RECOMMENDATIONS TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR EXPORTING FCL CARGOES IN DONG TAI GLOBAL LOGISTICS AND TRADING CO , LTD

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAININGVIETNAM MARITIME UNIVERSITY STUDENT NAME: PHAM THI DUNG DISSERTATION GLOBAL STUDIES AND MARITIME AFFAIRS RECOMMENDATIONS TO IMP

MINISTRY OF TRANSPORTATION MINISTRY OF EDUCATION & TRAINING

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: PHAM THI DUNG

DISSERTATION

GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATIONS TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR EXPORTING FCL CARGOES IN DONG TAI

GLOBAL LOGISTICS AND TRADING CO., LTD

VIETNAM MARITIME UNIVERSITY

STUDENT NAME: PHAM THI DUNG

CLASS: GMA 02

DISSERTATION

GLOBAL STUDIES AND MARITIME AFFAIRS

RECOMMENDATIONS TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR EXPORTING FCL CARGOES IN DONG TAI

GLOBAL LOGISTICS AND TRADING CO., LTD

Division : Logistics

HAI PHONG –2015

The trade between a country and other one increasingly leads to the marketdemands of freight forwarding service of imported and exported cargoes alsoincreasing in the world As a result, Vietnam enterprises which have been operating inthis sector have more opportunities to develop and gain benefits Being aware of thishigh demand of market Dong Tai Global Logistics and Trading Co., Ltd was foundedand operated in the field of export and import service The company would like to takethis opportunity to be seen as one of the most active forwarder in Vietnam It isdiversified total logistics provider with mainstream activities in forwarding,international ocean freight, air freight, warehousing & distribution, Logistics anddomestic transportation

Recognizing the importance of freight forwarders services in trading importedand exported goods combine with the learned knowledge in the internship time in thecompany, I chosen to study the topic “Recommendations to improve freightforwarding procedure for exporting FCL cargoes in Dong Tai Global Logistics andTrading Co., Ltd” From analyzing the strengths and weaknesses of the company,some recommendations are proposed to improve freight forwarding procedures in thecompany The dissertation is structured as follows:

Chapter I: Literature review

Chapter II: Freight forwarding procedure for exporting FCL cargoes of Dong TaiGlobal Logistics and Trading Co., Ltd

Chapter III: Recommendations to improve freight forwarding procedures forexporting FCL cargoes in Dong Tai Global Logistics and Trading Co., Ltd

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

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

Student Name and Signature

Pham Thi Dung

Firstly, I would like to express my sincere gratitude to my supervisor Pham ThiYen for the continuous support of my dissertation Her guidance helped me in all thetime of research and writing of this dissertation I could not have imagined having abetter advisor and mentor for my dissertation

Secondly, I deeply thank Director – Mr Do Viet Thanh and staffs at Dong TaiGlobal Logistics and Trading Co., Ltd for the help and guidance during internship

TABLE OF CONTENT

PREFACE i

ACKNOWLEDGEMENT ii

TABLE OF CONTENT iii

LIST OF ABBREVIATIONS v

LIST OF TABLES vi

LIST OF FIGURES vii

INTRODUCTION 1

1 Necessity 1

2 Methodology 1

3 Research scope 1

4 Research findings 2

CHAPTER 1: LITERATURE REVIEW 3

1.1 Definitions of freight forwarding services and freight forwarder 3

1.1.1 Freight forwarding services 3

1.1.2 Freight forwarders 3

1.2 The rights and obligations of the forwarder 5

1.3 The relationship of freight forwarder and related parties 6

1.4 Legal basis 7

1.4.1 Nation law 7

1.4.2 International law 7

1.5 Procedure of freight forwarding for exporting FCL cargoes 8

1.5.1 The role of freight forwarding of cargoes by sea 8

1.5.2 Definition of FCL 8

1.5.3 Process of freight forwarding for exporting FCL cargoes 8

1.5.4 Documentaries in export 8

CHAPTER 2: FREIGHT FORWARDING PROCEDURE FOR EXPORTING FCL CARGOES IN DONG TAI GLOBAL LOGISTICS AND TRADING CO., LTD 11

2.1 Introduction about company 11

2.1.1 General information 11

2.1.2 Organization 13

2.1.3 Personnel 15

2.1.4 Business model 19

2.1.5 Business results in 2012-2014 19

2.2 Freight forwarding procedure for exporting FCL cargoes in Dong Tai Global Co., Ltd 21

2.2.1 Freight forwarding procedure for exporting FCL cargoes at Dong Tai Global Co., Ltd 21

2.2.2 Explain the process 22

CHAPTER 3: RECOMMENDATIONS TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR EXPORTING FCL CARGOES IN DONG TAI GLOBAL LOGISTICS AND TRADING CO., LTD 28

3.1 Strengths and weaknesses 28

3.1.2 Strengths 28

3.1.2 Weaknesses 29

3.2 Recommendations to improve freight forwarding procedure for exporting FCL cargoes in Dong Tai Logistics and Trading Co., Ltd 30

CONCLUSION 33

REFERENCES 34

ANNEX 35

LIST OF ABBREVIATIONS

B/L Bill of Lading

C/O Certificate of Origin

CFS Container Freight Station

CY Container Yard

FCL Full container load

FIATA International Federation of Freight Forwarders Associations

THC Terminal Handling Charge

VCCI Vietnam Chamber of Commerce and Industry

VIFFAS Vietnam Freight Forwarders Association

VLA Vietnamese Logistics Association

LIST OF TABLES

TABLE 2.1: The classification of employees by education level………… ……….15TABLE 2.2 Business result in 2012-2014 and estimated in 2015……… 20

LIST OF FIGURES

FIGURE 1.1: The relationship between forwarder and related parties………… ……7FIGURE 2.1: Organizational chart………… ….……… ……….13FIGURE 2.2: The classification of employees by gender……… … 16FIGURE 2.3: The procedure of freight forwarding for exporting FCL cargoes…… 21

on how to move cargoes in the most efficient way from one place to another place.Freight forwarding is diversified with participation of various economic sectors andservices It is the fact that freight forwarding is still new concept in Vietnam.Freight forwarding companies find some difficulties because of lacking extensiveknowledge of documentation requirements, regulations, transportation costs andbanking practices that lead to in efficiency in exporting process Therefore,researching to enhance forwarding procedure for exporting FCL cargoes isnecessary for company to create competition in domestic as well as global market.

2 Methodology

The internship at Dong Tai Global Logistics and Trading Co., Ltd has given

me a chance to practice the process of freight forwarding for exporting FCLcargoes Also, I have gained the experiences and valuable knowledge related tofreight forwarding In order to do this dissertation, I use the following researchmethods:

- Observation: this method was used to scrutinize things that cannot be easilysported out such as the activities and attitude of staff

- Participation: in order to understanding the freight forwarding procedure ofexported cargoes, I participated in the daily activities of the company.Particularly, I had chances to go to shipping lines such as SITC, Nam Sung,NYK, VICONSHIP; customs departments, for example, border-gate customssub-department; ports; depots and related institution as Phytosanytary sub-department area I

3 Research scope

Dong Tai Global Logistics and Trading Co., Ltd provides various services offreight forwarding However, the main scope of this dissertation is research on the

freight forwarding procedure for exporting FCL cargoes in Dong Tai GlobalLogistics and Trading Co., Ltd.

CHAPTER 1: LITERATURE REVIEW1.1 Definitions of freight forwarding services and freight forwarder

1.1.1 Freight forwarding services

Freight forwarding carries with it a broader sense; it is the organization oftransport, care of goods to be shipped, then unloading, warehousing, transport,packaging, procedures, and documents Therefore, there are many definitions offorwarding According to International Federation of FreightForwarders Associations (FIATA, 2004), 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 inconnection therewith, including but not limited to customs and fiscal matters,declaring the goods for official purposes, procuring insurance of the goods andcollecting or procuring payment or documents relating to the goods”

Vietnam Commercial Law in 2005 (from article 233 to article 240) regulatingFreight Forwarding and Logistics services are “commercial activities wherebytraders organize the performance of one or many jobs including reception,transportation, warehousing, yard storage of cargoes, completion of customsprocedures and other formalities and paperwork, provision of consultancy tocustomers, services of packaging, marking, delivery of goods, or other servicesrelated to goods according to agreements with customers in order to enjoy servicecharges.”

1.1.2 Freight forwarders

According to FIATA, Freight Forwarder means the person concluding acontract of Freight Forwarding Services with a Customer According to VietnamCommercial Law (2005), people doing freight forwarding service as traders whohave certified business registration of freight forwarding service

From the above definitions we can draw comments: The forwarding activitiesunder the contract signed with shippers entrusted, to protect the interests ofshippers The delivery care about transport, but not exactly be the carriers They canuse or hire transport and also have means of transportation, can participatetransportation, but for trustee shippers Along with the organization of transport,forwarding people also do many other things in scope mandated by shippers to takethe goods from one place to another under the terms already committed Although

in different countries, the name of the delivery people may be different, however weall carry a common name in international transactions as international freightforwarder, and do a similar service, which is service delivery.

 The scope of main activities of freight forwarders

A Operating on behalf of the exporter - the shipper

- Selecting means of transport, monitoring entry plan and scheduling receiveand deliver cargoes

- Sorting and packing of goods for transport with the most beneficial effects

- Delivering cargoes to the carrier, on yards of the carrier (CY)

- Preparing documents

- Research the basic content of the L/C, the conditions of carriage, researchpolicies in managing import and export goods in order to establish a bill oflading and related documents

- Undertake some other works include: Storage, sorting packaged goods andgoods weighing measurement, type the code symbol marks

- Advising people to buy insurance or export under the entrusted of the exportinsurance

- Taking certificates and insurance policies

- Doing the work related to transportation of customs procedures, logistics,loading, finance, cost, and currency exchange

- Monitoring the transport process through the relationship with the carrier andpromptly notify damage to the shipper

B, Operating on behalf of the importer - consignee

- Monitoring and supervising the ship schedules and is expected time to entryports

- Supervising the transport of goods

- Receiving and checking the related documents

- Arrange the customs formalities, to pay the fee

- Organizations receiving cargoes

- Understand custom produces to advise importers

C, Operations as the carrier

The forwarders may operate as a carrier, which means that they are responsible forreceipt, supervision and preservation of goods and responsible for delivering goods

to the consignee on time Given the role of the carrier, the forwarders, after takingresponsibility for goods transport, the forwarder is obliged to provide to the shipper

a bill of lading perfect, responsible for goods when the goods are under theresponsibility of the carrier

D, Ensure some tasks and other services

- Paying attention to ensure of the transport of goods from a place to anotherplace, mainly as: caring for the transport of oversize and overweight, thetransportation of live animals and ensure the safety of epidemic prevention

- Organizing transport of dangerous goods in accordance with the internationalconventions on transport of dangerous goods

- Apart from the services mentioned above, the delivers can take on otherservices that may arise during transport and import and export activities such

as inform their customers about consumer demand, competitive situation, thesituation changes in the policies of the Government on goods imported andexported

1.2 The rights and obligations of the forwarder

 The rights of the forwarder

- The forwarders have rights to claime wages and reasonable expenses arise

under the contract for the benefit of customers on prices and paymentmethods for the two sides agreed

- The forwarders have the right to retain or reclaim brokerage commissions

- The forwarders has the right to hold the shipment and documents related to

the goods to ensure that the customer's debt until paid

 The obligations of the forwarder

- Forwarders will perform the tasks completely and accurately as required on

the agreements with their customers in a reasonable time

- In case of not implementing follow the request of customers but perform the

tasks in the aim of customer interests, the forwarders do not incur anyliability as well as other costs

- Forwarders are responsible if they do not used all reasonable measures in the

implementation of freight forwarding service In this case, the forwarders

have to compensate the customer for the loss and damage goods as well asfor the direct financial losses.

- Forwarders are not responsible for acts and shortcomings of third parties,

such as the carrier, warehousing, port authorities, unless the freightforwarders are not really carefully in selecting, guiding or monitoring of thethird party

1.3 The relationship of freight forwarder and related parties

As mentioned above, the freight forwarder is a receiver shippers mandate tocare of the transportation of goods from one place to another place However, theprocess of transporting cargoes is controlled many authorities through severalstages Therefore, the freight forwarder undertakes the tasks related to multipleparties

Forwarders not only work with the shipper and the consignee but alsotransactions with third parties in the service process our customers

a The Government and the other department parties

- The Customs office for customs declarations

- Port Authority for carrying out procedures through the Port

- The central bank for exchange

- Ministry of Health for health permits, phytosanitary

- Consular officials to obtain a certificate of origin

- Import Authority controls

- The transport license

b The private party

+ The carrier or other agents, such as:

- Ship owner

- People supplying road, rail, air transportation

- The inland transportation business in terms of schedule and save shippingcharges

+ The warehouse to store goods

+ The insurance for goods

+ Organizating packed goods

+ Commercial banks to carry out documentary credit

The diagram below shows the relationship of the forwarding and relatedparties

The government and competent authorities

Port authority

Export-import control, Exchange control, Transportation, licesing

Customs authority

Consignor/consignee Forwarder The carrier and other agentsShip owner

People supplying road, rail air transportation

Warehouseman Organized packing Bank

Legal proceedings People are resposibility for

liability insurance

Cargo insurance

people

Figure 1.1: The relationship between forwarder and related parties

(Source: Collected by author)

1.4.2 International law

The system of international law relating to transportation of goods by seaconcluding: Hague Rule 1924, Humburg Rule 1978 and Rotterdam 2010 Anotherinternational regulation is Incoterms 2010 standard interpretation of trade terms ofthe International Chamber of Commerce This basis defines clearly the rights, the

obligations and the risk of the buyer and seller in international trade Besides, eachnation may build its own law to adjust duties and responsibilities of the parties.However, in case of having a conflict, international law would be applied to resolvedisputes.

1.5 Procedure of freight forwarding for exporting FCL cargoes

1.5.1 The role of freight forwarding of cargoes by sea

Sea transport is essential to the world’s economy as over 90% of the world’strade is carried by sea and it is, by far, the most cost-effective way to move a largequantity of goods and raw materials around the world Sea transportation plays animportant role in transaction of cargoes Without shipping the export of goods onthe scale necessary for the modern world would not be possible Seaborne tradecontinues to expand, bringing benefits for consumers across the world throughcompetitive freight costs Thanks to the growing efficiency of shipping as a mode oftransport and increased economic liberalization, the prospects for the industry'sfurther growth continue to be strong

1.5.2 Definition of FCL

FCL stands for Full container load FCL term is used in ocean freight servicesdescribing full container shipping from one place to another place Shipmentswhose volume and weight are close the limits of a container or for which theshipper requests that it be the only cargo in a container

1.5.3 Process of freight forwarding for exporting FCL cargoes

Shipper or person who is entrusted by shipper send Booking request toshipping line Shipping line sends back shipper a booking confirmation Shipperbring the booking confirmation to shipping line to receive seal and take emptycontainers out of container depot and deliver to their place for cargo packing.Shipper invites representative of customs, check and monitors the process ofstuffing cargoes to containers then seal container Shipper deliver container to CYbefore closing time

1.5.4 Documentaries in export

Exporters should seriously consider having the freight forwarder handle theformidable number of documentary that export requires; freight forwarders arespecialists in this process The following documents are commonly used in

exporting; which of them are actually used in each case depends on therequirements of both our government and the government of the importing country.

* Sale contract: A legal documentary that being signed and agreed officially

between buyer and seller and would become the legal arrangement for both partieswhen cargoes are transported

* Commercial invoice: Commercial invoice is a bill for goods from the buyer

to the seller A commercial invoice should include basic information about thetransaction, including a description of the goods, the address of the shipper andseller, and the delivery and payment terms The buyer needs the invoice to proveownership and to arrange payment Some governments use the commercial invoice

to assess customs duties

* Bill of lading: A bill of lading is a required document to move a freight

shipment It works as a receipt of freight services, a contract between a freightcarrier and shipper The B/L is a legally binding document providing the driver andthe carrier all the details needed to process the freight shipment and invoice itcorrectly

* Certificate of origin: Certain nations require a signed statement as to the

origin of the export item Such certificates are usually obtained through asemiofficial organization such as a local chamber of commerce A certificate may

be required even though the commercial invoice contains the information

* Inspection certification: Some purchasers and countries may require a

certificate of inspection attesting to the specifications of the goods shipped, usuallyperformed by a third party Inspection certificates are often obtained fromindependent testing organizations

* Insurance certificate: If the seller provides insurance, the insurance

certificate states the type and amount of coverage This instrument is negotiablebetween the seller and the buyers

* Packing list: Considerably more detailed and informative than a standard

domestic packing list, an packing list itemizes the material in each individualpackage and indicates the type of package: box, crate, drum, carton, and so on Itshows the individual net, legal, tare, and gross weights and measurements for eachpackage Package markings should be shown along with the shipper's and buyer'sreferences

Documentation must be precise Slight discrepancies or omissions mayprevent merchandise from being exported, result in exporting firms not getting paid,

or even result in the seizure of the exporter's goods by local or foreign governmentcustoms Collection documents are subject to precise time limits and may not behonored by a bank if out of date The documentation is routine for freightforwarders or customs brokers acting on the firm's behalf, but the exporter isultimately responsible for the accuracy of the documentation

The number of documents the exporter must deal with varies depending on thedestination of the shipment Because each country has different import regulations,the exporter must be careful to provide proper documentation

CHAPTER 2: FREIGHT FORWARDING PROCEDURE FOR EXPORTING FCL CARGOES IN DONG TAI GLOBAL

LOGISTICS AND TRADING CO., LTD2.1 Introduction about company

2.1.1 General information

- Name of company: Dong Tai Global Logistics and Trading Co., Ltd

- Operational headquarter: 104+200, Nguyen Binh Khiem, Hai An, Hai Phong

- Tel: (84) 313 979356/ 357/ 595/ 351 - Fax: (84) 313 979 494

- Director: Mr Do Viet Thanh

- Tax ID: 0200438841

- Logo:

- Slogan: “One call, all services”

- Main activities: supplying air freight, sea freight, warehousing, inlandtrucking, project cargoes, customs clearance, supervisor, packing/lasing/loading service

 History and development

Dong Tai Global Logistics and Trading Co., Ltd is known as a member ofDongsue Logistics Korea The company is officially founded on December 21,

2009 has been operated in accordance with current regulations of the Government.The director is Mr Do Viet Thanh

In 2009, the company was officially established, and became an agent ofDongsue After three years of operation, the company has opened an office in Hanoiwith the functions of the business office and handling cargo air transport throughNoi Bai airports In 2014, with the development of forwarding services, thecompany oriented to Asian and international markets With world trends and future

vision correctness, the company has been extended to most of port and depot at HaiPhong, international gateway of Vietnam, coordinate partners around the world.From the first operation in 2009 with more than 29 employees, currently, thecompany has about over 45 employees The company expands not only in scale butalso in business operation Therefore, the annual revenue has been rising Althoughthere are many difficulties such as capital and competitors in the market, thecompany still tries its best to overcome and supply the best service for customers.Until now, the company has only operated over 6 years, this enterprise hassuccessfully demonstrated its business abilities and has met market needs Thiscompany has step by step to strengthened and reoriented services and businessstrategies to suit the situation of country

 Achievements

Some achievements Dong Tai Global Logistics and Trading Co., Ltd gained:

- Become a member of Vietnam Freight - Forwarders Association (VIFFAS)

- Become a member of Vietnam Chamber of Commerce and Industry (VCCI)

- Become a member of International Federation of Freight Forwarders

Association (FIATA)

- Become a member of International Chamber of Commerce

- Become a member of Vietnam Logistics Association (VLA)

 Vision and orientation

Dong Tai Global Logistics and Trading Co., Ltd has oriented to provide thecomprehensive solutions about the logistics field during business processes ofcustomers Besides that, the company can increase the competitiveness to ensuringoperational, saving cost and improving the quality of services

- Become a diversified company in the logistics field, warehousing andtransportation meet all the needs of customers in a more professional manner

- Become a company that provides the optimal logistics solutions to haveconfidence in customer to become leading enterprises in Vietnam That ispremised to support for the company on the way of development, expansionand integration with the economy world

- Human resources work in internationalization criteria to meet the needs ofdomestic and overseas market

Import Department DepartmenSale

t

Logistics Department

Export

Manager ManagerImport AccountantChief

- Completing the supply chain to provide customers the most effectivelogistics solutions with competitive quality services on the market

- Meet the increasing needs of the business with reasonable cost

- Development professional staff and skilled qualified for logistics

2.1.2 Organization

Dong Tai Global Logistics and Trading Co., Ltd which has organization byfunctions are presented as the figure 2.1 below

Figure 2.1 Organizational chart

(Source: Dong Tai Global Logistics and Trading Co., Ltd)