Understanding the importance of the freight forwarding service for the development of An Phu Co., Ltd, I chose the topic “Recommendations to improve the freight forwarding procedure of i
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PREFACE
If trading is considered as the “blood-line” of the world economy, it can be said that maritime transportation is the key element to ensure blood circulation According to International Chamber of Shipping, it is about 90% of the world trade carried by ship In order to support this potential industry, freight forwarding service was born
to enhance thedevelopment of maritime transportation and has played an important role Vietnam is not an exception with the strong emerge of the freight forwarding activities which attract many enterprises to involve in this field
Understanding the importance of the freight forwarding service for the development
of An Phu Co., Ltd, I chose the topic “Recommendations to improve the freight forwarding procedure of imported Animal Feed cargo at An Phu Trading and Forwarding service Co., Ltd” for my dissertation
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DECLARATION
I certify that all the materials in this dissertation that is not my own work has been identified, and that no materials is included for which a degree has previously been conferred on me
The contents of this dissertation reflect my own personal views, and are not necessarily endorsed by the University
Signature
LUU THI THU TRANG
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ABSTRACT
Thanks to globalization, economy of Vietnam has been developing dramatically Along with economic growth, exchange of goods and services has also significantly risen which are mainly transported by sea It is no doubt that freight forwarding is
an indispensable part of Export- Import industry As a matter of fact, after recognizing this potential field, An Phu Trading and Forwarding Service Limited Company was established which has been an active player in the freight forwarding service Therefore, recognizing the importance of freight forwarding activities in national economy development; in this dissertation, the freight forwarding procedure of imported Animal Feed cargoby FCL method will be studied and explained in details in the case of An Phu Co., Ltd The purpose of this study is to provide an overview of the freight forwarding activities and to understand deeply about the freight forwarding procedure of imported animal feed cargo at An Phu Co., Ltd Moreover, it aims to analyze the current status quo of the above mentioned procedure of the company
Although, the procedure is created to be compatible with specific cargo- Animal Feed cargo, there are still some problems happening during the procedure that need feasible solutions Thus, based on found limitations, I have proposed some suggestions to resolve the currents limitations of the procedure in this dissertation Therefore, this study hopes to help readers have a basic knowledge about freight forwarding service However, due to the limitations of time and length and other external factors, this report still contains some drawbacks with the aim of finding the most effective solutions for the company I really hope to receive feedback from the lectures to be able to complete my study
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Table of Contents
PREFACE i
DECLARATION ii
ABSTRACT iii
LIST OF ABBREVIATIONS vi
LIST OF FIGURES vii
LIST OF TABLES viii
INTRODUCTION 1
1 The necessity of the research 1
2 Methodology 1
3 Dissertation Scope 2
4 Time Duration 2
5 Research results 2
6 Dissertation structure 2
CHAPTER 1: LITERATURE REVIEW 3
1.1 General methodology of freight forwarding 3
1.1.1 Definition of freight forwarding and freight forwarder 3
1.1.2 Commercial functions of freight forwarders 4
1.1.3 Obligations, Responsibilities and Rights of freight forwarder 5
1.1.4 Definition of FCL cargo 6
1.1.5 Related parties in the freight forwarding procedure 6
1.2 Legal Basis of the freight forwarding 7
1.2.1 Vietnamese Law 7
1.2.2 International Law 8
1.2.3 Related documents in the freight forwarding procedure 8
1.2.4 Legal documents relating to animal feed 9
CHAPTER 2: THE STATUS QUO OF THE FREIGHT FORWARDING PROCEDURE OF IMPORTED ANIMAL FEED CARGO AT AN PHU TRADING AND FORWARDING SERVICE CO., LTD 11
2.1 Company Overview 11
2.1.1 History of foundation and development of the company 11
2.1.2 Company Structure 13
2.1.3 Business Performance 15
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2.2 The status quo of the freight forwarding procedure of imported Animal Feed
cargo at An Phu Co., Ltd 17
2.2.1 Introduction about the cargo and clients 17
2.2.2 The freight forwarding procedure of imported Animal Feed cargo at An Phu Co., Ltd 18
2.2.3 The status quo of the freight forwarding procedure of imported Animal Feed cargo at An Phu Co., Ltd 25
CHAPTER 3: RECOMMENDATIONS TO IMPROVE THE FREIGHT FORWARDING PROCEDURE OF IMPORTED ANIMAL FEED CARGO AT AN PHU TRADING AND FORWARDING SERVICE CO., LTD 29
3.1 Evaluating the freight forwarding procedure of imported Animal Feed cargo at An Phu Co., ltd 29
3.1.1 Advantages of the procedure 29
3.1.2 Limitations of the procedure 30
3.2 Recommendations to improve the freight forwarding procedure of imported Animal Feed cargo at An Phu Trading and Forwarding Serive Co., Ltd 32
3.2.1 Professional Training Courses for forwarding staff 32
3.2.3 Applying modern software 33
3.2.2 Re- allocation of human resources in the procedure 34
3.2.4 Re- arrange transportation plan 36
CONCLUSION 37
BIBLIOGRAPHY 38
APPENDIX 39
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LIST OF ABBREVIATIONS
B/L Bill of Lading
C/O Certificate of Origin
CLECAT Comité de Liaison Européen des Commissionaires et Auxiliaires
de Transport du Marché Commun Co., Ltd Company Limited
D/O Delivery Order
EIR Equipment Interchange Receipt
FCL Full Container Load
FIATA International Federation Of Freight Forwarders Association
THC Terminal Handling Charge
WTO World Trade Organization
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LIST OF FIGURES
Figure 1.1: Related parties in the freight forwarding procedure 6
Figure 2.1: Organizational structure of An Phu Co., Ltd 12
Figure 2.2: The current freight forwarding procedure of imported Animal Feed cargo at An Phu Co., Ltd 17
Figure 2.3: Login ECUSS VINACCS/VCIS 20
Figure 2.4: Register to open a new importing declaration 20
Figure 2.5: Declare General Information 21
Figure 2.6: Declare Cargo Information 22
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LIST OF TABLES
Table 2.1: An Phu Co., Ltd Business Performance from 2013 to the first six months
of 2015 14 Table 2.2: Volume of import, export and domestic of animal feed cargo at An Phu
Co., Ltd in 2013, 2014 and 2015 15 Table 2.3: Charges and Fees to be collected by Shipping Line 19 Table 2.4: The current number of staff involving in the freight forwarding procedure
of imported Animal Feed cargo at An Phu Co., Ltd 25 Table 2.5: The difference between the average required time and average actual
time for each step of the freight forwarding procedure of imported Animal Feed
cargo 26 Table 3.1: The difference of the working style and efficiency of staff before and
after applying F.A.S.T 32 Table 3.2: Re- allocation of human resources in the procedure 34
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INTRODUCTION
1 The necessity of the research
Thanks to globalization, Vietnam has been immersed in the growing development of the world’s economy It can be said that International Trade of Vietnam has grown rapidly over the past 20 years, especially after Vietnam became
a member of the World Trade Organization (WTO) Along with economic growth, exchange of goods and services has also significantly risen which are mainly transported by sea As seaborne trade has expanded, the significant role of freight forwarding service continues to become more important The development of freight forwarding activities in import and export field in our country play a key role which contribute to enhance the competitiveness of goods in international market Therefore, recognizing the importance of freight forwarding activities in national economy development;in this dissertation, the freight forwarding procedure
of imported Animal Feedcargo by FCL method will be studied and explained in details in the case of An Phu Co., Ltd Although, the procedure is created to be compatible with specific cargo, there are still some problems happening during the procedure that need feasible solutions Therefore, the purpose of this dissertation is
to assess the present freight forwarding procedure of Animal Feed cargoby FCL method at An Phu Co., Ltd and give some recommendations to improve the procedure in order to enhance the competitiveness of the company
2 Methodology
This dissertation applies the following approaches:
Participant observation: I have chance to work as an apprentice at An Phu Co., Ltd to study and have deep understand about the freight forwarding procedure
of imported Animal Feedcargo by FCL method
Data collection: General information about freight forwarding service is studied and gathered from books and internet Company’s information and statistics are provided by company’s functional departments and websites
Interview: I interviewed some company’sstaffs to get more detailed information about the freight forwarding procedure and their experiences as well as their advices
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Method of analysis: After collecting all necessary data and information, method of analysis is applied to assess the current status of the studied procedure
3 Dissertation Scope
This dissertation aims to analyze the freight forwarding procedure of imported Animal feed cargo carried out by employees of An Phu Co., Ltd More specific, the dissertation focuses on each detailed step to understand clearly how the company doesits business as well as the efficiency of company’s performance
6 Dissertation structure
This dissertation includes three chapters:
Chapter 1:Literature review
Chapter 2: The status quo of the freight forwarding procedure of imported animal feed cargo at An Phu Trading and Forwarding Service Co., Ltd
Chapter 3:Recommendations to improve the freight forwarding procedure of imported animal feed cargoat An Phu Trading and Forwarding Service Co., Ltd
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CHAPTER 1: LITERATURE REVIEW 1.1 General methodology of freight forwarding
1.1.1 Definition of freight forwarding and freight forwarder
a Definition of freight forwarding service
According to the International Federation of Freight Forwarders Association (FIATA) and theComité de Liaison Européen des Commissionaires et Auxiliaires
de Transport du Marché Commun" (CLECAT) on October29th 2004, freight forwarding is defined as following:
“Freight forwarding service is any service related to carrying, consolidating, warehousing, handling, packing or distributing goods as well as other supporting and advising services which are related to these aforementioned services In addition, freight forwarding service deal with not only customs or financial issues but also cargo insurance, charge and related documents Freight forwarding service also includes logistics services along with modern technology which has close relationship with the progress of transportation, handling, warehousing and supply chain management These services can be provided flexibly to support the main import and export activities” (FIATA, 2004)
In Vietnam, the time that the freight forwarding service was mentioned and defined clearly was in Article 163 of Vietnamese Commercial Law 1997 Today, the freight forwarding service has been developing more professionally and has close connection with other customer services which can be called logistics services
b Definition and role of freight forwarders
“
Freight forwarders are people who provide freight forwarding service and act
as trustees of their customers being cargo owners or carriers In other words, freight forwarders can be cargo owners, ship owners, handling companies or any companies which register to be involve in freight forwarding business In many countries around the world, freight forwarders are known as with different names such as Custom agent, Custom broker, Shipping and Forwarding agent, Principal carrier, etc However, they all has a common name in international transaction as
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“The international freight forwarding” with major task being providing forwarding service “
1.1.2 Commercial functions of freight forwarders
In general, freight forwarders can undertake many tasks in providing services for customers However, in fact, they have the following basic commercial functions:
a Customs brokers
“
Each country has different policies and regulations for customs procedure through each period; therefore, exporters and importers cannot update all information timely In order to support them, freight forwarders do customs clearance as customs brokers (conventional function of freight forwarder) on behalf
of their customers to minimize customers’ difficulties in doing business
b Agents
In this case, freight forwarders perform as a “bridge” to connect the shipper and the main carrier They are in charge of being agents of carriers or shippers In fact, the freight forwarder is not responsible for carrying goods Instead, the freight forwarder can look for the third party to undertake the mission of delivery as long as the forwarder is reasonably careful in the selection of a transportation company
c Transcargo and On-carriage
When goods are transited to the third country, freight forwarders will be responsible for transition procedure In others words, they are in charge of transiting cargo from one mean of transport to others If the freight forwarders have their own vehicles, in this case, they can act as the carrier and they must be responsible for delivery of goods from the point that they receive goods to the destination If the freight forwarders do not have their own vehicles, they will lease truck from Transportation Company
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d Warehousing
When customers require the storage of the goods before exporting goods or/and after importing goods, the freight forwarders will be responsible for this activity as a warehousing agent
e Cargo consolidator
In order to perform this function, the freight forwarders collect various small cargo from different customers to their warehouses In there, they organize, sort, categorize and combine small cargo which have the same destinations into larger cargo to utilize the capacity of vehicles
f Carriers
In this case, the freight forwarders perform as actual carriers from when they receive goods to the cargo are delivered to the destination Therefore, they can be Non-vessel Operating Common Carrier (NVOCC) or Multimodal Transport Operator (MTO).”
1.1.3 Obligations, Responsibilities and Rights of freight forwarder
a Obligations of the freight forwarder
The freight forwarders have obligations to depart from instructions of customer during the performance of contracts for plausible reasons and in the interests of customers
The freight forwarders have obligations to perform all the instructions of the customers In the case that the forwarders do not follow one or any instructions of customers, if they have reasonable justifications and all they do is for interests of customers, it is accepted
b Responsibilities of the freight forwarder
The freight forwarders are responsible for any incurred problem if they do not work hard and use reasonable measures in implementing forwarding services In this case, they have to compensate customers’ loss However, freight forwarders
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are not responsible for any acts and omissions of the third parties such as transporters, handling companies, and port authorities or other forwarders
c Rights of the freight forwarder
The freight forwarders have rights to enjoy service charges and other reasonable expenses
The freight forwarders have rights to complete their obligations to the customers under the contract
of one container However, in fact, the shipper is not required to use every single square meter of a container to send goods The goods inside containers can be half loaded or quarter loaded The container is sealed until it reaches its destination In
an FCL cargo, all the goods in the sealed container belong to only one consignee Another advantage of FCL cargo is that shipper and consignee have less risk.“
1.1.5 Related parties in the freight forwarding procedure
There are several parties involving in the freight forwarding procedure and they have close relationship to the freight forwarder:
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Figure 1.1: Related parties in the freight forwarding procedure
1.2 Legal Basis of the freight forwarding
“
The freight forwarding activities involve in different fields including transportation, purchase and sale contracts, payments, customs procedures; therefore, the freight forwarders show understand well about legal regulations of freight forwarding service
1.2.1 Vietnamese Law
Besides international conventions, each country can adjust law based on international law to accordant with its nation Vietnamese authorities have issued many legal documents related to the freight forwarding services including:
Freight Forwarder
Shippers
(Exporters)
Consignees (Importers)
- Banks
- Warehouse owners
Import- Export authorities:
- Taxation Department - Customs
- Port authority - Foreign ministry
- Health ministry
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- Vietnamese Commercial Law 2005 ( from Article 233 to Article 240) and Decree 140/2007/ND-CP September 5th 2007 which is regulated in the detail
of Vietnamese Commerce Law about business conditions for logistics and limited liability for traders providing logistics services
- General regulations: The Civil Law 2005; The Enterprise Law 2005; The Investment Law 2005, Tax Law and other regulations about trade insurance, anti-corruption, etc
- Specialized regulations: Vietnam Maritime Code 1990, Decision 2016 regulates the rule of loading, unloading, forwarding and storage of goods in Vietnam’s seaports, etc
1.2.2 International Law
The system of international law relating to freight forwarding includes:
- Vienna Convention for International Trade in 1980
- The International Convention for the Unification of Certain Rules of Law relating to Bill of Lading 1924 (Hague Rules/Hague-Visby Rules); First Protocol (1968) and Second Protocol (1979)
- The United Nations Convention on the Carriage of Goods by sea 1978 (Hamburg Rules)
- Inco-terms 2010 (International Commercial Terms) standard interpretation of trade terms of the International Chamber of Commerce
- UCP 600 (Uniform Customs and Practice for Documentary Credits) by the International Chamber of Commerce.”
1.2.3 Related documents in the freight forwarding procedure
- “Commercial contract: is a legal documentary agreement between importer and exporter stipulating every detail of the transaction It is a legally binding document
- Commercial Invoice is as formal demand note for payment issued by the exporter to the imported goods sold under the sale contract It should give details of the description, the quantity, the price unit, the total price of goods, the address of the buyer and seller, the payment terms and trade terms The commercial invoice is also used for the customs clearance of goods
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- Packing list is a list with detailed packing information of the goods shipped, including number of cartons or packages, net weight, gross weight
- Bill of lading is a contract of carriage binding not only the shipper and the carrier but also the consignee
- Certificate of origin is a certificate to certify the place of manufacture, the nature, quantity and value of the goods It is used to support the claim for preferential tariff entry in importing country
- Customs declaration is a statement made to the Customs, declaring full particulars of the imported/exported cargo “
1.2.4 Legal documents relating to animal feed
a Decree 08/2010 / ND-CP about the management of animal feed
According to the above decree, animal feed is the food that livestock eat or drink in fresh, raw or procedureedincluding raw material or mixed feed, supplements feed, animal feed additives, premixes, the active ingredient and others
Regulations about importing animal feed:
- Organizations and individuals are only allowed to import animal feed on the list that are allowed to circulate in Vietnam issued by the Ministry of Agriculture and Rural Development
- Organizations and individuals importing animal feed must be responsible for the quality and labeling of goods prescribed by law; responsible for collection of goods that do not meet the need of quality assurance and compensation for damage caused to farmers
- The procedures of importing animal feeds must comply with the provisions
of the current law (Government, 2010)
b Decree 17709/BTC-TCT about applying VAT for animal feed product
According to the Law Amending the Law on taxes in 2014: "Fertilizers; machinery and equipment used exclusively for agricultural production; offshore fishing boats; animal feed, poultry and other livestock feed are not subjected to pay VAT (Finance, 2015)
c Decree 26/2012/TT-BNNPTNT aboutinspecting quality of animal feed product
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Animal feed product imported must be implemented quality inspection as
according to Article 15 of Circular No 66/2011 / TT-BNN dated 10/10/2011 of the
Ministry of Agriculture and Rural Development (Development, 2012)
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CHAPTER 2:THE STATUS QUOOF THE FREIGHT FORWARDING PROCEDURE OF IMPORTED ANIMAL FEEDCARGO AT AN PHU TRADING AND FORWARDING
SERVICE CO., LTD 2.1 Company Overview
- Company’s name: An Phu Trading and Forwarding Service Limited Company
- Main Office Address: 43 Dien Bien Phu, Hong Bang District, Hai Phong
- Representative Office Address: Room 3, Floor 4, Thanh Dat Building, 3 Le Thanh Tong, Ngo Quyen District, Hai Phong
2.1.1 History of foundation and development of the company
It is undeniable that Exporting-Importing industry has been developing dramatically and it leads to the development of freight forwarding service It can be said that the freight forwarding plays a vital role in the completion of an export/import procedure Specifically, its contribution helps to minimize the risks that may occur during the exporting/importing procedure After recognizing the potential of this industry, An Phu Trading and Forwarding Service Limited Company was established in May 8th 2008
After 7 years of establishment and development, An Phu Co., Ltd has developed and expanded freight forwarding service with a strong customer base and increasing reputation
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Mission
The mission of company is to provide freight forwarding service for customers with the most achievable solutions and highest responsibilities Moreover, company’s mission is also to bring higher value of the company by contributing to the development of the national economy
Main Services
Agency for ocean carriers
Freight forwarding business
Customs Clearance
Container handling service
Construction of civil engineering
It can be said that the main service of the company is freight forwarding In recent years, the company has expanded its operation southward of Vietnam
Main customers
The main customers of the company that can be mentioned are Viet Dung Aluminum Joint stock company, Hong Trien Limited Company, EH Vietnam Limited Company and many other potential companies
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2.1.2 Company Structure
a Graph of Company Structure
Figure 2.1: Organizational Structure of An Phu Co., Ltd Copyright 2015 by An Phu
Co., Ltd Reprinted with permission b.Departmental Responsibilities
“According to the above company structure, the problem arising in the each department will be managed by specialized officers The common problems of the company will be discussed between the Director and Deputy Director
Director is the legal representative of the company who bears the highest responsibilities and makes the final decisions
DeputyDirectoris the person who is on the behalf of the Executive Director under the direct authority of the Director and responsible for managingbusiness activities and supporting Director in the management and planning
Sale Department is in charge of organizing andimplementing the business operations of the company as well as carrying out market research to actively seek
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for new customers This department plays a pivotal role in the operation of the company, in particular, it helps to expand the market share and attract more potential customers
Accounting Department is in charge oforganizing and implementing accounting operations, reporting accurate data periodically, monitoring business activities continuously and efficiently
Import-Export Department is the most important department in An Phu Company due to the fact that for a company operating in the field of logistics, import-export department accounts for majority of company’s employees with
½quantities of employees including forwarding team and documentation team
Forwarding team directly engaged in forwarding activities To be more specific, the team is responsible for implementing forwarding procedure from customer clearance to delivering goods to customers
Documentation team is in charge of tracking, managing, storing and dispatching documents The team supports forwarding team to complete assigned work effectively in draftingnecessary customs recordsandrequired documents In addition, the team also regularly monitors the whole forwarding procedure and continuously contactswith the customer to notify necessary information of the cargo.”
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2.1.3Business Performance
Table 2.1: An Phu Co., Ltd Business Performance from 2013 to the first six months
of 2015 (Unit: VND) (Tax= 25% Profit)
(Adapted from Accounting Department Copyright 2015 by An Phu Co., Ltd
Reprinted with permission)
The above table reveals the development of An Phu Co., Ltd business performance by year from 2012 to 2015 As we can observe from the above table, overall, revenue of the company increased considerably from 2013 to 2015 To be more specific, the total revenue increased from approximately four billion VND in
2011 to about 5.5 billion VND in 2014 Moreover, the revenue in the first six months of 2015 was close to total revenue in 2014 with approximately 3.5 billion VND It can be said that the growth rate of the company is increasing considerably