The recommendations to improve freight forwarding procedure for imported goods in TNN logistics joint stock company

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING VIETNAM MARITIME UNIVERSITY STUDENT NAME: NGÔ QUỐC VIỆT DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS RECOMMENDATION TO

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: NGÔ QUỐC VIỆT

DISSERTATION

GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATION TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR IMPORTED GOODS IN TNN

LOGISTICS JOINT STOCK COMPANY

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: NGÔ QUỐC VIỆT CLASS: GMA 02

DISSERTATION

GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATION TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR IMPORTED GOODS IN TNN

LOGISTICS JOINT STOCK COMPANY

Supervisor: Ms Pham Thi Yen

Division: Logistics

Faculty: Economics

HAI PHONG – 2015

PREFACE

Vietnam has been a member of WTO; this is a great opportunity for domestics businesses to integrate to international environment and attract foreign investment This is also a challenge for companies to prove themselves in global background Beside advantages, they have to face the difficulties because of the severe competition from foreign businesses as well as others inside Vietnam Therefore, in order to survive, companies need to enhance management ability so that they can work out a long term strategy

With the goal of understanding logistics environment in Vietnam, I choose the

topic: “The recommendations to improve freight forwarding procedure for

imported goods in TNN Logistics Joint Stock Company” with hope that I can

apply what I have learned into reality and obtain more experience, learn more professional skills In this dissertation, I focus on understanding the process of how

to import cargoes in Vietnam; what forwarders have to deliver goods to customers Customs clearance is a big step in the process with complicated steps From that, I

can have better view and objective options about logistics in my country

I declare that this report is my own unaided work It has not been submitted before

If violated, I am solely responsible for and bear the punishments of the Institution and University

Student Name and Signature

Ngô Quốc Việt

ACKNOWLEGEMENT

Firstly, I would like to express my sincere gratitude to my advisor Ms Pham Thi Yen for the continuous support of my dissertationand related research, for their patience, motivation, and immense knowledge Their guidance helped me in all the time of research and writing of this thesis I could not have imagined having a better advisor and mentor for my dissertation

Secondly, I would like to say thank you to all staff in TNN Logistics Company those who have given me facilities to deepen my knowledge about logistics industry Thank to forwarders of company, I have gained my practical skills and understanding about sea transport of Vietnam in general and logistics in Haiphong

in particular This period of internship is very valuable for me to prepare myself in the future

TABLE OF CONTENTS

LIST OF ABBREVIATIONS v

LIST OF TABLES vi

LIST OF FIGURES vii

INTRODUCTION 1

CHAPTER 1: LITERATURE REVIEW 2

1.1 Definition 2

1.1.1 Definition of freight forwarding 2

1.1.2 Definition of freight forwarder 2

1.2 Significance 3

1.3 Roles and Functions 3

1.4 Scope of operation 4

1.5 The rights and obligations of freight forwarder 4

1.6 Benefits of freight forwarding to businesses 5

1.7 The factors affect freight forwarding activities of imported goods 5

1.7.1 International background 5

1.7.2 Macro- management mechanism of State 6

1.7.3 The situation of domestic logistics 6

1.7.4 Weather volatility 7

1.7.5 Internal factors of company 7

CHAPTER 2: THE FREIGHT FORWARDING PROCEDURE FOR IMPORTED GOODS 9

2.1 Introduction about company 9

2.1.1 Company profile 9

2.1.2 Business targets and business sector 9

2.1.3 Company’s organizational structure 11

2.1.4 Business results in 4 th quarter 2015 12

2.1.5 Development plan of company 14

2.2 Freight forwarding procedure for imported goods 16

2.3 Assessment of the freight forwarding procedure for imported goods in TNN Logistics Joint Stock Company 23

2.3.1 Signing service contract 23

2.3.2 The process of receiving documents from customer 24

2.3.3 The process of preparing documents 24

2.3.4 The process of customs clearance 24

2.3.5 The process of goods inspection 24

2.3.6 The seasonality of freight forwarding operation 25

2.3.7 Strengths 25

2.3.8 Weaknesses 26

CHAPTER 3: RECOMMENDATIONS TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR IMPORTED GOODS IN TNN LOGISTICS JOINT STOCK

COMPANY 27

3.1 Suggestions to improve freight forwarding procedure of company 27

3.1.1 Creating coordination, close links between departments within company 27

3.1.2 Preparing imported documents 28

3.1.3 Improving service’s quality 29

3.1.4 Training human resource to adapt new situation 29

3.2 Recommendations 30

CONCLUSION 35

LIST OF REFERENCE 36

LIST OF ABBREVIATIONS

CFS Container Freight Station

ICD Inland Clearance Depot

D/O Delivery Order

OECD The Organization for Economic Co-operation and Development

APEC Asia-Pacific Economic Cooperation

ASEAN Association of Southeast Asian Nations

FCL Full Container Load

LCL Less Container Load

CFR Cost and Freight

CIF Cost, Insurance and Freight

LIST OF TABLES

TABLE 1: Business result in 4th quarter, 2015 13

LIST OF FIGURES

FIGURE 1: Company organization’s structure 11 FIGURE 2: Process of freight forwarding for imported goods 17 FIGURE 3: Process of customs clearance 19

INTRODUCTION

In order to build a strong and prosperous country in the context of

globalization, regionalization, international integration, we cannot overlook foreign trade activities because it ensures the commodity circulation with friends around the world; helps us effectively exploit internal and external potentials based on division

of labor and international specialization However, when it comes to import and export activities, we cannot ignore freight forwarding because they are inseparable activities The scale of import and export operation has been increasing in current years; it is the main reason for the huge growth of forwarding actives, especially sea freight forwarding in both width and depth Besides, with 3000 km coastline and many types of ports, Vietnam forwarding industry has been achieving significant progresses Quantity and value of cargoes through ports always account big proportion of total value of international cargoes in Vietnam Forwarding is the last step but very important of commercial contracts If it isn’t taken place in time, or not logically, there will be stagnation, congestion which cause damage for both seller and buyer.Realize the importance of forwarding, I applied for an internship at

TNN Logistics Joint Stock Company and write a dissertation with topic: The

recommendations to improve freight forwarding procedure for imported goods

in TNN Logistics Joint Stock Company

Because of the limitations in knowledge and experience, as well as the strict of time, shortcomings are inevitable I look forward to receiving the suggestion and

comments from lecturers

CHAPTER 1: LITERATURE REVIEW

1.1 Definition

1.1.1 Definition of freight forwarding

According to The International Federation of Freight Forwarders Associations (FIATA), “Freight Forwarding Services means services of any kind relating to the carriage, consolidation, storage, handling, packing or distribution of the goods as well as ancillary and advisory services in connection therewith, including but not limited to customs and fiscal matters, declaring the goods for official purposes, procuring insurance of the goods and collecting or procuring payment or documents relating to the goods.” According to 2005 Vietnam commercial law, freight forwarding is commercial acts; forwarders receive cargoes from shippers, organize transportation, warehouse, depot and related paperwork and services in order to deliver cargoes to buyers under the mandate of shippers, transporters or other forwarders

In a brief way, freight forwarding is a set of operations related to the process

of transportation to deliver the goods from seller to buyer Forwarders can do services directly or through agency and hire services from the third partner

1.1.2 Definition of freight forwarder

Freight forwarder is a firm or a person specializing in arranging storage and shipping of merchandise on behalf of its/his shippers It usually provides a full range of services including: tracking inland transportation, preparation of shipping and export document, warehousing, booking cargo space, negotiating freight charges, freight consolidation, cargo insurance, and filing of insurance claims

In the international business, transporting cargoes from seller to buyer usually goes through more than one mode of transportation with documents of export, import and other related papers Therefore, forwarders appear with the mission of arranging problems associated with procedures and modes of transportation in order

to deliver goods from a country to another quickly at low cost

According to 2005 commercial law, forwarder is defined as bellow:

Article 164: Person who’s working as freight forwarder is a businessman having business certificate of freight forwarding services

1.2 Significance

To make the social production develop efficiently, the ancient economists worked out the idea of labor specialization There must have a cooperative relationship with each other through economic activities, especially the movement

of capital, labor and exchange of merchandise within regions and countries From that, nations can expand production, capabilities and consumption, and improve people's lives Freight forwarding is an important link in the process of reproduction for transport industry in particular and import-export activities in general; making commodity circulation worldwide, contributing to boost the production, improve the quality and low down the costs

Forwarding network is covering the globe with bustling activities The forwarding agencies together create networks in airports, sea port, cities… taking responsibilities of a massive volume of imported-exported cargoes The advent of forwarders helps importers and exporters simply the issues they should deal with Forwarder firms are more specialized so the time of working will be shortened

1.3 Roles and Functions

Freight forwarding activities of imported and exported cargoes are necessary

in the implementation of sales contract between exporter and importer; it helps two sides meet the demand of punctuality under provisions in contract, and makes the customs procedure become faster

Today, the commercial trade between nations is more and more developing in greater quantity and diversity, and Vietnam is on the way to integrate the world economy There are more and more contracts inside and outside country are signed, pushing up the economy, bringing the foreign currency sources for national budget and the survival of the companies

To perform well and fulfill contract, we can’t but mention the role of forwarding companies Along with the growth of importing and exporting trade, forwarding is becoming more important and the number of forwarders is increasing that makes the goods circulation easier However, forwarding is quite complicated;

it requires forwarders to have specialized knowledge and dynamic agility If a forwarder is weak at profession, the shipment can be delayed and there will be difficulties such as slow delivery This can make businesses or shippers lack materials for manufacture, no goods to sell or have to pay the fee for inventory…

1.4 Scope of operation

Unless consignor or consignee conduct recieving, delivering and other related procedures by themsleves, forwarder wil be on behalf of them do all Freight forwarders can provide their services through foreign agencies, affiliates or throught subcontractors

 On behalf of exporter

As the request of consignor, freight forwarder will:

- Choose the route, method of trasport, transportor

- Recieve cargoes and supply related document

- Check all terms in letter of credit, as well as all regulations of State for cargoes delivery in exporting country, importing country andtransit country

- Package cargoes properly, conviniently to transport to importing country

- Arrange storage if necesssary

- Weighing the goods

- Buy insurance if being requested

- Transport to station, port and conduct customs clearance

- Arrange vehicles if necesssary

- Monitor the trasportation through the raltionship with trasnsportor and the agency in foreign country

- Recognition of losses and help consignor complain

 On behalf of importer

As the request of consignee, forwarder will:

- Receive cargoes and check documents relating transportation

- Pay freight rates

- Conduct customs declearation and related procedures

- Arrange storage and transit if necesssary

- Delivery of goods

- Help consignee deal with complains

1.5 The rights and obligations of freight forwarder

Article 167, Commercial law stipulates that forwarder has following rights and obligations:

- Fully implement obligations under the contract

- During the performance of contracts, if any plausible reason for the benefit

of customers, it can be done different from the customer's instructions, but must immediately notify the customer

- After signing the contract, if cannot perform or arrange time to perform obligations for customers, must inform customers to ask for more instructions

- Must perform duties in a reasonable time if the contract is not mentioned about time of performance of obligations to customers

- The forwarder is enjoyed remuneration and other reasonable earnings

1.6 Benefits of freight forwarding to businesses

Using freight forwarding services brings businesses the follow benefits:

- Reduce risks for shipment during transportation period Forwarders often have experience and knowledge in hire means of transport so they know which shipping line is reliable with reasonable price and specific schedule

- Save time and extra cost for shipper Using forwarding service will reduce the personnel for business On the other hand, because of being specialize in this field so forwarder usually carries out processes fast; avoid delay in progress of complementing contracts

- Forwarder can be on behalf of businesses to do complaints procedure to carriers or insurance company about cargos damage and losses

- Forwarders can also help businesses fill in the documents as well as tax code properly so that tax they have to pay is at minimum

1.7 The factors affect freight forwarding activities of imported goods

1.7.1 International background

These are delivery and receive the international cargoes so it is strongly influenced by international situation Just a small change in the import-export policies in a nation which is in relationship with company can increase or decrease the volume of cargoes Recently, there are movements in the world, conflict in South China Sea, the escalated tension between China and Japan… which have huge impacts on good circulation

In sea freight forwarding, the most important is situation liberalizing maritime transport services in WTO In multilateral cooperation, maritime transport is a sensitive industry and draws attention of many countries; however, the process of liberalizing this field encounters many difficulties because some nations counter this proposal, they want to apply own law in order to protect domestic maritime industry

In fact, the business environment for freight forwarding is being improved and significantly liberalized The main reason is the supports for liberalization is still happening in international cooperation forums such as The Organization for Economic Co-operation and Development (OECD), Asia-Pacific Economic Cooperation (APEC), or ASEAN

1.7.2 Macro- management mechanism of State

This is a very important factor to forwarding activities If government has open policies, it will promote the development of forwarding industry

When it comes to macro-management mechanism, we cannot just mention policies about sea transport or forwarding Mechanism includes all polices relating import and export activities Vietnamese government has issued many policies facilitating import and export activities such as applying 0% tax for exports, innovating customs law, VAT law and so on

Besides, the policy to restrict import such as applying high tax for imports makes the volume of imports decrease so the forwarding activities for imported shipment also go down

About customs policy, in the past, customs officers would help shippers to fulfill customs declaration Now that responsibility belongs to shippers; this makes the customs declaring service develop while forwarders are competent in this work

so the status of forwarder is increasing

1.7.3 The situation of domestic logistics

Although just appeared in Vietnam since the commodity economy was born, especially the trade between Vietnam and other countries in the world was developing; logistics has been gradually contributing to the economic development

of country According to the Ministry of Industry and Trade, logistics in Vietnam accounts for 15-20% of GDP (about 12 billion US dollars) - a huge sum of money and attaching to whole circulation, distribution of the economy If just taking a look

at transport – the most important stage of logistics, it accounts for 40-60% of total

cost; this is a huge service market The growth rate of this industry in recent years is 20-25% in average and now there are about 800 companies working in logistics at different scales The potential development of logistic services is even greater when Vietnam trade turnover is considered to have the fastest growth rate in the region to almost 18-20% per year and a turnover of almost 130 billion USD

According to the Vietnam Maritime Administration, the most important sector

in logistics is shipping transport There are up to 90% of Vietnam's exports and imports are transported by sea However, domestic enterprises can only meet 18%; the remaining belongs to foreign companies

Recently, Vietnam has been developing third party logistics and achieved initial success Those who do domestic 3PL understands every road, every bridge, every clause of law in Vietnam, and have been succeeded as Vietranstimex, Vinatrans, Sotrans, Vietfracht and so on

1.7.4 Weather volatility

Freight forwarding activities relate transport and conduct services to make sure shipment is transported from shippers to receiver so it is clearly influenced by weather conditions During the period of time on sea, if sea is calm, cargoes will be much safety secured In contrast, if there are storms, earthquake or tsunami, the risk

of being damaged is very high

- Not only natural disasters, may be just the change in temperature between two regions can affect shipment, for instance, commodity is vaporized, there need to

be special methods to storage That heightens the costs quit much

1.7.5 Internal factors of company

Company’s operations are upon capital sources, facilities, organizational regime, company’s policies, personnel’s qualification These are critical factor to business result

For example, a company which has spacious facilities, modern means of transport will firstly creates consumers’ trust; moreover, it can meet the higher and higher demand of forwarding Besides, a company with high capital ability has huge advantage in business

A part from that, company’s policies also influences forwarding operations In sea transport, the number of stable customers is quite high, if company has

incentives to customers, they are not only loyal to company but staff also benefit during negotiation and signing contracts

Another important factor is personnel qualification They need to have knowledge about law, international commercial procedures and experience Just a small piece of carelessness can cause an unexpected conflict

CHAPTER 2: THE FREIGHT FORWARDING PROCEDURE FOR IMPORTED GOODS

2.1 Introduction about company

2.1.1 Company profile

Company name: TNN Logistics Joint Stock Company

Headquarter: Room 602, 6th Floor, DG tower, 15 Tran Phu, Luong KhanhThien District, Ngo Quyen, Haiphong

2.1.2 Business targets and business sector

- Business target:

TNN Logistics Joint Stock Company is founded to efficiently use the resources for investment and business activities in maritime fields in order to maximize profits legally; create stable jobs for employees; increase dividends for

shareholders; contribute to State budget and develop company more successfully The development goals of TNN is to become a credible Vietnam logistics company

in ASEAN with mission towards development, providing effective logistics solutions and helpful to customers; commit to shared interests between customers, employees, shareholders and the community; as well as be a business establishments based on the quality of human resources and provide the resources and training opportunities for the community With the application of advanced software technology and quality management system ISO 9001-2008 in the management along with experienced, well-trained staff, company is proud to offer standard service with reasonable prices specializing in providing integrated logistics solutions package for multinational corporations to serve customers quickly and professionally in accordance with the motto "Make the best of what we have." Over the years, TNN Logistics Joint Stock Company has been constantly growing in all aspects of the business sector and the scope of activities with the Office in Hanoi and Ho Chi Minh City

Business sector:

a) Logistics services mainly include:

- Warehousing services and goods storage

- Transport services and Customs Clearance

- Other auxiliary services including activities of receiving, storing and managing information related to the transportation and storage of goods

b) Logistics services related transportation:

- Trucking services

- Cargo tallying service

c) Other related logistics services:

- Management and distribution of paint

- Commercial retail services including inventory management, gathering, aggregation, classification of goods, distribution and delivery

- Other transport supporting services

Company can register more businesses under the resolution of the Board of directors and the scope of law

2.1.3 Company’s organizational structure

Figure 1:Company organization’s structure

Source: Collected by Author

a) Marketing Department is responsible for the following functions:

- Conduct marketing research and process information, learn about the customers

- Set up market profile and revenue forecast

- Survey the behavior of potential customers

- Segment the market, identify targets, position the brand

- Product development, product improvements to the properties that the market wants

b) Operation Department takes responsibilities of:

- Take over the missions from general coordinator, assign them to fieldworkers

Great Assembly

of Shareholders

Board of Managers

Board of Director

Marketing

Accounting Department

HR-GA Department

- Make plans and schedule to meet the demands of customer and make sure cargoes and goods are delivery on time

- Monitor ships and cargoes’ schedule to evaluate the workload and arrange vehicles as well as warehouse

c) Accounting Department involves checking and managing the finance of company Monitor the money flows, make cash advance for fieldworkers, prepare budget for special events

d) HR-GA Department takes responsibilities for recruitment, checking staff’s profile, receiving the complains to ensure the right people with the skills and qualifications appropriate, in the right job at the right time to carry out the objectives of the company

The company's organizational structure is divided into separate departments, each one specializes a profession Same as other companies, service units contains these following departments: financial accounting, administrative personnel, information management and quality management

Particularly in the business sector which represents the specialized function in the business of freight, there are three main departments:

- Forwarding unit is in charge of tasks relating to professional intermediary services which are responsible for transporting cargoes to customers It contains sub-divisions taking responsibility in each certain stage of forwarding such as consolidation, logistics and so on

- Shipping agent specializes in directly supplying ships, vessels, container to meet the demand of maritime transport activities

- Inventory and preservation unit takes responsibility of containers and cargoes storage; preserving cargoes from being damaged, broken down and lost

2.1.4 Business results in 4 th quarter 2015

Table 1: Business result in 4th quarter, 2015

Source: Collected by Author

The table shows the statistics of company’s business in the 4th quarter, 2015

If compare to 2014, the revenue of sale and service increased over 1 billion and the cost of goods rose by nearly 5 billion at the There is a huge increase in total profit

No Indicator Amount (VND)