RECOMMENDATION TO IMPROVE FREIGHT FORWARDING PROCEDURE FOR IMPORTED GOODS IN TNN LOGISTICS JOINT STOCK COMPANY

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

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

HAI PHONG – 2015

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

Vietnam has been a member of WTO; this is a great opportunity for domesticsbusinesses 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 severecompetition from foreign businesses as well as others inside Vietnam Therefore, inorder to survive, companies need to enhance management ability so that they canwork 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 moreprofessional 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 beensubmitted before

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

Student Name and Signature

Ngô Quốc Việt

Firstly, I would like to express my sincere gratitude to my advisor Ms PhamThi Yen for the continuous support of my dissertationand related research, for theirpatience, motivation, and immense knowledge Their guidance helped me in all thetime of research and writing of this thesis I could not have imagined having a betteradvisor and mentor for my dissertation.

Secondly, I would like to say thank you to all staff in TNN Logistics Companythose who have given me facilities to deepen my knowledge about logisticsindustry Thank to forwarders of company, I have gained my practical skills andunderstanding 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 inthe 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 11FIGURE 2: Process of freight forwarding for imported goods 17FIGURE 3: Process of customs clearance 19

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

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

of labor and international specialization However, when it comes to import andexport activities, we cannot ignore freight forwarding because they are inseparableactivities The scale of import and export operation has been increasing in currentyears; it is the main reason for the huge growth of forwarding actives, especially seafreight forwarding in both width and depth Besides, with 3000 km coastline andmany types of ports, Vietnam forwarding industry has been achieving significantprogresses Quantity and value of cargoes through ports always account bigproportion of total value of international cargoes in Vietnam Forwarding is the laststep but very important of commercial contracts If it isn’t taken place in time, ornot logically, there will be stagnation, congestion which cause damage for bothseller 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 oftime, shortcomings are inevitable I look forward to receiving the suggestion andcomments 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 thecarriage, consolidation, storage, handling, packing or distribution of the goods aswell as ancillary and advisory services in connection therewith, including but notlimited to customs and fiscal matters, declaring the goods for official purposes,procuring insurance of the goods and collecting or procuring payment or documentsrelating to the goods.” According to 2005 Vietnam commercial law, freightforwarding is commercial acts; forwarders receive cargoes from shippers, organizetransportation, warehouse, depot and related paperwork and services in order todeliver cargoes to buyers under the mandate of shippers, transporters or otherforwarders

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 doservices 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 andshipping of merchandise on behalf of its/his shippers It usually provides a fullrange of services including: tracking inland transportation, preparation of shippingand export document, warehousing, booking cargo space, negotiating freightcharges, freight consolidation, cargo insurance, and filing of insurance claims

In the international business, transporting cargoes from seller to buyer usuallygoes through more than one mode of transportation with documents of export,import and other related papers Therefore, forwarders appear with the mission ofarranging 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 businessmanhaving business certificate of freight forwarding services

1.2 Significance

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

of capital, labor and exchange of merchandise within regions and countries Fromthat, nations can expand production, capabilities and consumption, and improvepeople's lives Freight forwarding is an important link in the process of reproductionfor transport industry in particular and import-export activities in general; makingcommodity circulation worldwide, contributing to boost the production, improve thequality and low down the costs

Forwarding network is covering the globe with bustling activities Theforwarding agencies together create networks in airports, sea port, cities… takingresponsibilities of a massive volume of imported-exported cargoes The advent offorwarders 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 twosides meet the demand of punctuality under provisions in contract, and makes thecustoms procedure become faster

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

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

it requires forwarders to have specialized knowledge and dynamic agility If aforwarder is weak at profession, the shipment can be delayed and there will bedifficulties such as slow delivery This can make businesses or shippers lackmaterials 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 relatedprocedures by themsleves, forwarder wil be on behalf of them do all Freightforwarders can provide their services through foreign agencies, affiliates or throughtsubcontractors

 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 forcargoes 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 theagency 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 andobligations:

- 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 mustimmediately notify the customer

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

- Must perform duties in a reasonable time if the contract is not mentionedabout 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 oftenhave experience and knowledge in hire means of transport so they know whichshipping line is reliable with reasonable price and specific schedule

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

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

- Forwarders can also help businesses fill in the documents as well as tax codeproperly 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 stronglyinfluenced by international situation Just a small change in the import-exportpolicies in a nation which is in relationship with company can increase or decreasethe volume of cargoes Recently, there are movements in the world, conflict inSouth China Sea, the escalated tension between China and Japan… which havehuge impacts on good circulation

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

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

1.7.2 Macro- management mechanism of State

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

When it comes to macro-management mechanism, we cannot just mentionpolicies about sea transport or forwarding Mechanism includes all polices relatingimport and export activities Vietnamese government has issued many policiesfacilitating 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 importsmakes the volume of imports decrease so the forwarding activities for importedshipment also go down

About customs policy, in the past, customs officers would help shippers tofulfill customs declaration Now that responsibility belongs to shippers; this makesthe 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 wasdeveloping; logistics has been gradually contributing to the economic development

of country According to the Ministry of Industry and Trade, logistics in Vietnamaccounts for 15-20% of GDP (about 12 billion US dollars) - a huge sum of moneyand 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 is20-25% in average and now there are about 800 companies working in logistics atdifferent scales The potential development of logistic services is even greater whenVietnam trade turnover is considered to have the fastest growth rate in the region toalmost 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 andimports 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 achievedinitial 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 makesure shipment is transported from shippers to receiver so it is clearly influenced byweather conditions During the period of time on sea, if sea is calm, cargoes will bemuch 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 betweentwo 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, organizationalregime, company’s policies, personnel’s qualification These are critical factor tobusiness result

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

A part from that, company’s policies also influences forwarding operations Insea 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 benefitduring negotiation and signing contracts.

Another important factor is personnel qualification They need to haveknowledge about law, international commercial procedures and experience Just asmall 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, LuongKhanhThien District, Ngo Quyen, Haiphong

Office in Ho Chi Minh: 18B Lưu Trọng Lư, Tân Thuận Đông Street, 7th

District, Ho Chi Minh

Tel/Fax: 08 222 97 694

TNN logistics joint-stock company is founded in 2003 in Haiphong; it is amember of International Federation of Freight Forwarders Association (FIATA),Vietnam Freight Forwarders Association (VIFFAS) and Vietnam Chamber ofCommerce and Industry (VCCI) At present, TNN has become popular in themarket and is regarded as one of successful companies in logistics

2.1.2 Business targets and business sector

- Business target:

TNN Logistics Joint Stock Company is founded to efficiently use theresources for investment and business activities in maritime fields in order tomaximize 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 logisticssolutions and helpful to customers; commit to shared interests between customers,employees, shareholders and the community; as well as be a businessestablishments based on the quality of human resources and provide the resourcesand training opportunities for the community With the application of advancedsoftware technology and quality management system ISO 9001-2008 in themanagement along with experienced, well-trained staff, company is proud to offerstandard service with reasonable prices specializing in providing integrated logisticssolutions package for multinational corporations to serve customers quickly andprofessionally in accordance with the motto "Make the best of what we have."Over the years, TNN Logistics Joint Stock Company has been constantlygrowing in all aspects of the business sector and the scope of activities with theOffice 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 andmanaging 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

Recommendation to improve freight forwarding procedure for imported goods in TNN Logistics

Joints Stock Company

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

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

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

c) Accounting Department involves checking and managing the finance ofcompany Monitor the money flows, make cash advance for fieldworkers, preparebudget for special events

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

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

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

- Forwarding unit is in charge of tasks relating to professional intermediaryservices which are responsible for transporting cargoes to customers It containssub-divisions taking responsibility in each certain stage of forwarding such asconsolidation, logistics and so on

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

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

Table 1: Business result in 4th quarter, 2015

1 Revenue of sales and

11 Total profit before tax 92,451,320

12 Income tax expense of

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 thecost of goods rose by nearly 5 billion at the There is a huge increase in total profitbefore tax between 2014 and 2015 In the November 2015, it is 92,451,320 VNDwhile it was only 5,557,507 VND in 2014 The same happened to profit afterincome tax It is 70,490,308 and 4,168,130 in 2015 and 2014 respectively Although