BANKING ACADEMY

INTERNATIONAL TRADE AND FINANCE

TITLE: REPORT ON THE SALE CONTRACT BETWEEN THE

VIETNAM TOBACCO IMPORT EXPORT COMPANY AND
FOREIGN BUSINESS PARTNER

Instructor: Mr. Do Phu Dong

Class: BUS12A07

Group 10

Ha Noi, February 24, 2022

Members:

Nguyễn Thanh Vân 22A4050061

Vương Dương Ngân 22A4050084

Nguyễn Thu Trang 22A4050384

Đinh Nguyệt Lê 22A4050313

Vũ Thị Hồng Nhung 22A4050253

Đoàn Thị Hiền 22A4050119

Trịnh Thị Anh Thư 22A4050154

Vũ Thị Hường 20A4050178

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 TABLE OF CONTENTS

INTRODUCTION..........................................................................................................3
CONTENT...................................................................................................................... 4
I. COMPANY BACKGROUND: VIETNAM TOBACCO IMPORT EXPORT
COMPANY................................................................................................................. 4
II. PESTEL ANALYSIS ABOUT THE IMPORTING COUNTRY.......................6
III. ANALYSIS CONTRACT, METHOD OF ENTERING AN OVERSEA
MARKET.................................................................................................................. 10
3.1. Method of entry................................................................................................10
3.2. The advantages and disadvantages of that method of entry..............................11
3.3. Suggest a better method....................................................................................12
IV. BILL OF EXCHANGE......................................................................................14
V. BILL OF LADING..............................................................................................16
CONCLUSION.............................................................................................................20
REFERENCE............................................................................................................... 21
ADDENDUM................................................................................................................22

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 INTRODUCTION

In the process of international integration, international trade has become a priority

field, paving the way for other fields to develop. Trade promotes the circulation of
goods in the market with state management, production is promoted, industrialization
and modernization of the country also. This is the way for developing countries exploit
the potentials and strengths of the country, attract foreign investment capital to catch up
with the world's development speed, step by step, reduce the gap with developed
countries.

Vietnam is not out of that trend. According to data from the Ministry of Industry and
Trade, recent years, Viet Nam has been in a period of rapid growth in importation and
exportation and has been improved the position on the map of the world.

Understanding the importance of international trade, our group 10 wrote a report:

"Analysis the content of the exporting contract, the Bill of Exchange and the Bill of
Lading of Vietnam Tobacco company to understand the importing company, the
contract performance and some documentations”.

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 CONTENT

I. COMPANY BACKGROUND: VIETNAM TOBACCO IMPORT EXPORT

COMPANY

Vinataba Imex, in full name Vietnam Tobacco Import Export Company, is a subsidiary
of Vietnam National Tobacco Corporation (Vinataba). Since its founding, Vietnam
Tobacco Import Export Company has always been the leading importer/exporter for the
Vietnam tobacco industry. Vinataba Imex is also a pioneer in making introduction of
Vietnam tobacco products to the world market. Vinataba Imex now plays a leading role
in Vietnam tobacco industry. Imports Vietnam tobacco industry has over the years made
intensive investments in modernizing technology and increasing our production
capacity in all fields with a view to improving product quality. A great number of new
machinery and equipment have been imported and put to use in many factories in
Vietnam. Most of the machinery has been imported by Vinataba Imex.

The company is trading with main products: Cigarettes, Tobacco, Confectionery,

Agriculture Products, Instant Noodle Wholesalers, Instant Noodle Dealers, Leaf
Tobacco, Biscuit Suppliers, Biscuits Manufacturers, Biscuit Makers, Cream Flavour
Biscuits, Reasonable Price Biscuit, Cheap Biscuit Wholesalers, Creamy Biscuits,
Virginia Tobacco Cigarettes, Tobacco Cigarettes Suppliers, Cheap Cigarettes Lights,
Cigarette, Tobacco Cigarettes, Cigarettes Sellers.

Vietnam Tobacco Import Export Company is a type of sole proprietor because there is
no legal distinction between the business entity and its owner, so it best fits situations
where the organization only has one owner. They are a popular choice for small
businesses due to the low initial costs. Also, any generated income is only taxed once,
as opposed to being taxed as a company and then again as a personal source of income.
They are also subjected less to taxation and regulation compared to other types of

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businesses. This type of company is incredibly popular due to the simplicity in which it
can be set up and operated. Only a local license and registered name are needed to
operate as a sole proprietorship. Most companies begin as a sole proprietorship and
eventually advance to a more sophisticated business type as the company grows.

Choosing to run a sole proprietor can have many advantages, especially for small
businesses. The following are a few of the benefits that choosing to start a sole
proprietor can provide:

1. Free to start: Unlike other types of businesses, a sole proprietor is typically

completely free to start. This can be beneficial for individuals wishing to turn a
side hustle into a more lucrative career or who do not have the funds to set up
another type of business.
2. Full control: Individuals who own sole proprietors are the sole owners of the
company and have the complete and final say as to how it is run.
3. Control over all revenue: Unlike other businesses that may be required to make
payouts to lenders, investors and other organizations or individuals, a sole
proprietor does not have any financial obligations besides those incurred by the
owner.
4. Ability to use losses on personal tax returns: Individuals who own sole
proprietors are required to include the income and losses of the business on their
personal tax returns. This means that the losses of the sole proprietor can be used
to offset other personal income for a higher tax return.

While there are certain advantages that come with starting a sole proprietorship, there
are also disadvantages to consider. Here are a few potential disadvantages when
determining if this type of business is the best choice:

1. Personally liable for lawsuits: Sole proprietors are personally responsible for all
aspects of the company's financial situation. This means that if the company is in
debt and unable to pay lenders, the lenders can bring lawsuits against the
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 individual who owns the sole proprietorship. If these lawsuits are settled in favor
of the lenders, the business owner will be held personally responsible to pay for
the debts.
2. Limited options for raising capital: Whereas other types of companies can sell an
interest in the business to raise capital, a sole proprietor cannot. This can limit a
sole proprietor's ability to bring in capital when it is needed.
3. Higher taxes: Individuals who own sole proprietorships are responsible for
paying the income tax and self-employment tax for the business's income. This
can be a hefty fee if the sole proprietorship is successful.

II. PESTEL ANALYSIS ABOUT THE IMPORTING COUNTRY

 Political

Hong Kong is a special administrative region of China, with executive, legislative, and
judicial powers devolved from the national government. The Sino-British Joint
Declaration provided for economic and administrative continuity through the transfer of
sovereignty, resulting in an executive-led governing system largely inherited from the
territory's history as a British colony.

Ethnic minorities (except those of European ancestry) have marginal representation in

government and often experience discrimination in housing, education, and
employment. Employment vacancies and public service appointments frequently have
language requirements which minority job seekers do not meet, and language education
resources remain inadequate for Chinese learners. Foreign domestic helpers,
predominantly women from the Philippines and Indonesia, have little protection under
regional law. Although they live and work in Hong Kong, these workers are not treated
as ordinary residents and are ineligible for right of abode in the territory. Sex trafficking
in Hong Kong is an issue. Hongkonger and foreign women and girls are forced into
prostitution in brothels, homes, and businesses in the city.

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  Economic

Hong Kong has a capitalist mixed service economy, characterized by low taxation,
minimal government market intervention, and an established international financial
market. It is the world's 35th-largest economy, with a nominal GDP of approximately
US$373 billion. Hong Kong's economy has ranked at the top of the Heritage
Foundation's economic freedom index since 1995. The Hong Kong Stock Exchange is
the seventh-largest in the world, with a market capitalisation of HK$30.4 trillion
(US$3.87 trillion) as of December 2018.

Hong Kong is the tenth-largest trading entity in exports and imports (2017), trading
more goods in value than its gross domestic product. Over half of its cargo throughput
consists of transshipments (goods traveling through Hong Kong). Products from
mainland China account for about 40% of that traffic.

 Social

Hong Kong as a member of the World Trade Organization (WTO) and the Asia-Pacific
Economic Cooperation (APEC) has a free trade policy, which can be maintained
without import taxes. and no barriers to trade (Ministry of Trade and Industry 2014).
Furthermore, according to the Index of Economic Freedom (2016), Hong Kong has the
highest index (88.6) in the world. This means that for international trade and
investment, Hong Kong maintains one of the most open economies in the world.
Meanwhile, for foreign investment, Hong Kong does not have stricter regulations and
controls. Most foreign-invested enterprises are able to retain their full ownership (Koscil
2011).

Hong Kong has a highly developed, sophisticated transport network. Over 90% of daily
trips are made on public transport, the highest percentage in the world. The Octopus

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card, a contactless smart payment card, is widely accepted on railways, buses and
ferries, and can be used for payment in most retail stores.

 Technological

Being such a well-developed country, Hong Kong has fantastic access to technology.
This includes telecommunications infrastructure, modern healthcare equipment, and
manufacturing tools. Not only does the country as a whole have great access to
technology, but so do its citizens thanks to their substantial incomes. Overall, this access
to technology allows the country to continue developing with the times while
maintaining a competitive edge in business efficiency in the current day.

 Legal

Under these terms and the "one country, two systems" principle, the Basic Law of Hong
Kong is the regional constitution. The regional government is composed of three
branches:

1. Executive: The Chief Executive is responsible for enforcing regional law, can
force reconsideration of legislation, and appoints Executive Council members
and principal officials. Acting with the Executive Council, the Chief Executive-
in-Council can propose new bills, issue subordinate legislation, and has authority
to dissolve the legislature. In states of emergency or public danger, the Chief
Executive-in-Council is further empowered to enact any regulation necessary to
restore public order.
2. Legislature: The unicameral Legislative Council enacts regional law, approves
budgets, and has the power to impeach a sitting chief executive.
3. Judiciary: The Court of Final Appeal and lower courts interpret laws and
overturn those inconsistent with the Basic Law. Judges are appointed by the chief
executive on the advice of a recommendation commission.

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  Environmental

Hong Kong has a humid subtropical climate, characteristic of southern China, despite
being located south of the Tropic of Cancer. Summer is hot and humid, with occasional
showers and thunderstorms and warm air from the southwest. Typhoons occur most
often then, sometimes resulting in floods or landslides.

Hong Kong is characterized as a hybrid of East and West. Traditional Chinese values
emphasizing family and education blend with Western ideals, including economic
liberty and the rule of law. Although the vast majority of the population is ethnically
Chinese, Hong Kong has developed a distinct identity. The territory diverged from the
mainland through its long period of colonial administration and a different pace of
economic, social, and cultural development. Mainstream culture is derived from
immigrants originating from various parts of China.

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III. ANALYSIS CONTRACT, METHOD OF ENTERING AN OVERSEA
MARKET

3.1. Method of entry

Based on the contract, Vietnam Tobacco import export company is the seller and Faith
on limited is the buyer. Vietnam Tobacco import export company has an address in “41
Le Quy Don street, District 3, Ho Chi Minh city, Viet Nam”, so the method of entry
which has been used is direct exporting or indirect exporting.

Direct exporting is when a company sells direct to the foreign end users. Indirect
exporting is where the company would engage the services of an intermediary that
specializes in finding foreign markets and buyers. The difference between direct export
and indirect export is very thin. We'll need to do some end-user accessibility analysis to
figure out what approach the company should take.

In this case, we can determine that indirect exporting is the method of entry that has
been used. Because Faith On Limited isn’t the end consumer. Tobacco is a special

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commodity, so the company can’t buy goods in large quantities for employees to use or
as gifts for employees. They act as a distributor, middleman to find and contact the
foreign market/buyer. They make an outright purchase of cigarettes and then resell them
on, again in specified territory, at a profit.

For a variety of reasons, the Vietnam Tobacco Import Export Company does not sell
directly to the final customer. To begin with, Tobacco Vietnam is a tobacco production
company with a manufactory in Vietnam. So, they are unfamiliar with foreign
traditions, regulations, and buying habits. Second, finding clients might take a long time
and be costly. Reality has proven, almost no manufacturer can organize its own
distribution network due to the high cost. Even with multinational enterprises, large
corporations such as Unilever, Coca cola, Tan Hiep Phat, Vinamilk, P&G with strong
financial potential must also rely on traditional distributors/retail agents in Vietnam.
South to make the most of the market. But with distribution intermediaries, businesses
will focus more resources on stages in the chain, improving product quality - value.
Finally, owing to the distance between the organization and the end consumer, the
corporation wishes to reach the client at the cost of experienced personnel and highly
specialized capabilities.

3.2. The advantages and disadvantages of that method of entry

Vietnam Tobacco import export company does not reach the end consumer so they use
indirect exporting method. However, this method also has some advantages and
disadvantages. The key benefit of this method for the seller is that it allows them to
reach an international market without the risks and complications of direct exporting
since the intermediary will handle all of the export services. Indeed, when Tobacco
offers items to Faith on limited basis, they avoid the danger of not finding a client,
although at a lesser profit, but not in the event of returned goods. Furthermore, the
company does not incur any fees in the development of the system or the hiring of
qualified staff. The unit that is entrusted with the task of exporting goods is the person

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who understands and firmly grasps the market situation and legal procedures, so the
trade is promoted faster and developed faster.

Furthermore, indirect exporting has several drawbacks. When you sell through an
intermediary, you can't manage your overseas sales, the distributor might sell a lot of the
same things, and we can't improve our product's competitiveness. In addition, the
company also has less profit, losing the opportunity to reach the end customer.

3.3. Suggest a better method

So what methods can the company use to enter foreign markets? Or can the company
switch from indirect export to direct export in order to achieve higher profits? In order
for Tobacco Vietnam to be able to directly export to Hong Kong companies quickly and
save time and money, the company needs to establish a subsidiary in Hong Kong.
According to research, Tobacco Vietnam is a joint venture between British American
Tobacco and Vietnam Tobacco Corporation Vinataba. Besides, in Hong Kong there is
also British American Tobacco Company (Hong Kong) Limited- a division of British
American Tobacco Group. Because Tobacco also has a branch in Hong Kong, Tobacco
Vietnam can absolutely direct export when exporting goods to Hong Kong. The
company can then directly contact the end-consumer, use the professional staff available
at Tobacco's Hong Kong branch, and also have the ability to bear all risks even if the
goods turn around.

On the other hand, the company should not use manufacturing methods abroad such as
joint venture, international franchising or international licensing. A joint venture (JV) is
a legal entity formed between two or more parties, sometimes referred to as a 'co-
operative agreement'. The company wishing to export would find a local overseas
company with which it would look to work together in the targeted country. Each party
involved in the JV would bring different skills and expertise to the newly formed entity.
The parties reach an agreement on the share of the revenues, expenses, assets and the
control of the newly formed enterprise. Equity in the new company would be split
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between the parties, and any profits and losses would be shared on the same basis.
Tobacco Company already has a Tobacco branch in Hong Kong and Vietnam Tobacco
import export company is also part of British American Tobacco. As a result, unlike the
Tobacco Group, Tobacco Vietnam lacks the financial ability and resources to adopt the
aforesaid approaches. Tobacco Vietnam does not need to build up a facility in Hong
Kong since British American Tobacco Company (Hong Kong) Limited is also operating
extremely well and efficiently. So applying to Tobacco Vietnam company, we can't use
joint venture.

International licensing is where a company makes a decision that it does not wish to
export directly or to do its own manufacturing in the overseas market. Instead it will
grant its intellectual property rights – trademarks, patents, etc – to an overseas
manufacturer in exchange for a fee. The overseas company is known as 'the licensee'
and the granting company is known as 'the licensor'. The license agreement will set out
the terms and conditions that the licensee must adhere to. The licensee will agree to pay
a fee or commission on its sales. An international franchise is where a company permits
an overseas party to use its business model or brand in a specified territory for a given
period. The exporting company would become the franchisor, and the overseas
company the franchisee, which would pay a licence fee or royalty for the privilege of
using the franchisor's name and business model. International franchising has been very
successful for many of the fast food outlets, such as McDonald's, Subway and
Starbucks. Theoretically, we find out that franchising or licensing applies to a particular
type of good. However, in the case of Tobacco Vietnam, the export product here is
tobacco. It is not intellectual property rights, trademarks, patents, or Intellectual
Property Rights, Training, Business Advice, Marketing assistance, for which we can
apply for licensing or franchising. In short, Tobacco Vietnam company should not apply
manufacturing abroad.

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IV. BILL OF EXCHANGE

BILL OF EXCHANGE

NO 22/BE-HM/2018          HO CHI MINH CITY, VIETNAM, JUNE 19th , 2018

FOR: USD 21,795.00

AT SIGHT OF THIS FIRST BILL OF EXCHANGE PAY TO THE ORDER OF JOINT

STOCK COMMERCIAL BANK FOR FOREIGN TRADE OF VIETNAM – HO CHI
MINH CITY BRANCH (VIETCOMBANK HCMCT) THE SUM OF UNITED STATE
DOLLARS TWENTY ONE THOUSAND SEVEN HUNDRED NINETY FIVE.

VALUE RECEIVED AS PER OUR INVOICE(S) NO(s):  EX 077/VIN-FOL/2018

DATED: MARCH 21, 2018

TO: DRAWEE’S BANK                                                      DRAWER

GREEN DRAGON                     VIETCOMBANK HCMC

COMMERCIAL BANK

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 HONG KONG                                                      HO CHI MINH CITY, VIETNAM

Sight Draft is a type of bill of exchange used in international payments, mainly in the
transportation of goods, import and export.

The above Bill of Exchange is one typical example of Sight Draft indicating the
international trade payments between Vietnam Tobacco Import Export Company
located in Ho Chi Minh City, Vietnam and Faith On Limited - a tobacco international
distributor importer originating from HongKong.

As clearly as stated on the BE example, the consignment code, date of issuing, the value
of payment and location from where it is issued are transparently noted:

Consignment code: EX 077/VIN-FOL/2018

Date of issuing: June 19, 2018

Issued location: HCM

Value of payment: USD 21,795.00

When the drawee - Faith On Limited received this BE, he is liable to pay immediately
the exact value payment specified on this BE valued in words: “Twenty One Thousand
Seven Hundred Ninety Five Dollars” to the bank account of the drawer Vietnam
Tobacco Import Export Company at Joint Stock Commercial Bank For Foreign Trade
Of Vietnam-Ho Chi Minh City Branch (Vietcombank HCMCT)

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Total contract value is 72,650 USD but Faith On Limited had deposited 70% of the
order, so when receiving the draft, only 30% of the order has to be paid, the remaining
is 21,795 USD.

This payment is conducted based on the contract NO(s): EX 077/VIN-FOL/2018 signed

on March 21, 2018

V. BILL OF LADING

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Contents of Bill of Lading:

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 Name and head office of the carrier: TOBACO Import-Export Company (box 2)
Address: 41 Le Quy Don, District 3, Ho Chi Minh City, Vietnam
TEL: 84.8.3932.2332 / 3932.2330
FAX: 84.8.3932.2331
 Name of recipient: BABA International Limited Liability Company, FREEDOM
AVENUE, COROZAL FREE ZONE, BELIZE (box 3)
TEL: +5014237248
 The party notifying the delivery: is the receiver (box 4)
 Number of vouchers (box 5): 235800378267
 Ship's name: EVERGREEN LINE
 Subsidiary company of the ship: EVERGREEN MARINE COPORATION
 Marks and identification characteristics of goods that the shipper has notified in
writing before loading the goods on board the ship and marked on each unit of
goods or packaging.
 Means of transshipment from the auxiliary port to the main port (box 12): ST
EVER 027B. This is a small ship's trip to first receive goods from the auxiliary
port and then deliver them to the larger ship to receive goods at the main port
(transshipment).
 Place of receipt (box 13): Ho Chi Minh
 Boat name/ Trip number (box 14): EVER LINKING 0941-026E. This is the
number information of the large ship receiving the goods, this ship is responsible
for transporting the main route and departing from the main port.
 Port of loading (box 15): Ho Chi Minh Port, Ho Chi Minh City, Vietnam
 Port of discharge (box 16): Belize City
 Port of delivery (box 17): BELIZE CITY
 Container number/seal number (box 18): information includes: cargo code sign is
N/M- no sign, container number is FCIU9465354, seal number is
EMCPTK4947, and container is 40 feet

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  Description of goods (box 20):

20 cigarettes/pack, 525,000 packs, 1050 cartons

Push enough cigarette packs and cigarette filters

Pill pack and sturdy box

Total Volume (Measurement): 500000CBM (cell no. 21)

Gross weight: 15,330.00 kgs

 Total number of containers (in words): one container (box 22)

 Bill of lading number (box 25): EGLV235800378267
 Delivery method (box 26): Full container goods
 Number of copies of the original bill of lading issued to the shipper (box 27): 3
 Time and place to issue bills of lading (box 28): Ho Chi Minh City May 8, 2018
 Pay later at destination (box 30)
 Exchange rate (box 31): US$1=VND22790
 Loading onto the train (box 33): 08/05/2018 ST EVER 027B Ho Chi Minh
 Signature of the carrier or the master or other authorized representative of the
carrier: available

General comment: This form of bill of lading (Straight Bill): is a bill of lading with the
name and address of the consignee and the carrier only delivers the goods with the name
and address on the bill. This is the "clean bill of lading". On the bill of lading there are
no bad comments, notes or reservations about the external condition of the goods. The
bill of lading is issued by Evergreen Marine Coporation. The shipper indicates that the
goods have been inspected and the packages are in good condition. Besides, the bill of
lading has all the terms, contact information, seal and signature of the shipper.

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 CONCLUSION

Through the above analysis, we can see that in order for the two sides to move forward
in signing cooperation, import and export contracts, carry out the successful export
process in particular with the company Import-Export Vietnam Tobacco.

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The company needs to master and constantly update circulars, decrees and decisions
related to the terms of the contract. Also analyze the contract clearly thereby understand
and understand the processes and procedures in the process of performing export
contracts password. The economy is increasingly integrated, trading with countries
around the world requires we must learn more about our partners, carefully consider
each opportunity, and offer the best deals suitable conditions if you want to establish a
long-term and strong relationship. Through the document and cooperation contract to
export tobacco products from Vietnam to Belize, we can partly observe a real contract
and can analyze and clarify the terms, from which to draw experience and general
comments on export contracts.

REFERENCE

1. Guide to International Trade and Finance – Paul, C. & Peter, Mc. (2014), If
University

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2. https://www.batvietnam.com/group/sites/BAT_9VJH58.nsf/vwPagesWebLive/
DO9VJEA5?opendocument&fbclid=IwAR2MhRCtX_bvjcgqVyP82-
BYA8l6VzPIlAih1cUL9zj_xf87NV3WODygGaw

3. https://www.bathongkong.com/?
fbclid=IwAR2AJeRfJD_OK1JgNq7e8XFtHaBHq5Oj4Vafc4t5WNX5iKqRJvlg9TQ0T
pk

ADDENDUM

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