Tai Lieu Logistics

8/4/2019 Tai Lieu Logistics

http://slidepdf.com/reader/full/tai-lieu-logistics 1/41





economic regime, from state economy to market –oriented economy which is suitableto WTO regulations.

Another thing that we need to consider is the change of administrativemechanism with aim to build and promote simple and effective one. This could alsoreduce the intervening measures from government. Besides creating a simplemechanism, in order to implement our commitments, our mechanism must betransparent and publicized. That’s why in recent research of Planning and InvestmentMinistry, more than a half of foreign investors said that they are no longer worriedabout our ambiguous administrative procedures.

In conclusion, participation in WTO is not a goal, but a mean for reforming our economic regime, from state economy to market-oriented economy, providing amomentum for sustainable development.

2. Joining WTO would provide Vietnamese enterprises favorable conditionsto expand their markets in a few items.

As I said before, to implement our commitments, Vietnam government must beaware of the importance of change of our legal system. Our legal framework musthave been uniform, sufficient, and suitable to common international laws. In addition,according to the first principle of WTO trading system, all economic sectors weretreated equally, and enjoyed the same favorable development conditions. They alsostrive to working based on the market-oriented economic regime as well. As a result,

in recent year, al great deal of local firm, especially in private sector, made their long-term investment and development plans suitably.

Joining WTO also provides a great opportunity for penetrating foreign market, asall WTO members could be treated equally.

Thanks to the clarified, simple and transparent legal system, the ability to foreseeand access some kind of necessary information would be increased positively for Vietnamese businesses. Local firms can find the suitable way of development.

It is clear that when participating in the WTO, some kind of subsidies and other kinds of business privileges, such as special consumption tax and energy consumptionfee must be eliminated. In this case, Vietnam government must increase contributiontoward infrastructure development through a great flow of foreign and stateinvestment. In fact, during the 3-year period from 2007 until now, our infrastructure,especially for doing business was better than those in the past.

In short, along with the change of policies, the change in infrastructure and trade policies provide a necessary and fundamental foundation for Vietnamese enterprises todevelop sustainably.

3. Vietnam is still a favorable destination of foreign investment:



Firstly, in recent report publicized, Vietnam is still considered an attractivedestination of foreign investment, as our legal framework were more and more suitableto WTO regulations and common international law in particular. Clearly, along withthe change of legal system, the opening of financial market, for example, banking andstock market, made a great contribution to attract a recent flow of investment. In fact,compared to those figured in the past, the recent flow of foreign investment is twice.

Second, in the long time, foreign investors were worried about their investmentin Vietnam, as their development conditions were not the same as those of local firms.However, In recent year, especially from 2005, according to NT treatment, when some business privileges would be limited, , just like local firms , foreign investors wouldnot only favor the same conditions for short and long-term development, but beregulated by the same Investment Act, Business Act…

At the time of joining WTO, Vietnam enjoys the results (more than 50 years of)of the eight multilateral negotiations relating to tax reductions of the World TradeOrganization immediately and unconditionally. So, local firms can have anopportunity to buy materials, goods and equipment with the same quality in thecheaper price. Low cost of input materials and equipment help goods made in Vietnammore competitive, as most of our exported goods are still dependent on importedmaterials.

Furthermore, to able to survive in fierce competition, not only technologyinnovation, but the optimal uses of resources for doing business, such as, materials,and capital, should be considered, so providing a fundamental foundation for development and increasing our competitive advantages in the world economy.

In addition, thanks to the innovation in administrative mechanism, manyadministrative costs and under-table costs, such as, lobbying and bribing, can bereduced.

Last but not least, the renewing infrastructure which was improved a lotthrough a great deal of investment can have a contribution to a decrease in the cost of doing business.

4. Exported goods and services can be easier to penetrate foreign markets:

According to the first principle- equality and non-discrimination, in time of joining WTO, Vietnamese goods and services would be equal to that of other WTOmembers. Vietnamese goods and services must be treated equally from thosecountries they imported from. In this case, some bilateral agreements such as lowestimport tax of certain goods of a country can put into practice with all WTO members.Incentive measures for domestic goods and services should be eliminated. In addition,the developed countries must reduce their contribution toward their less competitive products through lowering tariff barriers and especially eliminating non-tariff barriers,as Vietnam is officially WTO members, and every measure which puts into Vietnammust be suitable to WTO trading system.



Let take garment and textile industry for example. For textile and garment, by2005, when the ATC is no longer effective and WTO members remove quota to eachother, if Vietnam have not become an official member, it remains subject to quotaimposed by WTO member countries, including the US, EU, and Japan – the mostimportant markets for Vietnam. If by then, Vietnam has successfully completed its bidto the WTO, though free of quota, our textile products will have to compete withcountries with similar advantage in labor like China. Vietnamese businesses now donot have to worry about export quotas in the US market. Import tariffs on Vietnamesegarment and textile products exported to WTO members will be imposed following the NTR status. Domestic businesses will then have better conditions to penetrate deeplyinto foreign markets and increase their export turnover when, many negativeinfluences of an unfair competition, such as some privileges of domestics goods, andespecially some non-tariff barriers must be limited

Furthermore, Vietnamese enterprises no longer find it difficult to find out theinformation about trade policies of other countries, as according to WTO regulations,all WTO members trade policies must be publicized and transparent.

To sum up, during the 3-year period from Vietnam joined WTO, not only protection measures, but some other countries’ incentive for their own goods andservices would be limited and eliminated, providing great opportunities for local firmsto expand their market, keep their share in the world economy as well.

5. Domestic customers can gain some benefits, as Vietnam became anofficial WTO member:

After joining WTO, Vietnam must open its market to all WTO members.Measure of quantity limiting would be forbidden. Carrying out the second obligation,Vietnam must undertake ceiling tariffs or to tie down import tax of many goods. Tax privileges which local businesses are enjoying, but seem to be un-sufficient withinternational practice, must be greatly reduced or totally abandoned. This can make acontribution to attract a lot of imported high-quality goods and services from other WTO members. In addition, to be able to survive in the highly competitive worldmarket, our enterprises must improve and develop their capacities, ranging from

production to processing, so causing the increase in the quality of products. That’swhy Vietnamese consumers nowadays have great opportunities to buy a variety of goods with high-quality level in the cheaper price

Another thing that we need to consider is the increase in our quality of life.Obviously, during 3 years from 2007 until now, there has been a rise in the number of high-quality services in Vietnam, such as, education, medical treatment, and travel,through a flow of investment, as the agreement of market opening would allow foreignservices and services providers to enter our market easier. In addition, we have moreright to access the information and approach the new means of entertainment, causing

the increase in the satisfaction level of our local customers. Go abreast with above benefit, the increase in international trade indirectly leads to growth of demand in thenational markets, thus making the demand for labor rises. This also causes the income



rises which have an obvious effect on our quality of life. In fact, compared with theincome in past, the income now goes up almost three-fold.

Above is all positive impacts on our whole economy. However, every sector would have its own opportunities for development. In the next chapter, we willconsider some opportunities for three main sectors: agricultural, industry, and servicessector.

Challenges:Everything, just like a coin, has two sides, and participation in WTO is not an

exception. The theory is that the integration brings more advantages thandisadvantages, when Vietnam espoused world-wide. However, such losses are notminimal and people must be aware of those losses, especially in non-industrialcountries, such as Vietnam where businesses are not competitive in world markets.That’s why in this part, we try to analysis what such losses are.

1. Vietnam economy is more dependent on the globalization process:

After being a official WTO member, Vietnam legal system was strictly subject tothe principle of WTO trading system. In addition, every trade measures or policies arecontrolled and supervised by the WTO secretariat. So, the fluctuation in monetary and political policies in the world can have negative influences into Vietnam economy.The 2008 crisis can be an obvious illustration. In this year, the real estate bubbles inUS financial market have heavily negative influences on Vietnam financial market. Asa result, many small and disperse firms in Vietnam cannot survive and overcome thisdifficulties.About 20 percent of small- and medium-sized enterprises have gone bankrupt because of an inability to access funds. A further 60 percent of companieshave also faced a host of difficulties, especially in finding a balance between supplyand demand due to a hike in input costs and a shortage of capital.

2. Fierce competition:

Joining WTO force Vietnam government to lower their tariff barrier and toeliminate non-tariff measures, causing the decrease in protection measures and export

subsidies. Along with some incentive measures for foreign investment, this also leadsto the invasion of foreign goods and services into Vietnam. Realizing that, local firmsmust accept fierce and direct competition with imported goods, as well as local andservice providers. It is time for improving our own advantages, as without them, youwill lose in this competition

3. Business environment will be more complex:

To able to compete in the integrated world, Vietnamese enterprises wouldunderstand the other countries’ policies, especially taxation policy and apply it

effectively. Taking an opportunities and being apt with tendency of tax reduction arestill an objective required for all Vietnamese firms. In addition, knowing information



about other firms from other countries will be another requirement for surviving in thehighly competitive world market.

4. New export barrier will be more sophisticated and complex.

When tariff barrier were reduced, Vietnamese enterprises must be aware of thenew protection measures:

Technical barrier to trade: some requirements of labeling, food security andenvironment.

Barriers related to the property right.

The anti-dumping measures, subsidies-limiting measures.

5. Some cost of doing business can be increasing, such as:

o Cost of property right, and brand-building

o Cost of improving the competitive advantage.

o Cost of building quality management standards: ISO-9000, ISO14000, HACCP, GMP, SA-8000…

o Cost of attracting, retaining and training human resources.

o Cost of advertising as well as keeping and expanding their sharein world economy.

6. Lastly, Vietnam government must be aware or the threat of some conflictsappeared:

o Conflict between domestic protection and integration.

o Conflict between ethnic and foreign culture.

o Conflict between general development requirements and personalinterests

o Conflict between the national benefit and the international benefit.

In addition, participation in WTO also leads to widen income gap between therich and the poor.



Above are all six dilemmas that Vietnam government and Vietnam enterprisesneed to consider while they penetrate to foreign market.

However, realizing that, although industry and services sectors would face a littlechallenges, especially focusing on how to keep their share in the fierce competitivemarket, agriculture sector will face up to a great deal of problems, when cutting their subsidies.

According to new report which is publicized by An Giang University, during 3years from 2007, farmers and agricultural produces must deal with and overcomesome difficulties below:

Despite all the potential benefits listed here, Vietnam will no doubt face stronginternational competition, which may result in more damage to our farmers if there isno immediate determination by the Government to remove existing constraints.

Presently, most Vietnamese farm products are more expensive than foreign products, but the quality is lower. For example, premium quality Thai rice is a lowyielding traditional variety that is produced in natural, rain-fed conditions withoutmuch fertilizer or pesticide. Hence, the production cost of Thai rice is below 0.5 t/ha.In contrast, Vietnamese rice is usually of the high-yielding, short-duration variety.Farmers have to pump out water to spread out seeds and later pump in water toirrigate. In addition, they have to apply large amounts of fertilizer, then they have touse pesticide to protect from various pests. Towards the end, they have to continuously pump out water to prevent submergence of the crop. All these operations add more

costs to the production, which is usually no less than 2.5 t/ha.Other crops have a similar fate. In 2000, Vietnam will import 92 percent of its

milk powder, 85 percent of its cotton, 75 percent of its paper pulp, and more than300,000 tons of corn and soybeans to meet the demands of the domestic food processing industries. In other words, according to the Minister of Agriculture andRural Development, it is much cheaper to import these agricultural products than to bear the high production costs of locally produced raw materials. The Governmentneeds to invest more in research and development in order to remove these constraintsand lower the production costs of our farm products.

Furthermore, due to fragmented production by individual farming households,whose land holdings average less than one hectare apiece, it will be impossible torespond to foreign buyers with large shiploads at any given time. The government hasto improve agricultural policy so the industry can benefit from economies of scale inthe production of exports (i.e., we need more attractive regulations for agriculturalcooperatives and private farmlands).

As better crop varieties are bred, especially by foreign or joint venture seedcompanies, the intellectual property rights provisions in the agricultural clause of theWTO will prevent poor farmers from freely multiplying the seeds of the patented cropvarieties and animal breeds. As a result, poor farmers may not be able to takeadvantage of new technologies.



Foreign agribusiness companies will come in and compete with the local, moreinefficient companies, which may eventually be pushed out of production. For example, almost all Vietnamese animal feed companies went bankrupt when the Thaicompany, The CP Group, and the American company Cargill, established feed mills inVietnam. Another example is that 80 percent of the cooking oil used in Vietnam has to be imported because local industries are too inefficient in converting copra, peanut,etc. into oil. Of course, livestock growers can also buy cheaper and more efficientfeeds than before. The public cannot continue to support inefficient companies,whether they are state or privately owned.

Our proposal to maximize the opportunities and limit the challenges:

After having become a member of the WTO, Vietnam has to face to manychallenges beside opportunities. For the stable development of Vietnam economy, wehave some following proposals:

1/ To perfect the economic policy system :- We have to reform economic policy and law system so that they are adequatewith the WTO provisions. To comply with WTO rules, the most important prerequisitefor economic policy instruments is to avoid trade distortions. We have to ensure theequal treatment (ownership neutrality) between private, state-owned and foreigninvested enterprises.

- Enforcing the reform in financial and banking sectors. Perfect the managementsystem in real estate and market. Reform the accountancy and corporate finance inorder to satisfy international standards.

- Having new policies which are suitable to WTO provisions to support newindustries, new products. Eliminate, at the same time, all forms of subsidies or exportsupport which violated the WTO rules.

- Build and perfect the law of market competition, anti-dumping, anti-subsidies,… so that Vietnam can construct a transparent, competitive market. Standardize thetechnical criteria in order to protect the domestic consumers.

- Integrate the fiscal and monetary policies, use flexibly the economic instrumentsuch as interest rate, currency exchange rate, line of credit … to control our macro-economy. Upgrade the quality of economic forecast to exactly define and control the

demand – supply relationship, market price ….2/ Simplify the administrative procedures:

- Eliminate the bureaucracy, reduce the time and the cost needed for settle anenterprise.

- Popularize all policies and administrative system.- Improve the administrative procedure through internet.Reform the administrative will reduce the corruption, create an efficient

competitive market, decline the cost for enterprise. Efficient and transparent

administrative and juridical implementation procedures will improve significantly thereliability of Vietnam business environment.3/ Improve the quality of human resources:



People said that human resource is one of the strength of Vietnam economy.Young labor take a part of 70% among Vietnamese labor and this is one of our Vietnamese competitive advantages.

In fact, we only have advantages in the sectors which requires a lot of medium or

low educated labor. We are still lacking for labor in modern, high-technology sector which requires well-educated labor. That is why we have to improve the ability of Vietnamese workers, especially in high added-value sectors

We have to support the research and development (R&D) within companies,universities and research organizations.

4/ Improve the quality of infra-structure:

- Build new modern infra-structure such as road, airport, port, … or renovate theexistent infra-structure to attract more foreign investment.

- Develop the infra-structure by mobilizing many sources of capital such asgovernment capital, ODA, capital of foreign enterprise through BOT, BTO, or BTcontract.

5/ Increasing the role of business associations

In a market economy, business associations and other intermediate institutions play a vital role in policy networks between government and industry representatives.Effective communication channels are needed for developing a vision for Vietnam’sindustrial strategy and its future place in international markets that is shared by allstakeholders in Vietnam’s economic modernization, private industry, state ownedenterprises, foreign investors and the government. If today many firms still do notmake use of the potential role of business associations as information channels, a better publicity and further political independence seems to be needed so thatintermediary institutions can play an effective role in shaping industrial policy inVietnam. The government could support the development of independent intermediaryinstitutions, particularly for export promotion activities, helping domestic firms todiscover new export markets and informing foreign buyers about the potential of theVietnamese enterprises and the domestic market.

6/ Increasing the competitiveness of Vietnamese enterprises

- Vietnamese private businesses have to invest more time and effort in exploringforeign markets and developing new marketing activities and R&D to develop products suitable to the quality requirements of export markets

- Have to be adequate with the fact that all of support and protection fromgovernment will be cut after Vietnam had become a member of WTO.

- Invest in new technologies and R&D to be able to meet the technical standardsand quality requirements of the foreign enterprises.

- Bring added value to the existing production, in order to increasecompetitiveness.

- Find new potential market and foreign partners, in order to reach the economicsof scale and integrate more effectively in world market3. TRANSPORTING COMPANIES IN VIETNAM



4. VIETNAM’S TRANSPORTATION AND FORWARDING SERVICE

Vietnam’s transportationShipping market and tradeThe rapid growth of the Vietnam economy and its increased integration into the globaltrading system has seen Vietnam’s external trade volumes accelerate during the lastfive years. In this period, exports to Europe and the United States (US) have beengrowing at a faster rate than Asian volumes. However, the Intra-Asia trade continuesto dominate the shipping market in Vietnam representing an estimated 37 percent of total throughput volume in the country.Due to the lack of deep water port facilities in the country, Vietnam can only beserved by smaller feeder ships of less than 25,000 deadweight tonnes (DWT)(approximately 1,600TEU Twenty-Foot Equivalent Unit for container ships). Ho ChiMinh City, Haiphong, Cai Lan, Quinhon and Danang ports have regular weeklycontainer services by all leading shipping companies. Presently, the Vietnam shippingindustry is dominated by international carriers who are able to provide global coverageand a wide range of services. The local carriers are largely focused on domestic andregional shipping services within South East Asia. As a result of the terms for accession to the WTO, Vietnam has allowed foreign shipping companies to establish joint ventures with majority foreign ownership.A number of foreign shipping lines have also been granted licenses to operate fullyowned companies in Vietnam. This includes APL – a subsidiary of Singapore’s Neptune Orient Lines (NOL). APL is one of the top three international carriers inVietnam with a leading market position in Vietnam’s trades with the US, Europe andthe Middle East. The company also provides regular shipping services to and from therest of Asia, Australia and South America.

Port Sector Vietnam’s 3,260km coastline has 126 ports; of which 24 handle ocean cargo. Themanagement of ports is done by Vinamarine (Vietnam National Maritime Bureau), aunit of the Ministry of Transport and Communications (MOTC). Vinalines, another unit of MOTC, is the owner and operator of the largest fleet of commercial ships inVietnam. Over the last 10 years, containerised throughput within the country has beengrowing at about 19 percent per annum. However, Vietnam’s port sector is facing anumber of critical challenges, including the lack of deep water ports that can receivelarger ships; old and inefficient port facilities; and suboptimal landside infrastructure.Ho Chi Minh City, through which more than 70 percent of Vietnam’s container throughput passes, is a critical gateway for both imports and exports. However, potential congestion issues are expected to arise in its ports within the next five yearsas port capacity expansion plans lag behind the projected growth in container volumesForeign port operators are increasingly seeking to develop and manage new facilitiesin Vietnam, with several licenses approved in 2006. The majority are focused ondeveloping alternative ports near Ho Chi Minh City. Efforts are also in progress to



develop an international transshipment port at Van Phong Bay (near Nha Trang) and atCai Lan in Quang Ninh province in the north.

Air, Road and Rail TransportationThe transportation sector has had a positive impact on Vietnam’s economicemergence. However, challenges such as capacity constraints and high accident ratesdue to rapid urbanisation must be addressed. The sector also lacks coordinated policy planning, sufficient budget and suffers from various regulatory and proceduraldeficiencies.Like the seaports, Vietnam’s airports are also facing severe capacity constraints.The country’s 21 airports, including three international facilities - Noi Bai in thenorth (Hanoi), Danang in the central region and Tan Son Nhat in the south (Ho ChiMinh City), are operated by the Civil Aviation Administration of Vietnam (CAAV).To meet the growing passenger and freight traffic needs, the Government has plans todevelop a total of 18 domestic and six international airports by 2015, at an estimatedcost of US$7.2 billion. Of Vietnam’s 222,179km of roads, only 19 percent are paved.Among all the transportation segments, the roads receive 80 to 90 percent of Government funding. However, multiple levels of jurisdiction involved in financingand implementing road reforms make the administration of this sector highlycomplex.The rail network in Vietnam is regulated by the Vietnam Railway Administration andoperated by the Vietnam Railway Corporation. Both are government bodies.Currently, railways are the least utilised mode for transporting cargo within thecountry, mainly due to poor service quality and high costs. Despite plans to connect tothe proposed Trans-Asian railway network and a new express railway project,transportation by rail is not set to play a crucial role in the near future.

Reality of forwarding service of Vietnam:Forwarding in Vietnam has been formed long. Before Liberation Day, in South

Vietnam, there are many delivery companies which mostly do tax declaration in roadtransportation, in which has some agents of foreign logistics firms.

In the North, since 1960, the import and export enterprises have beenresponsible for transporting goods, so the import and export enterprises establishedlogistics office, import and export branch, delivery station at the railway stations. Inthis period, forwarding was not intensive activities, working and simple produce. AfterLiberation Day, to focus on managing transportation, Foreign Trade Ministry ( now itis Commerce Ministry) took delivery organizations in a relationship from North toSouth. The Vietnam National Foreign Trade Forwarding and WarehousingCorporation (Vietrans) was born. During the subsidy period, forwarding service waslimited and Vietrans was the only agency which was allowed to delivery import andexport goods authorized by enterprises. Since the 6th National Party Congress in 1986,our country has been moving to market economy which are regulated by state, tradewas expanded, so forwarding developed rapidly, the Vietrans didn’t monopolize. Theforwarding was expanded, number of forwarding company increased and professionalskills was improved quickly. Many forwarding companies of Vietnam joined inInternational Federation of Freight Forwarders Associations (FIATA). Up to January

31st

, 1998, there were 13 forwarding companies of Vietnam recognized as associatemembers of FIATA. Up to May 7th , 2000, there were 30 forwarding companies. Total,there were 43 forwarding companies recognized as associate members of FIATA.



Compared with other countries in the world, nowadays, forwarding is a nascentindustry. In fact, in our country , there isn’t organization which manages licensing,inspective and supervisory activities for delivery service, so many economic sectors participated in forwarding and service is widespread in the market. Besides, accordingto subjective judgments associated with gathering information from import –exportenterprises, forwarding in Vietnam still exists some pity

- Firstly, although forwarding service is diversified quantity but quality of service is not high. Currently, at the ports, there still exist status of goods blocked because the set of documents for goods is in error, forwarding agent don’t arrangedelivery schedule scientific, means of transportation don’t arrive on time and loadingcapacity can not meet requirements... For example, at the main ports invested withmodern equipments, the average loading capacity is 3500 tons/ m berths per year; atthe other small ports, loading capacity reached 2000 tons/m berths per year.Meanwhile, the average loading capacity at the other ports in the area such asSingapore port, Indonesia port…reached 5000 tons/m berths per year. Loadingcapacity at the ports in Vietnam is only 60% of other ports in the region.

- Secondly, our country’s maritime industry is developing fast but it still existssuch as fleet of ship has small quantity and don’t balance types of ship ( Until 31st

December, 2007, feet of ship has 1.199 ships with total capacity 2.937.327 GT andgross tonnage 4.384.880 DWT, in which, mostly is Grain Cargo ship, General Cargoship); capacity of ports is limited, there is no international transshipment port;container ships carrying goods to Vietnam port are feeder vessels so transportationcosts is high; price of maritime services is not competitive.

- Thirdly, in delivery of goods procedure, there are not the tools andinformation processing, communication, classification, measuring, protectionequipment,…commodities in the delivery process so delivery time in Vietnam’sseaports is slow and procedures are cumbersome so it must through many manual processes.

- Fourthly, due to limited budget, investment in infrastructure for forwardingindustry as well as the training human resources with professional knowdlege can notimplement immediately.5. DIFFERENCES BETWEEN BOOKING SPACE AND VOYAGECHARTER Liner Charter

Ocean Liner An ocean liner is a ship designed to transport cargos or people, fromone seaport to another one, along regular long-distancemaritime routes according to a schedule, which is widelyestablished , called “line voyage”.Features of Ocean Liner

Liners are designed to transport small-weight goods, drygoods….Ocean liners are usually well-equipped and strongly built.Liner’s design is usually more complicated than a normalcruise ship.many holds average capacity: 10.000 – 20.000 MT averagespeed: 25 - 30 knots 2.5MT – 7MT ‘s crane.



Concept:Liner charter , or being called “booking shipping space”. The Traders ,

directly or through a chartering Brokers , requires the Ship Owners/ Carriers to keep a rental of a part of the ship, to transport goods from oneport to another one.

Features :- The routine which the liner run is known in advance, it's in the

rules announced by the carriers, which is called routing.- The time and schedule are published (daily, monthly, or even

quarterly).- The liner freight tariff isnt by negotiated, but by calculated by the

Owners.- Liner terms is regulated and is printed on Bill of Lading , to issue tothe Cargo owners

Advantages• Cargo unlimited.• The ship owners undertake the cargo loading => simplify the procedure.• Considering the conditions of purchasing is easy, because the liner runs on

a fixed-schedule (predetermined schedule)• It’s convenient for shippers in calculating business efficiency• Shippers hold the initiative in booking.• Booking procedure is easy and simple.

DisadvantagesFreight-rate per transported unit (ton or cubic metre) is usuallyhigher than the freight in voyage charter.

The traders have to accept all the terms printed on Bill of Lading(not negotiate).

This method of affreightment is not flexible in operating thetransport if the port of loading or port of discharge is not included inthe routine of the liners.

VOYAGE CHARTERConcepts – TRAMP SHIPPING

- fixed schedules- fixed routes- published ports of call

Concepts – VOYAGE CHARTER The voyage charter is a contract for the carriage of a stated quantity andtype of cargo, by a named vessel between named ports against an agreedprice, called freight

The relationship between the Charterer and the Ship-owner is adjusted bya contract called Voyage charter party (C/P), which are signed throughnegotiation.Negotiations are usually carried out by Charterers and Owners through aShipbroker .

A Voyage charter party contains: Names and addresses of ship’s ownerand charterer,Vessel’s name and description,Commodities, Ports of loading and discharge, Laydays - cancelling date, Laytime, Freight rate…

There are normally 3 forms of voyage charter• Single voyage• Round voyage



• Consecutive voyage (connective voyage)CHARACTERISTICSCargo

- large quantity- homogeneous

- fully loadedShip - one deck- a lot of holds with wide hatches- large tonnage

Terms- regulated in details on the C/P* Freight rate

Pros and consPROS: WIDE-SPREAD

- High flexibility

- Cheaper than liner charter- The charterer can negotiate freely- The speed of conveyance is fast

CONS- The technique of chartering and signing is very complicated- Freight rate fluctuates regularly and very strongly

III. COMPARATION AND GUIDEDifferences between liner and

Standards Liner (tàu ch ợ ) Tramp (tàu ch ạy rông)

Route Usual running.Having regular route. Coming toregular ports

Unusual runningIt’s route depends on theshipper’s requirement

Premium Regular premium by Liner freightconference (easily and simple tohire a liner)Remain stable for along time.Include the cost of loading and

discharge

It depends on the laws of supply and demand.UnstableDepends on the contractbetween shipper and ship

owner

Therelationship

B/L (which was printed by shipowner)

Contract (which wasnegotiated by shipper andship owner)

Commodity Package or small volumecommodity

Large volume as similar asship’s tonnage

Ship’sconstruction

Complicated, more than 1 deck,good equipment and high speed

1 deck Wide hold mouth to load or

discharge modity moreeasilyGuide for chartering selection



commodity:Small volume, or dry and packaged cargo or were contained in containe=>booking shipping spaceLarge volume or our goods are bulk cargo => voyage charterroute and time:If you want the ship run in your route and your time or run from loadingport to discharging port directly => voyage charterIf you like stable cost and be easy to hire a ship => booking shippingspace

6. BILL OF LADING

Chapter 1: Bill of Lading:1. Definition:

B/L is a document with transporting goods by ships is issued by a carrier to a shipper

to determine the legal relationship between the carrier and shipper.2. Function of B/L:

- Is the carrier's receipt confirming receipt of goods to transport, perform the contractof carriage.- As proof of ownership of goods, allowing the holder of the original bill of lading of receipt goods when the ship landed, the right to sell or transfer the goods indicated onthe bill of lading.

3. Effect:

- As a basis for import and export tax, make procedures of export or import.- As a document enclosed a commercial invoice which the seller sends the buyer or bank for payment of goods- As vouchers to mortgage, sale, transfer goods- As a basis for determining the amount of goods were sent, against which to monitor the performance of the contract

4. Content:There are many kinds of bills of lading which are issued by many carriers , thecontents are different. Bill of Lading is printed into patterns, usually include two

aspects, with the main contents as follows:* On the first includes following content:- Number of bill of lading (số vận đơn)

- Shipper (Người gửi hàng)

- Consignee (Người nhận hàng)

- Notify address (Địa chỉ thông báo)

- Shipowner (Chủ tàu)

- Flag (Cờ tàu)- Vessel hay name of ship (Tên tàu)



- Place of receipt (Nơi nhận hàng)

- Port of loading (Cảng xếp hang)

- Port of discharge (Cảng dỡ hàng)

- Via or transhipment port (Cảng chuyển tải)- Place of delivery (Nơi giao hang)

- Name of goods (Tên hàng)

- Marks and numbers (Kỹ mã hiệu)

- Kind of packages and discriptions of goods (Cách đóng gói và mô tả hàng hoá)

- Number of packages (Số kiện)

- Total weight or mesurement (Trọng lượng toàn bộ hay thể tích)- Freight and charges (Cước phí và chi chí)

- Number of original bill of lading (Số bản vận đơn gốc)

- Place and date of issue (Thời gian và địa điểm cấp vận đơn)

- thường là master's signature (Chữ ký của người vận tải)* On the second page includes following content:Include provisions relating to transport which are printed by shipping companies, the

charterer has no right to add and have to accept it. The back of the sheet usuallyincludes content such as definitions, general provisions, terms and responsibilities of the carrier, the terms loading and delivery, terms, fees and charges, terms and limits of liability of professionals transport, free of charge provision of the carrier ...Gồm những quy định có liên quan đến vận chuyển do hãng tàu in sẵn, người thuê tàkhông có quyền bổ sung hay sửa đổi mà mặc nhiên phải chấp nhận nó. Mặt sau thưgồm các nội dung như các định nghĩa, điều khoản chung, điều khoản trách nhiệm củngười chuyên chở, điều khoản xếp dỡ và giao nhận, điều khoản cước phí và phụ phđiều khoản giới hạn trách nhiệm của người chuyên chở, điều khoản miễn trách củangười chuyên chở...

5. Types of Bill:Currently, the bill of lading has many different types, each type of bill of lading hasspecific requirements

5.1. Based on the way of transferring of ownership of goods- Straight Bill of Lading (vận đơn đích danh): of this lading, it was clearly namedconsignee- Order Bill of Lading (vân đơn theo lệnh): This bill of lading, the goods will bedelivered "by order of the shipment" or "by order of the consignee"

- Bearer Bill of lading (vận đơn xuất trình): This bill of lading, people do not sign theconsignee. Goods will be delivered to the person presenting the bill of lading



5.2. Based on the notes on the bill of lading, bill of lading is divided into perfectlading, imperfect lading- Clean Bill of Lading (vận đơn hoàn hảo): As the bill of lading that the carrier doesnot approve bad comments about the state of commodities and packaging- Unclean Bill of Lading: As the bill of lading that the carrier approve bad commentsabout the state of commodities and packaging such as having holes, burning, torn packet.

5.3. Based on the way of transporting, bill of lading is divided into Through Bill of Lading and Direct Bill of Lading- Through Bill of Lading: is representative of lading for all trips when the transshiphappens.- Direct Bill of Lading: is used when goods are transported on a ship straight from theloading port to port without transship

5.4. Based on the time for issuing bill of lading and the time for loading and unloadinggoods- Shipped on board Bill of Lading (vận đơn đã xếp hàng): a bill of lading was issued tthe shipment after the goods have been loaded on ship- Received for shipment Bill of Lading (vận đơn nhận hàng để xếp): a bill of ladingwas issued to the shipper as the carrier receives goods to load them on ship

5.5. In addition, the following types of bill of lading is also often used- Charter party Bill of Lading (vận đơn theo hợp đồng thuê tàu): be used when goodsare transported on a voyage charter - Combined B/L (vận đơn kết hơp): A type of bill of lading is used when cargo istransported by many different means- Short B/L (vận đơn rút gọn): a type of bill of lading summarizesimportant points-And some other types of B/L: Stale B/L (vận đơn đến chậm), House B/L (vận đơn tthể), Master B/L (vận đơn chủ).

6. Rules to adjust B/L

6.1. Sources of international law:Currently there are two main sources of international law on maritime transport,including:- Convention Brussels 1924- Convention Hamburg 19786.2. Maritime Code of Vietnam. (Bộ luật hàng hải Việt Nam) : issued on 30 May 200in 1990 and entered into force on 01 December 01 1991. Basically, like the MaritimeLaw Hague-Visby Rules6.3. Under the provisions of UCP 600

7.Difficulties in using B/L:

- The rate in sending B/L is slower than goods: Therefore, the consignee has no bill of lading for receiving goods, while it takes more storage charges, demurrage (lưu bãi)



- Heavily dependent on natural, marine conditions: face many risks such as stranding,sinking, burning, stabbing, and another, hit the ground, missing pirates ..gặp nhiều rủi ro như mắc cạn, đắm, cháy, đâm va nhau, va phải đá ngầm, mất tích,cướp biển...- Ship's speed is low: speed is only about 14-20 miles / 1 hour - Use of lading is costly : costs of printing and issuing bill of lading is expensive by because B/L is printed into many in the original and copy- The use of B / L may be atrisk in the delivery of goods : if B/L is stolen for B / L is documents of ownership of goods.

Chapter 2:1. Reality goods transportation by seaway in Viet Nam:Nowadays, imports and exports of Viet Nam almost use ocean linerand 84% the volume of exports and imports must hire foreign

shipping company, as domestic merchant shippings are few, small,old. Domestic owners of goods normally hire ship throughmiddleman, agency, so they only receive Bill of lading from owner of ship. Therefore, to avoid risk, import and export companys needknow thoroughly how to use Bill of lading.

- While demand to import and export goods is more and moreincreasing, understanding of the hiring ship still limit. Hence, ownersof goods need know important informations: vessel name must be inthe waybill, the carrier, the ship’s nationality, quality of ships,tonnage…- When hiring foreign cargo ships, owners need record clearlynames, registration brand goods because the international portsmay refuse loading no signs goods or goods whose signs are notclear. Don’t write exact quantity, should plus or minus percentdifference in weight.- When hiring foreign cargo ships, owners also need note thatthe ship’s nationality are in the “black book (list )” of the importingcountry (for examples: if we export goods to USA, we can’t hire ship

of Cuba, North Korea).In methods of hiring ships are common that hiring “liner”. Thisis type of ship in a certain line, it visits certain ports and have a fixedroute. So it often faster and priority access terminals. The cost isrelatively stable, not high => it is convenient for new businessenterprises.

Disadvantage of this ship is only suitable for transporting cargoin smallquantities, conditions of carriage printed in the bill of lading and noaccess the harbor outside route

2. Difficulty – Limited to import and export enterprises:+ Speed



- The speed sending the original bill of lading is slower than it’sgoods. Today, advances in science and technology in the maritimetransport, so the speed of transporting goods is very quick.Meanwhile, in many cases, journey of original bills of lading whichare sent by airway or by mail is often slower than journey of goodstransported by ship. Therefore, the consignee has no bill of lading forthe loading, at the same time, it takes more storage charges,demurrage charges.- The speed of the vessel is low, speed is only about 14-20 miles/ 1 hour and the speed of the vessel operators are still limited

+ Risk :

- Depend on natural, marine conditions, risky as sinking, burning,stabbing…According to the insurance companies, in the world, the

average monthly has about 300 ship accidents, including manycases of total loss.

- The use of B / L may be risky in the delivery of goods (if B/L of enterprises are stolen) because the B / L is evidence of ownership of goods.

+ Cost :

- Using of B/L is very expensive. Firstly, the cost of printing andissuing B/L is not small because B/L must be printed into the original

and copies. Secondly, printing B/L requires a lot of efforts andexpense due to printing words back of B/L is very small to combatcounterfeiting. Thirdly, the B/L is not high standard; each carrier willissue a type B/L; hence, using B/L takes additional storage costs.According to the WTO, the total value of export and import turnoverin 1996 reached 10,380 billion, in there, the cost of B/L is almost 7%.- Using B/L must use original, so it can’t apply the achievementsof information technology. Meanwhile, transporting goods by seawayaccounts for more than 80% goods in international trade. Therefore,the bills of lading and a series of other documents in international

trade become costly obstacles and trends in international trade.Especaily , on 01.01.2011, the international courier company inVietnam began to increase freight rates for each bill of lading sent tointernational.FedEx increases in the range of 4 -7%DHL is the lowest increase of 4%.Express International delivery company TNT - The minimum chargeis 0.7usd / bill of lading.

JSC Courier Post (EMS) and the postal system VNPT - 15-20%.

This is the inevitable trend of shipping industry in the future.



Increase the surcharge fees (fuel, transport) and by the effects of inflation ... These large companies often will be the leader in theimplementation of these price increases.

+ B / L is not suitable for the application of media modern automaticdata (fax, teleax ...) by the use of B / L in the payment and delivery.... requires original documents

+ If you do not understand the legal provisions of the bill of lading,the user will encounter risks and disputes

3. RecommendationA document which can substitute for B/L and have function similar toB/L was born. That is seaway bill. It can overcome these

disadvantages of B/L.

- Firstly, when using seaway bill, consignee can receive goods onship without original B/L. Cargo will be delivered to the consignee onthe basis of the conditions.- Secondly, seaway bill is not a document of ownership of goods.So it is not necessary to immediately send the original to theconsignee at the port of destination that we can send a copy throughthe system of automatic data transmission. Thus, the exporter canimmediately send Seaway bill to the consignee within minutes.Consignee and the carrier don’t have to worry about when deliveringwithout documents.- Thirdly, when using the Seaway Bill, the terms printed in verysmall letters on the back was replaced by a reference to theconditions, provisions relating to transportation on the front with ashort terms. On the other hand, the carrier just issues an originalseaway bill.- Fourthly, Seaway bill allows to deliver to a person when theyprove they are legitimate consignee. This helps to limit a lot of risksin the delivery, because Seaway bill is not evidence of ownership of goods, if it is lost or misplaced, it will not cause seriousconsequences.- However, the Seaway bill also has disadvantages. Seaway billhinders international trade (because Seaway bill is very complicatedand difficult when the carrier and the consignee are strangers andthey are a national difference; national laws of some countries andinternational conventions don’t admit seaway bill that it is ashipping document). Moreover, the seaway bill is not negotiable, andalthough accepted by banks for documentary credit, they do notafford the security that traditional bills of lading provide. In Vietnam,the using Seaway bill is still very new, although there were legalbasics to apply the Seaway Bill.



In short, all foreign trade must be based on the domestic andinternational rules .Traders have to understand the forms andfeatures of the b / l, the rules on new foreign trade transportationagainst the risk of disputes .

7. VOYAGE CHARTER PARTY

1.Charter party

1.1 Definition

Charter Party is a contract in which a shipowner agrees to place their ship, or part of it,at the disposal of a charterer for the carriage of goods from one port to another port on being paid freight, or to let the ship for a specified period, the remuneration being known as hiremoney. This term is derived from the fact that the contract which bears this name wasformerly written on a card and afterwards the card was cut into two parts from top to bottom,and one part was delivered to each of the parties, which was produced when required, and bythis means counterfeits were prevented.

1.2 Type of charter There are two main types of shipping, liner shipping and tramp shipping.Liner shipping is a kind of ship which operates within a schedule and has a fixed port

rotation with published dates of calls at the advertised ports.Tramp shipping or tramper on the other hand is a ship that has no fixed routing or

itinerary or schedule and is available at short notice (or fixture) to load any cargo from any port to any port.

From those two types of shipping, we have three main types charter: Liner charter from the first type of shipping- liner shipping, voyage charter and time charter from thesecond type of shipping- tramp shipping. A brief description of these three types of charter isgiven below. However, only the voyage charter party is examined in this essay.

1.2.1 Liner charter

“A liner service implies a fleet of ships, under common ownership or management,

which provides afixed service, at regular intervals, between named ports, and offer

themselves as general carriers of any goods requiring shipment between those ports. A fixed

itinerary, inclusion in a regular service and the obligation to accept cargo from all comers

and to sail, whether filled or not, on a date fixed by a published schedule; these, and not the size and speed of the ship are what distinguish the “liner” from the “tramp” – the ship which



can be hired as a whole, by the voyage or the month, to load such cargo and to carry it

between ports as the charterer may require.”

1.2.2 Voyage charter

Under a voyage charter party, the ship owner agrees to charter the vessel to thecharterer for one or more specified voyages. The vessel remains under the control of the shipowner who is responsible for equipping and manning the vessel. The charterer undertakes to provide the specified cargo and pays for the services either as a lump sum for the voyage, orin terms of the amount and type of cargo carried . The renumeration of the ship owner is afreight calculated according to the quantity of cargo loaded or carried or sometimes lump sumfreight.

1.2.3 Time charter

Under a time charter party, the charterer hires the vessel for a specified period of time.As in a voyage charter, the ship owner retains the control of the ship and the employees on board the ship. However, the charterer is responsible for its deployment, the number ofvoyages it undertakes, and the destination of the voyages. The ship owner in a time charter party does not undertake to transport the goods to specified port(s) as in a voyage charter party. Under a time charter the ship owner is only responsible for nautical and technicaloperation of the ship whereas and the charterer (in fact the time charterer) is responsible forthe commercial operation of the ship. It follows that under a time charter, the fixed cost of theship are for the account of the owner and the variable cost are for the account of the timecharterer.

1.3 Relationship between Charter party and Bill of Lading

1.3.1 Which is the governing contract of carriage - The Charter Party orthe Bill of Lading?

Since the bill of lading is a receipt for the shipment of goods, it will come into

operation once those goods have been shipped. However if the vessel has been chartered itwill probably come into operation as a result of orders which have already been given by thecharterer under the charter party.

However since the Bill of Lading is also a contract of carriage of goods a potentialconflict arises between the two contracts. It would be commercial nonsense for there to betwo contracts between the same two parties for the carriage of the same goods on the samevoyage. Accordingly the law has adopted a common sense approach and has held that when a bill of lading is held by a party who already has a charter party contract with the person whois the carrier under the bill of lading, the bill is to be treated as a receipt and a document oftitle-but not as a contract of carriage.



However once that Bill of Lading is endorsed to a party who is not a party to thecharter party then in his hands ,the bill of lading operates not only as a receipt and a documenof title but also as a contract of carriage between him and the carrier. Legal relations betweenship owner and charterer are governed by their contract contained in the charter party. When a bill of lading is issued or is transferred to the owner or person entitled to possession of thecargo who is not the charterer, then it contains or evidences a separate contract between theship owner and that other person.

1.3.2 Conflicting duties under the Charter Party and the Bill of Lading

Once the cargo has been shipped under a Chartered vessel it is clear that the shipowner can be a party to different contracts (the charter party and the bill of lading) with twodifferent contracting parties (the charterer under the charter party and the consignee under the

bill of lading). Therefore unless the two contracts are on back to back terms there is a potential for confusion and conflict.

The issue of a bill of lading may seriously diminish the effectiveness of rights whichthe owner may have under the charter.

However if a bill of lading has been issued in the meantime a withdrawal may be notmuch use to the ship owner since he completely separate obligations to the cargo owner underthe bills of lading will continue These obligations include the duty to proceed to and deliverthe cargo at the port specified in the bill of lading even though the bill of lading freight may

already have been pre-paid to the charterer and even though no further hire will be payableunder the time charter. Indeed the owner may even have to pay out of his own pocket portexpenses, stevedoring charges and other costs which should have been for the time charterer’saccount under the time charter if the charter had not been terminated by the withdrawal.

2 Voyage charter

Voyage charter is an engagement of a vessel for agreed voyage(s) between declared ports to transport full shipload of cargo or a certain quantity of cargo. The ship owner provides the vessel and her crew while the charterer supplies the cargo. The freight is paid ondeadweight tonnage (DWT) basis or on lump sum basis.

The ship owner provides for all the ship’s costs with its crew, expenses for fuel, water,canal dues, port dues, loading and discharging expenses etc. in return the charterer pays himthe hire charges for carrying the cargo as described or utilised cargo capacity of the ship.Voyage charters provide for demurrage and dispatch payments if the time in port(s) exceeds,or is less than, lay time.

2.1 Forms of voyage charter

There are many forms of voyage charter that can be applied. They are:



o Single voyage: the vessel(s) chartered for only a single voyage betweenspecified ports. After completion of unloading at port of destination, the charter party shallexpire.

o Round Voyage: the vessel(s) chartered to carry cargo in two-ways under thecharter party.

o Consecutive Voyage: this form can be either connective single or connectiveround voyage. The chartered vessel is used to carry cargo on connective single voyages or onround voyages. To introduce some flexibility and allow for changing circumstances thecharter party may incorporate options in terms of loading and or discharge ports, quantitiesand other contract terms.

o There is also lump sum charter in which the freight is calculated and paid onunit load or on the vessel’s cargo capacity basis (charter party does not specify name and

quantity of cargo and form of charter which means charter freight is calculated and paid onunit of weight or another cargo unit).

2.2 Characteristic of voyage charter

High loading capacity, usually full shipload of cargo or nearly full (90%), withmain items such as ore, coal, grains,…

In voyage charter, in addition to a bill of lading, two parties shall negotiateabout transport conditions and freight rates to sign a voyage charter party. The bill of lading

used in this case is called Charter party bill of lading which is of the same value as a receipt, alegal document complementary to the charter party but does not function as the bill of ladingin liner charter.

The charterer usually authorises a charter broker to search for a vessel,negotiating with the ship owner, bargaining over costs then signing the charter party.

Voyage charter has some advantages and disadvantages as follows:Advantages:• The voyage charter may give the charterer greater flexibility and control

because the charterer could demand loading at any port(s) and easily changeloading/discharging port(s).

• It may also be more economically advantageous because the charterer mayhave greater negotiating strength than an ordinary shipper. The charterer is free to negotiateevery term in the charter party, not being forced to accept like in liner charter.

• Besides, charter freight is cheaper than liner charter ( usually 30% cheaper)• Short transport time because the vessel departs straight from loading port(s) to

discharging port(s) with hardly visiting transit port(s).Disadvantages:• Complicated charter and contract-signing methods.



• Strong and usual fluctuations of freight rates require the charterer fullunderstanding of the market, otherwise the charterer has to pay high charter freight or cannotcharter.

3 Voyage charter partyThis is a charter party for the carriage of a full cargo, not for a period of time, but at a

stipulated rate per ton, for one voyage only, between named ports to be named on arrival in agiven area. It is a frequently used charter party of which there are many varieties, and mostcommodities and trades have a particular type to suit their purposes

3.1 Standard charter party forms

The most well-known standard form for use with general cargo is GENCON C/P,

approved by BIMCO - Baltic and International Marinetime Council. The form, despiterevisions (in 1922 and 1976), was not comprehensive with the result that parties usingGENCON regularly inserted additional clauses. BIMCO therefore produced an amendedversion of GENCON known as GENCON 1994. The 1994 version has introduced newclauses and has modified a number of clauses to reflect modern practice. . Other mostfrequently used general voyage charter agreements are: the “Multi-Purpose Charter party1982”, MULTIFORM, published by FONASBA; the “Tanker Voyage Charter party 1984”,ASBA II, published by ASBA; the “Tanker Voyage Charter party” INTERTANKVOY 76 published by INTERTANKO.

There are also other standard forms for use with specific cargo- for example, NORTHGRAIN 89 (North American grain charter party issued by the Association ofShipbrokers and Agents (USA Inc.) for use in the carriage of grain, OREVOY (the Baltic andInternational Maritime Conference standard ore charter party) for use in the carriage of ore,and FERTICON (Champer of Shipping Fertilizers charter) for use in the carriage of fertilizers.

Using standard C/P forms makes it easier for charterers and shipowners to

conduct business as only exceptions and additions are to be negotiated.

The advantages of using such recommended charter parties:• In common usage• Convenient and widely available• Expressed in wording that has often been legally tested in court

fair to both parties.

3.2 Obligations of the owner and the charterer

The voyage charter party imposes obligations upon both the Owner and the Charterer:



3.2.1 The owner’s obligations

The Owner is obliged to set the ship agreed upon at the disposal at the time and placethey agreed upon in the contract. The Owner, also, is obliged to keep the ship on its statealong the period of the trip on trips and carrying out all what is necessary for implementingthem.

The Owner, also, is obliged to perform the trip agreed upon at the fixed time in thecontract.

At last, the Owner is obliged to stow the loaded goods, as he possesses both thetechnical control and the commercial one of the ship. He has also to preserve the goods alongthe trip concerned up to their delivery to the consignee.

3.2.2 The charterer’s obligations

The voyage charter party imposes two obligations upon the Charterer as follows:a. The obligation of charging and discharging the Goods:

The Charterer is obliged to charge and discharge the goods at the time agreed upon inthe contract. If the contract is void of texts about the periods, they are identified according tothe conventional custom in the port of charge or discharge. If there is no custom in the portthe case is referred to the public Maritime custom

The established practice shows that the period of discharge is calculated separatelyfrom the period of charge. Therefore, if charge is completed before the end of the fixed

period, the spare of days is not added to recompensate the demurrage days of discharge,unless they agreed on otherwise. But, the diligent Charterer may be gifted an award, for hisdiligence in performing either loading or unloading before the fixed time, upon an agreement.

b. The obligation of paying the freight:

The Charterer is obliged to pay the freight, as a fundamental obligation against theOwner’s obligation of setting the ship at the Charterer’s disposal. The relation between the payment of the freight and the performance of the trip or trips agreed upon a question aboutthe effects of the wholly or partial abstention from performing the intended trip or trips. Theanswer to this question depends on different cases and how the law is interpreted.

3.3 List of charter party clauses

A voyage charter party usually contains a number of express terms. It is not possibleto examine all the terms, since the wording of these terms varies from charter party to charter party. What is provided here is a list of terms which are likely to be found in most standardform charter parties.

Place: the place where a contract is deemed to have may govern the law which is to beapplied to that contract in the event of dispute. Thus if the place is London, English Law may

be very likely prevail



Date: equally important the date to be shown is that, by fixture negotiations, areconcluded with all subjects lifted - in other words, when all negotiating formalities arecomplete.

Signature: No charter party is complete without the signatures of or on behalf of the parties concerned.

• Clause 1: The contract’s subjects: are Ship’s Owner or carrier and charterer… withclearly stated names, addresses of the contract parties. This clause also shows whether shipbrokers are employed.

• Clause 2: Vessel(s)/ Ship(s) Name of ship/vessel, flag, engines, class, register, arbitration, cargo capacity, position of theship when the contract is negotiated are stated expressly in this clause, also substitute sister ship if the ship owner wishes to replace the ship and has to advise the charterer in advance;

substitute ship must be equivalent to stipulated ship.It is usual for a ship owner to confirm that a vessel is in a suitable condition safely and properly to undertake the contractual voyage.

• Clause 3 : CargoThis clause states clearly name, packing, characteristics of the cargo. Cargo description-Commodity and nature of the goods to be carried eg bulk or bagged stowage factor( eg about55 cubic feet per tonne)

• Clause 4: Volume or Quantity of cargo

The contract often stipulates quantity of cargo together with a tolerance, i.e. 5000 tons 10%more or less at Master’s option.• Clause 5: Lay days

Lay days should be entered in the contract by two parties. Where the vessel does not arrive ontime, the charterer reserves the right to cancel the contract.

• Clause 6: Loading/ Discharging port(s)The charter party must states expressly named loading/discharging port(s) ( one or more portsaccording to the charterer’s requirements of carriage. They are safe politically and seaworthy, being deep enough for the ship to be always afloat.

• Clause 7: Loading/ Discharging ratesThe speed at which cargo-handling activities are to be performed, agreed by two parties, based on the study of the productivity of port(s) for stipulation.

• Clause 8: Laytime. Laytime can be showed in fixed days/ hours. Based on laytime tostipulate demurrage/dispatch as follows:- If laytime exceeds allowed limits, the charterer has to pay demurrage to the ship owner.- If laytime is less than allowed limits, the charterer is paid dispatch money by the ship owner.

• Clause 9 : Loading/Discharging costs: agreed by two parties according to one of thesefour ways:- Liner terms: loading/ discharging costs at ship owner’s account



- Free In – FI: loading costs at ship owner’s account.- Free Out – FO: discharging costs at ship owner’s account.- Free In and Out – FIO: the ship owner is free of loading/ discharging costs.Clause 10:

Freight rate: Contrary to liner charter, rate of freight in voyage charter is not set in the freighttariff but agreed by two parties on the basis of freight rate on voyage charter market.

• Rate of freight: is the freight calculated on freight unit.Freight unit can be either weight unit (metric ton, long ton, short ton) for deadweight cargo ormeasurement unit (m3 , cuft) for measurement cargo.Payment of freight: the parties could agree upon the payment of freight in one of thefollowing three ways:- Freight Prepaid: the charterer is to pay freight rate in full after completion of loading or after

signing the bill of lading a few days.- Freight to Collect: the freight is collected after the vessel’s arrival at discharging port. -Partial freight prepaid, partial freight-to-collectClause 11: Ship’s Gear A normal clause in dry cargo shipping specifying that a vessel’s gear will be maintained to ahigh standard and specifying what happens in the event of gear breakdown resulting in extraexpense.

• Clause 12 : Stevedore damage

The Charterers shall be responsible for damage (beyond ordinary wear and tear) to any part of theVessel caused by Stevedores. Such damage shall be notified as soon as reasonably possible by theMaster to the Charterers or their agents and to their Stevedores, failing which the Charterers shallnot be held responsible. The Master shall endeavour to obtain the Stevedores’ writtenacknowledgement of liability.The Charterers are obliged to repair any stevedore damage prior to completion of the voyage, butmust repair stevedore damage affecting the Vessel’s seaworthiness or class before the Vessel sailsfrom the port where such damage was caused or found. All additional expenses incurred shall befor the account of the Charterers and any time lost shall be for the account of and shall be paid tothe Owners by the Charterers at the demurrage rate.

• Clause 13 : Cargo Separation and TallyingWhere a vessel is to carry various parcels of cargo, it may not be possible for al separations between individual parcels to be natural.The tallying (checking) of cargo as it is loaded or discharged is frequently an expensiveoperation and cargo claims can arise for alleged short delivery, bad condition etc.

• Clause 14: Dues and TaxesThis clause specifies which party to the contract is responsible for taxes which may be leviedagainst the vessel and/or her cargo and /or the freight.



• Clause 15: Bills of LadingThe bill of lading to be presented to the Master or his/her agent upon completion of theloading. Master or his/her agent to sign the bill of lading indicating the apparent condition of the cargo.

• Clause 16: StrikesBoth parties to a charter party have risks and liabilities in the event of a strike.

• Clause 17 : ExceptionThe rights of contracting parties to cancel the charter parties in case of events making its performance virtually impossible – eg Force Majeure or Acts of God.

• Clause 18 : Protecting ClausesA set of clauses commonly included in the printed form of a charter party or as additionalclauses .This also includes P&I bunkering clause sets out owners rights to deviate for bunkers

during the contractual voyage.• Clause 19: Commission

Specifies the amount and to whom commissions and brokerages are payable, usually addingthat commissions/brokerages are payable on freight, deadfreight and demurrage.

• Clause 20: IceDepending on the trade involved it may not be necessary for an ice clause to be included in acharter party, but where one is required, great care should be taken over its wording.

• Clause 21: War Risks

War risks clauses should be examined in detail as some are unfair to ship owners, others tocharterers and/or patently unsuitable for the purpose intended.A war risk clause should provide a ship owner with the right to refuse to allow his vessel andher crew to enter or to remain in an area which has become dangerous due to warlike activity.

3.4 Sample of voyage charter party

Two standard voyage charter party forms hereunder are presentedin illustration for the above-mentioned clauses.

8. Different responsibilities of carriers and traders intransporting traded commodities.

Different responsibilities of carriers and traders in transporting traded commodities.

CarriersCarrier: Any person who undertakes to perform the performance of transport byrail, road, air, sea, inland waterway or by a combination of such modes.Actual carrier: Any person to whom the performance of the carriage of thegoods has been entrusted by the carrier

Contracting carrier: A person who as a principal makes an agreement for carriageTrader : Exporters & Importers



Responsibility of Traders: Incoterm 2000• Group E (Departure) EXW• Group F (Main carriage unpaid) FCA FAS FOB• Group C (Main carriage paid) CFR CIF CPT CIP• Group D(Arrival) DAF DES DEQ DDU DDP

Responsibility of TradersSeller: Delivery the goodsBuyer: Taking delivery of the goods when they have been deliveredThe risk of loss of or damage to the goods, as well as the obligation to bear thecosts relating to the goods, passes from the seller to the buyer when the seller has fulfilled his obligation to deliver the goods

Free Alongside Ship• Seller: place the goods alongside the vessel at the named port of shipment; clear

the goods for export• Buyer: take delivery of the goods when they have been delivered

=> The buyer has to bear all costs and risks of loss of or damage to the goodsfrom that moment

Free On Board• Seller: deliver the goods on board the vessel (passed the ship’s

rail) at the named port of shipment, clear the goods for export• Buyer: take delivery of the goods when they have been delivered

=> The buyer has to bear all costs and risks of loss of ordamage to the goods from that point

Cost and FreightSeller • deliver the goods on board the vessel at the port of shipment• clear the goods for export• pay the costs and freight necessary to bring goods to the named port of destination

Buyer: accept delivery of the goods when they have been delivered and receivethem from the carrier at the named port of destination

Cost Insurance and FreightSeller

• deliver the goods on board the vessel at the port of shipment• clear the goods for export• pay the costs and freight necessary to bring goods to the named port of destination• contract for insurance and pay the insurance premium

Buyer: accept delivery of the goods when they have been delivered and receivethem from the carrier at the named port of destination

Delivered Ex ShipSeller: place the goods at the disposal of the buyer on board the vessel not clearedfor import at the named port of destination

Buyer • take delivery of the goods when they have been delivered• clear the goods for import



• pay for all formalities and other charges upon importThe seller has to bear all the costs and risks involved in bringing the goods to thenamed port of destination before discharging

Delivered Ex QuaySeller: place the goods at the disposal of the buyer on the quay (wharf) not clearedfor import at the named port of destinationBuyer • take delivery of the goods when they have been delivered• clear the goods for import• pay for all formalities and other charges upon importThe seller has to bear all the costs and risks involved in bringing the goods to the

named port of destination before discharging the goods on the quay

Responsibility of the carriers for commodity transported by seaConcept:- Basis of Liability : 3 Responsibilities- 17 Exemptions- Period of Liability: Hague Rules & Hague-Visby RulesHamburg Rules

- Limit of Liability:Hague Rules1924 Hague-Visby Rules 1968 Hamburg Rules 1978

Value of goods

100 GBP / packageor unit

666.67 SDR / package or unit or 2 SDR / kg of grossweight of the goods

835 SDR / package or unit or 2.5 SDR / kg of gross weight othe goods

Rules- Hague rules- Hague-Visby rules- Hamburg rules

Notice of loss or damage stipulated in sources of lawObvious loss

The sources of law : Before or during delivery

Hamburg Rules : Not later than the business day after the date of deliveryUnobvious loss Hague Rules, Hague- Visby Rules: Within 3 days after delivery by the shipper Hamburg Rules : Within 15 days after delivery by the consignee

Delay in deliveryHamburg Rules : Within 60 days after the goods are delivered

Notice of damage or delayDamageMontreal - Montreal Protocol 4: Not later than 14 daysDelayMontreal Protocol 4: Not later than 21 days

9. CONSOLIDATOR



10. The relationship between bills of Lading and Letter of CreditA bill of lading and a letter of credit are completely different documents that serveunique purposes. These two documents are linked in that they are both commonlyfound in international trade transactions. Knowing the difference between a bill of lading and a letter of credit can help you to understand the import/export industry andthe international trade process.

1. Bill of Ladingo A bill of lading is a document listing and detailing all of the goods in a

shipment of any kind, whether by land, sea or air. Sellers of goods printa bill of lading that details the product types, quantities, prices, weightsand any other factors important to the distributor and the buyer. Theseller then signs the bill of lading and attaches it to the shipment as it is passed off to the distributor, assuming the seller uses a third-partydistributor.

The shipping company can use the bill of lading to double check that all goods areaccounted for. Although shippers generally cannot check the contents of containers,like boxes or pallets, they can check the number and type of containers present in theshipment.When the buyer receives the shipment, an employee can use the bill of lading to ensurethat all items on the bill are present in the shipment and to compare the list of shippedgoods against the buyer's purchase records to ensure all purchased goods are includedin the bill. The buyer can then use the bill of lading as an official receipt for thetransaction.

2. Letter of Credito A letter of credit is essentially a promise made by one bank to another

that the first bank's customer can be relied upon to pay for goods after they have been received. In practice, a buyer from one country asks his bank to send a letter of credit to the seller's bank in another country. Thisassures the seller that he can ship the goods to the buyer with a measureof financial security, since the letter of credit requires the buyer's bank to

cover the payment if the buyer defaults. This is a form of privateindustry regulation. Since there is no international authority with the power to enforce trade rules across countries, the banking industry relieson letters of credit to provide protection to international businesses.

Correlation

o Letters of credit and bills of lading represent two distinct steps in asingle process. After making a deal for an international transactioninvolving a physical shipment, the buyer initiates a letter of credit. Oncethe seller's bank accepts the letter, the seller can draft a bill of lading andship the goods.

Process



o Companies create bills of lading themselves, either by creating themfrom scratch or using a template packaged with an office productivitysoftware package. Bills of lading can take a wide range of forms, as longas all relevant information is included.

Letters of credit are drafted and sent by the buyer's bank. The purchaser in thetransaction must simply contact the bank, request a letter of credit be initiated and provide information about the transaction, the seller and the seller's bank.When transport documents are tendered under a documentary credit the bank willscrutinise them to ensure they comply with the terms of the letter of credit. The bank owes a duty to its customer to refuse documents which do not strictly conform, and the beneficiary of the credit must comply with the terms of his contract with the issuing banker. Every international movement requires a master transport document. This is thedocument issued by the actual carrier. The ‘actual’ carrier in this context would bethe shipping line, the airline, the road haulier or the rail service. This could extend toinclude the carrier’s appointed agent or representative but, as discussed below, it would usually not describe (for example) a freight forwarder.The master transport document will serve a variety of functions amongst which will beits role as a record of the terms and conditions of carriage – or as a reference to a set of such terms that will be applied in the relationship between the shipper and thecarrier.When the buyer and seller are working without a freight forwarder (or a cargoconsolidator), then the carrier issues the master transport document directly to the

shipper. However note that under certain conditions even when the seller is working with a freight forwarder the carrier’s document may show the seller, and not the

freight forwarder, as the shipper. In such cases, the freight forwarder is most probablyacting in the capacity of agent for the seller. But, it is more often the case that a

freight forwarder acts as a principal and the carrier issues the master transport document to the freight forwarder directly, with the freight forwarder shown as the

shipper on that master document. The freight forwarder in turn issues their own‘house’ transport document to the actual sellers, who will be shown on them as the

shipper.The use of ‘house documents’ issued ‘under’ the umbrella of a large Master

Document allows freight forwarders to buy bulk space for ‘x’ (on the Master document) and sell it off in smaller units to traders for ‘y’ (on the House document.)This arrangement is central to running a seafreight groupage or airfreight consolidation service.

In this entry, you will note the change of name as the seller becomes the shipper and you may wish to refer to the entry for Seller for more on this topic. Essentially, thename ‘seller’ only applies in the sales contract, whereas the ‘shipper’ enters into acontract with the carrier, which is independent of the sales contract – the namechange serving to emphasis this independence. Equally, a difference exists between abuyer and a consignee and this is covered under the entry for buyer..."

11. DOOR TO DOOR SERVICEThrough transport or shipping arrangement to ensure direct flow of goods fromthe exporter to the importer (or from the point-of-origin to the point-of-sale ) witha minimum of interruption and delay . Also called house to house service .

http://www.businessdictionary.com/definition/transport.html

http://www.businessdictionary.com/definition/shipping.html

http://www.businessdictionary.com/definition/arrangement.html

http://www.investorwords.com/1709/ensure.html

http://www.investorwords.com/9451/direct.html

http://www.businessdictionary.com/definition/flow.html

http://www.businessdictionary.com/definition/goods.html

http://www.businessdictionary.com/definition/exporter.html

http://www.businessdictionary.com/definition/importer.html

http://www.businessdictionary.com/definition/point-of-origin.html

http://www.businessdictionary.com/definition/point-of-sale-POS.html

http://www.investorwords.com/10321/minimum.html

http://www.businessdictionary.com/definition/delay.html

http://www.businessdictionary.com/definition/house-to-house-service.html

http://www.businessdictionary.com/definition/transport.html

http://www.businessdictionary.com/definition/shipping.html

http://www.businessdictionary.com/definition/arrangement.html

http://www.investorwords.com/1709/ensure.html

http://www.investorwords.com/9451/direct.html

http://www.businessdictionary.com/definition/flow.html

http://www.businessdictionary.com/definition/goods.html

http://www.businessdictionary.com/definition/exporter.html

http://www.businessdictionary.com/definition/importer.html

http://www.businessdictionary.com/definition/point-of-origin.html

http://www.businessdictionary.com/definition/point-of-sale-POS.html

http://www.investorwords.com/10321/minimum.html

http://www.businessdictionary.com/definition/delay.html

http://www.businessdictionary.com/definition/house-to-house-service.html



Benefits

For shippers:+ simplify logistic management. It provides a one-shop solution fordelivering goods to virtually anywhere in the world.

+ reduce costs. The commissions paid once with all-inclusive rates(pickup, customs clearance and delivery).

+ Minimize the risk of loss or product damage.+ Reduce the transit time of the product => Save time and money.

For national economy: Savings in costs of exports and make them more competitivein the international market.Vietnam’s situation:

Actual situationlarge quantity, not quality

51% of companies work as agencies in the chainReasons

Law system: Law of models of transportation, many other kinds of officialdocuments. Still have drawbacksInfrastructure: Transportation system. Ports, warehousesLogistics companies: Capital, Associations, Experience

12. LOGISTICSLogistics refer to the physical flow of raw materials, semi-finished products and

finished products along the supply chain, as well as all the flow of information and funds thatsupport the physical flow. It interlinks all the sectors along the supply chain, such as rawmaterial supply, manufacturing, distribution and retailing. Although logistics advanced in the1950s, the efficient logistics began to arise and spread in the 1970s and accelerated in 1990s.Today logistic is the main “facilitator” of trade:

• Use all transport modes to the full of their potential• Provide direct link between production and markets, with increased efficiency and

contained costs (this requires quality of services, which are not always a given)• Enlarge the commercial horizon of manufacturers, making far away markets

accessible to more and more SME’s• Provide a practical “single window” for customers, including transport, storage,

payments, Customs and other regulatory compliance• Transport costs have gone down in the last 25 year from over 13-14% of delivered

goods to 5-7% or less.For all benefits above, together with the expansion of globalization and regionalization,

logistics development and rationalization are still moving toward to meet the sophistication othe industry and the rapidly growing demand for a specialized supply chain managementservices. According to the official statistics, the logistics industry is expected to grow at anannual rate of 3-10%, which is valued at US$320 billion. This expectation is a strong stimulusfor those countries to develop their logistics industry and position themselves as a regionallogistics hub to gain from the enormous growth in demand. Competition has been particularlytense in the Asia where many countries have launched new initiatives to position their economy as the leading logistics hub in the region. Among these countries, Vietnam, export-oriented country, is no exception. With the stable economic growth at 6.5 percent which is thesecond highest in the region, next only to that of China, and the some vital geographic position, Vietnam is considered much more than potentials for the development of logisticsservices. Although it is no doubt Vietnam government has exerted to optimize some current



resources to facilitate the growth of logistics sector, unfortunately, some major constraints inlogistics infrastructure, administrative procedure and human resources make logisticsrationalization in Vietnam less developed than expectation in comparison with some regionalcountries likes China, and Thailand. Thus, this paper will emphasize to study what the mainconstraints to the growth of logistics sector are and then use China recent logistics

development as a case study to draw some implications or lessons for Vietnam logisticsrationalization.There is a wide acceptance that Southeast Asia and especially Vietnam have a great

economic potential for the development of logistics services. First of all, Vietnam can take anadvantage of a vital geographical position. To make it clearer, Vietnam is located in the ChinaSouth Sea, giving the country access to the main inter-Asian shipping routes, as well as accessto the developing land transport links with the rest of ASEAN countries. According to theresearch of some Western countries, the volume of goods which is transported throughshipping routes can exceed 1 tonnage of goods. That reason allows the country scope todevelop its trade logistics. Secondly, Vietnam’s membership of the World Trade Organization

since 2007, and Vietnam’s cheap labor are considered two driving forces for the developmentof Vietnam’s logistics and distribution systems. Actually, Vietnam’s membership of the WTOhas increased both its international trade and inwards investment. In addition to Vietnam’scheap labor that is the key factor leading to the cheap domestics logistics cost, manymultinational groups have chosen to set up their manufacturing factories there, makingVietnam become a world factory of a sizable portion of product. Among these companies,they have adopted supply chain improvement techniques, such as JIT, Lean manufacturingand some inventory reduction practices, requiring them to deliver small shipment on a morefrequent basis. In order to move that kind of shipment, these companies encounter risingfreight costs and deteriorating services, so urging the application of modern logistics industryin Vietnam. As a result, it attracts a huge investment flow into supply chain services.

Moreover, Vietnam’s current economic growth in the 3 year period at more 7 percents hascreated a larger local market that in turn gives impulse to the development of distributionsystems. Last but not least, after WTO accession in 2007, Vietnam political mechanism haschanged so as to boost our sustainable economic growth. The economy is rapidly movingfrom planned one to market-oriented one with several key developments in policies such as,availability of investment in private sector, to boost foreigner investor confidence. With ourgeographic advantage and our changes in economic mechanism, Vietnam is actually anattracted destination for foreign investment in box shipping sector. Actually, even thoughVietnam has some advantages in the development of logistics industry, Vietnam logisticsindustry cannot be developed as rapidly as some countries like Thailand or China because ofseveral challenges that delay its development and even make supply chain service lesscompetitive and less efficient than it can be.

In 2007, the World Bank launched its Logistics Performance Index (LPI), intended as'the first in-depth cross-country assessment of the logistics gap among countries'. The LPI wascalculated on a five-point scale and based on survey responses from over 800 logistics professionals. In the 2007 survey, Vietnam was ranked 53rd in the world with an LPI score of2.9. In comparison with other Asian economies, Singapore was the world number one with anLPI score of 4.2, followed by Australia (17th, LPI of 3.8) and Taiwan (21st, LPI of 3.6). Thencame South Korea (25th, LPI of 3.5), Malaysia (27th, LPI of 3.5), China (30th, LPI of 3.3),Thailand (31st, LPI of 3.3) and Indonesia (43rd, LPI of 3.0). Weaker areas which are alsoconsidered in this analysis in descending order were technology competence, logistics

competence including human resources, and infrastructure.Firstly, transportation infrastructure is considered one of the biggest challenges which

prevent multinational corporations to apply standard approaches to supply chain management



The first element that contributes to the weakness of transportation system is portinfrastructure. Since the literature suggests carriers view ships’ time at ports as an expensiveactivity, the speed of container handling and consequent vessel turnaround time is a crucialissue in terms of competitiveness for port authorities and port operators (Peters, 2001).Therefore, the level of efficiency can represent how quickly containers are handled and how

quickly vessels are turned around at ports. In reality, the higher the efficiency level of a portor terminal operation, the more port users are likely to choose it as their destination of callwhich, in turn, will make the port gain more market shares and improve the rationalization oflogistics activities. However, in Vietnam situation where many ports in the Vietnam PortSystem are very old and out-of-date, it can be considered a constraint of competitiveness because it does not increase, but slow down overall speed for handling. In addition, ports areshallow in draft and their yard and warehousing systems are insufficient for accommodatingcontainers and cargo. Today there are only a few ports with modern handling facilities andequipment to serve big ships. Thus, the speed of loading or discharging goods in Vietnam isvery comparative lower than this of regional countries. Moreover, lack of deepwater access innavigation channels and port basins added to the small amount of throughput preventsVietnam ports from being transshipment center, sincemany shipping companies intend toincrease the size of their container ships from Panamax to Post-Panamaxto accommodatetrade growth and to offer economies of scale in a highly competitive market.

In the logistics process, ships loaded and discharged their cargoes in towns or citieswhere producers and consumers are located. In others word, pre-export and post-import legsfor door-to door shipments require land transport. However, land transport infrastructure inVietnam has not developed as enough as it can to meet requirements for the development oflogistics services. Compared with the nation’s vast land size, dense population, and the fastgrowing transport demand, the total expressway mileage in Vietnam, giving the existing16000km expressway is not sufficient, only 13.5% of the road networks are considered to be

in good condition, only 26% have two or more lanes and only 29% are tarred. Moreover,roads in Vietnam are not only limited in quantity, but bad in quality resulting in the trafficcongestion which leads to the increase in overall speed of delivery. Moreover, traditionallylow investment in rail; although attempts are being made to rectify this, the potential of railfor cost-effective bulk freight is being under-utilized. Although Vietnam's government hasinvested a huge amount of money in order to develop its inland transport system,infrastructure investment is not sufficient to keep pace with the demand for the transport, andeven account of the small slices of money that needs to promote the current state of inlandnetwork. Consequently, until now land transportation remain a bottleneck. Another factor thatneeds to take into account is a linkage between Vietnam inland transport system and its portone. There is a wide-spread acceptance that inland transport and port systems are highlycorrelated because efficiency of inland transport to serve an increasing and most oftendisputed hinterland has become a critical factor of ports’ potential future as well as of theiroverall trade growth prospects. Furthermore, since ports have become a prominent node inintegrated logistics chains, quick and safe access to port facilities from an inland transportsystem becomes a basic requirement for users to evaluate their port selection options.However, the lack of an adequate road system to access to port basins has considered ahindrance to logistics providers as well as exporter/importer and then delayed thedevelopment of logistics services in Vietnam.

Secondly, while tangible transport infrastructure challenges within Vietnam's marketsoften get the most press and visibility, it is still the intangible items that can delay the

development of logistics in Vietnam. Besides factors in working locations, distant timezones, handoffs of products and associated information, different national holidays, languageand cultural barriers, there is the list of intangibles items that sometimes carry “hidden costs”



not fully grasped by companies entering an emerging market. It included all the tariffs, dutiestaxes, customs declarations processes, security and compliance requirements, and thedaunting task of dealing with government agencies and multiple third parties in a foreignlanguage. Among these factors, corruption is one of the factors that create the greatestheadaches for global logistics managers. According to the report of World Economic Forum,

corruption index in Vietnam is higher than many regional countries, even Laos. Multinationacompanies have complained that their operation cost has increased at least 20 percent just because of corruption. In spite of the regulatory changes for preparation to WTO accession,Vietnam political mechanism is too weak to protect foreign investors from adverse effects ofcorruption.

The weakness in technology is also considered a constraint for logistics development.Recently, information and communication technologies, and especially web-basedtechnologies are becoming critical as ‘virtual infrastructure’ that supports freight operationson physical infrastructure. Besides some tradition ICT application that is highly relied on e-mail, phone, and facsimile, the recent take-up of multi-applications, such as portal

technologies, hosted ‘software as a service’ application (SaaS), public user booking systems public user track and trace systems, e-markets and even common Radio FrequencyIdentification (RFID) scan storage systems has been limited. The move towards thesetechnologies should deliver a critical improvement in the efficiency of the freight andlogistics industry. In addition to changes in the freight and logistics industry enabled by ICTdevelopment, significant changes are also occurring due to the uptake of ICT by others in thelogistics system. For example, improvements in inventory control, warehouse managementand ordering mean that ‘just-in-time’ logistic is now thought of in terms of single freightitems rather than pallets or containers. This approach affects freight transport in many waysincluding the types of vehicles used, frequency of delivery and delivery lead times. Theserecent applications in logistics industry actually provided a strong momentum for its

development, but unfortunately, most Vietnam enterprises did not apply these technologiesinto their business, leading to the lack of high value-added services provided by logistics providers, even track and trace services that are a type of shipment status or information-sharing system accessible through Web sites. However, we need to recognize that one part ofthis problem maybe comes from the modern technology's insufficiency in Vietnam.

Last but not least, based on the research of Ministry of Transport, the big constraint thatslows down the development of logistics industry is the lack of co-operation among manysmall or medium-scale domestic logistics providers and the lack of human resources. Theword “logistics” is no longer a new phenomenon in Vietnam. In reality, logistics market hasmore than 800 provider companies, but many of them are small or medium-scale companiesthat cannot meet a capital requirement to bring powerful logistics strategy capacity into full play. Unfortunately, we rarely find out the co-operation between Vietnamese logistics providers, which lead to the weakness of logistics industry in Vietnam. As a result, withoutco-operation, the logistics companies cannot compete with the evasion of international providers after becoming WTO membership in 2007, and so they just provide some part ofsupply chain management such as warehousing, and transport hiring. Besides the lack of theco-operation and capital requirements, insufficient human resources led many Vietnamesecompanies not operate the whole logistics process. Actually, hundreds of students who canwork in the logistics sector have graduated every year, but the hunt of good-qualified logisticsmanagers is not easy because of two reasons below. In one hand, Vietnam has not anyuniversity or faculties, which is specialized in this kind of training. In other hands, the

Vietnamese curriculum study does not keep pace with the advancement of logisticsknowledge in the world. In reality, because of the lack of co-operation and human resources,



Vietnam logistics industry cannot be developed as possible as it can and just get a small sliceof domestic pie.

To become international logistics hub, Vietnam government must promulgate some policies or synchronous solutions on aspects of logistics industry to reduce our disadvantagesand even translate our disadvantages into profits. Before giving some recommendation for thelogistics development, we need to consider another country logistics development strategy todraw lessons for Vietnam. In the limit of this paper, I will choose the Chinese tactics to provide reference lessons for the logistics development in Vietnam for several reasons: (1)Vietnam and China have both been through periods of centrally-planned economicdevelopment in which the logistics infrastructure and distribution networks were weak andcentrally managed by the Government and (2) Vietnam and China have recently joined theWorld Trade Organization.

In order to give impulse to the development of this kind of distribution industry, theChinese regulations of logistics operation have changed before and after WTO accession in2001. In the past, foreign investors were just encouraged to make investment in storage andlogistics center operations, and the remaining ones are highly protected by the Government.However, after joining the WTO, in order to take advantage of the development of logistics,China has loosened its policies of logistics protection. This allows foreign logistics service providers to take part further in logistics services. For example in the field of logisticstransportation, foreign companies were allowed to set up their own companies in four-year period after China’s joining the WTO; that was impossible previously, before China had joined the WTO. Moreover, like Vietnam, the logistics infrastructure in China was considereda constraint to the development of logistics industry because having a lot of limitations incomparison with its economical development in general and its logistics development in particular. However, realizing that, Chinese Government has highly prioritized thedevelopment of logistics infrastructure in eleventh five-year plan (2006 – 2010). Instead ofthe only contribution on infrastructure made by Chinese government, China’s determinationto develop logistics infrastructure is shown by its encouragement of a number of capable private companies to join in the building of logistics infrastructure. Local and foreign logisticservices providers have seen China’s poor logistics infrastructure as an opportunity to join in building the infrastructure. Let’s take Yangshan’s deep water port project as an example.Yangshan’s deep water port, which is a group of container ports with the capacity to receiveships of over 8,000 tonnages, has seen investment of a record amount of 50 billion dollars.These ports are to be complete by 2020 and will be the largest port in the world. This projecthas attracted not only local investors such as Shanghai International Port Group, COSCO andChina Shipping Group but also foreign investors such as PSA (the first raking investor incontainer port), AP Moller Maersk, Hutchison Whampoa and OOCL. After making it free forforeign investment in logistics system, China has attracted large investments frominternational groups of shipping, express delivery, freight forwarding and logistics services.By the end of 2007, the total investment capital for China’s logistics infrastructure reachedabout 160 billion dollars, an increase of 18.8% compared to 2006. Of the investment capital,124 billion dollars are for transportation, an increase of 13% and taking 76% of the totalinvestment capital for logistics infrastructure. These investments which are a result of changein investment regulation actually provide a strong momentum for logistics development. Thelast lesson that we can learn from Chinese logistics development strategy is its effort toincrease more logistics providers to join China market so as to take advantage of theirexperiences and resources. Despite a huge amount of investments in China logistics system,

the variety of these businesses which has been shown with the leading international ones likeDHL/Exel, Kuenhe&Nagel, Panalpina and small ones with one delivery truck and one store,together with the Chinese Government, have invested into the logistics human resources to



meet the developmental needs of the logistics industry. Besides, in order to apply newtechnology practices in some aspects of logistics services, these companies has also gonealong with Chinese government to develop its current technological system. In short, thelesson that can be drawn from China logistics development is its change in regulation for providing attractive destination for foreign investor, and then leading to several promising

opportunities in a range of aspects of logistics industry from the development of infrastructure to the improvement of human resources.Even though a comparison can be made in terms of the scales of logistics operations in

Vietnam and China, the development of logistics industry in China can still contribute withvaluable references for Vietnam’s logistics industry:

1. China has chosen a number of logistics sectors like storage and logistics centerswhich can enhance the function of infrastructure to encourage investment. Vietnam’s logisticsindustry can learn from this to upgrade rapidly its logistics infrastructure. At present, thedecree 140/2007/NĐ-CP has regulations, which limit the participation of foreign companiesin storage services. Foreign companies are only allowed to operate storage services in theform of joint-ventures with less-than 51 per cent investment capital (this limitation will beannulled in 2014). In addition, of the regulations on logistics operations in Vietnam, there arecurrently no documents or policies to encourage the establishment of logistics centers.Drawing from Chinese lessons, Vietnam government needs to lose its regulation on foreigninvestments in the logistics sector, allowing them set up their own business to brings alllogistics capacity into full action. 2. In the field of logistics infrastructure, Vietnam’sGovernment should encourage private and foreign businesses to take part. According to theTransportation Ministry’s strategy of developing transportation infrastructure until 2020, thenecessary capital from the Government will take about 2,3% of GDP, but the minimal fundingneeds must be from 3 to 3,5% of GDP. The compensating capital can be raised from privateand foreign investors. The point is that the Government should create conditions, which areconcrete and attractive to these investors. Not only can they make up for the shortage ofinvestment capital but also contribute with management skills, information technology andexperience for effectively building up the infrastructure. However, almost current Vietnam'sdecree has limited private sector from investing into logistics infrastructure, but based onChina lessons and real circumstances in Vietnam, in the next 5 year. Vietnam governmentneeds to foster good partnership between government and private sector. Although it is nodoubt the government sector is important for the formulation and implementation ofappropriate policies, the private sector is in need to carry out and translate the overall policydirection into action. Thus, a good partnership between the government and the private sectoris an important ingredient to the success of a logistics hub strategy. Again, based on China’sexperience, the government of Vietnam needs to be pro-active and supportive to the logistics providers in aspects of infrastructure development by providing incentives or financialsupports.

3. Learning from China, Vietnam has recognized the significance of having more andmore powerful, professional logistics providers from every part of the world. . Not only canthey make up for the shortage of investment capital but also contribute with managementskills, information technology and experience for effectively developing logistics industry. AsI considered above, the shortage of pro human resources in the logistics sector is delaying thedevelopment of this kind of productive services in Vietnam. However, with the help of manylogistics businesses, Vietnam universities have been urged to develop their logistics course tomeet social demands. Moreover, the experiences of these companies over hundreds of yearsworking in the logistics sector can be a good reference for Vietnam government to promoteand improve the quality of its logistics courses.



4. All above recommendations tried to solve and encourage the development of thetangible and visible problem, but some intangible ones can deteriorate all Vietnam concertedeffort to promote its development. Vietnam authorities must improve the consistency andtransparency in government policy towards the industry, because foreign investors need tohave a sense of security from consistent and predictable policies since their investment is

usually bulky and requires a long gestation period. Moreover, according to the complaint ofsome foreign investors, corruption accounts for at least 15 percentages of their operation costsannually. That’s why clean government with efficient and simplified administrative processescan be not only a unique feature, which made the country attractive as a base for multinationacorporations’ regional and global operations, but a main area that has the powerful impact onthe success of logistics development strategies.

Documents

Tai Lieu Logistics