PREFACE
Along with the regionalization and globalization of economic cooperation, the strong development of the market economy, and the increasingly deep economic and trade interdependence between countries, Vietnam has been constantly trying to promote the industrialization and modernization of the country, integrating the economy into the dynamism of the Southeast Asian region, or more broadly, the Asia-Pacific belt. Starting from a poor and backward agricultural country with limited scientific and technological level, the fastest way to industrialize and modernize the economy is to quickly access advanced foreign technologies and techniques to import modern equipment to serve the cause of economic development and national construction. That context has posed many great opportunities and challenges for the Trade sector in general and the Import-Export Company of Complete Equipment in particular. It is how to get the best, most modern technology with the least time and cost, for the highest efficiency.
During a short internship at the Import-Export Department-5, the Import-Export Company of Complete Equipment and Engineering, based on the knowledge of economics and import-export operations that have been taught at school and some practical experience gained, with the aim of learning more about the import process of complete equipment at the Import-Export Company of Complete Equipment and Engineering. I decided to choose my research topic as: Solutions to improve the import process of complete equipment at the Import-Export Company of Complete Equipment and Engineering . With the hope that it will contribute a small part to the improvement and innovation of the import process in our country today.
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Based on the purpose of the topic, the internship topic includes the following main parts:
after:
Chapter I: Import activities of complete equipment in the market mechanism
school.
Chapter II: Analysis of the process of importing complete equipment at the Import-Export Company of Complete Equipment and Engineering.
Chapter III: Solutions to complete the process of importing complete equipment at the Company for importing and exporting complete equipment and techniques.
Hereby, I would like to sincerely thank Associate Professor, Dr. Hoang Minh Duong - my direct instructor, the teachers in the Faculty of Commerce, the staff of Technoimport Company, the uncles and aunts and brothers and sisters in the Import-Export Department - 5 who enthusiastically helped me complete the research on this topic. Due to limited level and time, mistakes are inevitable. I look forward to receiving comments from teachers and friends.
Chapter I
IMPORT ACTIVITIES OF COMPLETE EQUIPMENT IN THE MECHANISM
MARKET.
I. CONCEPTS AND CHARACTERISTICS OF IMPORT ACTIVITIES
FULL EQUIPMENT.
1. What is the complete equipment?
Complete equipment works - as the subject of commercial contracts - have existed for many years, but to date there has been no comprehensive and concise definition accepted by all countries and international organizations for this particular type of goods.
In the former Soviet Union and present Russia, the complete equipment project is considered a set of machinery, equipment, and construction materials used to construct an entire project according to design, operated according to a specific technological process, and achieving the proposed production parameters. According to this definition, the complete equipment project includes components such as:
Technical survey and scientific and technical research.
Establish technical and economic arguments.
Prepare technical design and construction drawings.
Delivery of complete equipment and materials.
Construction, assembly and commissioning.
Perform related services.
The United Nations Economic Commission, based on summarizing practical commercial activities in the field of trading and assembling equipment and machinery, drafted the "General Conditions of Delivery and Assembly of Import-Export Plant and Machinery" No. 188A. These General Conditions are accepted and applied by most countries and international trade organizations with modifications depending on each specific situation and case. In this "General Conditions", a definition is given that is close to the concept of complete equipment works that we often understand, but more generally:
“The Works” means the entire Plant delivered by the Contractor and the work to be carried out by the Contractor under the Contract. “Plant” means all machinery, equipment, instruments, controls, materials and items delivered under the Contract.
For Vietnam, the concept of "complete equipment" was first introduced in Article 2 of "Temporary regulations on ordering between the Ministry of Foreign Trade and Ministries nationwide" issued with Circular 07/TTg dated January 7, 1961 of the Prime Minister:
"The entire equipment is a factory, agricultural, forestry, fishery production facility, scientific or experimental facility, hospital, school, architectural works, irrigation works, traffic, post office,... designed or helped to design by foreign countries, by
Foreign countries provide equipment, raw materials for trial production, instructions for machine installation and trial production. In addition, based on special situations, there may be some equipment that does not meet the above conditions but is approved by the State Planning Commission as complete equipment, and is also regulated as complete equipment."
Thus, except in special cases, according to this definition, a system of equipment is considered a complete equipment if it has three basic conditions:
These are projects designed by foreigners or designed by us.
Foreign countries provide equipment and raw materials for trial production.
Foreign guidance on construction and trial production.
However, along with the development and structural changes of the Vietnamese economy, these concepts and definitions have also been supplemented and developed. On November 13, 1992, the Prime Minister issued Decision No. 91/TTg promulgating "Regulations on the management of machinery and equipment imports using State budget capital", which defined Complete Equipment as follows:
Complete equipment is a set of machinery, equipment and materials used exclusively for a project with specific technological equipment and economic and technical parameters described and specified in the project design.
Thus, the contents of the entire equipment goods include:
Technical survey.
Economic-technical justification or feasibility study of design work.
Equipment, machinery, materials... for project construction.
Construction, assembly, calibration and operating instructions.
Other services related to the project such as technology transfer, training...
Import is carried out through a contract (in a package form) with all the above goods, or carried out in parts depending on the requirements.
That means when importing a complete equipment project such as a cement factory, in addition to individual equipment, the scope of import of these types includes the import of physical goods and non-physical goods. Although it was born a bit late and still has certain shortcomings, it can be said that Decision 91/TTg of the Prime Minister has provided a clear and precise definition of complete equipment and individual equipment as well as their scope, contributing significantly to improving the efficiency of importing machinery and equipment, defining the functions and tasks of State management agencies as well as the methods and procedures for importing equipment and machinery in a market economy in line with the trend of opening up and integrating with the regional and world economy as well as the policy of simplifying administrative procedures of the State.
2. Current equipment import activities in Vietnam.
2.1. Subjects permitted to import complete equipment.
Whole equipment import business is the process of trading, signing and implementing contracts to import equipment (including whole equipment and individual equipment) and services related to equipment in relations with foreign partners.
Complete equipment projects usually have a very large total investment capital. The capital used to import complete equipment is often the state budget or foreign funding sources through the Government or foreign loans with State guarantees, Vietnamese commercial banks, etc. Therefore, an enterprise can only be allowed to import complete equipment after having completed all relevant procedures according to specific regulations of law.
Previously, according to the provisions of Circular 04/TM-DT dated July 30, 1993 of the Ministry of Trade, in order to conduct business in importing and exporting complete equipment, enterprises must be granted a business license by the Ministry of Trade in accordance with Article 5 of Decree No. 144/HDBT dated July 7, 1992, in which the import section includes the equipment and machinery industry. In addition, enterprises must meet the following requirements:
- The enterprise has an organizational structure and a team of staff with sufficient technical expertise, foreign trade, pricing, and international legal capacity in the import and export business of complete equipment.
- The enterprise has been in the business of importing retail machinery and equipment for at least 5 years and has an annual turnover of machinery and equipment imports of not less than 5 million USD.
- Enterprises with working capital assigned by the State must supplement it in Vietnamese currency and foreign currency equivalent to at least 500,000 USD at the time of business registration for equipment import.
Therefore, enterprises need to apply for business registration to import complete equipment with the Ministry of Trade by submitting a business registration dossier, including:
Application for business of importing equipment.
Import and export business license.
Valid documents confirming working capital (including State-allocated capital and self-supplemented capital).
Summary of assets for the last 5 years (Summary table).
Organizational chart of the business apparatus and necessary staff to ensure sufficient capacity for equipment business.
However, later, according to the content of Decree 33/CP dated April 19, 1994 on State management of import and export activities, import and then Decree 57/1998/ND-CP dated July 31, 1998 detailing the implementation of the Commercial Law on import and export activities, processing, and agency for buying and selling goods with foreign countries; to be allowed to do import and export business (including complete equipment and goods), enterprises must be established according to the provisions of law, and be
Import and export licenses for goods according to registered business lines, registered business codes with the provincial and municipal Customs Departments, and the goods are not on the list of prohibited import and export goods. With the new mechanism, to expand production, enterprises can directly import complete equipment through bidding; or enterprises can authorize other enterprises to be licensed to import and export complete equipment. However, it is worth noting here that for a business that wants to be licensed to import and export this item, the documents issued after Circular 04/TM-DT as mentioned above have not been specifically regulated, and in the list of industries that businesses register to import and export, there is no name of the industry "complete equipment". Therefore, in reality, currently, businesses that want to import and export equipment still apply the regulations of Circular 04/TM-DT. The import and export business license of the Complete Equipment and Technical Import-Export Company itself is also granted based on the old license that the Ministry of Trade granted to its predecessor, the General Corporation for Import and Export of Complete Equipment and Technical, but if applied according to the regulations of Decree 33-CP or Decree 57/1998/ND-CP, it is difficult to grant an import and export business license for the complete equipment industry to the company.
2.2. Methods of importing complete equipment.
If implementing a contract to import individual equipment does not encounter many problems and only takes a relatively short period of time, implementing a contract to import complete equipment often takes much longer with a huge and complicated amount of work related to the stages of factory construction, goods import, installation, operation, operator training... Therefore, the question is which method of import is the most optimal to ensure safety for investment while we do not have enough capacity and qualifications to be completely assured about the decision to import complete equipment and our technology.
Currently, there are many ways to classify the methods of importing complete equipment. According to the classification of FIDIC (International Federation of Consulting Engineers), there are four main methods of importing complete equipment in the world (in Vietnam, these methods are not called methods of importing complete equipment but are called forms of organizing and managing the implementation of complete equipment projects - defined in the Regulation on Investment and Construction Management dated (July 8, 1999) including:
2.2.1. Conventional method:
This is a very popular method, in which the investor or project owner, through a consulting unit, is responsible for project preparation, design and bidding documents, helping the investor organize bidding and supervision, which is called the method where the investor directly manages project implementation.
2.2.2. In-house method:
In the self-management method, the investor does not use an external consulting unit but uses internal forces within the unit to carry out all work related to construction and installation from project establishment, design, construction to trial operation and warranty... In the world, people apply this method mainly to special specialized projects such as projects in the fields of oil and gas, nuclear energy...
As for Vietnam, this is only a do-it-yourself method and only applies to small-scale repair and renovation projects, specialized projects that do not require high technical expertise such as agricultural and forestry construction and self-invested projects to build technical facilities of construction enterprises...
2.2.3. Project management method:
In this method, the investor will hire a consulting company to take full responsibility for dealing with design units, material suppliers and construction contractors. The consulting company is responsible for supervising all aspects but is not identical to the role of general contractor in turnkey construction.
In Vietnam, this method is called Project Management Method. For this method, after the selection process, the investor will submit to the competent authority to decide on a consulting organization to sign the above contracts on their behalf and be responsible for supervising and managing the entire project implementation process. Accordingly, this method is only applicable to large-scale projects with complex techniques and long construction periods.
2.2.4. Turn-key method:
Simply put, people often think of importing machinery and equipment as importing technology and techniques. Importing complete equipment or factories in the form of "turnkey" is considered a suitable form to take advantage of foreign technology and techniques.
If importing by this method, the investor only has a relationship with one seller, supplier or general contractor who is responsible for the process of project preparation, construction design, material procurement and complete construction and installation for the investor to operate. The investor only approves the technical design, acceptance and handover when the project is completed and qualified for use. The seller can subcontract to subcontractors, but is still directly and fully responsible to the investor. Depending on the level of service provided by the seller, the turnkey method can be divided into several forms such as:
2.2.4.1. Light turn –key:
The seller is responsible for the entire process of project establishment, construction design, material procurement, complete construction and installation, then handover of the project and provide the buyer with some operating instructions.
2.2.4.2. Technical turn-key:
The seller assists the buyer with technical services but does not guarantee that the operating results meet the design criteria of the project.
2.2.4.3. Product-in-hand turn-key:
The seller undertakes to train the buyer a team of operating workers and provide trial production materials. Only when the manufactured products meet quality standards and design criteria will the project be handed over to the buyer for management.
2.2.4.4. Market-in hand turn-key:
After completing the project, the seller helps the buyer with some marketing activities and trains the buyer's business management staff.
In Vietnam, this method is also called the turnkey method, however, it does not apply the complete management and implementation method as the turnkey method is classified above, but applies a mixture of the technical turnkey method and the turnkey product method. That means when importing a complete equipment project according to this method, the seller helps the buyer with some technical services, is responsible for training the buyer a team of workers to ensure the operation of the project until the operating results are achieved, meeting the design criteria, then handing over the project to the buyer for management. However, the seller is not responsible for providing raw materials for trial production as the responsibility prescribed by the buyer according to the turnkey product method.
The main disadvantage of the "Turnkey" method is that it does not improve the technical level of the plant recipient, because this method has almost no technology transfer. The seller (contractor) hands over the built and installed plant, along with the technical knowledge to operate and maintain the entire equipment. The detailed design and manufacturing and technical know-how of the plant are not transferred or are not transferred systematically and completely. With the little knowledge received, the buyer is often not capable of mastering the technology of the newly built and installed plants, so it is common to see the presence of foreign experts continuing to stay after the project has been handed over. For example, in Malaysia, most of the petrochemical industrial plants were handed over to Malaysian buyers since the early 1980s, but many years later they are still operated and maintained by foreign contractors.
That means, by importing in this way, the buyer only buys the "Product of technology" but not the "Technology", which is the scientific and technical knowledge and technology used to create that product. This can be imagined as a person buying a new car, being carefully instructed by the seller to control and drive that car, but when it breaks down, he does not understand why and has to invite a technician to help repair it.
Nowadays, in Vietnam, there have been many contracts for importing complete equipment signed under the BOT (Build + Operate + Transfer) or BT (Build + Transfer) method.