Solutions to improve the goods import process at phuc hung investment and trading joint stock company

ACADEMY OF POLICY AND DEVELOPMENT INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE GRADUATION THESIS Topic: “SOLUTIONS TO IMPROVE THE GOODS IMPORT PROCESS AT PHUC HUNG INVESTMENT AND T

ACADEMY OF POLICY AND DEVELOPMENT

INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE

GRADUATION THESIS

Topic: “SOLUTIONS TO IMPROVE THE GOODS IMPORT PROCESS

AT PHUC HUNG INVESTMENT AND TRADING JOINT STOCK COMPANY”

Instructor: Pham Ngoc Tru, PhD

Hanoi, July 2020

ACADEMY OF POLICY AND DEVELOPMENT

INTERNATIONAL SCHOOL OF ECONOMICS AND FINANCE

GRADUATION THESIS

Topic: “SOLUTIONS TO IMPROVE THE GOODS IMPORT PROCESS

AT PHUC HUNG INVESTMENT AND TRADING JOINT STOCK COMPANY”

Instructor: Pham Ngoc Tru, PhD

Hanoi, July 2020

DECLARATION

I would like to assure the graduation thesis on the topic “Solutions to improve the goods import process at Phuc Hung Investment and Trading Joint Stock Company” is my individual research project with the enthusiastic guidance

from Pham Ngoc Tru, PhD All data used in the analysis of this thesis and the

results of the study are my own self-study and an objective analysis, honesty, of clear origin and have not been published in any form

I accept full responsibility for any dishonesty in the information used in this research

Hanoi, July 05, 2020

Author

Nguyen Phuong Dung

CONTENTS

DECLARATION ii

LIST OF ACRONYMS v

LIST OF TABLES AND FIGURES vi

INTRODUCTION 1

1 Research motive 1

2 Research objective and mission 2

3 Research object and area 2

4 Research methods 2

5 Research structure 4

OVERVIEW OF PROCESS OF IMPORTING GOODS 5

Chapter 1 1.1 Import 5

1.2 Process of importing goods 12

1.3 Overview of the current situation of Vietnam’s import procedures 31

Chapter 2 PROCESS OF IMPORTING GOODS AT PHUC HUNG INVESTMENT AND TRADING JOINT STOCK COMPANY 35

2.1 General introduction about Phuc Hung Investment and Trading Joint Stock Company 35

2.2 Business performance of the Company in recent years 37

2.3 Reality of the process of importing goods at Phuc Hung Investment and Trading Joint Stock Company 45

2.4 General assessment on the process of import of goods at Phuc Hung Investment and Trading Joint Stock Company 63

Chapter 3 SOLUTIONS TO IMPROVE THE PROCESS OF IMPORTING GOODS AT PHUC HUNG INVESTMENT AND TRADING JOINT STOCK COMPANY 68

3.1 Development orientation of the Company in the coming years 68

3.2 Solutions to improve the process of importing goods at the Company 69

CONCLUSION AND RECOMMENDATIONS 77

REFERENCES 82

LIST OF ACRONYMS

CAD Cash Against Documents Phương thức trao chứng từ trả tiền

ngay

CIF Cost, Insurance, Freight Tiền hàng, bảo hiểm, cước phí

PJICO Petrolimex Insurance

Corporation Tổng Công ty Bảo hiểm PJICO

Commerce and Industry

Phòng Thương mại và Công nghiệp

LIST OF TABLES AND FIGURES

Table 1.1 Favorability in import transactions of ASEAN countries from June 2018

to June 2019 31

Table 1.2 Vietnam's cross-border trade transaction index from 2012 to 2019 32

Table 1.3 Average cost and time to carry out imports in Vietnam in 2019 33

Table 2.1 Structure of imported products 40

Table 2.2 General analysis of the number and value of import contracts from 2016 to 2019 42

Table 2.3 Some typical contracts are signed by fax machine 49

Table 2.4 L/C payment fee at Vietcombank 56

Table 2.5 Mistakes when carrying out Customs procedures in 2019 65

Figure 2.1 Total import turnover from 2016 to 2019 41

Figure 2.2 Import process of animal feed products at Phuc Hung JSC 45

Figure 3.1 Telegraphic Transfer flow chart 75

INTRODUCTION

1 Research motive

Foreign trade activities play a very important role in the era of globalization, regional and international economic integration Participation in integration and expansion of international trade relations has become an indispensable trend of nations In particular, the issue of promoting foreign trade activities is one of the top priorities for many countries Imports allow the addition of products that cannot be produced domestically or inefficiently produced while exports help boost domestic production network and increase foreign exchange earnings Implementing this foreign trade activity well, each country can expand, dominate the regional market and reach the world market

As Vietnam becomes an official member of WTO, the opportunities for trade with other countries in the world are increasing widely However, it also brings many challenges for Vietnam, how to promote all the benefits of the country, attract many foreign investors This has contributed to foreign trade activities much more developed

Foreign trade activities are increasingly strong, contributing to improving the lives of people Therefore, it is imperative that the Government need to put forward appropriate foreign trade policies, contributing to promoting the socio-economic development In the process of industrialization - modernization of the country, our foreign trade policy focuses on the main objectives of boosting exports to meet the needs of industrialization - modernization and curbing inflation, increase state budget accumulation and improve people's lives Foreign trade has gradually become a modern socialist-oriented business activity, capable of integrating into regional and world markets To do so, Vietnamese businesses need to build themselves a reputable brand and gain a firm position in the confidence of foreign partners

In the current difficult economic period, thousands of enterprises close or suspend their operations every year because the issue of improving import

efficiency becomes more urgent This is the key to help businesses overcome difficulties In particular, completing the import process is a prerequisite to improve the efficiency of import activities The import process is counted from the time the ship arrives at the port of destination until cargo are brought into the enterprise’s warehouse

During my internship at Phuc Hung Investment and Trading Joint Stock Company, having access to the process of importing goods, I felt the great influence

of this process on the business performance of the company Therefore, I chose

“Solutions to improve the goods import process at Phuc Hung Investment and Trading Joint Stock Company” as the graduation thesis topic

2 Research objective and mission

The objective of this thesis is to contribute ideas to help Phuc Hung Investment and Trading Joint Stock Company have more solutions to overcome the limitations of the import process

The mission of the thesis research is to determine the situation in order to provide solutions to complete the import process at Phuc Hung Investment and Trading Joint Stock Company

3 Research object and area

Research object: Research topic on the process of importing goods Phuc Hung Investment and Trading Joint Stock Company

coordinate methods: qualitative analysis, statistics, comparison, synthesis, logical reasoning

5 Research structure

In addition to the table of contents, list of tables and figures, introduction,

conclusion and references, the research topic is divided into 03 chapters:

 Chapter 1 Overview of process of importing goods

 Chapter 2 Process of importing goods at Phuc Hung Investment and

Trading Joint Stock Company

 Chapter 3 Solutions to improve the process of importing goods at Phuc

Hung Investment and Trading Joint Stock Company

OVERVIEW OF PROCESS OF IMPORTING GOODS

1.1.2 Nature, objectives and characteristics of import

Nature: Import is the purchase of goods from economic organizations or foreign companies and conducts the consumption of imported goods in the domestic market or re-exports for the purpose of making profits and connecting the Export with consumption

Objectives: Imports ensure stable economic development, production and business activities and improvement of the people's life In addition, imports must ensure continuous development, improve labor productivity, ensure domestic manufacturing industries and address scarcity in the domestic market

Features: Importing is a complex activity compared to domestic business activities and has the following characteristics:

 Import activities are governed by many resources such as International and Foreign Trade Agreements, National Laws of the concerned countries, and International Trade Practices

 Trading methods on the international market are plentiful: regular transactions, intermediary transactions, trade fairs and exhibitions

 The methods of payment are diverse: collection, barter, L/C, TT, etc

 Currency used in payment is usually strong foreign currencies with high conversion power such as: USD, GBP, etc

 Conditions of delivery: there are many forms but it is common to import under CIF, FOB, etc

 Import business is business on an international scale, so the area is wide, complicated procedures, and the implementation time is long

 Import business depends on business knowledge, managerial level, foreign trade skills and information acumen

 Importing is an opportunity for businesses of different nationalities to cooperate for a long time International trade has a direct influence on the economic-political relations of exporting countries, contributing to the development of external economy

1.1.3 Role of import

1.1.3.1 For economy

Import is an important activity of international trade, which has a direct impact on the production and life of a nation For an economy, import operations usually aim to:

- Supplementing goods that are not allowed or cannot be domestically produced

- Replace goods that domestic production has no competitive edge compared

to imported goods

Import activities, if well organized, rational with domestic demand and production capacity, will positively impact the balanced development of the economy In particular, direct balancing of three factors of production: labor tools, labor objects and labor

In the market economy in our country today, import activities are growing and showing an important role for the national economic development Shown in the following aspects:

- Imports facilitate the process of economic restructuring towards industrialization of the country

- Importing contributes to improving the living standards of the people For consumers, imports provide opportunities to balance with diverse, modern goods and lower prices than domestically produced goods For production and import, it is

the source of input assurance for production activities, technology and equipment for modernizing production, creating stable jobs for workers

- Imports play an active role in promoting export activities With the production materials that import brings will increase the quality of goods, making our country's exports closer to the needs of the world, creating favorable conditions for Vietnamese goods to be exported to the world market

1.1.3.2 For enterprises

Import activities are one of the important stages in the production and business process of enterprises, contributing to providing inputs for the production process At the same time, if the import activities are implemented well, it will help businesses save production costs, thereby reducing product prices, increasing profits and increasing competitiveness in the market for enterprises

From import activities, businesses can improve and innovate technology to help improve production efficiency

Import activities are complicated due to the participation of many different economies, requiring businesses to always update and improve management Every individual in the business needs to learn voluntarily, gain experience, develop professional skills

Import activities create conditions for businesses to link with each other and

with foreign enterprises

1.1.4 Forms of goods import business

The business of importing goods can be divided into various forms depending on criteria used for classification The classification of import business forms will help enterprises identify the strengths and weaknesses of the type of business being applied, thereby promoting their strengths, overcoming and limiting

weaknesses in order to increase their competitiveness in the market

1.1.4.1 According to the level of specialized

 The level of specialization has been increasingly raised, which is conditional

to increase productivity and business efficiency, modernize technical facilities Especially, special-use technical infrastructure systems create great advantages in competition

 Ability to train good managers, experts and excellent business staff, with depth knowledge of the products that the company is trading

in-Disadvantages:

 In the context of competition - the inevitable trend of the market economy, the risk is high

 When business goods are unfavourable, the business direction is slow and it

is difficult to ensure supply of goods for demand

b General business

Enterprises trading in a variety of goods with different uses, states and characteristics, trading not dependent on traditional goods or markets, they can trade any goods that have competitive edge

Advantages:

 Limiting some business risks due to easy business diversion

 Business capital is less stagnant due to quick purchase, quick sale and capital investment for many products, capable of quick capital turnover, ensuring consistent supply of goods for demand

 Having a large market, a new market, the confrontation with competition has stimulated dynamism, creativity and requires a lot of understanding of business people, and conditions to develop sales services

An enterprise trades in many different commodities but always has a group

of major business products of the same use, state or nature This type of business is applied by many businesses, it allows to promote the advantages and limit the

disadvantages of the general business type

1.1.4.2 According to the categories of business goods

a Production materials business

Business objects are products for production activities such as machinery, equipment, materials, etc Characteristics of this type of business are:

- In Vietnam, currently, production materials are being encouraged to import for the purpose of developing domestic production for export, expressed at lower tax rates or exempted from tax on these goods, the import is unlimited in quantity with a number of incentives in business loans

- Market of production materials based on production and serving production Market size depends on the size and level of production organization of that market area Therefore, the size and structure of the market depends on the level of a country's production development

- Buyers are mainly production units, the volume of goods in each transaction is often large and can be provided for a long term shipment

- Buyers have a comprehensive knowledge of the features and value of different products, have quite a high requirement for specifications and places of production of goods

- Trading in production materials needs to be synchronized, in addition to providing the main equipment, it also needs sufficient spare parts and components for some products of technological transfer, the trader must also provide specialized services in instructions on how to install and use for buyers

b Consumer goods business

Consumer goods are products that serve all needs of human life, including products such as textiles, electrical appliances, food, and groceries Each type of goods is very diverse and rich in type, design, product quality, etc The consumer market often has large and complex fluctuations, with the following characteristics:

- Currently, consumer goods are not encouraged to import for the purpose of developing domestic production Therefore, consumer goods businesses have encountered some obstacles such as: the list of imported goods is under the management of the Ministry of Industry and Trade, specialized agencies, high tax rates, import quotas and foreign currencies management, restrictions on bank credit (force enterprises to deposit 100% when opening L/C)

- Diversity consumers: including all classes of people, with different professions, qualifications and financial capabilities, leading to a variety of demands for goods

- Buyers often buy in small quantities, with a wide range of consumption, dispersed in every geographical area, causing difficulties and costs for transportation, distribution and preservation

- Purchasing power often has big changes: changes in people's lives such as lower wages, increasing prices of some necessity goods, and fluctuating political

environment often lead to huge changes in size and consumption structure

1.1.4.3 According to the mode of import

a Direct import

Direct import is an independent import operation of an import trading enterprise, in which the enterprise must directly do all stages of the import business process, such as seeking partners, negotiating and signing contracts and they have to spend capital to organize import business

When using this mode, importing enterprises must take full responsibility for their activities The risk of direct import is higher, but it is more profitable than other mode

b Entrusted import

Entrusted import is an activity formed between a domestic enterprise with its own foreign currency capital and the need to import some goods but not having the right to participate in or the inability to participate or participate but not effective

At that time, it will authorize other businesses to conduct direct transactions and import at their request

Entrusted parties are not allowed to use quotas or licenses granted by the Ministry of Industry and Trade to receive import entrustment

c Barter import

Importing goods for bartering and exchanging goods are two main operations

of countertrade, that is the mode of import together with export Means of payment

in this activity do not use money but goods The purpose of bartering is to earn profits from both import and export business to export goods to foreign markets The importer is also an exporter

Imported and exported goods must be of similar value, ensuring a condition

of equilibrium in price, terms of delivery and total value of goods exchanged

d Temporary import for re-export

Temporary import for re-export is a form of enterprises importing goods but not for consumption in the domestic market, it is for export to another country for profit These products are not processed or processed at the place of re-export

Goods are subject to both import procedures and export procedures

afterwards

1.2 Process of importing goods

1.2.1 Goods import process concept

The import process is one of a series of steps that must be taken to purchase goods from abroad into the country Each step is an important link in the process That requires each link to perform the right job and achieve efficiency

Import activities in particular and international trade activities in general are very complex activities, which contain many risks that require traders to have professional qualifications and high professional capacity Therefore, the import of goods to be effective must follow a scientific process, the content of each business

in the process must be performed very well However, the number and content of operations in the process applied by importers are not necessarily the same Because, the amount and content of work that the importer must do is affected and depends on many different factors such as:

- Depending on the State management of goods that enterprises import;

accordingly, there are goods that require import and export license, there are goods that do not need to be licensed This is clearly shown in the Government’s Decree

No 69/2018/ND-CP of May 15, 2018, specifying which goods are prohibited from import and export; conditional import and export

- Depending on the international payment methods and conditions: Each

international payment method requires the importer to perform different tasks at different stages to ensure the payment takes place smoothly

1.2.2 Steps to proceed the import process

1.2.2.1 Market research

Market research is a fundamental step in an import process In order to plan and build strategies for importing goods, it is necessary that importers must answer the following questions:

- What are the demand of consumers?

- What goods should be imported?

- What is the perfect time for importing goods?

- What is the market size and market share of the Company?

Market research requires not only domestic market research to determine demand, but also necessary foreign market research, in order to figure out the ultimate supply source options

a Domestic market research

Studying the domestic market can be considered as the first step that enterprises should take before importing goods This will help businesses acquire the understanding of the market demand, goods that should be imported and prices, the level of competition in the supply of goods that businesses want to import

When researching the domestic market, importers should base on: the situation of consumption, prices and production of these goods in the country; ability of the business in meeting demand

b Foreign market research

Studying foreign markets is the step assisting importers in identifying sources of goods, prices and quality of supply sources, choosing suppliers, etc Foreign markets research is a very difficult and complex task due to the significant differences between countries in economy, politics, society and geography

Foreign market research includes several stages:

- Research foreign business partners: This is an important stage which requires importers to conduct careful and accurate research It is important to conduct research to determine how the production and supply of this product is on the international market How many partners can supply this product It is also necessary to carefully study partners on: the situation of production and business, the ability to supply goods, the reputation in business, the quality and price of goods From there, importers will choose the most suitable partner for them

- Research on goods prices: Determining the right prices of imported goods has great significance for improving the importer’s business efficiency

Prices in import activities are international prices, international prices are representative of a commodity on the world market Those prices must be the regular commercial transaction prices, without any special conditions and paid in freely convertible foreign currencies The price of a good depends on a number of factors: the cycle; competition; supply and demand relationship; fluctuations of exchange rates

In the process of analyzing factors affecting prices, importers are aware of these fluctuations From there, the importer proceeds to determine the price level for the type of goods that they intend to import

1.2.2.2 Submitting documents for import approvals

Import-trading enterprises should pay attention to monitoring and updating state information on the list of goods banned from import or conditional import, etc from which to consider whether the goods they intend to import are subject to apply for import license or not Enterprises may refer to the list of goods banned from import or conditional import in the Prime Minister’s Decision No 23/2019/QĐ-TTg

on goods import and export If the imports are on the list of goods subject to import permission, the Company must apply for an import license from the competent state authority

1.2.2.3 Transactions, negotiation, signing contracts

The transaction, negotiation and signing contracts are of paramount importance for importers, it greatly affects the efficiency of import activities and the subsequent operations in the process Therefore, importers need to study carefully before performing these operations, including the following main tasks:

 Offer

An offer is a request to enter into a contract of sale and purchase of goods with the following provisions: Name, quantity, quality, price, payment method, etc The offer can be made by seller or buyer, when the seller offers it is called a sales

offer, and with the buyers it is called a purchase offer There are two types of offers: Firm offer and free offer

In the offer letter, we need to introduce our company’s operations, the products that our company has the ability to trade and sell and the company's reputation so that the seller and the buyer have a certain understanding of business partners From that, they can create trust and open up the possibility of higher trading

The letter of offer should determine the fair transaction price, including all costs incurred and other conditions in the sale transaction

 Order

Ordering is an offer to sign a commercial contract of a buyer, in principle it must ensure the content necessary for signing the contract In fact, people only place orders with regular customers Therefore, ordering only stated: name, specifications, quality, quantity, delivery time Other conditions, the two sides apply general conditions agreed upon or under the contract signed in the previous transaction

 Counter-offer

When the offer recipient does not fully approve the offer or make a new offer, this offer is called a counter-offer When there is a counter-offer, the previous offer is considered to be canceled

 Acceptance

Acceptance is the agreement on the transaction conditions, the two parties record the results achieved and exchange for each other, that is confirmation The confirmation is usually made in two copies, signed by both parties and each party keeps one copy

 Confirmation

After agreeing on the terms of transaction, the two parties record the results achieved and exchange for each other, that is confirmation Confirmation is usually made in two copies, signed by both parties and each party keeps one copy

b The main methods of transaction

Here are some commonly used transaction methods:

Direct transaction: A transaction in which the seller and the buyer directly

interact with each other by meeting via electronic mail, discussing and agreeing on transaction conditions When using direct transactions, it is necessary to prepare a number of tasks: research and study carefully about the customers, the goods being traded, the terms and conditions of trading, clearly define the purpose and requirements of the work

Intermediary transaction: in this form, every relationship between the seller

and the buyer and the stipulation of the terms of sale must go through a third party This thirty person is called intermediary, usually an agent and a broker

Transaction at the Goods Exchange: through brokers appointed by the

Mercantile Exchange, people buy and sell goods of great quality, of similar types and qualities that can be substituted with each other

Transaction at the fair: at the fair, the seller displays his goods and contacts

with the buyer to sign a sales contract

International processing: is a method of transaction in which the overseas

processor provides machinery, equipment, raw materials or semi-finished products for the domestic processor to organize the production process into finished product according to the request of the ordering party All products made by the processor will be handed back to the processor to receive a remuneration (called processing

 Characteristics

Firstly, negotiating a foreign trade contract is a process of constantly adjusting the needs and benefits of the negotiating parties in the ultimate goal of concluding contracts with terms that are beneficial to both parties

Secondly, negotiating a foreign trade contract is a process of unifying benefits while maintaining a good relationship between the two parties in the contract

Thirdly, negotiating a foreign trade contract is a science, and it is also an art

 Categories

Based on the form of negotiation, we can divide the negotiations into categories: Negotiating by mail, negotiating by phone, negotiating by meeting in person

an amount equal to the value of the goods by international payment methods When concluding a foreign trade contract, the parties should note the following:

- Contracts must be built on a solid legal basis, the basis of which is international law, national law, international rules or practices

- Formally, Article 48 of Vietnam's Commercial Law stipulates that foreign trade contracts must be made in writing, verbal transactions with foreign countries

in Vietnam are not legally valid

- There is a need to agree on all terms of the contract based on the willingness of both parties before signing

- The subject of the contract must have legal status Contracted goods must

be goods that are allowed to be traded under the laws of Vietnam and the laws of the exporting country

- Contracts must ensure the main content of the goods sale and purchase contract They are: name, quantity, specification, quality, price, payment method, delivery time

1.2.2.4 Affreightment charter

There are many different modes of international transport such as: Multimodal transport, air transport, sea transport Different transport modes have different means of transport Which vehicle is hired depends on the condition of the delivery and the calculation by the party who is obliged to hire the vehicle

Import businesses are mostly people who have cargo but do not have means

of transport to ship the cargo Therefore, when the carrier is obliged to carry out the import contract, the importer must hire a ship from the shipping organizations to transport the goods

Chartering a ship is a task whereby a shipper himself, through a third person,

a broker, contacts the shipowner or carrier of goods from one or more ports to one

or many other ports Normally, this import export business unit will entrust the chartering of a ship to a professional forwarding company The major forwarding companies in Vietnam today are: Vietnam Freight Forwarders Association (VIFFAS), The Foreign Trade Freight Forwarding and Warehousing JSC (VIETRANS)

As a charterer, based on the characteristics of liner vessels such as: the volume of cargo is usually not large, usually dry goods, goods with packaging; routes, time, freight are known in advance, etc then they will choose so that the chartering of ship is most effective

Liner charter process:

- Find the ship schedule and choose the most suitable ship

- Sign the application for storage (Booking note) with the ship owner or agency, and pay freight

- Request the seller to gather cargo in accordance with contracts in order to deliver them to the ship

- Take the bill of lading (B/L)

- Prepare for receiving goods at the port of destination

b Voyage charter

Voyage charter is a charterer’s request for the charterer to lease the entire ship to carry goods from one port to one or more other ports and to pay a freight agreed by both parties

When importers hire the voyage, they take advantage of some of the benefits

of this method such as: the freight of the voyage is cheaper than the liner charter; charterers are not bound by the conditions available in B/L but are freely agreed in the charter party; the quick and convenient transport of goods on time and schedule required by charterers, etc However, chartering also has some disadvantages such as: chartering process is quite complicated; freight rates vary depending on the season, shipping lines, business areas Therefore, importers need to consider carefully before deciding on the method of chartering

Voyage charter process:

- Determine the type of ship to hire: Single voyage, Round voyage, Consecutive vovage, or charter a whole ship for a time (Lumpsun)

- Charterer directly or entrusts the forwarding company to negotiate and sign a voyage charter party with shipping line (charter)

- Request the seller to gather cargo at the port for delivery on board

- Receive goods at the destination and pay to the ship owner

1.2.2.5 Buy cargo insurance

Insurance on carriage of imported and exported goods is a commitment of economic compensation of the insurance company to the insured when risks, losses

or accidents occur to the goods during the carriage The insured must pay an amount called a premium to the insurance company

International trade activities in general and import activities in particular are activities where goods are transported over a long distance, across the border of one

or more countries Therefore, the risk of loss during transportation is quite high and

it is necessary to buy insurance for goods The main purpose of buying cargo insurance is to reduce risks for goods due to the coordination of inspection and prevention of losses from the insurance company; be compensated when there are losses and risks

When buying cargo insurance, the importer must base on the following characteristics: the nature of the goods, the terms of the contract, the loading position, the condition of the packaging, the type of ship, socio-economic situation Currently, there are big insurance companies in Vietnam such as Bao Viet and Bao Minh

 Procedures for buying cargo insurance

- Go to the insurance company, asking for insurance for the goods and signing an insurance contract

- Pay insurance premiums to the insurance company and get the insurance policy or certificate of insurance

 Insurance conditions

Vietnam's cargo insurance has three original insurance conditions: insurance condition A, insurance condition B and insurance condition C There are also other insurance conditions such as war insurance, strike insurance The terms and conditions of insurance cover insured risks and losses, and uninsured risks and losses

 Value of insurance

The insurance value is calculated according to the formula: V= C + I + F Where:

+ V is value of insurance + C is cost of the goods insured (according to FOB price) + I is insurance fees

+ F is freight

 Content of freight insurance contract

The insurance contract is printed in form, usually includes 02 sides The back side has printed regulations on insurance The front side consists of blank contents, including: name, address, bank account number of the insurer and the insured; name

of goods, quantity, weight, type of packaging; type of vessel, name of the vessel or mode of transport; ways of loading goods on board the ship, place of departure, destination, place of transshipment; date of shipment; the date the ship commences its journey; insurance conditions; place of compensation payment; location, date of signing the contract; insurance company name and signature of person in charge,

stamp

1.2.2.6 Carry out import customs procedures

Goods that cross national borders for import must go through customs procedures Customs procedures consist of the following three main contents:

- Customs declaration: The goods owner must declare the details of the goods on the customs declaration truthfully and accurately At the same time, the owner must determine by himself the goods codes, tax rates, taxable prices of each imported goods, and calculate the payable tax amounts of each kind of taxes on customs declarations The declaration must go together with a number of other documents: import permit, invoice, bill of lading, packing slip

- Show goods: Customs is allowed to check the goods if necessary Imported goods must be arranged in order and convenient for inspection The owner of the goods bears the labor cost of opening and closing the packages

- Implementing the decisions of the customs: After checking documents and goods, the customs will make a decision: allowing goods to be allowed to cross the border (customs clearance) or allowing goods to pass through under certain conditions or not accepted for import, the goods owner must strictly comply with

the customs regulations

1.2.2.7 Receive, inspect and assess cargo

a Receive cargo

To receive imported goods from abroad, the importing unit must do the following tasks:

- Signing an entrusted contract with the transport agency for receiving goods

- Confirming with the transport agency the plan to receive goods on a quarterly and yearly basis, cargo structure, ship schedule, technical conditions upon loading, unloading, transportation and delivery

- Providing necessary documents for receiving goods (Bill of Lading, Delivery Order)

- Monitoring the delivery and receipt, urging the transport agency to make a record (if necessary) on goods and solving problems occurring in the delivery and receipt within their scope

- Payment to the transport agency for loading, unloading, storage, preservation and freight of imported goods

- Notifying the ordering unit about receiving goods

- Transferring goods to the enterprise’s warehouse or directly delivering to

the ordering units

b Inspect and assess cargo

Goods imported through the border gate must be inspected Each agency conducts inspections according to its functions and powers If signs of abnormal signs are detected, it is necessary to invite expert to make assessment records Transport agencies shall inspect seals and lead seals before unloading goods from means of transport The importing unit, as a party in the bill of lading, must also

examine the goods and make a letter of protest if there is any suspicion that the

goods are damaged, missing or not in accordance with the contract

1.2.2.8 Payment procedures

There are many different international payment methods such as: Collection method (Collection), Remittance payment method, Cash Against Documents - CAD, Documentary Credit, Open Account Each method has its advantages and disadvantages and its own application process One of the international payment

methods widely used by import-export enterprises is Letter of Credit (L/C)

a Open Letter of Credit – L/C

In international trade contracts, if the payment is made by documentary credit method, the importer must write “Request for opening Letter of Credit” to L/C Opening bank or Issuing bank The way to open L/C at Vietnamese banks is as follows:

 Conditions for opening L/C:

To open an L/C, the importer must submit to the bank:

- Business registration certificate

- Foreign currency account at the bank

 How to open L/C:

Depending on whether enterprises want to open L/C at sight or deferred payment, documents that they need to submit are also different However, the main documents are:

- Import license (if it is import goods requiring a license)

- Quota (if goods are imported according to quotas)

- Import contract (copy)

- Application for opening L/C (according to bank’s printed form)

- Sales plan for import payment (with deferred payment L/C)

- Application for guarantee and commitment to pay the debt (with deferred payment L/C, according to bank’s form)



- The establishment of the application for opening of L/C is a signed purchase and sale contract

- In order to avoid having L/C to be amended many times, the importer can fax the L/C application to the exporter for previewing so that they can give their opinions

- Importers should carefully review the original L/C and propose amendments in case of necessity to protect their rights

- The L/C opening application must be signed by the Director and Chief Accountant of the importing unit In case of entrusted import, there must be 04 signatures of: Director, Chief Accountant of the entrusting unit and the trustee

 Deposits for opening L/C: Currently, banks set a margin ratio (100%, less than 100%, or do not need a margin), the above rate depends on:

- Prestige in the payment of the enterprise

- Relationship of the enterprise with bank

- Foreign currency balance on the account of the enterprise at the bank

- The feasibility of the importer’s business plan

 How to open an L/C deposit:

- If the enterprise's deposit account balance is higher than the deposit amount, the enterprise requires the bank to deduct money from the deposit account for deposit

- If the balance of an enterprise's deposit account is smaller than the deposit amount, the enterprise may require the bank to sell foreign currency to the enterprise to make deposits, or to let the business borrow foreign currency to make

deposits

b Coordinate with the bank to check a set of documents, pay and receive a set of documents

When paying by L/C, before accepting payments for “L/C opening bank” or

“Issuing bank”, the importer needs to send staff to coordinate with the bank to verify the validity of a set of documents, they usually apply the terms in the

“Uniform Customs and Practice for Documentary Credits” (UCP-500) They often check the following documents: Draft (Bill of Exchange), Bill of Lading, Commercial Invoice, Insuarance Certificate and Packing List

After a thorough checking of documents, if there are errors, not in accordance with the provisions of L/C, the importer may refuse to pay If the documents are fully compliant with the conditions of L/C, the importer will pay to the bank

The importer must pay the bank the value of L/C and fees related to payment

by L/C (such as L/C opening fee, L/C amendment fee, endorsement bill of lading) These fees may vary depending on the bank opening L/C and margin ratio

After payment, the importer needs to ask the bank to sign a set of documents

to receive the goods

1.2.2.9 Complaint and complaint settlement

When performing the import contract, if the import-export owner finds that the goods are damaged, missing, lost, broken, etc., it is necessary to file a complaint immediately to avoid missing the time for complaint

The object of complaint is the seller if: the seller does not deliver the goods; slow or missing delivery; delivery is not in accordance with the contract

The object of complaint is the transporter if: the transporter does not bring the goods to delivery; bring goods late compared to the provisions of the charter party; cargo is not in accordance with B/L

The object of complaint is the insurance company if the insured’s goods are damaged due to a natural disaster, unexpected accident or a third party’s fault, when these risks have been insured

If the complaint is not satisfactorily resolved, the two parties may appeal at the arbitral tribunal under the terms of the signed contract

During the implementation of the import contract, there are many types of documents attached with the steps to be implemented such as: cargo documents, transport documents, delivery and receipt documents, insurance documents,

steps of contract, so it is very meaningful in the payment and dispute resolution Importers must be careful of each type of documents in the process of making documents, in the record, requirements must be clear and not erased, especially the

payment invoices are detailed lists or bill of lading

1.2.3 Factors affecting the goods import process

of the nations Fluctuations in exchange rates can cause large fluctuations in the proportion of imports

Domestic and international law policies:

 Import activities are carried out among entities of different countries Therefore, import activities are influenced by domestic and international laws because they express the will of the State and the general unity of the world

 In addition to the legal system, depending on the country’s development period, the government has issued macro policies to manage import activities These policies have a direct impact on import activities such as the erection of tariff and non-tariff barriers (import licenses, quality standards, etc.) in order to protect production with low competitiveness in domestic Infrastructure factors for international goods trading: These factors directly affect imports:

 Modern equipped seaport system allows to shorten the loading and unloading time

 Banking system: The development of the banking system creates more favorable conditions for importers to mobilize capital and make payment In addition, the bank is also a factor to ensure benefits for businesses with payment services through banks

 Insurance and quality control system allows international goods trading activities to be carried out more safely, reducing the level of damage that can

be caused to traders in case of risks

Domestic and foreign market factors: Situation and volatility of domestic and foreign markets such as price increase trend, supply capacity, consumption capacity and market fluctuation trend All of these factors affect import activities

Technological factors: Today, science and technology affect all economic fields and bring many benefits, in import and export it also brings high efficiency Thanks to the development of the postal and telecommunication system, foreign trade enterprises can communicate directly with telex, fax, telegraph customers, etc This helps reduce travel costs, promote import and export activities Traders can capture information and market movements accurately and timely Thanks to exports, Vietnamese businesses are exposed to advanced technology achievements in the world, replacing and renewing technologies in manufacturing enterprises Science and technology also impact on fields such as goods transport, banking techniques, etc

socio-Influence of the world socio-economic situation: In the trend of globalization, the dependence among countries is increasing Therefore, every fluctuation of the socio-economic situation abroad has certain effects on domestic economic activities The field of import and export activities is directly related to entities abroad, subject to the influence and impact of factors abroad, so it is even more sensitive Any change in import-export policies, inflation, unemployment, strengthening or recession, etc of countries will affect import-export activities in

our country

1.2.3.2 Subjective factors

Management apparatus, administrative organization: The direct impact on the leadership levels to staff and employees for the purpose of being forced to perform an activity For uniform centralized management, administrative methods must be used The establishment of the organizational structure of the business apparatus as well as the way of management of the leaders are the decisive factor in business efficiency It is necessary to have a complete management system, leadership, no redundancy, no shortage and a decentralized organization of management and division of labor in the enterprise that will contribute to promoting business efficiency On the contrary, if the organizational structure is unreasonable, poor management will lead to low efficiency

Financial resources: Financial resources are an important factor determining the ability of production and business and is also a leading indicator to assess the size of the business The financial viability of the business consists of either equity capital or owner’s capital and working capital Finance does not only include fixed assets and current assets of the enterprise, but also loans, and future earnings If lack

of necessary financial resources, enterprises can go bankrupt at any time In business, finance is considered a sharp weapon to dominate the market and annex competitors

Human factor: People are always placed at the center of all activities Import and export activities of particular goods must emphasize the human element because it is the creative subject and directs the activities The influence of this factor is reflected in working spirit and work capacity Working spirit is manifested

by the atmosphere in the business, solidarity and the will to strive for common goals The competence of employees is expressed through operating skills, professional operations and performance In order to enhance the role of the human element, enterprises must focus on training workers, fostering and improving their professional skills, on the other hand, they must pay proper attention to personal interests, including both material and spiritual benefits

The organization of business network: The business results of foreign trade enterprises are highly dependent on properly arranged business locations as a

condition for businesses to conduct business activities such as creating goods source, transporting more conveniently and contribute to improving business efficiency If the business network is inadequate or unreasonably arranged, it will hinder business activities, eliminating the dynamism and competitiveness of enterprises in the market

Material facilities of an enterprise: The enterprise's physical facilities, such

as fixed capital, include machines, processing equipment, warehouse systems, means of transportation, points of purchase, agents, branches and equipment, together with working capital, are the basis for doing business These capabilities define the scale and nature of the field of import and export activities, contributing

to the business efficiency

1.2.4 Criteria for evaluating the results of implementation of the import process

The import process is counted from the time the ship arrives at the port of destination until cargo are brought into the enterprise’s warehouse The criteria for measuring international trade transactions and customs procedures include basic elements such as time and transaction costs of commercial entities Accordingly, time and cost of transactions are determined by a process of 04 basic steps: (1) Preparing documents; (2) Customs inspection and assessment; (3) Inland transport; (4) Loading and unloading on international transport vehicles

Time during import implementation includes:

(1) Time to complete transaction processes such as negotiating, organizing the implementation of orders, international sales contracts;

(2) Document processing time;

(3) Customs clearance time for import and export goods;

(4) Inspection and assessment time of State management agencies

Costs include:

(1) Commercial transaction costs of commercial entities;

(2) Total costs of customs clearance for export, import and/or transit;

(3) Costs and fees relating to import and export procedures at ports, wharves, airports or at domestic transshipment points;

(4) Taxes and fees according to State regulations

1.3 Overview of the current situation of Vietnam’s import procedures

1.3.1 Import turnover of Vietnam

By the end of December 2019, Vietnam’s import value of goods reached 253.07 billion USD In particular, there were 38 major commodity groups reaching over 1 billion USD, accounting for 90.7% of the total import value of the country With this result, the import value of goods in 2019 was 16.2 billion USD higher than in 2018, equivalent to an increase of 6.8% compared to 2018 The main increase goods were: computers, electronic products & accessories increased by 8.22 billion USD; machinery, equipment and other spare parts increased by 3.87 billion USD; complete automobiles of all kinds increased by 1.33 billion USD; coal

of all kinds increased by 1.24 billion USD; crude oil increased by 849 million USD

1.3.2 Procedures for importing goods of Vietnam

Currently, implementation of import procedures despite positive changes in the level of convenience when implementing customs administrative procedures, there still exist negative phenomena, problems and difficulties in procedures relating to this field

The results of measurement of the cross-border trade transaction index of Southeast Asian countries in 2019 according to the World Bank’s announcement are

as follows:

Table 1.1 Favorability in import transactions of ASEAN countries from June

2018 to June 2019

Rank (/189)

Import document (number)

Import time (days)

Import cost/01 cont

(USD)

(Source: World Bank)

The table above shows a significant difference between Southeast Asian countries, whereby Singapore is the leading country in the region as well as the world with impressive indicators such as the lowest import time with 4 days At the same time, the cost of transactions in Singapore is highly competitive, equivalent to

440 USD for an imported 20’ container If Singapore is in the first place for many years on this index, other ASEAN countries in different positions from low like Laos at 156 to relatively high such as Malaysia at 11 Vietnam, Indonesia and Myanmar are countries with similar import time and cost, taking more than 20 days and more than 600 USD for a 20’ container

Practical indicators of international trade transactions (moving goods across borders), including Vietnam’s customs procedures over years, are shown in the

following table:

Table 1.2 Vietnam's cross-border trade transaction index from 2012 to 2019

(Source: World Bank)

In addition, details of the components of time and cost of import in Vietnam

are shown in the following table:

Table 1.3 Average cost and time to carry out imports in Vietnam in 2019

(Source: World Bank)

Table 1.3 above shows that, in 2019, the import time in Vietnam is 21 days, which has decreased compared to the 22 days of previous years, although this index

is equal to the average compared to other East Asian countries, but still quite good High compared to developed countries like Singapore, OECD block is 4 and 10 days with import However, compared to other ASEAN countries (Table 1.1), Vietnam’s import transaction time is lower than only those of Laos and Cambodia, and higher than the remaining 7 countries

In terms of cost of cross-border trade, Vietnam’s index in 2019 increased compared to previous years to reach 610 USD/1 container 20’ for imports

No of import

documents

Import cost (USD/

cont 20’)