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Cad Method Payment Process.


Payment Document (CAD) Method


This is a payment method in which the importer requests the bank to open a deposit account to pay the exporter when the exporter presents all required documents. After completing the delivery obligation, the exporter will present the set of documents to the bank to receive payment.


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(1)

Importer representative in exporting country

Cad Method Payment Process.

(2)

Bank in exporting country

Exporter

(4)

(5) (6)


(3)


Figure 1.4 Payment process of CAD method.


Explain the process


(1) The importer goes to the bank in the exporter's country to sign a memorandum and deposit 100% of the transaction value to set up an escrow account.


(2) The bank informs the exporter that the importer has deposited the money and the escrow account has started operating.


(3) The exporter delivers the goods to the importer under the control of the importer's representative in the exporter's country.


(4) The exporter presents to the bank the set of documents requested by the importer to withdraw money.


(5) The bank checks the validity of the documents and pays the exporter.


(6) The bank delivers the set of documents to the importer's representative.


Documentary credit payment method


It is an agreement in which a bank, at the request of a customer, undertakes to pay a certain amount of money to a third party or to accept a bill of exchange drawn by a third party within that amount when the third party presents to the bank a set of payment documents in accordance with the provisions set out in the letter of credit.

Advising bank

Exporter (the beneficiary)

Issuing bank

(7)


(6)




(10) (5) (3) –L/C

(2) – L/C


Importer (the applicant)

(1) (8) (9)



(4)


Diagram 1.5 Documentary credit payment process.


Process explanation :


(1) The importer makes a request to open an L/C and submits the necessary documents to the bank, and makes a deposit as required so that the bank can issue the L/C for the benefit of the exporter.


(2) The bank issues the L/C in accordance with the requirements of the L/C opening application and transfers it to its correspondent bank in the exporting country.


(3) The advising bank sends the original L/C to the exporter so that he can evaluate the possibility of implementing the L/C and propose amendments when necessary.


(4) The exporter delivers the goods in accordance with the provisions of the L/C and L/C amendments (if any).


(5) The exporter prepares a set of documents in accordance with the provisions of the L/C and amendments (if any) and presents them to the bank within the prescribed time limit.


(6) After checking the validity of the set of documents, the correspondent bank will transfer them to the issuing bank (or paying bank).


(7) The bank issuing the letter of credit checks the payment documents. If it finds them to be in accordance with the provisions of the L/C, it will proceed to pay or accept the draft (for deferred payment L/C). If it finds them to be incompatible with the provisions of the L/C, it will refuse to pay and return the documents to the exporter.


(8) The bank issuing the letter of credit delivers the documents to the importer and issues a payment order to the importer.


(9) The importer checks the set of documents. If it is found to be in accordance with the L/C regulations, it will go to the bank to complete the payment procedures, and the issuing bank will sign the set of documents to receive the goods. If it is found to be in accordance with the L/C regulations, the importer has the right to refuse payment.


(10) The exporter receives payment.


1.4.2.10 Complaints


Complaints are a method of resolving issues arising during the performance of a contract by direct negotiation between the parties to come up with legal solutions that satisfy or do not satisfy the claims of the complaining parties. The subject of the complaint may be the buyer, the carrier or the insurance company depending on the nature of the loss.


The resolution of the loss depends on the complaint. If the complaint cannot be resolved, a petition will be filed with the economic arbitration as stipulated in the contract.


1.5 Vietnam's wood export management mechanism


1.5.1 Domestic policies


1.5.1.1 In terms of planning


While many industries have Development Plans stipulated in a legal document, the wood processing industry only has one Plan issued by a Decision of the Minister of Agriculture and Rural Development (an administrative document, not a legal document) - "Planning of the wood processing industry to 2020, vision to 2030" approved in Decision No. 2728/QD-BNN-CB dated October 31, 2012 of the Ministry of Agriculture and Rural Development.


In addition, the wood processing industry planning has also been stated in a planning document at the Prime Minister's Decision level: Master plan for agricultural production development to 2020 and vision to 2030 issued in Decision 124/QD-TTg of the Prime Minister dated February 2, 2012. However, in this document, the wood processing industry development planning is just one of many other agricultural sectors, with very little content mentioned.


1.5.1.2 Preferential policies


Currently, policies related to the wood processing industry are mainly policies for the development and restructuring of the forestry industry (forest planting, management and use), there are very few specific policies and laws specifically for the wood processing industry. However, in reality, some preferential policies for the wood processing industry have been applied such as:

Decree 210/2013/ND-CP on policies to encourage enterprises to invest in agriculture and rural areas (including regulations on supporting investment in processing special planted forest wood for the Northwestern provinces and provinces with poor districts; supporting investment in manufacturing, preserving and processing facilities for agricultural, forestry and fishery products.


Decree 75/2011/ND-CP dated August 30, 2011 of the Government on State investment credit and export credit (subsequently amended and supplemented by Decree 54/2013/ND-CP dated May 22, 2013 and Decree 133/2013/ND-CP dated October 17, 2013) (according to this Decree, the production of exported wooden furniture is classified in the Handicraft Group in the List of goods eligible for export credit loans; however, to comply with international commitments, the loan interest rate is stipulated to be determined according to the principle of being consistent with market interest rates. Therefore, in principle, this is not a preferential credit policy.


Domestic support policies for the forestry industry, through which the wood processing industry indirectly benefits, in recent times, the Government has had many policies to invest in forest development through specific support programs, with an important contribution from non-refundable ODA capital (according to statistics, about 560 million USD for the period 2005-2020) such as:


Project to plant 5 million hectares of forest (Project 661 - implementing Decision 661/QD-TTg of the Prime Minister dated July 29, 1998 on objectives, tasks, policies and organization of implementation of the Project to plant 5 million hectares of new forest)


Program 327 (according to Decision 327-CT dated September 15, 1992 of the Chairman of the Council of Ministers on a number of policies and strategies for using bare land, bare hills, forests, coastal alluvial plains and water surfaces)

Decision 57/QD-TTg of the Prime Minister dated January 9, 2012 approving the forest protection and development plan for the period 2011-2020.


1.5.1.3 Control policy


In recent years, the wood processing industry has been subject to a number of tightening policies and regulations, focusing on four groups:


Group of policies related to reducing exploitation, moving towards temporarily stopping exploitation of natural forests (for example: Decision No. 186/2006/Đ-TTg, dated August 14, 2006 of the Prime Minister 27/VBHN-BNNPTNT promulgating the Forest Management Regulation; Decision No. 57/QD-TTg dated January 9, 2012 of the Prime Minister approving the Forest Protection and Development Plan for the period 2011-2020.


Group of policies related to ensuring the legal origin of raw wood (for example: Circular No. 01/2012/TT-BNNPTNT dated January 4, 2012 of the Ministry of Agriculture and Rural Development regulating legal forest product dossiers and checking the origin of forest products, amended and supplemented by Circular 42/2012/TT-BNNPTNT).


Group of policies related to plant quarantine for timber and non-timber forest products.


Group of export control procedures for wooden furniture (e.g. the VPA/FLEGT Agreement currently being negotiated with the EU).


1.5.2 International policy


1.5.2.1 Tariff policy


Through international trade agreements, tariffs on processed wood products have generally been sharply reduced, with a significantly deeper reduction than on agricultural and forestry products. MFN tariffs (most favored nation tariffs, applied within the WTO framework) on imported wooden furniture in major markets (the US, EU, etc.) have nearly reached 0% on many tariff lines. Preferential tariffs in FTAs ​​for wooden furniture have almost been completely eliminated.


This is a very favorable condition for the Vietnamese wood processing industry to develop, expand its market and significantly increase its competitiveness in export markets, especially the world's major consumer markets.


However, from a domestic perspective, along with other subjective reasons, recent easy tariff policies may be one of the fundamental reasons why Southeast Asian, Taiwanese and Chinese wooden products can easily access the Vietnamese wooden product market, competing with domestic products. This will also be a big challenge for Vietnamese wooden product manufacturers in the coming time.


1.5.2.2 Policy on non-tax measures


Also through the WTO and FTAs, common non-tariff measures such as quotas and import licenses for processed wood products in most markets have been removed.


Some specific policies related to trade of some high-value wood species such as export tax policies, export bans, etc. are still maintained but with limited scope and have almost no major impact on total wood furniture trade, especially processed wood furniture.


1.5.2.3 Technical barriers


The group of TBT measures that currently has the strongest impact on processed timber trade are regulations on verifying the legal origin of timber.


In the United States, this measure is included in a law called Lacey (full name is the Conservation Act) with major amendments to wood products in 2008. This law is believed to have a wide impact on Vietnamese wooden furniture exports when the US market currently accounts for nearly half of Vietnam's total wooden furniture export turnover.


Measures on the legal origin of timber in the EU market are implemented under the FLEGT Action Plan (Action Plan on Trade, Governance and Enforcement of Forest Law). To implement FLEGT, the EU has designed a mechanism that allows relevant exporting countries to self-monitor the FLEGT compliance of their export products through negotiating and signing Voluntary Partnership Agreements (VPAs) with the EU. The nature of VPAs is to transfer the authority to confirm that timber meets the requirements of legal origin and is eligible for import into the EU from the EU border control agencies to the management agencies of the exporting country, provided that the procedures and criteria for granting certification (FLEGT licenses) must meet the requirements of the EU. Vietnam is currently in the process of negotiating and signing this VPA with the EU.


1.6 Current status of Vietnam's wood export and issues raised


1.6.1 Current status of Vietnam's wood exports


Wood processing is one of the few industries that is considered to have successfully integrated with rapidly increasing export turnover and making an important contribution to Vietnam's export achievements and creating a position in global wooden furniture exports.


Currently, wood products export ranks 6th among 10 key export industries of Vietnam. In the world, Vietnam is among the top largest exporting countries in the world, ranked 2nd in Asia and 1st in Southeast Asia.

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