The needs and characteristics of consumption of uk market for coffee beans the united kingdom – vietnam free trade agreement and main opportunities for vietnam’s exporters

Untitled GROUP ASSIGNMENT Class IB1605 Lecturer Cung Thị Ánh Ngọc Course IEI301 Group 2 member 1 Nguyễn Lê Trang Linh 2 Phạm Quỳnh Anh 3 Nguyễn Phương Anh 4 Nguyễn Đăng Anh Dũng 5 Nguyễn Diệu Linh FPT[.]

GROUP ASSIGNMENT

Class: IB1605

Lecturer: Cung Thị Ánh Ngọc

Course: IEI301

Group 2: member

1 Nguyễn Lê Trang Linh

2 Phạm Quỳnh Anh

3 Nguyễn Phương Anh

4 Nguyễn Đăng Anh Dũng

5 Nguyễn Diệu Linh

FPT University Fall 2022

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Table of contents 2

II Payment method is used in this contract 4

1 The risk of the company when using this payment method 4

2 Some solutions to limit such risk 4

III The analysis report on the United Kingdom market 5

1 The needs and characteristics of consumption of UK market for

2 The United Kingdom – Vietnam Free Trade agreement and main opportunities for Vietnam’s exporters 6

3 EU’s specific requirements/regulations should Vietnamese

exporters pay attention to when exporting to this market 8

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I Incoterm rules in this contract

Incoterms rules used in contracts are CFR

1 The duties of ABC Company and XYZ Company under this Incoterms rule

● The duties that Company ABC

The seller pays for goods and freight before shipping on board.The

exporter will have to sign the contract and pay the necessary costs and freight to bring the goods to Hai Phong port in accordance with the regulations and avoid the risks, damage and loss of goods during the transit, and deliver the goods to the ship The buyer is obliged to deliver the goods in accordance with the

specified contract Must prepare all required invoices when buying and selling such as commercial invoices, export permits, sea transport documents Commit

to deliver the goods on board and pay all loading costs Carry out import and export customs clearance procedures according to the correct process to ensure on-time delivery Inform the delivery process including the time to prepare the goods, taxes, the time of arrival at the port, the appropriate receiving process for the buyer Provide full invoices, shipping documents related to sea such as conditions loaded on board, freight Be responsible for risks and losses during the delivery of goods on ships, loading and unloading

● The duties of Company XYZ

The buyer is obliged to accept the delivery upon receipt of the invoice and transport document Receive goods at the right port of loading specified in the contract Pay the costs of unloading, loading and unloading are not included

in the freight to be paid by the exporter Sign a safety insurance contract to ensure the interests of both parties Company XYZ has to bear the risks and losses when the goods have been delivered to the port vessel at the specified port of loading and cleared for import Taxes incurred in the process of

importing goods Must follow all necessary procedures for transit if any in the 3rd country and prepare all the required documents when importing and

transiting the goods in the 3rd country during transportation The point of transferring risk: Goods and freight are paid by ABC company and delivered on board

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● The point of transferring risk

The risk of loss or damage to the goods transfers when they are delivered

on board the vessel The seller must contract and pay the costs and freight necessary to bring the goods to the port With this condition, company ABC has

no obligation to company XYZ about signing an insurance contract, so if

necessary, company XYZ should buy insurance for the goods themselves to avoid risks This term has two important ports: the port of departure (Hai Phong port) where the goods are delivered on board the carrier and the port of

destination (Southampton port) The risk passes from the seller to the buyer when the seller delivers the goods to the buyer by placing the goods on board the carrier at the port of departure (Hai Phong port) However, the seller will be responsible for concluding a contract of carriage to bring the goods from the port of departure (Hai Phong port) to the port of destination (Southampton port)

II Payment method is used in this contract

The method of payment being used is a Documentary Collection

(Documents against Acceptance) The documents required to take possession of the goods are released by the clearing bank only after the buyer accepts a time draft

1 The risk of the company when using this payment method

There are a few risks associated with this type of payment If the buyer does not accept the goods or delays the acceptance then payment can either be delayed or by rejecting the goods the buyer can escape from the transaction As coffee is a perishable item, the loss against a rejection from the buyer will be dealt by the supplier The seller in this case does not receive a bank guarantee for payments which means that if the buyer was to decide to reject the trade, the seller will have to pay for the shipping to ship the product back to himself Even

if the buyer does agree to pay and takes the goods he may not pay up on the due date As there is no bank guarantee the buyer can make an escape

2 Some solutions to limit such risk

To avoid such mishaps during trades, the seller can use a Letter of Credit as it guarantees payment from the buyer to the seller The bank issues a guarantee against payment for the goods received Although a Letter of Credit is more expensive than a DA, it is still the safer route and guarantees payments In

case the buyer rejects the payments, finding another buyer in the same region could be a way out However, it can be a difficult route at times, especially for perishable items so the seller can re-negotiate terms with the buyer in order to convince the buyer for payment The seller can also include a clause in the sales contract that requires the buyer to pay for shipping if the products have to be returned To avoid buyers escaping payment, sellers can ask the buyers to inspect the goods at the loading port and pay upon arrival before transferring ownership If other options seem too costly for the seller then the best thing to

do would be to dispose of the goods before a bigger loss is made

III The analysis report on the United Kingdom market

1 The needs and characteristics of consumption of UK market for coffee beans

Coffee is the most popular beverage worldwide with more than

400 billion cups consumed each year The UK is the 5th largest coffee consuming market in Europe On average in the UK, they drink about 2 cups

of coffee a day, the total value of coffee consumed in the UK annually is about

£ 3.9 billion About 80% of UK households use coffee at home with an estimated demand of more than 38,000 tonnes, accounting for 41% of the entire UK coffee market 57% of coffee is drunk at breakfast, 34% between meals and 13% at other meals Sales of the top 10 beans in the UK in 2020 reached £328 million, accounting for 73.5% of total sales in this coffee segment

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The UK coffee market is increasingly important for coffee drinking

in the workplace, and so coffee shop owners try to locate their shops near business offices There is a difference in different age groups People 20 and younger drank an average of just half a cup of coffee a day, while 20- to 37-year-olds drank 1.3 cups, and 38 to 52-37-year-olds consumed 2.1 cups of coffee More coffee consumption not only means higher revenue but also more jobs

2 The United Kingdom – Vietnam Free Trade agreement and main opportunities for Vietnam’s exporters

a UKVFTA

FTA is an acronym for the phrase Free Trade Area, also known as Free Trade Agreement So UKVFTA is the Vietnam - UK Free Trade Agreement that officially completed negotiations on December 11, 2020 and signed on the evening of December 29, 2020

The Agreement is negotiated on the principle of inheriting the commitments

6 already in the Free Trade Agreement between Vietnam and the European

Union (EVFTA) with necessary adjustments to ensure conformity with the trade framework bilateral relationship between Vietnam and the UK

The Agreement takes effect temporarily from 23 pm on December

31, 2020 (i.e 6:00 am on January 1, 2021 in Vietnam time), and officially takes effect from May 1, 2021

b The opportunity this agreement brings to Vietnamese exporters

- 85.6% of tariff lines will be eliminated on January 1, 2021

- 99.2% of tariff lines will be eliminated on January 1, 2027;

- 0.8% of tariff lines are partially liberalised through tariff quotas (with a preferential tax rate for products within the quota of 0%)

In addition to import tax, the UK gives Vietnam a preferential tariff quota (TRQ) for a number of items with an import tax rate of 0% such as seafood, fruit, coffee, rice, and textiles sewing, furniture…

In 2020, Vietnam's exports to the UK will reach about US$5.04 billion, accounting for 0.8% of the UK's total import turnover, while UK exports to Vietnam are worth nearly US$700 million, accounting for nearly US$700 million 0.3% of Vietnam's total imports In the first 10 months of

2021, two-way trade between Vietnam and the UK reached 5.5 billion USD and the import and export value both increased by double digits Accordingly, the export value of Vietnamese goods to the UK reached $4.7 billion, up 15% According to Vietnam Customs, two-way trade turnover between Vietnam and the UK in 2021 will reach impressively high growth despite the COVID-19 pandemic, reaching $6.6 billion, an increase of 17.2% compared to 2020 In which, Vietnam's exports reached nearly $5.8 billion, up 16.4%

In the field of investment, as of May 2022, the UK has a total of

462 FDI projects in Vietnam, with a total valid registered investment capital of 4.15 billion USD, accounting for billion accounts for 0.97% of the total foreign investment capital registered in Vietnam Manufacturing and processing industry with 120 projects, registered investment capital reached nearly 1.6 billion USD, accounting for nearly 40% of total investment capital Next is the real estate business with 23 projects, total investment capital of 1.04 billion USD, accounting for 26% of total investment capital Mining ranked third with 7 projects, total registered capital of 701.44 million USD,

accounting for 18% of total investment capital The remaining projects are in other fields such as: wholesale and retail, repair of cars, motorbikes and motorbikes; accommodation and catering services; water supply and waste treatment; professional, scientific and technological activities; education and training

For example, lychee, longan, rambutan, dragon fruit, pineapple, mango have an additional advantage in accessing the UK market in the context of competitive countries such as Brazil, Thailand, and Malaysia

3 EU’s specific requirements/regulations should Vietnamese exporters pay attention to when exporting to this market

The EU is Vietnam's largest coffee consuming market Germany

is Vietnam's largest coffee import market in the EU

a Customs procedures

When importing goods from outside the EU in general and for coffee in particular, when importing goods, customs declaration is required Customs clearance is the procedure by which goods are released upon completion of the import declaration accompanied by relevant documents and full payment of taxes and other customs duties to the customs authority

b Basic documents in the customs dossier

According to EU regulations, when clearing goods, a declaration must be presented to the Customs office according to the form prescribed by the

Customs The basic documents for goods imported into the EU Member States

do not depend on the value of the shipment or the type of transport Normally, for goods imported into the EU, the following basic documents are required:

● Commercial Invoice( CI)

Importer and exporter information, invoice date, invoice number,

description of goods, terms of delivery and other details necessary to determine the correct price and freight should be clearly stated fees and insurance

● Single Administrative Document (SAD)

The customs declaration is submitted using the standard administrative document , which is a common form for all EU Member States under the Union

8 Customs Code and the Transition Authorization Act (Regulations) EU

2016/3413 dated December 17, 2015) while the e-customs environment is

implemented synchronously.

● Bill of Lading

A copy of the bill of lading (or air waybill) is required for customs

clearance Consignees usually need an original bill of lading for import

clearance

● Certificate of Origin( C/O)

Coffee products circulated on the market must meet PDO ( ) regulations For the export of some products including Coffee to the EU, it is allowed to self-certify export for shipments valued at less than 6,000 EUR and without having to make a paper C/O and with the condition that the REX code must be registered (Registered Exporter) For goods with a value of more than 6,000 EUR or requested by the importer, a certificate of “CO from EUR” is required first" In addition, goods eligible for GSP (Good Storage Practices) must have a certificate of origin form A "C/O form A"

● Packing list

Accompanied by a commercial invoice and transport document,

providing information on the imported item and the packaging details of each shipment

● Export declaration

Applies to shipments with a value of more than 2500 USD

● Import Licence

Under EU regulations, an import licence is required for most shaved commodities including coffee

● Insurance Certificate

Present if premium information is not shown in the commercial invoice

c Produce traceability

Coffee imported into the EU is required to comply with EU requirements and regulations for food Traceability due to growing concerns about food safety and consumer health, traceability is essentially a requirement that coffee

products must be tracked worldwide supply chain to ensure food safety, enable appropriate action in the event of unsafe food, and limit the risk of

contamination Therefore, having a traceability system is an advantage that creates trust for customers and stabilises market share Examples of trackable data:

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d Regulations on contaminant

The EU regulates that contaminants should be kept as low as possible so

as not to threaten human health or negatively affect food quality Common contaminants that can be found in coffee products include: mycotoxins;

salmonella; extraction solvent; polycyclic aromatic hydrocarbons (PAHs); acrylamide, ochratoxin (1,4-dimethylnaphthalene, 8-hydroxyquinoline,

pinoxaden and valifenalate) maximum residues MRLs (Maximum Residue Level) such as: Glyphosate-0.1 mg/kg, Bixafen- 0.05 mg/kg, Fenazaquin- 0.05 mg/kg)

e Labelling Regulations

Exported coffee labels must comply with the EU's general food labelling requirements in regulation (EU) 1169/201119 of 25 October 2011 on Food Information for Consumers (FIC) Coffee labels need additional information to ensure traceability of each batch:

- Product name;

- ICO International Coffee Organization's format code;

- Country of origin (ie Vietnam);

- Classification/grade;

- Net weight in kg;

- For certified coffee: name, code of inspection agency, certificate number For extracted, instant or instant coffee (except for instant torrefacto coffee, which is coffee roasted by a process that includes the addition of a certain

10 amount of sugar during roasting) a statement is required Specific labels apply