REPORT OF IMPORT BUSINESS PROCESS ANALYSIS case cars importation

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESSREPORT OF IMPORT BUSINESS PROCESS ANALYSIS Case of Vietnam’s cars importation Hanoi, September 17, 2021 download by

FOREIGN TRADE UNIVERSITY SCHOOL OF ECONOMICS AND INTERNATIONAL BUSINESS

REPORT OF IMPORT BUSINESS PROCESS ANALYSIS

Case of Vietnam’s cars importation

Hanoi, September 17, 2021

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TABLE OF CONTENTS

INTRODUCTION 3

1 Overview of import of cars and main mode of international transaction in Vietnam 4

2 Sales contract of importing cars 6

3 Car importing process and core activities 9

3.1 Car importing process 9

3.2 Core activities and stakeholders involving importing cars 11

4 Analysing and some recommendations for import process 15

4.1 Advice for car importing companies 15

4.2 Proposed innovation of payment term 16

5 Impact of COVID 19 on the export/ import performance of Vietnamese businesses 17

CONCLUSION 18

REFERENCES 19

TABLE OF FIGURES Figure 1 Top 10 countries exporting cars to Vietnam (March 3, 2021) 4

Figure 2 Preliminary information about CBU cars of all kinds registered with the Customs in June 2021 5

Figure 3 Car importing process 9

For many countries in the world, the automative industry is one of the importanteconomic sectors with a long history of development The automotive industry isconsidered as one of the leading industries, which has a big impact on thedevelopment of other industries Therefore, the strong growth of the automotiveindustry is said to be a positive factor in enhancing the process of industrializationand modernization of the country Meeting the demand for using modern productswith good quality and safety assurance, cars will be the priority means of transport,and at the same time used as a direct resource for the circulation of goods andpromoting trade

In Vietnam, the development of the automotive industry as well as the car business is still a new and nascent field This activity only started to take shape when our Party carried out renovation and transformation from a centralized, bureaucratic and subsidized economy to

a market economy, especially since the Foreign Direct Investment Law took effect Vietnam

is a country with over 96 million people, a developing economy, so the demand for cars is increasing enough for many car enterprises to invest in large-scale production However, the domestic market capacity has not been developed compared to its potential, because the Vietnamese car industry has not yet met the market conditions as well as other factors

to develop like other countries As a result, Vietnam tends to import CBU cars from abroad

to meet domestic demand Although up to now, part of the demand has been met by domestic production, the number of imported cars has increased continuously with many models, designs, from plenty of different brands all around the world.

In order to import cars from abroad, businesses must establish sales contracts.Contracts have become increasingly detailed these days, and every effort is made

to make all possibilities and eventualities clear, especially in sale contracts

Therefore, in this report, we will provide a specific view of the current situation ofthe car import industry, a detailed sales contract, an analysis of the export/importprocess based on BPA methodology, and the impact of the Covid 19 pandemic onthe export/import performance of Vietnamese businesses

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1 Overview of import of cars and main modes of international transaction in Vietnam

In 2019, Cars were the world's 2nd most traded product, with a total trade of

$777B Between 2018 and 2019 the exports of Cars decreased by -0.82%, from

$784B to $777B Trade in Cars represents 4.29% of total world trade Vietnamranks 41st of Cars Importing Countries in 2019 - 2020

According to the Trade Competitiveness Map, Vietnam import value of vehiclesother than railway, tramway (HS Code: 87) is 6,440,933, accountings for 3.22% ofworld total imports

More than 1.1 billion USD was spent on importing 49,360 completely built-up (CBU)vehicles in the four months of 2021 in Vietnam, a surge of 55.2 percent in volumeand 57.2 percent in value over the same period last year, the General StatisticsOffice (GSO) has reported

Cars are registered for customs procedures imported into Vietnam mainlyoriginating from many countries with a diversity of types Vietnam auto market inthe first 3 months of 2021, according to data of the General Department ofCustoms, shows a stable increase, which is indicated in the following figure:

Figure 1 Top 10 countries exporting cars to Vietnam (March 3, 2021)

In June 2021, CBU cars of all kinds registered for customs procedures imported into Vietnam mainly originate from 3 main markets, namely from Thailand with 7,264 units;

from Indonesia with 4,729 pieces and from China with 2,077 pieces This tableillustrates preliminary data on CBU cars of all categories that were registered withCustoms in June 2021:

Figure 2 Preliminary information about CBU cars of all kinds registered with the Customs in June 2021

With a preferential import tax of 0% under the ASEAN Trade in Goods Agreement(ATIGA), cars from Indonesia and Thailand have led the way in volume exported toVietnam since 2018 and maintained until now In the first quarter of 2021, carsexported from these two countries accounted for about 80% of the market share Inwhich, cars from Thailand increased by 56%, Indonesian cars decreased by 26%over the same period in 2020

For imported cars, companies such as Toyota, Mitsubishi, Honda, Ford, Suzuki,and Mazda mainly import from the two markets above to sell in Vietnam Someimported cars are selling well such as Mitsubishi Xpander from Indonesia, ToyotaCorolla Cross, Ford Rander from Thailand

The main mode of transaction of car in Vietnam is direct import which means Vietnam firms usually take care of importing activities and are in direct contracts with the

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exporters in the foreign target markets, Vietnamese buyers often directly buy cars

to an international market, either through intermediaries – such as salesrepresentatives, distributors, or foreign retailers

2 Sales contract of importing cars

SALE CONTRACT

No.9064/HDVN-LHCN

Date: 11/09/2021

Between Northern Car Import Export And Trading Joint Stock Company

Address: 10 Alley 8 Dinh Nguyen Temple Street, Tho An Commune,

Dan Phuong District, Hanoi, Vietnam

Tel: 0108 268 041

Represented by Mr Dang Van Dinh

Hereinafter called The Buyer

And: Ford Thailand Manufacturing (FTM)

Address: 500/103 Moo 3 Tambol Tasit, Amphur Pluakdaeng,

Hemaraj Eastern Seaboard Industrial Estate, Rayong 21140, Thailand

Tel: +66 38950510

Fax: +66 38950510

Represented by Mr Kel Kearns - President

Hereinafter called The Seller

It has been mutually agreed to the sale and purchase of rice on the terms

and conditions as follows:

1 Commodity: Ranger Wildtrak 2.0L AT 4X4

2 Specification:

- Color: Chilli Orange

- Number of seats: 5 seats

- Overall dimensions DxRxC (mm): 5362 x 1860 x 1830 mm

- Wheelbase: 3220 mm

- Engine: Bi Turbo Diesel 2.0 i4 TDCi

- Diesel: fuel type

- Maximum power: 160 – 213 Hp

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- Total amount: USD 200000

- In word: Two hundred thousand US dollar

5 Packing: as per manufacturer standard packing, and safety for long-sea

transportation

6 Shipment and Delivery:

- Time of shipment: 15 - 20 days after L/C opening date

- Port of Loading: Laem Chabang Port, Bangkok, Thailand

- Port of Discharge: Haiphong Port, Haiphong City, Vietnam

7 Retention of Title: The goods shall remain the property of the Seller until the complete payment of the price.

8 Inspection:

- The Seller shall make a free prior- delivery inspection

- During the period until Ford Ranger is shipped, the vehicle will fully meet thecompany's stringent quality standards under the supervision of FTM and VehicleEvaluation Center (VEC) in Thailand

9 Payment:

By Confirmed Irrevocable Letter of Credit at sight

Buyer shall open an irrevocable letter of credit at sight L/C, to be opened

through Bangkok Commercial Bank, in favor of Vietcombank Hanoi, 15 days

before the shipment, valid for 30 days, in favor of the seller for the total value

of the good to be shipped

- Partial shipment: Not Allowed

- Transhipment: Not Allowed

- Detailed Packing list: 03 originals

- Certificate of Quality and Quantity issued by The Seller : 03 originals

- Certificate of Origin issued by Thailand Chamber of Commerce: 1 original and

12 Penalties conditions

12.1 Shipment and Delivery in clause 6.0 is approximate and has only +/- oneweek tolerance In case of any delay of this tolerance period, the Seller accepts topay penalty of daily 0.5% of the total value of concerned shipment

12.2 In case of any delay of shipment not reasoned by Force Majeure, the Buyerwill charge the cost of his production lost to the Seller

12.3 In case the quality of the product does not match with the clause 2.0, it will

be returned back to the Seller after agreement of both parties and all expensesincurred after the approval date of the contract and cost of product will be charged

to the Seller, before return back the product to the Seller, the Seller should pay allexpenses and cost of goods to Buyer If the quality problem continues, the Buyercan cancel this contract

12.4 The price abatement for retained non-conforming goods shall not exceed: 10% of the price of such goods Any action for non-conformity of the must be taken by the Buyer not later than 10 days from the date of arrival of the goods at destination

13 Applicable Law: Any questions not covered by CISG will be governed by the law

of the Socialist Republic of Vietnam

14 Resolution of Disputes: ICC Arbitration is applied

15 Others

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Any amendment of the terms and conditions of this contract must be agreed

by both sides in writing

All commercial terms used for this contract will be interpreted according to

the publication “Trade Terms” (Author: Michael B Smith & Merrit R

Blakeslee – National Politics Publishing House – 2001)

This sales contract is done in Vietnam on 11 September 2021 in 04 (four)

English originals, 02 (two) for each side

Made in Hanoi Capital, on 11 September 2021

3 Car importing process and core activities

3.1 Car importing process

Figure 3 Car importing process

Northern Car Import Export And Trading Joint Stock Company and Ford Thailand Manufacturing have already agreed the delivery term is CIF Haiphong Port, Incoterms

2020, so the delivering of cars to the specific port of departure, bearing settlement

charges for carriage and insurance till the designated port is the responsibility of the

exporter - Ford Thailand Manufacturing

So Northern Car Import Export And Trading Joint Stock Company signs the contract with a

Forwarder to help them prepare and submit important documents to customs authotities,

arrange the release of goods, optimize the warehouse receiving process Outsourcing

these activities takes up more costs, but a Forwarder is more professional and

knowledgeable about importing procedures , so they can do these activities easier and less

time-consuming than Northern Car Import Export And Trading Joint Stock Company has to

do these activities themselves.

2.1 Obtain import permission 3.1 Inspection

Northern Car Ministry of Industry Importer Goods shipped

Importer license

2.2 Handling Payment Process 3.2 Claim and dispute resolution

Application for opening L/C Make a claim

2.4 Custom Clearance

Customs declaration and documents

Forwarder Sub-Department of

Customs Physical Inspection

Tax, fees and charges

Customs Decision on customs clearance

2.5 Taking delivery of import

Goods Haiphong Port orthern Car’s Warehouse

3.2 Core activities and stakeholders involving importing cars

1 Buy - Exporter - Importer has a - Importer sends Offer Importer and

- Importer list of cars according to Purchase exporter have

potential sellers Order concluded

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2.1. - Ministry of Northern Car Northern Car Joint Stock The Import

Car Import Manufacturing maintenance of importedExport And have already cars to the Ministry ofTrading Joint concluded a Industry and Trade

Stock trade contractCompany and termsand Ford

ThailandManufacturing

2.2. Northern Car Northern Car Vietcombank opens LC L/C issued by

Stock documents:

Company Financialand issuing documents andbank application forVietcombank opening L/C

2.3 Get - The The company - The Forwarder goes to - The

the importer receives Arrival the shipping line to Forwarder

Delivery - Forwarder Notice from the receive the Delivery Order goes to the

- It includes: Referral, DeliveryArrival notice, Copy of Bill Order from

of Lading with the owner ofendorsement and stamp the ship with

or Original Bill of Lading - thewith endorsement and documents

stamp of the bank, IDCard

2.4 Customs Declarance

and Department necessary declaration software and request of

on the container andmakes notes

- Import customs dossierincluding:

+ Customs declarationand customs valuedeclaration

+ Commercial invoice+ Transport documents+ Contracts for sales ofgoods

+ Import license (if any)+ Certificate of Quality -CQ

+ Certificate of Origin (C /O)

+ Other documents

Bringing Forwarder has submitted all Customs uses the CKO declaration is

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goods and - Sub- the necessary operation to inform the sent to the

transport of Customs received enquiry the location, form and

actual goods

- IDA01 is used to textrequirements procedures,modify the content of thedeclaration, tax

assessment and send tothe customs declaration

taxes and Forwarder and inspection taxes, fees and charges issue a

fulfill other - The Sub- steps are done immediately and the decision on

about the payment of goods.taxes and fees

2.5. - Port of The financial Forwarder arranges The cars are

discharge vehicles

the import

3 After shipment

3.1. - Forwarder The cars are Importer check the quality The

Inspection - Importer taken to of the cars received from inspection of

Northen’s forwarder whether they importer is

warehouse by keep the maintenance or finished to

make a claim

or not

3.2 Claim Importer The goods do + Exporter: If the exporter The importer

and Exporter not conform with fails to perform the makes a

the importer could rely onthe contract to make aclaim

+ Carrier: If the goods aredeficient in quantity

compared to the B/L orthere is a loss occurringduring transportation, thecarrier is not exempt fromliability

+ Underwriters: When thegoods are damaged due

to the insured perils, it isnecessary to rely on theinsurance certificate tomake a claim

4 Analysing and some recommendations for import process

4.1 Advice for car importing companies

Those companies who are engaged in importing goods into Vietnam should be wise and

efficient to save the time and cost involved in trade by identifying the business processes

that can be performed simultaneously For example, the business

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