Why is it difficult to reduce the cost of import and export activities?

There are many reasons why import-export costs have been high recently. For example, some countries still follow the zero Covid policy, rising gasoline prices, and the Russia-Ukraine conflict.

High pressure

The outbreak of the Covid-19 pandemic has greatly affected the country's economic development; in which enterprises’ import-export activities were significantly affected. Along with that, the Russia-Ukraine military conflict and the increase in world oil prices led to higher transportation and logistics costs, and increasing import-export costs.

According to businesses, costs were pushed up, the competitiveness of Vietnamese goods decreased, many export enterprises accepted to break even or even suffer losses when exporting goods to maintain their business relationships.

Recently, container shipping fees continued to be adjusted by many shipping lines to increase by 20%, although the price is already very high, many times higher than before the pandemic.

Talking at the seminar "Finding solutions to reduce import and export costs for businesses" held by Customs News on April 6, Tran Viet Huy, Head of Customs and Trade Facilitation Department - Vietnam Association of Logistics Service Enterprises, said that the Covid-19 pandemic has had a strong impact on global economies and social life, upsetting the global supply chain, including logistics activities. Meanwhile, about 97% of small and medium-scale logistics businesses have been severely affected.

From May 2020, although logistics activities have been restored along with the economy, about 20% of logistics businesses have seen a decline in activities. Compared to the time before the pandemic, the volume of goods transported across borders, especially through China, is still congested.

Supply chain disruption is changing global trade trends. Trade protectionism is taking place strongly, instead of globalization as before, now countries want to bring production back home, increase sanctions against each other, making exporting more difficult. Supply chains and logistics costs have changed, increasing prices many times over.

From a business perspective, Johnathan Hanh Nguyen, Chairman of the Board of Members of the Imex Pan Pacific Group (IPPG), said that freight rates and world oil prices have continuously increased in recent years, greatly affecting enterprises’ import and export activities.

Currently, the cost of air freight from Vietnam to the US has increased from US$1.8/kg to US$18/kg (10 times higher). The more a business exports, the more it loses. "Amid many global fluctuations, the high prices of raw materials and fuel will continuously affect transport activities in import and export, so businesses must prepare to cope," said Johnathan Hanh Nguyen.

Many solutions to reduce costs

According to Dao Duy Tam, Deputy Director of the Customs Supervision and Administration Department, General Department of Customs, there are many reasons why it has been difficult to reduce import-export costs.

For example, some countries still follow a zero-Covid policy, the increase in gasoline prices, and the Russia-Ukraine conflict.

Additionally, in import-export activities, ministries and sectors related to licensing, specialized inspection, and implementation of administrative reform procedures have not been synchronized, a number of issued regulations have not kept up with reality, and specialized management documents have overlaps.

From the side of businesses, knowledge, as well as understanding of customs procedures and regulations related to import and export goods, is still unclear, leading to errors and problems.

According to Tam, although there are many practical reduction measures, businesses need solutions to be able to release goods faster. Therefore, Customs will continuously review and improve institutions, legal documents and decrees related to specialized inspection, data sharing, in the direction of not requiring businesses to submit documents already on the system.

Besides, implement solutions toward paperless Customs. The General Department of Customs has issued Directive No. 384/CT-TCHQ on administrative reform and reduction of customs procedures towards Paperless Customs in 2022.

This is the solution to promote IT and electronic documents instead of paper documents, thereby supporting enterprises’ import-export activities. In 2022, ministries and sectors will coordinate to promote the connection and exchange of electronic documents through the ASEAN Single Window, connect and exchange electronic data with trading partners such as the Republic of Korea and the Union of Eurasian economies.

Johnathan Hanh Nguyen said that to reduce export costs for domestic enterprises and improve the competitiveness of Vietnamese goods, Bellazio Logistics JSC has a charter capital of VND100 billion with the participation of many "big companies" including IPPG, Sasco, Vietnam Post, Viettel Post, Bellazio Trading Online, and IPP Air Cargo.

This company was granted a business registration license on April 5, 2022. Simultaneously, on March 29, the Ministry of Transport submitted to the Prime Minister for consideration and granting a business license for air cargo transportation for IPP Air Cargo. Johnathan Hanh Nguyen also said that IPPG has signed a contract to buy 10 Boeing aircraft worth US$3.5 billion to prepare for the flight plan of Vietnam's first cargo airline.

According to Le Minh Phuc, General Director of Long An International Port Management and Operation Company, in the current context, Vietnamese import-export enterprises may adjust their plan that instead of importing CIF and exporting FOB, they should import FOB and sell CIF to be proactive in sea and air costs.

Regarding import and export costs, the space on the ship and the number of empty containers is getting less and less, so customers with a large volume of import and export goods, up to 20-25 containers/trip, can export bulk cargo and go by ship of about 7,000-8,000 tons. This option will reduce costs and save a lot of time for businesses.