measures to avoid risks of sea freight in tan ca loi trade and intertional freight limited company

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Academic Year 2009 - 2011

INTERNSHIP REPORT For

MASTER OF INTERNATIONAL BUSINESS AND MANAGEMENT

University of Nice-Sophia Antipolis

IAE Schol of Busines Administration THANG LONG UNIVESIT

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Thư viện ĐH Thăng Long

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Academic Year 2009 - 2011

INTERNSHIP REPORT For

MASTER OF INTERNATIONAL BUSINESS AND MANAGEMENT

University of Nice-Sophia Antipolis

IAE Schol of Busines Administration THANG LONG UNIVESIT

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ACKNOWLEDGEMENTS

I would like to show my gratitude to all who encouraged me to complete this thesis. I would like to thank Mr. Chung, Managing Director of Tan Ca Loi Company (TCL) for giving me permission to commence this thesis in the first instance, to do the necessary work and to use company data.

I would also like to express my thanks to Ms. Hanh, Head of Export Department and all staffs from this Department of TCL Company. Although they are extremely busy with their own task; they have never hesitated to assist me with any questions or problems I’ve had over the duration of my internship.

I am deeply indebted to my Academic supervisor Assoc. Prof. Le Thanh Binh from Thang Long University for her great encouragement and advice during the time of writing this thesis.

I would like to take this opportunity to thank Office Representative of Dolphin Sea Air Service Corporation, Ms. Hanh, who gave me useful advices and was of great help in difficult times.

My colleagues from the Department of Japanese supported me a lot during my internship. This thesis would not have been completed without their help.

Especially, I would like to give my special thanks to my husband Nguyen Anh Dung for suggesting and encouraging me to go ahead with my thesis. He spent so much time helping me for this report. He gave smart advices that improved the English of this report as well as looked closely at the final version of the thesis in terms of English style and grammar, correcting both and offering suggestions for improvement.

Thư viện ĐH Thăng Long

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ABSTRACTS

Along with globalization trend, international transportation systems have been under increasing pressures to support the growing demands of international trade and the globalization of production and consumption. Among various means of transport, maritime transportation plays an important role because in terms of weight, sea freight accounts for 90% of all transportation worldwide. It is now without doubt one of the most exciting, challenging and complex areas of the logistics industry.

We cannot deny that sea freight brings a big profit to the operator of this industry; however, they also have to face many unpredictable difficulties and risks. The freight forwarder company that I am doing my internship, TCL Company, is making his full use of the existing capacity to avoid the risks and to exist in a severe competition.

During four month internship at TCL Company, I have tried to give out risks of sea freight as much as possible based on company’s data. Among these risks, I focus on five groups of risks: transport related risks, nonpayment and late payment risks, operational risks, political risks and cultural, language risks

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TABLE OF CONTENTS

CHAPTER 1 COMPANY BACKGROUND ...2

1. Company formation and development history ...2

2. Function and responsibility of each department and division...8

2.1. Export and Import Department:...8

2.2 Marketing Department ...9

2.3 Accounting department ...9

2.4 Administration and human resource sector...10

2.5 Warehouse sector...10

CHAPTER 3 THE MISSION: ASSIGNED TASKS AND GOALS ...11

1. The tasks assigned to my position ...11

2. The link between the subject matter and my mission... 11

3. The goal I am asked to reach... 12

4. What I can bring to the company... 13

5. How can I put the theoretical knowledge acquired during my academic year in Master AMI into practice during my internship?...13

5.1. International trade payment and risk insurance ...14

5.2. International contract law ...14

5.3. International risk management ...15

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1.1 Inland transportation ...16

1.2 Loading and unloading...16

1.3 During transportation by sea ...17

2. Credit risk or non-payment risk:... 17

5.3. Risk of declaration on AMS ...19

5.4. Risk of customs declaration...20

5.5. Risk relating to weight declaration ...20

1.3 During transportation by sea ...21

2. Nonpayment or late payment risks ...21

1. Have the goals been reached? ... 27

2. Suggestions/ recommendations for the company ... 27

3. What have I gained from the internship? ...32

REFERENCES... 32

LIST OF TABLES ...34

LIST OF SYMBOLS...35

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INTRODUCTION

This report introduces you to my AMI internship. This assignment was carried out as a master internship at TCL International Freight Company.

This report is divided into 5 chapters:

 Chapter 1: Company Background

This chapter describes shortly TCL International Freight Company and its sector of activity

 Chapter 2: Company Structure and Organization Chart

This chapter is about company organization and Department which I belong to during the internship.

 Chapter 3: The mission: Assigned tasks and goals

This chapter is dedicated to explaining my mission in the company and which subject is chosen to put its theoretical knowledge into practice during the internship.

 Chapter 4: Development

This chapter addresses my own perception of problems arised from internship subject and the ways to solve them.

 Chapter 5: Conclusion

This chapter captures the conclusion.

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CHAPTER 1 COMPANY BACKGROUND

1. Company formation and development history

 Company name: Tan Ca Loi Trade and International Freight Limited Company  Transaction name: TCL International Co., Ltd

 Abbreviation name: TCL

 Head office: Room 1125, Floor 11, CT5 Building, Pham Hung Str., My Dinh Ward, Tu Liem District, Hanoi, Vietnam

 Branch in Hai Phong city: No1, Van My, Ngo Quyen, Hai Phong

 Branch in Hai Phong city: No160 Nguyen Tri Phương Street, Thanh Khe District, Da Nang

 Website:

TCL was established in 1996, specialized in shipping and transporting all kinds of merchandise. It has been recognized as one of the leading and most prestigious International freight forwarders.

Since its inception in 1996, TCL has made great efforts for continuous development to confirm its stance in the field of freight forwarding. Besides, it is considered as a trustworthy partner by international agencies.

TCL is a member of Vietnam Chamber of Commerce and Industry (VCCI), China Global Logistics Network under WCA Family of Logistics Network-World Cargo Alliance (CGLN). It possesses a reliable global network of agents located in Asia, Europe, America, Africa, and Pacific Ocean, especially in Japan, Hong Kong and Singapore.

TCL is able to provide freight forwarding services to every corner of the world, including even tough markets like the Russia and SNG countries, etc.

The staff is not only well-trained and experienced. Moreover, staff’s knowledge is constantly improved through supplementary training courses held by the general Department of Customs and the Ministry of Trade as well as regional and global conferences.

TCL frequently upgrades facilities, especially the communication systems for a better service to its customers.

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 Customs Declaration, Certificate of Origin, Phytosanitary, Fumigation and Cargo Insurance, etc

 Warehouse, cargo preservation, packing, crating and dunnage

2.1 Sea Freight

The stringent selection of reputable shipping lines and close relationships with Mol, K’Line, Nyk, Wanhai, Dongnama, Cosco, Maersk, Rcl, Msc, Pil, Cma, Yangming, Zim, Germatrans, Apl, Happalloyd, Ocl, Heung-A, Hyundai, Evergreen, helps TCL take advantage of their strengths in order to satisfy all its customers’ requirements.

TCL offers a wide range of services: Full Container Load (FCL), Less than Container Load (LCL) consolidation and deconsolidation for general cargoes, frozen commodities, hanging garment, project cargoes, personal effects, both to port and to door.

TCL provides Import and Export services at any port to/from any Vietnam port, particularly Hai Phong port (Viconship Warehouse) and Cai Lan Port-Quang Ninh province.

TCL has also signed the Liability Insurance for Transportation and Logistics companies with prestigious Insurance Firms such as Bao Viet Insurance Company.

2.2 Air Freight

Close co-operation with the leading airlines such as Vietnam Airlines, Pacific Airlines, Air France and Thai Airways… enables the company to book timely flights at customers’ request regardless of weight per shipment.

On the basis of global agency networks, the cargo can be delivered to all international airports or any inland destination as per their request.

Term of delivery: Warehouse to airport, airport to airport or door to door is available Air cargo insurance available upon request.

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TCL’s honest, enthusiastic, experienced and professional warehouse staff is determined to carry out the slogan: “security, safety, swiftness and convenience”.

3. Objective

TCL is sensitive to customer’s requirements in order to provide the best service:

“Safe – Swift – Competitive”

4. Slogan

“Keeping quality in every service”

5. Human Resource

 Over 50 experienced, well-trained staffs are working for the company now.

 The majority have BA degree and certificate of specialist-skill internal training course and overseas as well

6. Customers

Targeted customers of TCL may be internal or oversea individuals or enterprises including manufacturing companies and even logistics companies. Below is the list of typical customers:

 Sumitomo Heavy Industries (Vietnam) Co., Ltd (Thang Long I.Z, Dong Anh, Hanoi)  Denso Manufacturing Vietnam Co., Ltd (Thang Long I.Z, Dong Anh, Hanoi)

 Nichias Hai Phong Co., Ltd (Nomura I.Z, Hai Phong)

 Iriso Electronics Vietnam Co., Ltd (Tan Truong I.Z, Hai Duong Province)  Vietnam Stanley Electronic Co., Ltd (Duong Xa, Gia Lam, Hanoi)

 Hanel Co., Ltd (Hanoi)

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7. Review of freight forwarding business of the company (2008-2010)

Over the three years (2008-2010), the company has gained more than 1290 contracts, equivalent to 17,450 billion VND.

Table 1 Freight services overview from 2008 to 2010

Scope of activity Number of contracts

Gross value Proportion

Multimodal transportation

Source: Company’s Accounting Department

The proportion of sea freight is 57.4%, illustrating that most of the customer tend to export their cargo by sea because of the following reasons:

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Source: Company’s Accounting Department

Sea freight is the main activity as well as the strength of the company. As we can see, the number of sea freight service contract increased gradually. Despite financial crisis in 2008, the company still well maintained. The number of contracts shows the non-stop efforts of Marketing Department in searching for the customer and flexible policies of the company.

Source: Company’s Accounting Department

Air freight is the second largest activity in the company after sea freight. Normally, air freight is used for shipping important and expensive cargoes. Therefore, the number and weight of

the cargo is relatively smaller compared to other means of freight.

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IMPORT & EXPORT DEPARTMENT

MARKETING DEPARTMENT

WAREHOUSE SECTOR

HUMAN RESOURCES &

ADMINISTRATION

SECTOR

FREIGHT FORWARDING

DIVISION

CARGO PROCEDURE

DIVISION

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2. Function and responsibility of each department and division

Looking at the above company structure, we can realize that the company is organized logically. The highest position is Managing Director, below is Vice Director and below Vice Director is different Departments and Sectors. Generally, the company is organized under broad business model.

According to the above organization chart, problems if any in functional departments will be solved by officers. And relating to the common problems in the company, there will be discussion between the Managing Director and Vice Director. Managing Director will give the last solutions and is entirely responsible for his decision.

I was assigned to work in Export and Import Department. It can be considered as the most important department in the company. Below is the function and responsibility of these departments in general, and of Export and Import Department in particular.

2.1. Export and Import Department:

This department is comprised of two divisions: Freight forwarding and cargo procedure division. It is responsible for receiving contracts for importing and exporting cargoes, commitment contracts and allocating work to staffs in order to get most effectively and rapidly results.

Freight Forwarding Division

The freight forwarding division provides the following services:

 Consulting service on International law and Import and Export regulations  Arranging for inland trucking,

 Booking space with the ocean air carrier,  Completing export and import documentation,  Arranging for cargo insurance,

 Providing guidance on packaging, marking and labeling,  Arranging for products to be packed and containerized,  Freight consolidation

In addition, this division also offers a complete customs clearance service from/to any destination:

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9  Import/export

 Goods in transit  Tax reimbursement What is more, it provides

 Phytosanitary/ Fumigation certificate  Issuing certificates

Cargo documentary procedure division: is responsible for monitoring, managing and

storing all documents and official correspondences, preparing customs clearance and necessary correspondences to support the Freight forwarding division. The staff in this division has to frequently monitor the cargo process and always keep in touch with the customer to inform them of necessary information relating to the cargo.

and brings about a lot of valuable contracts for the company.

2.3 Accounting department

Functions of an accounting department include:

 Payroll: Calculate gross wages or gross earnings, the correct amounts of income tax, social security tax, and other deductions from gross wages

 Cash collection

 Cash payments (disbursements)  Procurement and inventory  Property accounting

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10  Prepare freight disbursement and accounts for the ship owner for each voyage  Complete the remittance of freight for the ship owner

2.4 Administration and human resource sector

 Receiving and sending official correspondences  Managing and storing documents

 Making insurance procedure  Managing assets

 Administration services  Recruiting

 Compensating  Training

 Organization development

2.5 Warehouse sector

 Storing goods temporarily before being exported or delivered to recipients  Loading/unloading of containers and vehicles

 Picking and packing

 Arranging deliveries in addition to other warehouse duties

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CHAPTER 3 THE MISSION: ASSIGNED TASKS AND GOALS

1. The tasks assigned to my position

In the export and import department I work as general assistance for viewing two types of contracts: Transportation contract and Agency agreement. I was also assigned to support Customer Relationship Management (CRM). The Head of Export Department asked me to pay more attention on solving dispute basing on the contract. In addition to this, there were many small tasks lying ahead of me, however, to a certain degree, it made the job exciting.

Viewing a contract

I was responsible for

 Checking all necessary terms for a contract,

 Checking terms relating to risk avoidance and compensation as ruled by law,  Checking contract’s terms to be matched with regulations of Vietnamese Law,

International Law and the Law of destination country  Whether contract’s conditions ensure TCL’s interest or not.

 Reviewing terms/clauses relating to disputes to check if the dispute violates which term of the contract and who is responsible for it.

CRM Support

 Receiving claims from customers,

 Negotiating with customers to solve disputes relating to Overage/Shortage/Damage (OSD),

 Keeping usual contact to customers who deliver FCL cargo for market survey or getting some information of the competitor

2. The link between the subject matter and my mission

So as to have an overall look of all types of risks in sea freight forwarding before giving proper countermeasures, I follow the following steps.

Subject: Identifying the risk in sea freight forwarding before giving proper

countermeasures.

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12  Define how many operations the company have in sea freight forwarding (By

brainstorming with experienced staff)

Relation: I check claim-list against a list of risk items, and then compare with

clause regulated in the corresponding contract.

 Define which risk in pre-process, in process, and after process (By brainstorming with experienced staff)

Relation: I check claim-list against a list of risk items, and then compare with

clause regulated in the corresponding contract.

 Categorize the risk in group, investigate possible causes, and make fishbone diagram (answer why-why question)

Relation: This step will analyze causes in a nutshell, and then customer/market

information will support me in finding out what the fact is.

 Test & Propose C/M (countermeasures) to board of managers to improve performance & reduce risk.

Relation:

This step will shed light on my study.

3. The goal I am asked to reach

 Point out all possible risks influencing company’s profit and group them logically.

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13  Base on theoretical and practical knowledge to find out the solution to help the

company to limit the risk, increase the profit and improve the company business situation.

 On the basis of risk analysis, find out the matters that need consider in drafting and writing a contract to prevent the risk and ensure the company’s rights in the contract

4. What can I bring to the company?

In the early period of my internship, I gather and classify risks that freight forwarding companies often face in sea freight. Afterward, I investigate and make real causes of risks that TCL encountered in the past in group. This should help the company understand the nature of different kinds of risks and to understand which risk has the greatest influence to the company’s business operation. The aim is to find out the solution to avoid and manage the risk.

Furthermore, experienced members (after brain-storming meeting) in TCL give ideas to find out the most reasonable measures to minimize the risks. Precious ideas from experienced members and my risk collection, classification and my own research are common background to plan business strategies for the company on the basis of predicted risks.

Also, my risk analysis is also a base to predict company’s future business performance. Moreover, the company can give the best solutions to recover it when the risk arises. Finally, the assigned daily work can also help the company in many aspects such as:

 Through negotiation with customers by CRM operations, FCL order can be improved. Also, FCL order can reduce cost per order as well as achieve an effective timing transaction.

 Quality of goods delivered can be improved significantly. To achieve the result, risk-avoidance must be set up in receiving, packing, warehousing & transportation.  Because of usual contact to customers, the quality of service can be improved and

therefore the company can attract more customers and get more orders.

 I am asked to review the contract to check whether there are any mistakes or not before it is printed and sent to the customer/agency. It is very essential because the

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14 company may avoid mistakes of making a contract and takes more advantageous in transporting goods. The Company can be able to avoid disputes arising outside the contract.

5. How can I put the theoretical knowledge acquired during my academic year in Master AMI into practice during my internship?

During my academic year in Master AMI, I have learnt a lot of subjects and each subject brought me useful knowledge. Actually, the theoretical knowledge acquired can help me a lot during my internship. The list of main subjects that I can use during my internship is as below.

5.1. International trade payment and risk insurance

In this subject, I learnt about the risk of exporting and importing. There ate totally 7 kinds of risks which are not easy for any company to solve. Thanks to this subject, I can easily discriminate each kind of risk and can apply theoretical solutions to practice. Furthermore, through international transactions I can understand more about different methods of payment. The company may use Confirmed Letter of Credit, Stand-By Letter of Credit or Cash depending on each transaction. Sample Ocean B/L, Commercial Invoice or L/C, etc that I saw in my lesson will help me a lot when I use them in practice.

5.2. International contract law

In session 4 mentioning to Finance, the lecturer explained very clearly about Bills of Lading and Letter of Credit as well as contract language and documents usually required. Using knowledge acquired in this session, I can pay more attention on the following things while making a contract:

 All necessary terms for a contract, especially for a international contract  Methods to examine a contract and how to write an effective one

 The contract must be clearly stated

 The contract must mention to all parties and each party’s obligations, rights and benefits

 The contract must have “price” term and “payment” term

 The contract must have terms to solve possible problems if disputes arise (Between two parties signing the contract or with the third party)

 Methods to solve a dispute based on contract terms

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