MINISTRY OF EDUCATION AND TRAINING UNIVE RSITY OF ECONOMICS HOCHIMINH CITY HUỲNH NGỌC MINH THƯ INTE RNATIONAL PAYMENT: A CASE STUDY OF FRE IGHT FORWARDING AND LOGISTICS COMPANIES IN VIE TNAM MASTER’S THE SIS IN BANKING HOCHIMINH CITY, 2010 MINISTRY OF EDUCATION AND TRAINING UNIVERSITY OF ECONOMICS HOCHIMINH CITY Huỳnh Ngọc Minh Thư INTERNATIONAL PAYMENT: A case study of Freight Forwarding and Logistics Companies in Vietnam MASTER’S THESIS In Banking Ology code: 60.31.12 Supervisor As Pro Dr Lê Thành Laân Hochiminh City, 2010 Preface Firstly, I would like to express my deepest appreciation to my Sponsor, Dr Le Thanh Lan, for his precious guidance, comments and suggestions This paper is one of the last compulsory elements of Banking program at the University of Economics Hochiminh City The objective of this subject is to find out the new appropriate mode of international payment that is more suitable and convenient to import and export enterprises in Vietnam, especially for small and medium ones This is accomplished via a survey and literature research I hope it can be applied to a practical situation I would like to assure that the research of “International Payment: A case study of freight forwarding and logistics companies in Vietnam” was carried out by me under instruction of As Pro Dr Le Thanh Lan All figures illustrated in this paper are honest, accurate and quoted from a reliable source Ho Chi Minh City, October 2010, Huynh Ngoc Minh Thu MM IC Lu v TÀI tài: “International Payment: A case study of Forwarding and Logistics Companies in Vietnam” c a tác gi Hu nh Ng ng d n khoa h c: PGS TS Lê Thành Lân, gi i thi u d ch v tóan qu c t theo nh n ngo i c C.A.D C.O.D công ty giao m nhi t hàng l , s ng ít, giá tr khơng cao, g n v i d ch v giao hàng t n nhà thông d ng c a doanh nghi p D ch v m i m l c ngòai Vi c ng d ng Nam s thu n ti n nâng cao hi u qu ho t Vi l i khơng xa c tốn m i t i Vi t t ki ng xu t nh p kh u c c chi phí, th i gian, giúp giao nh n ngo i ng th i n i dài d ch v tóan qu c t ngòai tr s c a i TABLE OF CONTENTS Preface Table of contents List of firgure List of tables .9 Abbreviation 10 Chapter 1: Introduction 11 1.1 Introduction .11 1.2 Research background 11 1.3 Problem statement 13 1.4 Research objective 13 1.5 Scope and methodology of the study 13 1.5.1 Scope of the study 13 1.5.2 Research method 14 1.6 Structure of the study 14 Chapter 2: Literature Review 16 2.1 Introduction 16 2.2 COD/CAD in international payment 16 2.2.1 Payment process .17 2.2.2 Condition for CAD/COD application 19 2.2.3 Advantages and disadvantages of CAD/COD 2.3 Forwarding and logistics companies 21 2.3.1 Definition 21 2.3.2 Characteristics 22 2.3.3 Functions .24 2.4 Conclusion 27 Chapter 3: Methodology 28 3.1 Introduction .28 3.2 Business research .28 3.3 Research design 29 3.4 Pilot test .30 3.5 Main survey 31 3.6 Conclusion 32 Chapter 4: Settling CAD/COD via forwarding and logistics companies 33 4.1 Introduction .33 4.2 Forwarding and logistics in international payment, in reality .33 4.3 Encroaching of forwarding and logistics companies in international payment 35 4.4 Undertaking CAD via forwarding and logistics companies 36 4.4.1 Procedure for settling CAD via freight forwarders 36 4.4.1.1 Payment process 36 4.4.1.2 Document required 38 4.4.1.3 Conditions to apply 39 4.4.2 Advantages of undertaking CAD via forwarding and logistics companies 39 4.4.2.1 Advantages to the Importer 39 4.4.2.2 Advantages to the Exporter 40 4.4.3 Significances of applying CAD via forwarding and logistics companies 40 4.4.3.1 Time savings 41 4.4.3.2 The cargo situation has been well checked and monitored .41 4.4.3.3 Eliminating fraudulent shipping documents 42 4.4.3.4 More choice for import export customers 42 4.4.3.5 Avoiding risk in payment .43 4.4.4 Role of commercial banks in CAD/COD once being settled via freight forwarders .43 4.4.4.1 Currency exchange .44 4.4.4.2 Overseas money transfers 44 4.5 Customer’s behaviors towards settling payment via freight forwarders 44 4.5.1 What local Import Export companies say? .45 4.5.1.1 Difficulties in settling payment via the banks and forwwarder’s workarounds 49 4.5.1.2 How much convenient they feel? 50 4.5.1.3 Opinions about time saving 50 4.5.1.4 Ideas regarding collection fees 51 4.5.1.5 Point of views in terms of maximum of goods 50 4.5.2 What local International Forwarding and Logistics companies say?51 4.5.2.1 Background for local forwarding and logistics staffs in international payment .51 4.5.2.2 Experiences of local staffs in international payment 51 4.5.2.3 Interest and willingness to participate in international payment.52 4.6 Petition to the authorities 52 4.6.1 Solution for forwarding and logistics companies 52 4.6.1.1 Training and employing 52 4.6.1.2 Expanding network 54 4.6.1.3 Upgrading the IT system 55 4.6.1.4 Advising customer to diversify foreign currencies in settling payment to reduce the dollarization effect 56 4.6.2 Petition to the government .58 4.6.2.1 Allow this new method of payments 58 4.6.2.2 Public companies main achievements and their problems in an open system 58 4.6.3 Petition to the Customs Division 59 4.6.3.1 Publishing enterprises black list .59 4.6.3.2 Being accustomed to new methods of payment 60 4.6.4 Petition to the State Bank of Vietnam 59 4.6.5 Petition to the Commercial Banks .60 4.6.6 Market sharing with Post Offices and express services .61 4.6.6.1 Nature of goods .61 4.6.6.2 Size of goods 62 4.6.6.3 Value of goods .62 4.7 Conclusion 62 Chapter 5: Conclusion and imlication 63 5.1 Introduction .63 5.2 Conclusion of the study 63 5.3 Implication of the study 64 5.4 Limitation and recommendations for further research 65 Appendix 67 Reference 90 LIST OF FIGURE Figure 2.1 CAD/COD payment process .17 Figure 4.1: Payment process of undertaking CAD via forwarding and logistics companies .36 LIST OF TABLES Table 4.1: Respondents’ profiles in partern 45 Table 4.2 Respondents’ profiles in pfrequency of using CAD/COD 45 Table 4.3 KMO and Bartlett’s test .46 Table 4.4 Cronbach Alpha Test 47 Table 4.5 Coefficients 48 85 - - - - - Original Message - - - - From: Thu Pax/ SGN To: 'elley' Sent: Wednesday, June 17, 2009 4:59 PM Subject: Regulation in int'l payment Hi E y, lle Go o d d a y to yo u ! Co uld yo u us so me fa vo ur ? One o f o ur c usto me r ,who will ve a n e xpo rt c a rg o to yo ur c o untry, wo nd e rs if yo u c a n c o lle c t the va lue o f g o o d s fro m b uye r o n the ir b e lf a nd tra nsfe r the a mo unt to Vie tna m o r no t, if ye s, ho w a b o ut the & ma x va lue a llo we d in yo ur c o untry, d e a r? (It lo o ks like C AD Ca sh a g a inst pa yme nt, b ut b e ing se ttle d via fo rwa rd e r in ste a d o f the b a nk) Ma ny thks a nd lo o k fo rwa rd to he a ring fro m yo u Brg d s, T / Pa x SGN hu 86 From: Voellmin, Peter [p.voellmin@gondrand.ch] Sent: Wednesday, June 17, 2009 4:15 PM To: Thu Pax/SGN Subject: Regulation in int'l payment Dear Thu Michael does not work at Basel anymore He got transfered to New York No problem for us to collect money, but invoice should be with us in advance Then we should know all costs and ask for a 3% commision ( Minimum US$ 50.00 ) Goods only to be forwarded after our okay Best regards - Peter From: Thu Pax/SGN [mailto:minh.thu@paxglobalcargo.com] Sent: Wednesday, June 17, 2009 9:26 AM To: Auf der Maur, Michael Subject: Regulation in int'l payment De a r Mic e l, Go o d d a y to yo u ! Co uld yo u us so me fa vo ur ? One o f o ur c usto me r ,who will ve a n e xpo rt c a rg o to yo ur c o untry, wo nd e rs if yo u c a n c o lle c t the va lue o f g o o d s fro m b uye r o n the ir b e lf a nd tra nsfe r the a mo unt to Vie tna m o r no t, if ye s, ho w a b o ut the & ma x va lue a llo we d in yo ur c o untry, d e a r? (It lo o ks like C AD , Ca sh a g a inst pa yme nt, b ut b e ing se ttle d via fo rwa rd e r in ste a d o f the b a nk) Ma ny thks a nd lo o k fo rwa rd to he a ring fro m yo u Brg d s, T / Pa x SGN hu 87 From: tina-l-mtc [tina-lin@makotrans.com.tw] Sent: Wednesday, June 17, 2009 2:39 PM To: Thu Pax/SGN; frank-lin@makotrans.com.tw Subject: Re: Regulation in int'l payment Dear Thu, Thanks for e-mail We can collect freight or value amount for you Actually if we transfer this amount by T/T back to your account, there is no max value allowed Waiting for your comments Thanks & Best Regards, Tina Lin Mako Transport Co., Ltd 11F-7, No 155, Sec 1, Keelung Rd.,Taipei Taiwan Tel: 886-2-2528-7272 ext 362 Fax: 886-2-2528-7373 tina-lin@makotrans.com.tw E-mail : Website : www.makotrans.com.tw - Original Message From: Thu Pax/SGN To: frank-lin@makotrans.com.tw Sent: Wednesday, June 17, 2009 3:19 PM Subject: Regulation in int'l payment De a r Mr Fra nk L in, Go o d d a y to yo u ! Co uld yo u us so me fa vo ur ? One o f o ur c usto me r ,who will ve a n e xpo rt c a rg o to yo ur c o untry, wo nd e rs if yo u c a n c o lle c t the va lue o f g o o d s fro m b uye r o n the ir b e lf a nd tra nsfe r the a mo unt to Vie tna m o r no t, if ye s, ho w a b o ut the & ma x va lue a llo we d in yo ur c o untry, d e a r? (It lo o ks like C AD , Ca sh a g a inst pa yme nt, b ut b e ing se ttle d via fo rwa rd e r in ste a d o f the b a nk) 88 Ma ny thks a nd lo o k fo rwa rd to he a ring fro m yo u Brg d s, T / Pa x SGN hu 89 From: HTNS SINGAPORE [sin@htns.com] Sent: Wednesday, September 08, 2010 1:45 PM To: thu@htns.com Cc: 'sin' Subject: RE: Regulation in Int'l Payment Dear Thu, Good day! This is Andy Kim from HTNS Singapore It’s glad to contact with you Yes, but could you send me a details for this shipment? I would like to know if you have a value of goods and more details Once get your answer then we’ll discuss it with our person in charge And, regarding the tariff in Singapore (Goods and Services Tax) Goods and Services Tax (GST) is a tax charged on the importation of goods into Singapore GST on imports is levied at 7% of the commercial invoice value Should you require any further enquiries, please not hesitate to contact us Thank you B Regards / Andy Kim From: Thu SGN [mailto:thu@htns.com] Sent: Wednesday, September 08, 2010 12:25 PM To: sin@htns.com Subject: Regulation in Int'l Payment Dear Mr Andy Kim, Good day to you !!! Could you us some favour ? 90 One of our customer , who will have an export cargo to your country, wonders if you can collect the value of goods from buyer on their behalf and transfer the amount to Vietnam or not, if yes, how about the & max value allowed in your country as well as collection fees tariff? (It looks like CAD , Cash against payment, but being settled via forwarder in stead of the bank) Pls let us have som e idea to get back to clients with thks Many thks and look forward to hearing from you Brgds, Thu / HTNS SGN 91 From: mayuree [mayuree@transaircargo.com] Sent: Wednesday, June 17, 2009 5:45 PM To: minh.thu@paxglobalcargo.com Cc: 'saowaros'; import@transaircargo.com Subject: RE: Regulation in international payment Good afternoon Thu Pax SGN Normally we concern only the air freight , if the shipment is concern to the c o lle c t the va lue o f go o d s and send back to the shipper our account must arrange lot of paper support to the government Your can send the shipment and specify on your HAWB that We have to hold the shipment until your instruction to release the goods in that case our staff will hold the documents in our hand and wait for your instruction after you shipper receive the money from consignee an advise you to confirm us to release the documents Thanks & Best regards, Mayuree Lilitpunnavong TRANS AIR CARGO CO.,LTD Tel ( 662 ) 6509040 -9 Ext 408 Fax ( 662 ) 6514667 -8 Email : mayuree@transaircargo.com From: saowaros [mailto:saowaros@transaircargo.com] Sent: Wednesday, June 17, 2009 11:24 AM 92 To: 'Thu Pax/SGN'; mayuree@transaircargo.com Subject: RE: Regulation in international payment Dear Thu, Please kindly discuss with our Import Manager / Ms.Mayuree Best regards, Saowaros From: Thu Pax/SGN [mailto:minh.thu@paxglobalcargo.com] Sent: Wednesday, June 17, 2009 10:32 AM To: 'Saowaros' Subject: Regulation in international payment Hi Sa o wa ro s, Go o d d a y to yo u ! Co uld yo u us so me fa vo ur ? One o f o ur c usto me r ,who will ve a n e xpo rt c a rg o to yo ur c o untry, wo nd e rs if yo u c a n c o lle c t the va lue o f g o o d s fro m b uye r o n the ir b e lf a nd tra nsfe r the a mo unt to Vie tna m o r no t, if ye s, ho w a b o ut the & ma x va lue a llo we d 93 in yo ur c o untry, d e a r? (It lo o ks like CAD , Ca sh a g a inst p a yme nt, b ut b e ing se ttle d via fo rwa rd e r in ste a d o f the b a nk) Ma ny thks a nd lo o k fo rwa rd to he a ring fro m yo u Brg d s, T / Pa x SGN hu NOD32 4160 (20090616) Information This message was checked by NOD32 antivirus system http://www.eset.com NOD32 4160 (20090616) Information This message was checked by NOD32 antivirus system http://www.eset.com 94 From: sherry@paxglobalcargo.com.cn Sent: Wednesday, June 17, 2009 1:39 PM To: yunmi; Thu Pax/SGN Cc: itoh@paxglobalcargo.com.cn; Subject: Re: Regulation in international payment D ear Thu: I n accor dance w t h t he pr ovi si ons of For ei gn Exchange of C na, i hi w can onl y paym e ent f r ei ght char ge, can' t col l ect & paym ent t r ade goods char ge, hope you can under st and w hat I m ean, t ks! Tks & B' r f ds! Sher r y - - - - - O i gi nal M r essage - - - - Fr om yunm : i N To: Thu Pax/ SG C i t oh@ c: paxgl obal car go com cn ; sher r y@ paxgl obal car go com cn ; j i nl ong@ paxgl obal car go com cn ; j i nyi ng@ paxgl obal car go com cn ; m n i Sent : W ednesday, June 17, 2009 11: 39 AM Subj ect : R R e: egul at i on i n i nt er nat i onal paym ent Dear Thu This is not something we can decide, Our account department manager Ms Sherry can decide whether we can or not C.c : Sherry Pls see below Ms Thu's request, let her know whether we can it or not Thanks Best Regards Yunmi - - - - - O i gi nal M r essage - - - - Fr om Thu Pax/ SG : N To: ' yunm ' i C i t oh@ c: paxgl obal car go com cn Sent : W ednesday, June 17, 2009 11: 28 AM Subj ect : R egul at i on i n i nt er nat i onal paym ent Hi Yunmi, CC: Re b e c c a , 95 Go o d d a y to yo u ! Co uld yo u us so me fa vo ur ? One o f o ur c usto me r ,who will ve a n e xpo rt c a rg o to yo ur c o untry, wo nd e rs if yo u c a n c o lle c t the va lue o f g o o d s fro m b uye r o n the ir b e lf a nd tra nsfe r the a mo unt to Vie tna m o r no t, if ye s, ho w a b o ut the & ma x va lue a llo we d in yo ur c o untry, d e a r? (It lo o ks like C AD , Ca sh a g a inst pa yme nt, b ut b e ing se ttle d via fo rwa rd e r in ste a d o f the b a nk) Ma ny thks a nd lo o k fo rwa rd to he a ring fro m yo u Brg d s, T / Pa x SGN hu 96 From: Irfan Haider [pyramid1@cyber.net.pk] Sent: Thursday, June 18, 2009 3:37 AM To: Thu Pax/SGN Cc: pyrAMID1@cyber.net.pk; v.President@grouppyramids.com Subject: Regulation in int'l payment Dear Thu, We can collect Ocean Freight from the conee here and remitt the money as Ocean Freight Freight Payment Not Goods Value if this is Goods Value then "No" we can not "NOT" send money on accounts of Goods Value as we will have show our State Bank of Pakistan the purpose/reason of transaction Our Core Business is Int'l transportation we can only collect ocean freight and send over to you or your customers Our bank limit is US$8,000/Eight Thousand US Dollars We can not send more than US$8,000 one time Yes more money can be transfered after one week of remittance US$8,000/Eight Thousand US Dollars But remember this should be only Ocean Freight Payment against following shipment not NOT goods value payment One Transaction Bank Fee is US$50/Per Transaction By the way what is place of origin and how much is the volume of business Per week???pls advise Also advise name of Commodity pls ??? Pls comment B/Rdgs Irfan Haider Vice President / C.O.O Pyramid Pakistan (Div of Pyramid Transportation Group ) Suite # 1108, 11th Floor Uni Plaza , I.I Chundrigar Road, Karachi-74200, Pakistan U.K cell # 00447011176312 PABX : (9221) 2415182, 83 (Ext 802) Direct : (9221) 2411705 / 2411942 Hotline: (9221) 7011170 U.S.A Tel# 1-718-535-7000 Fax: 92-21-2415184 Efax# 1-866-363-2194 mobile: 92-300-9267266 email: pyramid1@cyber.net.pk v.president@grouppyramids.com Web site: www.pyramid-transgroup.com www.pyramidpakistan.com.pk 97 "The Newly Designed Website Of Pyramid Transportation Group: www.pyramidtransgroup.com - Original Message From: Thu Pax/SGN To: pyramid1@cyber.net.pk Sent: Wednesday, June 17, 2009 12:13 AM Subject: Regulation in int'l payment De a r Mr Irfa n Ha id e r, Go o d d a y to yo u ! Co uld yo u us so me fa vo ur ? One o f o ur c usto me r ,who will ve a n e xpo rt c a rg o to yo ur c o untry, wo nd e rs if yo u c a n c o lle c t the va lue o f g o o d s fro m b uye r o n the ir b e lf a nd tra nsfe r the a mo unt to Vie tna m o r no t, if ye s, ho w a b o ut the & ma x va lue a llo we d in yo ur c o untry, d e a r? (It lo o ks like C AD , Ca sh a g a inst pa yme nt, b ut b e ing se ttle d via fo rwa rd e r in ste a d o f the b a nk) Ma ny thks a nd lo o k fo rwa rd to he a ring fro m yo u Brg d s, T / Pa x SGN hu 98 REFERENCE In English R.N.Bose, CAD/COD pros and cons, Institute of Banking Studies, Calcutta, West Bengaal, India DHL Global Forwarding website: http://www.dhl-dgf.com/legal.html Jörg Heiser, Good Circulation, Frieze Magazine, (Issue 90, April 2005) Business Monitor International Ltd, Mermaid house, Ouddle Dock, London EC4V 3DS UK, (2009), Vietnam Freight Transport Report 2009 Supply Chain Management Institute, Logistics in the Modern World Zoser, Cash Against Documents & EX-Works?, Export Blueprint (November st, 2009) In Vietnamese Duong Quang Duy, Logistics Vietnam - i, Viet Forward (23/03/2010) SPSS guidance, 2009, Bích Liên, Th túng ng Logistics Vi t Nam: “Ơng l c ngồi thao ng (28/07/2010) Song Linh - Ngân hàng s a cho doanh nghi p, VN Express (10/07/2009) Bùi Ng c Loan, Chú tr o ngu n nhân l c logistics, Vietnam Logistics Review (20/08/2009), Nh t Minh, Ngu n khó mua, VNExpress (01/10/2009) Tr n Hồng Ngân, Thanh Tóan Qu c T , NXB Th ng Kê 2001 99 Th Nguy n Duy Ngh i v i phát tri n xu t kh u d ch v c a Vi t Nam sau gia nh p WTO, T p chí C ng S n (S , H Thanh Tùng, Giáo trình Thanh tốn Qu c t , (04/09/2008) 10 Phịng phân tích Cơng Ty Ch ng Khóan Ch L n, Logistics Vi t Nam Ti 11 Website c n, khai thác nh , Sài Gòn Gi i Phóng (14/05/2010) n Thành Ph H Chí Minh 12 Website c a Ngân hàng Á Châu 13 Website c a Ngân hàng HUD ... remarkable advantages, forwarding and logistics companies can participate and perform very well the role of a key chain in international payments Settling via international freight forwarding and. .. 4.2 Forwarding and logistics in international payment, in reality 34 As an international business, forwarding and logistics companies should operate their activities basing on a stable and extensive... logistics, transportation, and supply chain management 4.3 Encroaching of forwarding and logistics companies in international payment Forwarding and logistics companies satisfy the necessary and sufficient