Cashew container confusion points to payment issues, photo VNA |
Bach Khanh Nhut, vice chairman of the Vietnam Cashew Association (Vinacas), said that businesses have lost control of 36 containers worth about $7 million due to a loss of original documents. Up to now, the investigation into the suspected cashew nut export scam has not been concluded.
Several Vietnamese cashew processing and exporting enterprises have signed contracts with some customers to import Italian cashews through the brokerage company Kim Hanh Viet. The consignments had been packed into 100 containers which were being shipped to the ports of Genoa and La Spezia by international shipping lines Cosco, Yangming, Hmm, and One.
Vietnamese banks said they had shipped all original documents of the shipment of 36 containers via international courier services. However, banks in Italy responded that they only received copies of the documents.
Vinacas has sent an express document to the Vietnamese Embassy and the Vietnam Trade Office in Italy to request support. Vinacas has also worked with five Vietnamese banks, related businesses, and shipping lines. However, most of them said that it was impossible to find the original documents of the shipment.
It is thought that it is an urgent situation because all original documents are in the hands of the buyers. Shipping lines will be forced to deliver the goods to the holders of the original document according to international practice.
Meanwhile, Italian police released a written response about the blockade of three containers on March 8 and another two on March 11 to wait for the case to be resolved. However, the number of blocked containers is very small compared to the 36 containers being at risk of loss.
Vietnamese cashew exporters have negotiated disadvantageous payment terms with first-time purchasers who do not fully comprehend customer needs. The nature of payment methods like Documents against Payment, Cash against Documents, and Letter of Credit (L/C) are settled with banks. All these methods require payment for a set of documents prior to obtaining the goods.
Therefore, they are considered quite secure in terms of paperwork. However, if the buyer has a fraudulent intention to appropriate documents, there are some risks.
Concerned about a payment scam in the African market, the Vietnam trade offices in Algeria, Gambia, Mali, Niger, and Senegal issued a warning for Vietnamese businesses to not use the L/C payment method with African importers in April 2020.
In addition, they were advised never to use Document Acceptance as a payment method. Due to financial restrictions at that time, African importers frequently offered to buy products on a deferred payment basis under cost, insurance, and freight agreements. They did not open L/C accounts due to expensive fees.
L/C is the least risky payment method but it is not the most popular one in the agricultural trade. L/C agreements only account for about 5 per cent of transactions.
Although L/C is the most secure payment method for the sellers, it is the most disadvantageous for the buyers. To guarantee payments, banks often require buyers to deposit a certain amount, even all of the value of the contract.
In commercial transactions, both parties want to close the deal quickly. The question is which side is in the bargaining position. When buyers have a bargaining advantage over sellers, they will offer a payment method that is convenient for them, or vice versa.
The European economy is still recovering from a series of supply chain headwinds over the past two years. The commodity demand gradually recovers, opening up the opportunity for Vietnam to increase cashew exports to Europe by 15 per cent to over 155,000 tonnes in 2022. Cashew exports reached a record of $3.64 billion in 2021.
Ta Quang Huyen, chairman of Hoang Son 1 JSC in the southern province of Binh Phuoc, one of Vietnam’s leading cashew nut exporters, said that exporters can reacquire their exported containers which have yet to leave the ports if they use a different approach.
“After receiving the buyers’ deposits, sellers will make a contract. The deposit amount ranges from 20-30 per cent of the order value. This will ensure that the buyers pay the rest when receiving the goods. If the importers do not make the deposit, the transaction is cancelled,” Huyen said.
He added that exporters should actively win the right to charter ships. Paying the charter will enable businesses to be more proactive in understanding schedules and deal more easily with shipping lines in the event of a mishap.
This strategy is akin to selling via carriage and insurance paid to contracts rather than freight on board, which is the current bottleneck in Vietnam’s exports.
“For many years, Vietnamese exporters have been accustomed to transferring all charter rights to their partners. They only receive products at the port for import or delivering goods to the port for export. It is time for a change,” Huyen emphasised.
Last week, the Government Office issued Official Dispatch No.1583/CD-VPCP conveying the direction of Prime Minister Pham Minh Chinh on exporting cashews to the European market. The PM assigned the ministers of industry and trade; agriculture and rural development; public security; and transport, as well as the governor of the State Bank of Vietnam, to urgently coordinate with the Vietnam Cashew Association and relevant agencies to inspect and clarify the cause. The regulatory bodies have to take measures to handle and support businesses to ensure the legitimate interests of people and businesses in accordance with the provisions of domestic and international laws. The regulatory bodies are required to report to the prime minister any difficulties beyond authority. |
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