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After finding Vietnam manufacturers that meet your requirement, it’s time for you to order product samples from these potential suppliers. It could be said that ordering product samples is a crucial step for your sourcing process no matter which countries are you sourcing from. In order to make sure that your upcoming investment is worthwhile, checking samples before committing to a larger order is extremely necessary. This blog article, therefore, will provide you with knowledge you need when requesting product samples from Vietnam manufacturers.

Check out our main points in this blog article:

1. Why Should You Order Product Samples?

There are many reasons for why you should order product samples before actually making any larger orders.

Evaluate Quality

You can directly evaluate how the products look, smell or taste even. Especially for customized products, you will know exactly whether your products are manufactured in a proper way and meet your requirements or not. By checking samples instead of just placing your trust in images which the suppliers provide, you can ensure the high quality you want for your products before the large volume is manufactured or making a bulk purchase.

Evaluate Suppliers’ Competency

This step can help you evaluate suppliers’ competence. Through the process of ordering and shipping product samples, you can know well how they communicate, how fast they process the orders and the way they package their products. Furthermore, with the sample products, you can check if the manufacturers are capable of making products that qualify your requirements or not. Then you could narrow down your list before choosing the most suitable one.

Build relationship with suppliers

This practice will show your seriousness in this business and this helps establish your relationship with suppliers. When suppliers realize that you are seriously interested in their products, they will be more willing to spend time on making conversation with you. This means that you can get more detailed information to consider which is very helpful for the sourcing process.

Use for Product Photos

You can take more advantages of samples by using them in your product photos for your online store or displaying it in your brick-and-mortar store also.

With reasons listed above, it is obvious that ordering samples benefits you in many aspects and this step, therefore, plays a crucial role in your sourcing process.

2. Ways to Pay for Ordering Product Samples

Most of the time, suppliers will not ask you to pay for the samples. The product samples are free but the shipping fee is not. In fact, since suppliers usually send samples to you by air, its fee is relatively high. 

There are a number of financial systems that you can use to pay for suppliers depending on which one is the most suitable one for both sides. In Vietnam, financial systems that are mostly used include Paypal, Western Union, MoneyGram and Transferwise.

However, if you think this cost is too high and want to avoid it, there is still a solution. You can negotiate with the supplier and suggest that this payment should be taken off since the purchase order is large enough.

Besides, you cannot order from only one supplier but various manufacturers to have a comprehensive evaluation. This will lead to several orders that are shipped and the total shipping fee could be very high. It is recommended that you should ask all your suppliers to send their samples to a third party located in the same country with them. This approach will save you a lot when you just have to pay shipping fee once for all.

3. What Should You Bear In Mind When Purchasing Product Samples

When making product samples orders, a number of things should be taken in account. Have a look at points below to make sure that you will cover all of them when ordering any samples.

Order from more than one supplier

After the first step of finding Vietnam manufacturers, you should have a list of 3 – 5 potential suppliers that meet your requirements. Then, in the step of requesting product samples, what you need to do is order samples from each of them instead of just asking one to give samples and trust the remaining ones with their photos. Then you can compare samples from many suppliers to find which supplier is the best one.

Order more than one product sample from a supplier

For each supplier, it is highly recommended that you should order more than one product sample from a supplier. This means that you can get more samples to consider and have a comprehensive look at what they are producing. You’ll then be able to make a well-calculated decision on which supplier you should use for a specific product.

Furthermore, in the shipping process, there is still a chance that samples could be damaged. For this reason, ordering more than one sample will partly avoid the situation that you have to make another order and pay shipping fee twice. 

Check samples carefully

As the sample will become the guide for suppliers to manufacture or supply exactly what you want, you should carefully check samples to ensure it completely meets your requirements. Furthermore, the sample you approve could be used for comparing to the final products and considered as a reference if any bad situations occurred.

What’s more? If product samples you receive have been damaged in the shipping process, there are chances that a larger order will have similar characteristics. In any cases, it is necessary to contact your suppliers to discuss your needs more. If you two cannot reach the consensus in achieving a better approach or win-win, choosing another manufacturer is suggested.

Send feedbacks after receiving samples

No matter how you feel about the samples, satisfied or disappointed, you should let suppliers know what you think of their products. If they’re good, give them the compliments. This could help you build a good relationship with your suppliers.

But if their samples do not meet your requirements, let them know and discuss more to see whether they can offer anything or change according to your need. Then you can make your own decision on which is the most suitable supplier for your business.

4. How to Know Whether a Supplier Is Right for Your Business

After receiving and evaluating product samples, it’s time for you to decide which one is the best to do business with. Now you should think of the experience you have had with your potential manufacturers, from the first time they respond to you to the moment that you evaluate all their samples. This will adequately reflect what you will experience when purchasing a larger order.

Yet there are still a number of factors that should be considered when you place expensive orders, including:

Price: Besides product quality, prices also play a crucial role in your choice of suppliers. What do you have to pay for all? Verify all elements: cost per unit, delivery cost, etc.

Quantity: To get the best price, the MOQ the suppliers offer is usually high. If it does not align to your needs, you can negotiate with the supplier to reach the number that works best for your business.

Production capacity: The ability of a manufacturer to produce and fulfill your order is important. By learning it in the beginning, you will save a lot of time as well as efforts later.

Payment Terms: Vietnam suppliers favor 2 main payment terms which are T/T payment and LC irrevocable at sight. You can find out more about payment methods when making international trade in Vietnam HERE.

Delivery Terms: When it comes to Delivery Terms, Vietnam manufacturers prefer FOB, CIF or EXW. You can negotiate with them to have the best approach for both sides.

With knowledge of ordering product samples above, you can make this step in your sourcing process from Vietnam more efficient than ever. In order to facilitate the process of sourcing from Vietnam, check out our Vietnam sourcing blog list below:

6 Decisive Steps for Sourcing Goods from Vietnam

Sourcing from Vietnam: An Ultimate Guide to International Shipping

Vietnam Sourcing: Invaluable Guide for International Sea Freight

Vietnam Sourcing: Required Shipping Documents for Export/Import Process

Vietnam Sourcing: Must-Know Payment Methods When Making International Trade in Vietnam

Vietnam Sourcing: An Essential Guide to Finding Vietnam Manufacturers

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source from Vietnam, an Asia sourcing hub with great potential? Are you faced with any problems when sourcing from Vietnam? With professional experience and presence at factory location, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave your comment below or click HERE for further support!

When it comes to sourcing business, you may have heard much about terms like ODM and OEM. Yet you are still a bit confused by these terms and find it difficult to choose a suitable manufacturing partner for your outsourcing process in Vietnam. For that reason, this blog article will cover definitions of these terms and partly help you make decisions on which is the best option for your business in Vietnam.

Check out the main points here before jump into this blog article:

1. Outsourcing to Vietnam

In recent years, due to a number of reasons, many businesses all over the world have decided to move their operations out of China to Southeast Asia countries, especially to Vietnam which could be considered as the rising star of Southeast Asia region. 

In fact, in the period of ten years from 2010 to 2019, Vietnam attracted USD 143 billion in cumulative FDI. Of this, 59 percent went into manufacturing – especially in the electronics, textiles, footwear, and automobile parts industries – as many companies shifted supply chains to Vietnam, according to a report of the U.S Department of State.

When sourcing to Vietnam , ODM and OEM are the two manufacturing types that are mentioned and considered the most.  Both these terms refer to outsourcing the production of certain products/components to Vietnamese contract manufacturers. Read the sectors below to have a clear understanding of these terms.

2. What is ODM? 

ODM, which stands for Original Design Manufacturing, is a type of manufacturing in which the manufacturer will research product designs, specifications and manufacture based on the product idea brief provided by the client. In most cases, ODMs also manufacture products they design and these products will then be branded in the client companies name and sold on in the market.

This type of manufacturing is also referred to as Private Labeling. With an ODM company, importers do not need to invest millions of dollars in research and development to create a completely new product since the ODM takes care of these stages, product concepts, testing and manufacturing as well.

3. What is OEM?

OEM, which stands for Original Equipment Manufacturing, is a manufacturing type in which you have spent millions of dollars in R&D to possess a unique product design and then contracted a number of third-party manufacturers to handle the mass production. The contracted suppliers will manufacture products based on the provided product design and specifications. 

Apple is a good example for this manufacturing type. In fact, this technology giant came up with the idea, designed their own products and then licensed their scratch out to Foxconn for the manufacturing process.

4. Pros vs Cons

As an old saying goes, every coin has two sides. This means that despite advantages each manufacturing type brings to the importers, they still have some disadvantages. And by considering them both, buyers can choose the right one for their sourcing business.

ODM

With ODM, not only do you not have to spend time and resources designing the product, but you can also take advantage of the economies of scale from an ODM firm. This means that they could save a lot of money and spend more resources on their core operations as well as marketing strategies like developing brands, testing customers’ responses or marketing products. Besides, minimum order quantity (MOQ) requirements for this type of production will be lower than that for OEM since there are less set-up costs.

Despite advantages above, this manufacturing type still has downsides which should be considered. First, you will not receive a unique product, which means it will be hard to differentiate your product from the rest of goods in the market, and accordingly there could be another competition in price and margins. Second, the intellectual property of the product is owned by the supplier or another company and you have to carefully consider whether your partner is violating the IP of someone else.

OEM

In contrast to ODM, before licensing to the third-party manufacturers for mass production, the buyers have spent millions of dollars and a great deal of time on doing all the market research, stage of R&D and developing its own product. Accordingly, this product will be unique when it is launched to markets, making it more attractive in the markets compared to other ones. 

However, a huge downside of this type is that the cost of OEM products is very expensive. Furthermore, it takes a longer time to launch products to the market, compared to the period of time the ODM takes. Additionally, since the set-up costs for these products to be properly manufactured are high, the MOQ is also higher compared to that of ODM.

Check out the summary table below:

	ODM	OEM
Pros	Little or no costs on R&D  Lower MOQ for production	Unique products Customized products Own IP
Cons	Undifferentiated from other products Price competition Do not own the IP	Expensive cost in R&D Higher MOQ for production Time-consuming

As each one has its own pros and cons, choosing between the two depends much on the type of products you want to sell, the resources you have and are willing to invest as well as the budget on hand. With the pros and cons for each manufacturing type presented above, you might have your own decision for your outsourcing business. 

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source commodities from Vietnam, an Asia sourcing hub with great potential. Are you faced with any problems when sourcing Vietnam? With professional experience and presence at manufacturing locations and economic centres, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave your comment below or click HERE for further support!

Sourcing from Vietnam has become familiar with many countries in recent years thanks to its huge advantages. Yet there’s still people who do not really know what’s made and exported the most in this country. For this reason, this guide aims to help you have an overview of Vietnam products and a brief introduction of Vietnam industrial zones where you can find the products you want. 

Find out more about Vietnam potential for Sourcing at Vietnam Sourcing – A Promising Land for Sourcing before reading this article.

Check out our main posts in this blog article:

1. Top Vietnam Export Products

Vietnam has been considered as a manufacturing hub among Asian countries. Have a look at which products Vietnam are producing and exporting the most over recent years:

Electrical equipment

Electrical equipment includes things like telephones, mobile phones, electrical motors, spare parts and other components thereof which are of great importance in our daily lives. According to the Vietnam Customs’ Reports in March 2017, these Vietnam products lead in the list of Top 10 major export commodities of Vietnam, making up an significant contribution to the expansion of Vietnam’s total merchandise exports. 

In fact, the largest export market of Vietnam for these products is the United States, a country with very strict regulations, stated by the United States Trade Representative. Furthermore, many technology giants are expanding their presence in Vietnam like Samsung, Intel, LG, HP Canon due to its skilled labor force fully capable of performing complicated tasks.

Footwear

As stated by Vietnam Trade Promotion Agency, Vietnam now is the third largest footwear manufacturing country in Asia after China, China and places fourth in the world’s ranks. In fact, there are many reputable brands having chosen Vietnam over China as a place to manufacture their products like Adidas, Nike, etc. 

In an article published by Vietnam Industry and Trade Information Center, the major export markets of Vietnam for these commodities include the US, China, Japan, Belgium and Germany. Of those countries, the US is the largest export market of Vietnamese footwear in the first seven months of this year.

Clothing and Textile

Not only does the Textiles and Garments significantly contribute to Vietnam’s total export value but it also solves the employment issues with more than 2.7 million people employed across six thousand textile companies as reported by Statista.

Furthermore, with a productive capacity in clothing manufacturing, Vietnam has become the fourth in top leading clothing exporters in 2019, according to Statista. The labor cost for clothing production is lower than other countries like China, Indonesia, Cambodia, which poses a major competition advantage for Vietnam in the global market.

Furniture

Regarding the furniture category, wooden products play an important role in Vietnam’s economic growth. Despite the COVID 19 pandemic, Vietnam still maintains its growth in furniture export.

Thanks to the locals’ effort in sustainable forestation and forest development program, Vietnam productivity and product quality have increased substantially, making Vietnam “new star” in the furniture industry. For this reason, many brands famous for furniture like IKEA, Ashley Furniture, or West Elm decide to manufacture furniture in Vietnam.

Coffee

Vietnam has long become one of the largest exporters of coffee beans, especially Robusta. In fact, for coffee in general, Vietnam is the second largest exporter after Brazil. However, when it comes to Robusta coffee, Vietnam is the country that supplies this type of coffee the most to the whole world.

Vietnam now possesses around 600,000 ha of coffee farms, mostly concentrating on three main provinces Dak Lak, Dak Nong and Lam Dong. In the first eight months of this year, Germany, the United States and Italy are the 3 largest markets of Vietnam coffee and the total value of coffee export in this period is up to US$ 184.35 million, according to the Vietnam Industry and Trade Information Center.

Want to source coffee from Vietnam? Check out our Coffee blog list HERE to have a comprehensive and informative guide to source coffee from Vietnam.

Fruit, vegetable and nuts

This export sector of Vietnam is growing significantly in recent years. Regarding vegetable and fruit exports, Vietnam’s largest export market is China. Since the serious effects of COVID 19 pandemic, a decrease in the total export value was witnessed in this market in the first quarter of this year. 

Nevertheless, it seems that Vietnam fruit and vegetables have become more favorable in other countries, such as Japan, Thailand, the US, etc. which means that Vietnam can reduce dependence on the Chinese market by boosting exports to other markets, according to the Ministry of Agriculture and Rural Development. One more interesting fact, Vietnam is currently the largest exporter of cashew nuts in the world.

Fishery products

With more than 3,000 km of coastline, it came as no surprise to learn that Vietnam is the largest exporter of fisheries production worldwide after Norway and China, according to the 2016 report of Food and Agriculture Organisation (FAO) of the United Nations.

 

Vietnam mainly exports shrimp, pangasius, tuna, squid and octopus to other countries, including 170 markets in the world. Not only does Vietnam possess the advantage of the long coastline, its skilled labor force and high commitment of government for food safety are also factors that contribute to Vietnam’s potential for seafood export, stated by Vietnam Association of Seafood Exporters and Producers (VASEP).

Plastic

Main export markets of Vietnam’s plastic products include China, Japan, Thailand, Malaysia and India. According to the Vietnam Industry and Trade Information Center, the country’s export of plastic products saw a growth in the first seven months of this year. In fact, Vietnam’s exports of plastic materials increased both in volume and value compared to June of 2019, by 36,5 per cent to 167,600 tons, and by 34,2 per cent to 234,07 million USD, respectively.

Rubber Goods

Concerning Rubber Goods, Vietnam is currently the member of the Association of Natural Rubber Producing Countries, which includes 13 countries having accounted for around 91 per cent of the global production of natural rubber during 2017. Furthermore, of which Asian countries, Vietnam has placed in Top 6 countries that have the highest natural rubber output.

Iron and Steel

It could be said that Vietnam’s iron and steel industry has high potential to reach a production growth rate and expand export markets in present and years to come. In the first nine months of this year, the General Department of Customs stated that Vietnam’s exports of iron and steel increased in volume and in turnover compared with the same period last year.

2. Where can you find Vietnam products?

Until the year 2020, Vietnam has more than 300 industrial zones in total spreading across the country, from the North to the South. These industrial zones not only offer a range of incentives to domestic and foreign investors, their labor source and infrastructure are also developed significantly, making them attractive places to manufacture Vietnam products. Check out a number of major industrial zones where to find Vietnam manufacturers in Vietnam below:

Dinh Vu Industrial Zone

Dinh Vu Industrial Zone is located in the Dinh Vu peninsula – on the lower river from Haiphong to the sea, on the continental shelf of the Gulf of Tonkin. With a total area up to 1,463 hectares and the advantages of a port city, a national transportation hub, Dinh Vu Industrial Zone has been attracting many domestic and overseas investors..

Vietnam-Singapore Industrial Park (VSIP)

VSIP was established based on the friendship and economic cooperation between Vietnam and Singapore. With the support from 2 countries’ governments, VSIP has a string of industrial parks located in many provinces, including Binh Duong, Bac Ninh, Hai Phong, Quang Ngai and Nghe An, making it an attractive industrial zone for foreign investors.

Hiep Phuoc Industrial Zone

Located in Nha Be District, Ho Chi Minh City, Hiep Phuoc possesses a strategic location with modern infrastructure, facilities, three international seaports and near international airport. with a total area of 1,686 hectares, this industrial park is the largest industrial zone in the city. 

Phuoc Dong Industrial Zone

Located in Tay Ninh province, Phuoc Dong Industrial Park has a total area of 2,190 hectares. This industrial zone has a convenient geographical location – 42 km from Tan Son Nhat International Airport, 74 km from Cai Mep International Port, and only 23 km from Long An Port. Therefore, this industrial park facilitates not only the manufacturing process of Vietnam products but also the shipping.

Exporters/importers could run into a number of difficulties when trading internationally. Check out our Vietnam Sourcing blog list below to facilitate your sourcing process from Vietnam right away:

6 Decisive Steps for Sourcing Goods from Vietnam

Sourcing from Vietnam: An Ultimate Guide to International Shipping

Vietnam Sourcing: Invaluable Guide for International Sea Freight

Vietnam Sourcing: Required Shipping Documents for Export/Import Process

Vietnam Sourcing: Must-know Payment Methods When Conducting International Trade in Vietnam

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source commodities from Vietnam, an Asia sourcing hub with great potential. Are you faced with any problems in Vietnam sourcing? With professional experience and presence at manufacturing location and economic centre, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave you comment below or click HERE for further support

Of 6 crucial steps to source goods from Vietnam, making an analysis of Vietnam manufacturers and choosing which one for your business are the very first steps.These first steps are of great importance, since they could lead to unexpected consequences if they are not taken into account. For this reason, this blog article in our Vietnam sourcing series will provide you with an essential guide to help you find and choose a right Vietnam manufacturer that you can place trust in.

Have a look at main points in this piece of writing:

1. Vietnam in the Covid 19 Era

There is no doubt that the Covid 19 pandemic has damaged the whole world in all the aspects since it first emerged in Wuhan province, China. One of the worst crises this virus has caused is a massive disruption in the global supply chain, leading to the fact that many manufacturers almost collapsed due to the lack of Chinese supply. And it’s the moment that they start rethinking China and seeking a new approach to remedy their supply chain.

Diversifying the supply sources instead of relying on just one source to take advantage of cost-efficiency is an option favored by many economies. In this way, Vietnam is one of the top destinations to which many countries consider to move their production. There are a number of reasons for why Vietnam is chosen in preference to other countries. 

First and foremost, Vietnam has achieved success in the initial stage in the fight of containing Covid 19 epidemic despite the fact that this country is highly vulnerable due to the long shared border with China, limited healthcare infrastructure and dense population. Secondly, Vietnam has signed one more free trade agreement, called RCEP, opening more opportunities for Vietnam exports in years to come. And what is more? According to the General Statistics Office of Vietnam, the Vietnam GDP in the third quarter of 2020 is estimated to increase by 2.62% over the same period last year. Though this figure is the lowest one in recent periods, this is still a positive signal for the future recovery.

With achievements mentioned above, it could be said that Vietnam is making its ways to become an ideal manufacturing hub to other countries. Yet with plenty of manufacturers in this country, finding a suitable one is not easy at all. Have a look at recommended channels below for searching Vietnam manufacturers before getting into the sourcing process.

2. 5 Reliable Channels for Searching Manufacturers in Vietnam

There are 5 reliable channels for importers to search Vietnamese manufacturers. These channels are considered as the most reliable ones as they are used widely and some of them are even administered by the Vietnam government.

Alibaba

Alibaba could be considered as the most popular channel for importers to find their suppliers. Due to the fact that Alibaba is a market for manufacturers from all over the world to market their business, you should sort by country on Alibaba’s website when finding Vietnam manufacturers.

Amazon

Like Alibaba, Amazon is also a very famous website for you to search for Vietnam manufacturers. There are many suppliers on Amazon, so confining the area to region or country would help you find a manufacturer in Vietnam more easily. The prices also vary according to the region/country you are searching.

ASEMConnect Vietnam

This channel is supported by Vietnam government. Not only does it generally find suppliers in Vietnam, it also helps you sort these companies by Vietnamese regions and provide you with details on suppliers you are interested in.

Vietnam Trade Promotion Agency

Vietnam Trade Promotion Agency’s website is also under Vietnam’s Ministry of Industry and Trade administration This website provides a sector, called Trade Opportunity, helping importers to find trusted suppliers/manufacturers in Vietnam. This sector includes a list of Export – Import Businesses in Vietnam and all needed information about these businesses.

Yellow Pages

Each country possesses a Yellow Pages website for storing their businesses’ profiles. This website contains the address as well as other details about this countries’ business. Beside other channels above, this website is also an ideal place for foreign buyers to find and consider Vietnam manufacturers.

3. How to verify manufacturer that you can trust

It is obvious that there are more than just finding some suppliers on these websites above and immediately making a deal with them. Of course we do not want to fall victim to a scam, so checking whether our potential manufacturers/suppliers are legitimate or not is highly recommended. For this reason, a number of ways here will help you to verify a manufacturer efficiently.

Ask for Documentation

Asking for Documentation could be considered as the best way to verify if your potential manufacturer is legitimate or not. Even if the manufacturer has shown their legitimate documents on websites you find them, don’t hesitate to ask for more if necessary. In fact, the genuine businesses are always willing to show their documents to you.

Background check 

Due to the fact that you live overseas, you cannot get all updated information about your potential manufacturers’ performances in recent years. Therefore, Checking backgrounds is extremely important to make sure that you are not going to work with a scam.

There are three main approaches, including Ask for References, Use Search Engines, and Call Directly.

In terms of Ask for References, it means that you ask these suppliers for the previous clients with whom they used to do business. Then, you can contact these people and ask anything you want to know about the manufacturer/supplier yourself. Nevertheless, keep in mind that scam suppliers could create false references, so you can find their clients online, directly contact them and ask for what you need. And in case that manufacturers refuse to supply their partners, it may be time for you to rethink.

Concerning Search Engines, you can easily search for recent news about a manufacturer. If you want to know whether this supplier has any bad reviews, you can add keywords like “scam”, “fraud”, or the like to find out more about them on Google search engine.. 

Regarding Call directly, this could be considered a good one also. In this way, you should call the manufacturer’s salesperson and discuss with them directly. It would be easier for you to find out whether they are lying or not since a scam supplier will become overreacted when being asked questions they are not comfortable answering.

Pay a visit in person to Vietnamese factory

For an order taking you tons of money, carelessness in verifying your manufacturer can cause serious trouble. This means that you should pay a visit to your potential partners. But you cannot just go to the factory by yourself, it is recommended that you should hire a quality assurance agency to accompany you on this trip. A QA agency offers the audit service to ensure that your potential Vietnam manufacturers completely meet your demand.

This article has just provided an essential guideline for any importers who are going to source from Vietnam, especially who are finding the most suitable and trusted suppliers in this country. With these 5 channels to find Vietnam manufacturers and a number of ways to verify them above, the very first step in your Vietnam sourcing process would be easier than ever.

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source commodities from Vietnam, an Asia sourcing hub with great potential. Are you faced with any problems in Vietnam sourcing? With professional experience and presence at manufacturing location and economic centre, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave you comment below or click HERE for further support

Along with choosing the right transport, the suitable delivery term or trusted logistics agent for your international freight, defining suitable payment methods also deserves equal concern. In fact, the most secure method for exporters is clearly not the case for buyers, making it hard for both sides to reach the consensus on the payment term. To avoid losing your customers due to the lack of flexibility in offering a favorable term, it’s better that exporters/importers understand all the payment methods commonly used in international trade.

This article will explain to you the 4 common methods of payment used in Vietnam and a number of financial systems that can be used for paying Vietnamese suppliers.

1. Cash In Advance

Cash In Advance is a payment method which requires importers to pay fully and before the shipment is received. In Vietnam and other Asian countries, exporters commonly ask for making use of Telegraphic Transfer as an option to pay in advance. Telegraphic Transfer, abbreviated to TT, is the transfer of funds from the importer’s bank account to the exporter’s one by electronic means. The fee could be charged by the sending bank or receiving bank.

While buyers are not willing to agree on this method, it is the most desired one by exporters, however. It is mostly because the sellers could avoid all the risk of default. An example is that when there are problems with order or damages to the shipment, the sellers already have cash in hand and they do not have to worry whether buyers will pay for the goods or not. Besides, in some cases, the buyers are not able to afford prior to the shipment. For these reasons, importers, in contrast, do not favor this term as much as the sellers do.

Consequently, if the sellers insist on this method, chances are they will receive fewer orders or even lose their business to others who are willing to offer favorable terms to their customers flexibly.

What is T/T? How does it work?

A T/T payment is a Telegraphic Transfer or Wire Transfer of funds between banks using the SWIFT system. It is commonly requested by Vietnamese suppliers and is a standard way for importers to send money abroad.

Below is the way T/T payment commonly works:

1. You ask the supplier to develop samples until you learn that they are doing properly and exactly what you want.
2. You send a 50% deposit (by T/T) before production starts.
3. Your supplier (the seller, manufacturer, or exporter) purchases the components and/or materials and arranges the production.
4. You work with a third-party agent specializing in product quality inspection (this is optional and you can do it by yourself but it is usually a good idea).
5. You send the remaining 50% (by T/T) before shipment.
6. The supplier ships the goods and sends you the documents by freight forwarder.

2. Open Account

In contrast to Cash In Advance, Open Account transaction is a sale where the goods are shipped directly to the importers who have agreed to pay for the invoice at a specified day (30, 60, or 90 days after the shipment). It is, therefore, the most beneficial term to the importers while it is the highest risk term to exporters. 

Despite disadvantages of this term, it has upsides that the exporters could consider. In particular, since this is an advantageous term for buyers, exporters can offer this term in order to win more customers in the current intense competition, which will help maximize sales and boost business growth. 

Although the potential this method has, only offering this term to businesses that you completely trust is highly recommended. Besides, making use of protection like export credit insurance somehow can help you mitigate the risk of commercial losses (default) and political losses (war or non-convertible currency).

3. Letter of Credit

Both Cash In Advance and Open Account cannot satisfy the expectations of exporters and importers since one type that benefits the exporters will not be a favorable one for importers and vice versa. It, therefore, leads to the establishment of other payment methods that can help mitigate risks for both sides. Letter of Credit is one of them, though it’s relatively complicated.

Letters of Credit ensure that payment will be made by the buyer’s bank to the seller as soon as it receives the documents proving all of the terms and conditions expressed in LC have been qualified. This method benefits the seller when the foreign buyer with credit information being hard to obtain works with a creditworthy bank, ensuring the payment has to be made. In the meantime, an LC also protects the importers as they do not have to pay until the goods are shipped as promised. Though this paying method gives advantages to both buyers and sellers, it can be expensive, time consuming and hard to manage the whole process. 

How does this paying process work?

• Sale Contract: This process begins with a contract signed between the buyer and seller. All important information such as price, quantity, and the like has to be agreed in this contract. 
• Request for Letter of Credit: The buyer will be the one that requests a LC from his/her Issuing Bank. This document has to specify details about beneficiary’s name and address, date of shipment, transport mode and other terms.
• Send Letter of Credit: After issuing the LC according to the buyer’s demand, the Issuing Bank will send this document to the seller’s bank. The beneficiary bank will carefully check all the information to ensure that this document is perfectly correct without any mistake.
• Deliver Letter of Credit: The LC will be delivered to the seller (exporter) to make sure that this document is correct in every detail according to the contract between seller and buyer.
• Deliver Goods: The seller exports goods in compliance with terms and conditions stated in the LC.
• Present Export Documents: Export documents have to be presented fully to the exporter’s bank. The bank has the responsibility to verify whether these documents satisfy terms and conditions of the LC or not. This step must be conducted carefully before passing the documents on to the importer’s bank as the importer’s bank can refuse to pay even with a very tiny mistake.
• Forward Documents to the Issuing Bank: The importer’s bank will give these documents a final check before sending them to Buyer.
• Documents and claim for payment: Importer’s bank forwards documents, claims for payments to the buyer and makes payment to the seller’s bank. The importer then will use these documents to take possession of goods and the seller gets paid.

Depending on the time that the Issuing Bank agrees to make payment for Advising Bank, there are two main types of LC, including LC at sight and Deferred LC.

• LC at sight means that the Issuing Bank makes payment immediately after receiving all the documents and carefully verifying all terms and conditions stated on LC. Vietnamese exporters preferred this option for their trade.
• Deferred LC (after 30, 60, 90 days) means that the Issuing bank on behalf of the buyer pays the seller on a specified future date after completion of the transaction. 

4. Documentary Collections

Documentary Collection, abbreviated to D/C, is a transaction that the seller (exporter) delegates the collection of payment to the bank (remitting bank), which also has the responsibility to forward the shipping documents to the buyer’s bank, with instructions to release the documents to the buyer and claim for payment. In order to clear the goods through customs, the buyer has to present shipping documents, which can only be received when the exporter gets payment.

There are two main types of this method, encompassing Document Against Payment and Document Against Acceptance.

• Document against payment means the payment has to be made immediately when the buyer is presented the sight draft. 
• Document against acceptance, on the other hand, do not require the buyer to pay immediately but to provide a specified date for payment. This type gives the importer a short amount of time to pay the exporter after receiving goods.

Documentary collection mitigates risks of international trade for both sides. For exporters, only when payment or acceptance has been obtained, the possession of documents is handed over, which means that the exporter remains title of goods until buyers have made payment. For Importers, they have to make payment only after goods are shipped. Besides,  this term is less expensive and complicated than its alternative, Letter of Credit.

This term, however, still has a drawback which could affect the seller. In fact, the importer could change their mind and refuse to pay for the goods, leading to other serious problems for the seller. Therefore, compared with Letter of Credit, which could be used even when the foreign importer’s information is hard to obtain, this method should be applied to work with trusted partners.

How does this method work?

This method includes 4 main phases:

1. The contract of sale is signed between the exporter and importer, including all key points such as the amount to be paid, delivery date, and payment method which is documentary collection. The exporter then ships goods to the final destination with support of freight forwarder.
2. The shipping documents will be prepared and forward to the seller’s bank (remitting bank). This bank then sends these documents to the importer’s bank (collecting bank).
3. After receiving the shipping documents of goods, the collecting bank will notify the buyer that the documents have been received. The buyer is requested to make payment by the collecting bank in exchange for the documents.
4. When the bank gets paid or the buyer accepts the time draft (pay on a specified date later), the documents of shipping will be released to the buyer.

5. Popular Financial Systems Used For Paying Vietnamese Suppliers

After considering 4 must-know payment methods used in Vietnam, finding suitable services to pay Vietnamese suppliers is highly necessary. There are a number of services that foreign importers can use to make payment for Vietnamese sellers, including:

Western Union

Western Union is a very popular service for sending money around the globe. Customers can send money by phone, through Western Union website, or in person. Its fees can be attributed to a long list of elements, especially when transferring money internationally.

MoneyGram

As Western Union, MoneyGram is also a very popular service for making payments, making it the biggest rival to Western Union. While Western Union considers many factors to decide the amount of money you can transfer such as the origin and destination, your transaction history, type of payment and so on, MoneyGram sets a limit of $10,000 USD for most online transactions. For this reason, many people choose WU over MoneyGram.

Transferwise

Transferwise has bank accounts all over the world linked together by smart technology. This is how it works: When you send USD to Vietnam, just simply log on and pay your USD to the Transferwise VN account. Then this Transferwise VN account sends VN Dong to the recipient. Not only is it very easy to conduct, but it’s also up to 8 times cheaper than using banks.

PayPal

It could be said that PayPal is the best option to send a small amount of money to someone overseas. It is the most used online payment platform with instant payments. However, PayPal also has its own disadvantage. In fact, its rules are very strict, which means that your account could be suspended easily and locked by PayPal with a very slight suspicion.

These payment methods and services above are the ones that are commonly used in Vietnam as well as other Asian countries. Of these methods, T/T payment and LC irrevocable at sight are mostly chosen by Vietnamese exporters. With the useful information this article provides above, you now have a general view of payment terms and know how to choose a suitable one for your next dispatch. 

Along with payment methods, exporters/importers could run into other difficulties when trading internationally. Check out our Vietnam Sourcing blog list below to facilitate your sourcing process from Vietnam right away:

6 Decisive Steps for Sourcing Goods from Vietnam

Sourcing from Vietnam: An Ultimate Guide to International Shipping

Vietnam Sourcing: Invaluable Guide for International Sea Freight

Vietnam Sourcing: Required Shipping Documents for Export/Import Process

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source from Vietnam, an Asia sourcing hub with great potential? Are you faced with any problems when sourcing from Vietnam? With professional experience and presence at factory location, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave your comment below or click HERE for further support!

In order to carry out international shipping successfully, there are many important steps which have to be conducted. Of these crucial steps, preparation for shipping documents is clearly the one that needs to be carefully considered most. In fact, it will cost you a lot if you ignore this step and just push your products to the ports. Read this article to the end and Find out what you need for a full documentation process which decides the fate of your shipments.

Before reading this post, you could take a look at 6 Decisive Steps for Sourcing Goods from Vietnam to have a general view of sourcing goods from this manufacturing hub.

Check out our main points in this article:

1. Why do we have to carefully prepare for shipping documents?

It is always said that an adequate preparation for documents is extremely important in any international shipping. But why? Why do these documents matter a lot to our export/import process? In fact, these documents have to be prepared not only fully but also correctly. If there is a mistake in documents, even with a seemingly minor detail, it definitely causes shipping delays and your shipments will be waiting at customs to be shipped.

In fact, shipping delay will lead to many problems that could severely damage your business performance as well as reputation. There are three main ways in which delays can cost your business. 

Firstly, delays in shipping can cause degradation of the products’ quality. These adverse effects are especially huge to companies that export or import perishable goods or use temperature sensitive containers for shipping.

Secondly, the reputation of businesses that have been acknowledged for its on-time delivery could be damaged if their goods are held at customs. These delays will lead to other ones, losing their precious reputation.

Last but not least, delay-related charges could become a serious problem if they are not solved as soon as possible. There are two main types of charges when it comes to the delay in international trade, including:

• Demurrage charges depend on how much time a container is stored in a port after arrival.
• Detention charges are applied for consignees holding on to the carriers’ equipment (container) beyond the allowed days.

You will run into these charges if your free time is exceeded. Free time is the number of days you are granted to pick up your container from the port, load/unload your cargo or deliver your goods to the designated port. In fact, not taking these charges into account will lead to unnecessary demurrage and detention charges, which can increase to many times its normal value. 

For these reasons, carefully preparing shipping documents can help you avoid delays as well as loss of money. Check out the following section to know what documents must be prepared in any international shipping.

2. 4 Important required documents in Export/Import process

In the process of shipping internationally, there are many types of documents that have to be presented in order to pass the customs and release goods. The required documents could differ according to which country is the destination. However, 4 shipping documents below are absolutely necessary no matter what country is your destination.

Commercial Invoice

The first important document is commercial invoice, which is used for the Customs Declarations. This document includes all the critical information about the transaction. The customs will use this invoice to determine taxes, tariffs duties and other costs for your freight. For this reason, any practice of falsifying this document is considered as a criminal offence and receiving a severe punishment is obvious.

As has mentioned before, a commercial invoice encompasses a lot of important information. Below are the minimum data generally included in a commercial invoice:

• Importer and Exporter information
• Products’ Detailed Description (Products’ name, Quality, HS Code, Quantity, Price per unit,…)
• Country of Shipment
• Delivery Term
• Payment Term

This document could be prepared in any language, a translation in English, however, is highly recommended. The suppliers/manufacturers/exporters issue this invoice and then it then will be sent to the customs via the freight forwarder. 

Packing List

A packing list is a document that provides all involved parties, including the exporter, the international freight forwarder, and the consignee, with all the information about the shipment. In particular, it could be details about how the shipment is packed, the number of cartons, units per carton, and other packaging information. 

Besides, this document must match with the commercial invoice, which means that they have to reflect the same involved parties and other transaction details. Likewise the commercial invoice, this document is prepared by exporters/manufacturers and sent to the customs before goods arrive via carriers/freight forwarders. 

Other names of Packing List:

• Bill of Parcel
• Packaging Slip
• Delivery List
• Shipping List
• Customer Receipt

Certificate of Origin

Certificate of Origin is a document that indicates in which country commodities and goods are manufactured. It is issued by manufacturers from a country of the exporter. In Vietnam, the Ministry of Industry and Trade is responsible for drafting, submitting to authorities to issue legal documents on the origin of goods, according to Vietnam Trade Promotion Agency. It also can authorize the Vietnam Chamber of Industry and Commerce to issue the certificates of origin.

This document is considered as an important one since it provides customs with the basis to calculate the taxes, tariffs for your dispatch. Vietnam now has 13 free trade agreements with many countries throughout the world, resulting that its goods can enter these countries without trade barriers.

Bill of Lading

Bill of Lading, abbreviated as BOL or B/L, is a legal document issued by the carrier, or shipping agent, that acknowledges they have received goods for shipment. Along with Commerce Invoice, Packing list, and Certificate of Origin, not only is Bill of Lading one of 4 required shipping documents, it is also the most important one.

In fact, this document plays a huge role in the international shipping process. It serves three main functions:

• A receipt acknowledging that goods have been loaded
• Evidence of Contract of Carriage between the carrier and the the shipper
• A document of Title to the goods that determines the right to the possession of the goods

Below are the main information that must appear on a bill of lading:

• Information of Shipper, Consignee, and Carrier
• Booking Number (provided by the Freight Forwarder)
• Vessel Name
• Port of Load and Discharge
• Container Number and its Seal Number
• Information on Goods (quantity/volume/weight)
• Delivery Terms, Payment Terms
• B/L number

Other Documents that could be needed when exporting or importing 

• Proforma Invoice
• Dangerous Goods Form (for Dangerous Goods)
• Health Certificate (for Food)
• Bank Draft
• Import/Export License
• Insurance Certificates
• Sales Contract

Preparing documents for your international shipping requires a lot of effort. Not only do you have to prepare them all but you also make them right without any mistakes, even a very tiny one. 

If you’re still confused about shipping terms like Bill of Lading, Commercial Invoice or you do not have much experience in Export/Import process, it is highly recommended that you should find a sourcing company to help you with this. A sourcing agent not only helps you to identify trusted suppliers/manufacturers but they also make your shipping process as smooth as possible.

Find out more about potential of Vietnam sourcing hub at Vietnam – A Promising Land for Sourcing

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source from Vietnam, an Asia sourcing hub with great potential? Are you faced with any problems when sourcing from Vietnam? With professional experience and presence at factory location, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave your comment below or click HERE for further support!

Sea freight is always compared to other shipping methods when someone has a tendency to export goods. In Vietnam, ocean shipping could be considered as the backbone of international trade and the global trade, and the same goes for the world. Why is this method chosen over the others and what do we need to know when exporting goods by ocean freight? Go through this blog post to have the answers for these questions.

Check out our main points in this post here:

1. What is ocean freight?

Ocean Freight is a method of transporting a large amount of goods by sea via standard shipping containers. Due to the fact that Vietnam has conditions facilitating ocean shipping, this method has become the most used one when shipping internationally. In fact, according to the Representative of Vietnam Maritime Administration, sea freight has carried out more than 90% of international shipping in Vietnam, making it an important shipping solution for many foreign and domestic businesses. Furthermore, Vinamarin also states that there is an estimated increase of 16% in export commodities through Vietnam seaports in the end of 2019.

2. Why choose sea freight instead of other methods?

It is absolutely necessary to consider which one is the best transport way for your freight. Sea freight seems slow compared to the other global transport like international courier services, standard air freight or express air freight. Nevertheless, this method has its own huge competitive advantages, making it more attractive than other transports. Let’s check out its upsides below.

Cost

It is apparent that cost is always an issue to be carefully considered when choosing a shipping method. Compared to the cost of shipping by air, ocean freight completely wins the battle of cost especially with larger shipments. However, shipping by sea costs you more time than air freight does, which means that you should choose air shipping if time is your first priority.

Capacity

The second advantage that ocean shipping offers exporters is its ability to ship heavy or large loads. In fact, if you are going to ship goods weighing more than 150kg or 2 CBM (Cubic Meter), air freight will be extremely expensive, and transporting by sea now is an optimal choice for you.

Environmental friendliness

Environmental issues have received increasing public attention in recent years. When it comes to environmental protection, shipping by sea will be the better option. 

According to World Shipping Council, maritime shipping is the world’s most carbon-efficient transport method. In fact, it is far more efficient than road and air freight, which releases carbon dioxide most to the environment.

Nevertheless, due to a number of factors such as speed, types of products, and so on, it leaves you no choice but choosing other methods over sea freight. For this reason, in order to choose which method is the best one for your freight, ask yourself 5 questions below:

• How much money are you willing to spend on transporting your freight?
• How quickly do your goods need to be dispatched?
• Is reaching your destination in time your first priority in shipping goods?
• Do you care much about reducing CO2 footprint and protecting the environment?

Or you could check out factors that affect your decision on methods of dispatch at Sourcing from Vietnam: An Ultimate Guide for International Shipping.

3. International sea freight services: LCL and FCL

In this method, 2 main concepts are applied when shipping Vietnam’s goods, encompassing FCL (Full Container Load) and LCL (Less than a Container Load). 

FCL (Full Container Load) refers to a container shipment which is used for only one consignee. This means that this carrying container doesn’t have to share capacity with goods from other shippers. In particular, the container in this type of shipment is sealed at origin and just opened at the destination, thus offering a high security and minimum handling for products.

LCL (Less than a Container Load), in contrast, is a container shipment in which exporters share the container capacity with other shippers. This concept allows goods to be shipped economically but less secure and chances are that you have to wait for 1-2 days until the container is fully loaded.

4. Process for Shipping by Sea

Having a shipping agent is highly recommended in this process since the import and customs processes are relatively complicated. The shipping company can help you to manage risks and ensure a smooth process.

A number of steps should be taken into account when shipping by sea with a transport agent:

• Choose a trusted shipping agent.
• This agent will collect goods from your supplier.
• Goods are transported to the port and pass through customs in the origin.
• Goods can be loaded into your own container (FCL), or a shared container (LCL), then it will be put into a cargo ship.
• Goods will be released after passing the destination’s customs and all duty and taxes are paid.
• Goods are delivered to you now.

5. Vietnam Seaport System

Thanks to the advantage of a long coastline of 3,260km, Vietnam has developed a system of international seaports throughout the country, which facilitates the process of shipping by sea from Vietnam. Vietnam has 114 sea ports in total with 14 of them are large, playing a key role in economic growth. According to the Ministry of Transport, there is a significant development in both the scale and capability in recent years.

Take a look at the three most modern seaports for each region in Vietnam:

Northern Vietnam – Hai Phong Seaport

Hai Phong Port is the most modern seaport for international container traffic in the North of Vietnam now. In fact, it is well-equipped with advanced facilities and safe infrastructure, which are suitable for multimodal and international trade. 

Chua Ve and Tan Vu Terminals are 2 of 5 Hai Phong Port branches. These two branches have a large area of container yard which is more than 700,000m2 in total. Besides, since Hai Phong Port is the seaport handling the largest traffic volume in Northern Vietnam, this port can receive 10 million tons of throughput per year.

Central Vietnam – Da Nang Port

Da Nang Port is the major port in Central Vietnam and the third largest one in Vietnam’s seaport list. This port has three berth areas, including two main terminals (Tien Sa – Son Tra and Song Han) and a freight warehouse (Tho Quang Station). Not to mention Song Han and Tho Quang, Tien Sa terminal is able to receive tankers which are more than 40,000 DWT and container ships of up to 2000 TEUs, making this port the busiest one in Central Vietnam.

Southern Vietnam – Cat Lai New Port

Recently, Cat Lai Port has achieved a grand milestone of being the largest and most modern international terminal in Vietnam. The throughput at this port accounts for more than 90% of market share in the South of Vietnam.

According to the statistics that Vietnam Seaports Association provided in 2019, Cat Lai Port handled more than 5 million TEUs of containers, making it a key terminal in Vietnam’s seaport system nowadays.

Below is the list of other international seaports in Vietnam

• Vung Tau Port
• Van Phong Port
• Quy Nhon Port
• Quang Ninh Port
• Cua Lo Port
• Dung Quat Port
• Chan May Port

Viego Global – Your trusted sourcing partner in Vietnam

Are you going to source commodities from Vietnam, an Asia sourcing hub with great potential? Are you faced with any problems when sourcing from Vietnam? With professional experience and presence at factory location, Viego Global thoroughly understands and has the capability to help you break through all the barriers as well as successfully do business in this country. Just leave your comment below or click HERE for further support!