Recommendations to improve the freight forwarding procedure of imported animal feed cargo at an phu trading and forwarding service co , ltd

Understanding the importance of the freight forwarding service for the development of An Phu Co., Ltd, I chose the topic “Recommendations to improve the freightforwarding procedure of im

PREFACE

If trading is considered as the “blood-line” of the world economy, it can be said thatmaritime transportation is the key element to ensure blood circulation According toInternational Chamber of Shipping, it is about 90% of the world trade carried byship In order to support this potential industry, freight forwarding service was born

to enhance the development of maritime transportation and has played an importantrole Vietnam is not an exception with the strong emerge of the freight forwardingactivities 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 freightforwarding procedure of imported Animal Feed cargo at An Phu Trading andForwarding service Co., Ltd” for my dissertation

I certify that all the materials in this dissertation that is not my own work has beenidentified, and that no materials is included for which a degree has previously beenconferred on me

The contents of this dissertation reflect my own personal views, and are notnecessarily endorsed by the University

Signature

LUU THI THU TRANG

Thanks to globalization, economy of Vietnam has been developing dramatically.Along with economic growth, exchange of goods and services has also significantlyrisen 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, afterrecognizing this potential field, An Phu Trading and Forwarding Service LimitedCompany was established which has been an active player in the freight forwardingservice Therefore, recognizing the importance of freight forwarding activities innational economy development; in this dissertation, the freight forwardingprocedure of imported Animal Feed cargo by FCL method will be studied andexplained in details in the case of An Phu Co., Ltd The purpose of this study is toprovide an overview of the freight forwarding activities and to understand deeplyabout the freight forwarding procedure of imported animal feed cargo at An PhuCo., Ltd Moreover, it aims to analyze the current status quo of the above mentionedprocedure of the company

Although, the procedure is created to be compatible with specific cargo- AnimalFeed cargo, there are still some problems happening during the procedure that needfeasible solutions Thus, based on found limitations, I have proposed somesuggestions to resolve the currents limitations of the procedure in this dissertation.Therefore, this study hopes to help readers have a basic knowledge about freightforwarding service However, due to the limitations of time and length and otherexternal factors, this report still contains some drawbacks with the aim of findingthe most effective solutions for the company I really hope to receive feedback fromthe lectures to be able to complete my study

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

2.1.3 Business Performance 15

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

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

VAT Value Added Tax

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

LIST OF TABLES

Table 2.1: An Phu Co., Ltd Business Performance from 2013 to the first six months

of 2015 14Table 2.2: Volume of import, export and domestic of animal feed cargo at An Phu

Co., Ltd in 2013, 2014 and 2015 15Table 2.3: Charges and Fees to be collected by Shipping Line 19Table 2.4: The current number of staff involving in the freight forwarding procedure

of imported Animal Feed cargo at An Phu Co., Ltd 25Table 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 26Table 3.1: The difference of the working style and efficiency of staff before and

after applying F.A.S.T 32Table 3.2: Re- allocation of human resources in the procedure 34

1 The necessity of the research

Thanks to globalization, Vietnam has been immersed in the growingdevelopment of the world’s economy It can be said that International Trade ofVietnam 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 mainlytransported by sea As seaborne trade has expanded, the significant role of freightforwarding service continues to become more important The development offreight forwarding activities in import and export field in our country play a keyrole which contribute to enhance the competitiveness of goods in internationalmarket Therefore, recognizing the importance of freight forwarding activities innational economy development; in this dissertation, the freight forwardingprocedure of imported Animal Feed cargo by FCL method will be studied andexplained in details in the case of An Phu Co., Ltd Although, the procedure iscreated to be compatible with specific cargo, there are still some problemshappening during the procedure that need feasible solutions Therefore, the purpose

of this dissertation is to assess the present freight forwarding procedure of AnimalFeed cargo by FCL method at An Phu Co., Ltd and give some recommendations toimprove 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 PhuCo., Ltd to study and have deep understand about the freight forwarding procedure

of imported Animal Feed cargo by FCL method

Data collection: General information about freight forwarding service isstudied and gathered from books and internet Company’s information and statisticsare provided by company’s functional departments and websites

Interview: I interviewed some company’s staffs to get more detailedinformation about the freight forwarding procedure and their experiences as well astheir advices

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 ofimported Animal feed cargo carried out by employees of An Phu Co., Ltd Morespecific, the dissertation focuses on each detailed step to understand clearly how thecompany does its 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 animalfeed cargo at An Phu Trading and Forwarding Service Co., Ltd

Chapter 3: Recommendations to improve the freight forwarding procedure ofimported animal feed cargo at An Phu Trading and Forwarding Service Co., Ltd

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 the Comité de Liaison Européen des Commissionaires et Auxiliaires

de Transport du Marché Commun" (CLECAT) on October 29th 2004, freightforwarding is defined as following:

“Freight forwarding service is any service related to carrying, consolidating,warehousing, handling, packing or distributing goods as well as other supportingand advising services which are related to these aforementioned services Inaddition, freight forwarding service deal with not only customs or financial issuesbut also cargo insurance, charge and related documents Freight forwarding servicealso includes logistics services along with modern technology which has closerelationship with the progress of transportation, handling, warehousing and supplychain management These services can be provided flexibly to support the mainimport and export activities”[CITATION Mae04 \l 1033 ]

In Vietnam, the time that the freight forwarding service was mentioned anddefined clearly was in Article 163 of Vietnamese Commercial Law 1997 Today,the freight forwarding service has been developing more professionally and hasclose connection with other customer services which can be called logisticsservices

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, freightforwarders can be cargo owners, ship owners, handling companies or anycompanies which register to be involve in freight forwarding business In manycountries around the world, freight forwarders are known as with different namessuch as Custom agent, Custom broker, Shipping and Forwarding agent, Principalcarrier, etc However, they all has a common name in international transaction as

“The international freight forwarding” with major task being providing forwardingservice “

1.1.2 Commercial functions of freight forwarders

In general, freight forwarders can undertake many tasks in providing servicesfor customers However, in fact, they have the following basic commercialfunctions:

a Customs brokers

“

Each country has different policies and regulations for customs procedurethrough each period; therefore, exporters and importers cannot update allinformation timely In order to support them, freight forwarders do customsclearance 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 shipperand the main carrier They are in charge of being agents of carriers or shippers Infact, the freight forwarder is not responsible for carrying goods Instead, the freightforwarder can look for the third party to undertake the mission of delivery as long asthe 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 beresponsible for transition procedure In others words, they are in charge of transitingcargo from one mean of transport to others If the freight forwarders have their ownvehicles, in this case, they can act as the carrier and they must be responsible fordelivery of goods from the point that they receive goods to the destination If thefreight forwarders do not have their own vehicles, they will lease truck fromTransportation Company

d Warehousing

When customers require the storage of the goods before exporting goodsor/and after importing goods, the freight forwarders will be responsible for thisactivity as a warehousing agent

e Cargo consolidator

In order to perform this function, the freight forwarders collect various smallcargo from different customers to their warehouses In there, they organize, sort,categorize and combine small cargo which have the same destinations into largercargo to utilize the capacity of vehicles

f Carriers

In this case, the freight forwarders perform as actual carriers from when theyreceive goods to the cargo are delivered to the destination Therefore, they can beNon-vessel Operating Common Carrier (NVOCC) or Multimodal TransportOperator (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 ofcustomer during the performance of contracts for plausible reasons and in theinterests of customers

The freight forwarders have obligations to perform all the instructions of thecustomers In the case that the forwarders do not follow one or any instructions ofcustomers, if they have reasonable justifications and all they do is for interests ofcustomers, it is accepted

b Responsibilities of the freight forwarder

The freight forwarders are responsible for any incurred problem if they donot work hard and use reasonable measures in implementing forwarding services Inthis case, they have to compensate customers’ loss However, freight forwarders

are not responsible for any acts and omissions of the third parties such astransporters, handling companies, and port authorities or other forwarders.

c Rights of the freight forwarder

The freight forwarders have rights to enjoy service charges and otherreasonable expenses

The freight forwarders have rights to complete their obligations to thecustomers under the contract

of one container However, in fact, the shipper is not required to use every singlesquare meter of a container to send goods The goods inside containers can be halfloaded 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 andthey have close relationship to the freight forwarder:

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 includingtransportation, purchase and sale contracts, payments, customs procedures;therefore, the freight forwarders show understand well about legal regulations offreight forwarding service

1.2.1 Vietnamese Law

Besides international conventions, each country can adjust law based oninternational law to accordant with its nation Vietnamese authorities have issuedmany legal documents related to the freight forwarding services including:

Import- Export authorities:

- Taxation Department - Customs

- Port authority - Foreign ministry

- Health ministry

Shippers

(Exporters)

Consignees (Importers)

Freight Forwarder

- Vietnamese Commercial Law 2005 ( from Article 233 to Article 240) andDecree 140/2007/ND-CP September 5th 2007 which is regulated in the detail

of Vietnamese Commerce Law about business conditions for logistics andlimited liability for traders providing logistics services

- General regulations: The Civil Law 2005; The Enterprise Law 2005; TheInvestment Law 2005, Tax Law and other regulations about trade insurance,anti-corruption, etc

- Specialized regulations: Vietnam Maritime Code 1990, Decision 2016regulates the rule of loading, unloading, forwarding and storage of goods inVietnam’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 Lawrelating to Bill of Lading 1924 (Hague Rules/Hague-Visby Rules); FirstProtocol (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 oftrade terms of the International Chamber of Commerce

- UCP 600 (Uniform Customs and Practice for Documentary Credits) by theInternational Chamber of Commerce.”

1.2.3 Related documents in the freight forwarding procedure

- “Commercial contract: is a legal documentary agreement between importerand exporter stipulating every detail of the transaction It is a legally bindingdocument

- Commercial Invoice is as formal demand note for payment issued by theexporter to the imported goods sold under the sale contract It should givedetails 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 Thecommercial invoice is also used for the customs clearance of goods

- 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 thecarrier but also the consignee

- Certificate of origin is a certificate to certify the place of manufacture, thenature, quantity and value of the goods It is used to support the claim forpreferential tariff entry in importing country

- Customs declaration is a statement made to the Customs, declaring fullparticulars 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 ordrink in fresh, raw or procedureed including 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 thelist that are allowed to circulate in Vietnam issued by the Ministry ofAgriculture and Rural Development

- Organizations and individuals importing animal feed must be responsible forthe quality and labeling of goods prescribed by law; responsible forcollection of goods that do not meet the need of quality assurance andcompensation for damage caused to farmers

- The procedures of importing animal feeds must comply with the provisions

of the current law.[CITATION Vie10 \l 1033 ]

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; offshorefishing boats; animal feed, poultry and other livestock feed are not subjected to payVAT.[CITATION Min01 \l 1033 ]

c Decree 26/2012/TT-BNNPTNT about inspecting quality of animal feed product

Animal feed product imported must be implemented quality inspection asaccording to Article 15 of Circular No 66/2011 / TT-BNN dated 10/10/2011 of theMinistry of Agriculture and Rural Development [CITATION Min12 \l 1033 ]

CHAPTER 2: THE STATUS QUO OF THE FREIGHT FORWARDING PROCEDURE OF IMPORTED ANIMAL FEED CARGO AT AN PHU TRADING AND FORWARDING

SERVICE CO., LTD2.1 Company Overview

- Company’s name: An Phu Trading and Forwarding Service LimitedCompany

- Main Office Address: 43 Dien Bien Phu, Hong Bang District, HaiPhong

- Representative Office Address: Room 3, Floor 4, Thanh Dat Building, 3 LeThanh 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 developingdramatically and it leads to the development of freight forwarding service It can besaid that the freight forwarding plays a vital role in the completion of anexport/import procedure Specifically, its contribution helps to minimize the risksthat may occur during the exporting/importing procedure After recognizing thepotential of this industry, An Phu Trading and Forwarding Service LimitedCompany was established in May 8th 2008

After 7 years of establishment and development, An Phu Co., Ltd hasdeveloped and expanded freight forwarding service with a strong customer base andincreasing reputation

The mission of company is to provide freight forwarding service forcustomers with the most achievable solutions and highest responsibilities.Moreover, company’s mission is also to bring higher value of the company bycontributing to the development of the national economy

Vision

The vision of company is to become one of the leading freight forwardingservice providers in Hai Phong in particular and in the North of Vietnam in general,and continuously earning the trust of Vietnamese customers

Objectives

During the operation, the strategic objective of An Phu Co., Ltd is tocontinuously improve service and maximize profits In addition, workingenvironment should be professional so that its employees are able to develop fully

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 recentyears, the company has expanded its operation southward of Vietnam

Main customers

The main customers of the company that can be mentioned are Viet DungAluminum Joint stock company, Hong Trien Limited Company, EH VietnamLimited Company and many other potential companies

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 eachdepartment will be managed by specialized officers The common problems of thecompany will be discussed between the Director and Deputy Director

Director is the legal representative of the company who bears the highestresponsibilities and makes the final decisions

Deputy Director is the person who is on the behalf of the Executive Directorunder the direct authority of the Director and responsible for managing businessactivities and supporting Director in the management and planning

Sale Department is in charge of organizing and implementing the business

for new customers This department plays a pivotal role in the operation of thecompany, in particular, it helps to expand the market share and attract morepotential customers.

Accounting Department is in charge of organizing and implementingaccounting operations, reporting accurate data periodically, monitoring businessactivities continuously and efficiently

Import-Export Department is the most important department in An PhuCompany 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 morespecific, the team is responsible for implementing forwarding procedure fromcustomer clearance to delivering goods to customers

Documentation team is in charge of tracking, managing, storing anddispatching documents The team supports forwarding team to complete assignedwork effectively in drafting necessary customs records and required documents Inaddition, the team also regularly monitors the whole forwarding procedure andcontinuously contacts with the customer to notify necessary information of thecargo.”

2.1.3 Business 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 businessperformance 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 bemore 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 sixmonths of 2015 was close to total revenue in 2014 with approximately 3.5 billionVND It can be said that the growth rate of the company is increasing considerably

Following the same upward pattern with total revenue, the amount ofoperation cost increased by time To be more specific, there is a slight increase inthe total cost with 3.6 billion VND in 2014 against 4.8 billion VND in 2013 Itshows that the company has had right policies and strategies to control andminimize company’s expense

Regarding to profit, the company’s total profit after tax almost doubled fromapproximate 284 million VND in 2013 to 450 million VND in 2014 Moreover, inthe first six months of 2015, the profit after tax of company reached 476 millionVND This growth leads to the increase in average wage of company’s employeeswith 4 million VND in 2015 against 2 million VND in 2015

In conclusion, it can be said that all above statistics forecast a strong andsustainable development of the company in the near future

Table 2.2: Volume of import, export and domestic of animal feed cargo at An Phu

Co., Ltd in 2013, 2014 and 2015Year

(Adapted from Accounting Department Copyright 2015 by An Phu Co., Ltd.

Reprinted with permission)

The given table 2 illustrates the distribution of Animal feed cargo volumethat An Phu Co., Ltd served its customers in the period from 2013 to the first sixmonths of 2015 As can be observed from the above table, import volumeaccounted for the largest proportion in the shown period and kept the role of domaincargo To be more specific, in 2013, the volume of import was 2313 TEUs, being