graduation report Thesis On ImportExport procedure

Mẫu báo cáo của sinh viên năm 4 khoa Kinh tế Đối Ngoại trường Ngoại trường Ngoại Thương, viết về đề tài quy trình xuất nhập khẩu tại công ty SMC. Bài làm mang tính tham khảo, đạt điểm 810. Bài viết đi chi tiết về các công đoàn thực hiện một hợp đồng ở công ty xuất nhập khẩu thép, bên cạnh đó cũng có áp dụng những kiến thức về Supply Chain, nhằm giúp công ty hoàn thiện quy trình và những điểm trong khâu quản lý rủi ro và chất lượng

Chapter One: INTRODUCTION OF THE SMC TRADING INVESTMENT JOINT STOCK COMPANY

1 Brief history 3

2 General information 4

3 Organization structure

4

7

4 Business outcomes from 2011-2013 8

5 Roles of conducting contract of steel import in SMC Trading Investment JSC.11

Chapter Two: CURRENT SITUATION OF CONDUCTING STEEL IMPORT CONTRACT

2.1 Describe and analyze the current situation of the import contract conductingsteel import contract at SMC 12

2.2 Summary of strengths and weaknesses

20

Chapter Three: THE OUTLOOK, ORIENTED DEVELOPMENT AND RECOMMENDATION FOR IMPROVEMENT OF THE CONDUCTING IMPORT CONTRACT AT SMC

3.1 The outlook of the conducting import contract at SMC in the future 21

3.2 The company’s oriented development of the conducting import contract inthe future 22

3.3 Recommendations for promoting the conducting import contract 23

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3.3.3 Suggestion for Cooperation between Deps 30

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CONCLUSION

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ANNEXES

REFRENCES

Dep Department (Deps for Departments)

HCMC Ho Chi Minh city

LIST OF TABLES, CHARTS AND FIGURES

N

o

e

2 Figure 2.1 General process of import/export at SMC 12

3 Table 1.1 SMC outcome report period 2011 – 2013 8

4 Table 3.1 Balanced scorecard for internal progress 30

From the moment our pen shaped signatures onto World Trade Organization’sdeclaration, Vietnam has been put on the map of Trade and prepared ourselves for abright era of world integration where the economic connection among countries isbecoming stronger and stronger Never before has foreign trade played such crucialand strategic role in domestic economy The development of foreign trade performs

as an economic dynamics that leads to several benefits such as technologyenhancement, domestic industry restructure, jobs creation, income increase, labor’sliving standard improvement

That Vietnam has joined the WTO, however, proves itself a big challenge for us.Along with the barriers that have been cut down came the bigger playground inwhich we have to deal with harder competition and need to take our best advantage

if we want to attract foreign investment

Rapidly as foreign contracts have developed in the last 5 years, Vietnamentrepreneurs find themselves at risk in transactions since they are newbie with littleexperience in conducting foreign contract This results in the fact that we stand in at

a lower position compared to foreign competitors, which bears huge potential threat

of loss, inefficiency and defraud

Anyone with updated knowledge understands that Supply Chain is now no longer atheory for only developed industry, but already a worldwide trend for those whodesire success It comes naturally to my mind that if we exploit this merely brandnew knowledge in Vietnam, the above-mentioned risk could be avoidedsignificantly

Account of 5% of national market share and 15% of the Southern one, Ltd T.J.SSMC prides on being a professional enterprise that has long-year experience inimporting steel from many markets in the world Coming from my noticing, SMC is

an ideal place for such theory to research Over three-month internship inImport/Export Dep of the company, I decide to choose the project: “Conjuncture ofconducting import contract at Ltd, T.J.S SMC” as my report internship With

objective as applying Supply Chain theory into practical and focus onto the RiskManagement, I am looking forward to experiencing business import activity frompractical in particular Dep of conducting import contract, which may help toimprove and maybe bravely suggest some solutions to improve.

- The report includes following content:

Chapter 1: INTRODUCTION OF THE SMC TRADING INVESTMENTJOINT STOCK COMPANY

Chapter 2: CURRENT SITUATION OF CONDUCTING STEELIMPORT CONTRACT

Chapter 3: THE OUTLOOK, ORIENTED DEVELOPMENT ANDRECOMMENDATION FOR PROMOTION OF THE CONDUCTINGIMPORT CONTRACT AT SMC

- Time and place:

+ Place: Import/export Dep of Ltd, SMC T.J.S

+ Time: from January 6th 2014 to 6th April 2014

Through the report, I would like to send my sincere thanks to Mr Tran Thanh Tamand all personnel in Import/Export Dep of T.J.S SMC to whom I have been givenbig help to accomplish this project In completion the project, on account of limitedknowledge as well as page required, the existence of shortcomings are unavoidable

I would be grateful on acceptance of constructive ideas or any contributorycomment from you to better my work

Le Vu Thanh Thanh

CHAPTER 1: INTRODUCTION OF SMC TRADING INVESTMENT JOINT STOCK COMPANY

1.1 Brief history

In 1996, Manufacturing and Trading Factory of constructive material no.1, directlyunder Building and Settling Trading Company no.2 – Trade Ministry, was foundedbased on its forerunner as constructive material store no.15, which opened in 1988 The brand named SMC officially came into public 10 years later in 1998, whichstands for “Steel Materials Company” Then in 2002, SMC was honored the ThirdLabor Medal and also in this year came out the birth of the company’s official logowith symbol of two sharp and flexible steel slat connected together

In 2003, the brand name SMC successfully became registered trademark andofficially earned its recognition under the Designation 4704/QD-DK issued byOffice of industrial property Ministry of Science Technology and Environment onJune 20th 2003

On August 19th 2004, SMC was equitized and officially changed the name into

‘SMC TRADING INVESTMENT JOINT STOCK COMPANY’ with the capital of

25 billion VND Two years afterward, 2006, SMC officially put their first foot onthe floor of Stock Exchange and posted at HMC Stock exchange with the stockcode: SMC and the international trading name: SMC TRADING INVESTMENTJOINT STOCK COMPANY

2010 was a big year for SMC since SMC achieved its five year strategic plan 2006

-2010, reaching 558 thousand metric tons in total volume, in which 540 thousandmetric tons of steel and 18 thousand metric tons cement NI reached 82 billionsVND, confirming its leading position in the business of steel distribution Followingthe success of 2010 On 10th of June, 2011, the factory of SMC Steel MechanicalLtd, Co, went into operation with two processing lines to be able of slitting steelwith the thickness up to 16mm and cutting up to 20mm

1.2 General information

SMC TRADING INVESTMENT JOINT STOCK COMPANY

Business official name: CÔNG TY CỔ PHẦN ĐẦU TƯ THƯƠNG MẠI SMCForeign name: SMC TRADING INVESTMENT JOINT STOCK COMPANY

Foundation date: 19th August 2004

Registration license number: 0303522206

Charter Capital: 295.183.610.000 Vietnam dong

Slogan: “SMC The professional steel distribution”

Logo:

Located at a strategic position which is opposite Saigon Bridge, the Easternentrance of HCMC, the head quarter of SMC was designed as an environment-friendly eight-floor building with modern architecture It plays the leading role ofoperating steel professional distribution of SMC’s whole system

Main business lines

• Trading and importing various types of steel, metal goods, constructionmaterials, interior design materials and construction equipment of all kinds,mechanical equipment, frame warehouses, factories with aluminumstructures, steel and stainless steel

• Construction and installation of civil, industrial projects, transportation,irrigation, housing repair and interior decorating in accordance with the law

• Set up construction project, consulting, design and trading properties asprescribed by law

• Trading of appliances, groceries, consumer goods, food

• Providing logistic services, warehousing for domestic as well as import andexport goods

• Trading real estate, rights for land-use, owning or renting properties

1.3 Organizational structure

1.3.1 Organizational Hierarchy chart

Source: by writer, simplified from origin at http://www.smcsteel.vn/?id=10

According to the mechanism of SMC, we can be aware that Great meeting ofShareholders is on the top of the hierarchy structure that holds in hand the mostpowerful Therefore, SMC has been applying directly functional structureorganization, which means the options of functional Dep are professionalconsultancy, Deps take direct order from Board of Directors; the decision wouldindeed depend on Board of Directors after they consider options from functionalDep The strength of such mechanism is promoting the company’s operation since ittakes advantage of professional skills of functional Dep Of course, the drawbackcan be information overloaded, which confuses the Board of Directors This,however, lead to many meetings that takes time and obstacle for making decision.Employee having graduated from college, university and higher education accountsfor a major part of the whole and this ratio has sustainably increased over the pastfew years SMC has attracted a source of higher-education employee to apply formanager position in Deps In 2012, SMC has raised Income Fund 15% higher thanthat of 2011 and the number of employees as well

1.4 Business outcome from 2011-2013

Table 1.1 SMC outcome report period 2011 – 2013

Net sales billion VND 8.939,8 8.961,5 9651Combined profit billion VND 313,8 242,7 273,1Pre-tax profit billion VND 86,8 75,1 33,7After-tax profit billion VND 73,1 59,5 26,1Short-term asset billion VND 2.047,2 1.709,9 562,0Long-term asset billion VND 328,1 415,1 2.495,5Total asset billion VND 2.375,3 2.125 3.057,5Short-term debt billion VND 1.756,2 1.401 1.094,4Long-term debt billion VND 43,8 145,1 1.401,1Total debt to pay billion VND 1.800 1.545,7 2.495,5Financial expense/Gross

(Source: SMC Annual report in year 2013)

2013 was not a big year for SMC According to the above indicators, the profitsdrew a significant drop Explaining this, The Chairman of Shareholders mentionedboth Marco effects and internal obstacles that might be the cause for it

Macro effects included decreasing buying power, slow consumption, frozen estatemarket, burden of large inventory, increasing bad debt Much as the otherbusinesses was suffering, due to slow consumption, steel trading business wasforced reduce the price to stipulate demand, which obviously did harm the profit,even led to loss and bankrupt in internality of steel business

After two continuous year of negative growth, the final total asset in 2013 reached3.068 billion, a dramatic increase of 43,3% compared to the previous year Thisresults from 2 factors: short term asset which increased 45,4% and long term assetwhich increased 34,7%

With the trading business as the company’s particularity of trading, processing,manufacturing and distributing steel, the short term asset account for 81,7% overthe total most of which are inventory and money-to-lend.

However, that the inventory made an extinct rise when it triple the amountcompared to the obvious years was the key factor pushing hard to short term asset.Coil Center factory came into operation in December 2013, which foster import-export activities, hence, enhance inventory ready for FDI project This led to the bigamount of inventory at the end of 2012

At the end of 2013, 65,7% long term asset reached 562 billions VND In correlation

of the asset’s growth, the total debt to pay had a sharp rise from nearly 1000 billion

to over 2.496 billion VND, 60,9% higher than that of 2013 Both short term andlong term debt from the bank had the respective increase of 57,1% and 107% morethan year 2012 Short term debt of 2013 was 1.094 billions VND and the long termdebt was 153 billions VND, due to the investment of SMC Tan Tao and increasinginventory

Changing in the structure of consumption, along with the noticeable improvement

in quality and quantity of flat steel has brought an obvious development in the ratio

of combined profit in 2013 Much as SMC suffered from the macro factor of steelmarket, the ratio of combined profit remains slight increase from 0,1% to 2,8% Theflexibility in trading and selling helps to foster the consumption and overtake sharemarket, as well as increase the cost of sales

On the other hand, though the general of loan interest was justified considerably,the financial cost still rose to 17% compared to 2012 due to the demand ofinvestment and the higher working capital for all system Hence, while the ratio ofcost of enterprise management has been maintained quite well over the years, theratio of sales cost and financial cost increased, this had negative effect on the finalresult of profit The year 2013 ended with SMC’s only harvesting 26,1 billionsVND of after tax profit, 62% far behind from the previous year The ratio of aftertax profit had the same consequence when it was only 0,3%

The shift in consumption structure, along with the strong growth of bot quatity andquality of flat steel, has brought about obivious improvement in combined profit of

2013 Therefore, much as SMC was affected negatively by strong fluctuation ofinput price, production cost, electricity cost and so on, the ratio of combined profit

in 2013 showed a slight increase of 0,1% compared to the previous year, making thenumber 2,8% The fact that SMC has had more flexibility in business activities,which aims to raise market share, led to the significant increase in sales expense Onthe other hand, although the general interest rate in 2013 has been much adjustedcompared with previous years, the financial costs 17% more than 2012 due to highinvestment capital and working capital Hence, while the administrative costrelatively remained stable over the years, the ratio of financial cost and salesexpense has negative impact on the final profit result

1.5 Roles of the conducting import contract in SMC

For SMC, importing is correlated with the growth of company It plays the decisive role, merely the most important activities of the company’s business At the position

of a professional distributor, SMC consequently undertakes the role of steel supplierfor constructive entrepreneur working on domestic construction

The total consumed amount of export and import steel in 2013 reached 482.411 tons

of all kinds, a dramatic increase of 71,3% in comparison with year 2012 andexceeded 155,6% the expectation of the year, of which over 80% is made up by theimport Taking well the advantage of relationship with big foreign partner, SMC hasmade good use of the imported which was the main source for domestic demandand manufacture

The amount of imported steel in 2013 rocketed 87,5% more than last year in whichwide rod and hot rolled steel accounted for the most In a word, import activitiesplay the main role in company’s business

Since our industry remain unable to produce the steel rough draft, the importcontract holds simultaneously provides the ‘output’ for the export contract anddomestic construction’s contract The input for manufactures and demand for steeldepend on this

First of all, having a smooth and efficiency contract conduction means a huge profitfor the company, saving a lot of time and avoiding unwanted damages Secondly,

meeting the demands of market timely and fully consolidates SMC’s rank in bothdomestic and foreign market SMC can also guarantee the product to sell and thematerial to manufacture

On the contrary, provided that the conducting import contract faces up withweaknesses and challenges, the whole business results of the company will benegatively affected Loss is inevitable since Goods is under the risk of defraud,which leads to delay of delivery for the export (if the consignment is re-exported),unqualified products, failure to meet the demand of market… Profit is not the onlything that will be damaged Credit will suffer the same as consequence

Therefore, where all the contracts are processed favorably, not only will the

company reach ultimate profit but it also develops the quality of all products and maintain the company’s credit Needless to say, conducting import contract

efficiently shall push SMC nearer to become the biggest steel enterprise in market

of Vietnam

Phase 1 is contract negotiation which is conducted mostly by Sales Dep, consulted byImport/Export Dep and signed by the Board of Director

Phase 2, L/C payment procedure, and phase 3, purchasing insurance, are taken care byAccounting Dep and sometimes, Finance Dep

Phase 4 is custom clearance and the last phase, phase 5, Goods receipt, is carried out

by Import-Export Dep The detail process is demonstrated in Annexes 2

Accounting Dep

Import/Export Dep

It is easy to notice that conducting import contract at SMC involves mostly 2-3 Depsand the board of director By this way, the company can make sure every phase is athigh amiability and conducted professionally Particularly, the cooperation betweenthe Sales Dep and the Import/Export Dep is essential at the first three phases while therest depends on the cooperation of Import/Export Dep and the Accounting/FinanceDep In a word, Import/Export Dep plays the key role throughout the process

Global Trading Corporation, shall be used to demonstrate these following steps, which

is attached in Annexes 1 Contract 102E735A hereunder shall be understood simply as

‘The Contract’

The Contract performance lasts in 2 months with the shipment date of November,

2013 and payment finishing in December, 2013

The first phase would be transaction negotiation and signing contract.

Based on the report from market research, the Sales Dep brought forward importedgoods business project The purchasing business project of The Contract is signed onOctober 4th 2013 by Head of the Sales Dep

After the business project had been passed, Board of Director planned to negotiate andsign The Contract The final signed Contract is attached at Annexes 1

Goods were to be shipped partially under CFR term of Incoterm 2000 and not earlierthan October 30th 2013 The loading port was any port any Taiwan and the port ofdischarge was Phu My Port, Vietnam The commodity was hot rolled steel sheet incoils (leeway) with description about quality, quantity, origin, package, the toleranceamount and other terms

Payment was made by irrevocable L/C

At present, SMC regularly uses method of negotiation through telefax in combinationwith telephone and email The direct approach can also apply for new partners whohave their first contract with SMC In this case, The Seller has been The Company’s

partner in a long time, so duration and method of contract negotiation is lessenedsignificantly.

Secondly, after The Contract was signed, L/C was opened without delay by employee from Import-Export Dep.

As The Contract value reaches a number 1.008.800 USD in detail, that SMC appliedL/C method for payment is very reasonable

All import contracts are applied not confirmed, irrevocable L/C

L/C payment procedure in SMC has 7 steps

Step 1: SMC send requirement to open L/C and necessary document, pay the security

at VIETINBANK The Notice of fee charged on insurance was markedSG.05.MCA.AD.13/01306/1301 – DN1/1 and attached in Annexes 1 with thepremium of 598.39USD This is the guarantee for the L/C The L/C was opened byImport-Export Dep while this guarantee is taken care of by Finance Dep

The Contract’s L/C was under the form of fax, which is attached in Annexes 1 It wasopened on 31st October 2013 Content of such form is decided base on content of TheContract which requires strict accuracy and compliance in information about:commodity, name and exact address of the issuer and the beneficiary, shipmentcondition, loading port, latest delivery date…

In contract no 10E735A, SMC chose VIETINBANK to open L/C

The set of files consist of:

(1) Borrowing Application: 1 original (issued by Finance Dep)

(2) Business Plan: 1 original

(3) Foreign currency contract: 2 duplicates

(4) Foreign Trade: 1 copy

(5) L/C application form: 2 duplicates

The Import/Export Dep sent the L/C opening application form to VIETINBANK bymail (Since the bank guarantee 70% of the contract value, represented as L/C onbehalf of SMC, the company has to make Borrowing Application that states the duty

of the bank to pay for CSGT Corp)

Step 2: VIETINBANK notified content and send the L/C original to the exporterthrough BTKB This document remains between the bank and the exporter

Step 3: BTKB transferred the L/C original for the exporter (CSGT Corp)

Step 4: Discrepancy fee USD100.00 would be automatically deducted from theproceeds when payment effected for discrepant documents drawn this L/C Since theL/C was accepted without any amendments, Goods was to be delivered, otherwise,requirement for L/C amendment would have gone on until the L/C was accepted Step 5: The CSGT Corp presented the document for payment to the BTKB to notifyVIETINBANK

Step 6: BTKB inspected on the payment document and the L/C payment was made.Otherwise, BTKB would have been bond to notify such discrepancies for both parties;

if SMC does not accept such document, the bank shall refuse to pay and return thedocument for the exporter In reality, however, SMC has other solutions depending onwhich the case is

If discrepancies are acceptable, SMC shall either notify the bank to pass the documentand make payment, or force the exporter to satisfy conditions that may allow Goodsacceptance

If discrepancies are unacceptable, the exporter shall be bound to amend and paydamages (regulated in Contract)

Step 7: VIETINBANK sent letter of payment to SMC for the rest of the security,stating some supplementary amendment The supplementary amendment is attached inAnnexes 1 with the final date of payment was December 25th 2013 It has 3 copies kept

by Insurance Company and 1 copy hold by SMC