnam's total export turnover

Group 1 – CLC22DTM04 15

Other machinery, equipment, tools and spare parts; 25.6

Microcomputers, electronic products and components; 25.2 Phones and accessories;

9.5 Fabrics of all kinds; 9.5

Petroleum of all kinds; 4.5

Other common metals; 4.3 Products from plastic; 4

IMPORT

Chart: 2 IMPORT

The survey results reflect the main concentration of goods processing activities inFDI enterprises with the value of goods after processing reached 25.6 billion USD,accounting for 78.9% of the total value of goods after processing and importing rawmaterials 16.3 billion USD, accounting for 80.5% of the total value of imported rawmaterials; value of goods after processing of non-state enterprises reached 6.7 billionUSD, accounting for 20.6%; and raw material imports reached 3.8 billion USD,accounting for 19%; value of goods after price Public works of state-owned enterprisesreached a modest value of about 150 million USD, accounting for 0.5% and imports ofraw materials reached 99.6 million USD, accounting for 0,5%

Group 1 – CLC22DTM04 16

Total value of imported raw materials for processing to foreign countries

Total value of goods after processing

Table 1: Struture of export and import of processed goods of enterises in 2016

Thus, the outsourcing activities of Vietnamese enterprises are still mainly still is hiredfor foreign partners because most of the input materials are due to foreign partners.provided by foreign actors, Vietnamese enterprises only enjoy the fee (money work) frommachining and assembly (PPT)

b) Revenues from processing textiles and footwear accounted for the weight in the operation Dynamic processing and assembly of goods for foreign traders:

Processing textile and garment group ranked first with foreign currency earned 4.1billion VND USD, accounting for 48% of total machining fees; followed by footwearwhich earned $ 2.7 billion, accounting for 32% of the total processing fee; Computerelectronics assembly grossed $ 63 million, accounting for 0.7%; Phone assemblycollected $ 268 million, accounting for 3.1%; Goods processing Other chemicalscollected 1.4 billion USD, accounting for 16.2%

Group 1 – CLC22DTM04 17