Sokfarm’s export

activities to the
USA and the
potential of Cash
in Advance
payment.
Group 2 - IB 1701 - IIP301
Lecturer: Vo Thanh Thien
 Members of Group 2

1 Hanh Gia 3 Bao Han 5 Bao Ngoc

2 Kim Anh 4 Thao Tran 6 Phuong Thy

Introdution
SokFarm is a high-tech agricultural
firm based in Tra Vinh, Vietnam, that
specializes in the production and
distribution of high-quality organic
agricultural goods. Coconut flower
juice is one of their flagship items
and made by using native Tra Vinh
coconut types.

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Sokfarm’s
export activities
to United States
of America

2
 Factors that influences the
Sokfarm’s export activities

01 02 03 04

Financial risks Political risks Legal and regulatory Regulatory risks

Sokfarm’s financial risks Political shifts in Vietnam
risks Regulatory risks for
Sokfarm must adhere to Sokfarm involve trade
hinge on the VND/USD and the US pose risks to
Vietnamese and US agreements like the U.S.-
exchange rate, which Sokfarm, potentially
export/import regulations Vietnam BTA, which can
affects their pricing and affecting export costs and
to avoid penalties and significantly reduce tariffs
revenue. Additionally, market competitiveness.
ensure market access. and enhance
interest rate changes can Such changes can lead to
Compliance with competitiveness.
influence borrowing costs currency volatility and
regulatory standards is Efficiently navigating
and consumer spending, trade barriers, influencing
essential to prevent customs procedures is
impacting profitability and Sokfarm’s export
financial loss and protect essential to prevent delays
demand. profitability.
their reputation. and extra costs.

3
 Factors that influences the
Sokfarm’s export activities

05
Operational risks
Operational risks like
shipping cost,
infrastructure issues, and
unexpected events can
significantly disrupt
Sokfarm’s supply chain
and customer satisfaction.
Sokfarm must ensure
reliable logistics, diversify
suppliers, and maintain
safety stock.
06 07
Counterparty risks Economic risks
Sokfarm mitigates Economic risks for Sokfarm
counterparty risks by arise from shifting US
assessing the consumer preferences and
creditworthiness of US the country’s economic
buyers, and defining clear health, which can affect
payment terms in product demand. Sokfarm
contracts. They also protect should stay abreast of
their finances by requiring market trends to adapt its
upfront payments and offerings and monitor
conducting due diligence economic indicators to
on potential business adjust its strategies.
partners.

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Incoterm that suitable for Sokfarm
FOB Incoterms function as a clear demarcation point in international
transactions, ensuring a smooth transfer of responsibility and minimizing
potential contractual disputes.

Therefore, in this case, FOB is chosen to be the most suitable Incoterms for
export Sokfarm’s coconut flower juice. However, there is an important
distinction to be aware of regarding FOB (Free on Board) Incoterms when
Sokfarm exports their products to the USA

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 Expected export quantity

6
How CIA is possible
Studies have shown a positive correlation between the
use of Cash In Advance (CIA) payment terms and the
likelihood of exporting for firms facing institutional
constraints.

CIA is not the only option available, but this is the most
suitable transaction for Sokfarm in their export
activities.

Mr. Pham Dinh Ngai also commented that, although the

company has a lot of potential, the company's capital
issue is still quite difficult.

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 About Cash in Advanced
Cash Advanced provides security for the seller,
ensuring that the buyer settles the full payment before
the goods are dispatched. The payment can be made
via bank transfer, credit card, or escrow.

Usually, small businesses in need of immediate working

capital for expenses like raw materials, payroll, and
overhead costs prefer this method. However, this method
also brings disadvantages to the buyer in case the goods
when delivered have problems such as not arriving on time
as scheduled, not of the right quality and quantity, or
having customs problems leading to damage. The buyer
must return the goods or even sue if not resolved
satisfactorily.

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 Advantages and Disadvantages
of Cash Advanced Method

Pros Cons
The seller is guaranteed payment Lack of trust
Quickness and Convenience Loss of competitive
Minimize credit risk advantage
Safe for Initial Collaboration Diminished competitive edge
Pressure on reputation

9

Checking list
ANSWERING QUESTIONS CLEARLY AND
COMPLETELY IS EXTREMELY IMPORTANT
FOR BOTH BUYERS AND SELLERS
QUESTION FOR THE BUYER
Are cash in advance terms the only option available?
Will the seller comply with the terms and ship the goods
as promised?
What recourse is available if the goods are not shipped as
ordered?
Are there economic, political, or social instabilities in the
seller's country that may increase the likelihood that the
seller cannot ship as promised?
QUESTION FOR THE SELLER
Is the product unique enough or in high enough
demand to "get away with" requiring cash in advance
terms?
Is the buyer willing to pay at least some proportion in
advance?
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 Reason why using
CIA method

“Unique product” Small businesses Small order

An ideal choice for diabetics,
dieters, vegetarians and
providing stable energy.
Sokfarm’s coconut flower juice
products are relatively new on
the market.
Sokfarm is a small business,
while Costco is a big brand.
Costco can use the CIA to
support capital for Sokfarm,
helping Sokfarm meet the
product production needs of
Costco.
The first batch will be a small
order to build trust with Costco.
After that, the relationship
between Sokfarm and Costco
will be firmly consolidated,
creating a premise for
continuing to apply the CIA for
subsequent orders.

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 1st step: Signing a foreign trade contract
State important terms: price, quantity of goods,
payment method, delivery time, shipping terms,
insurance terms, payment terms, responsibilities of
the parties, dispute resolution process,...

Describe the process 2nd step: Costco makes payment

of payment
Costco create a money transfer order, the remitting
bank sends a notification to the correspondent
bank (the bank serving the exporter) to make
payment.

3rd step: Sokfarm deliveries goods

Sokfarm arranges to transport the goods to the
delivery point according to the contract and
obtains the Bill of Lading and other shipping
documents.
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 RISK MANAGEMENT

Potential Risk Solutions

Lacking transparency and
competitiveness
Buyers are not in agreement with
the cash in advance
Legal and compliance risks
Publicly and clearly explain the cash
advance policy
Enhance the quality of products and
services
Establish comprehensive regulations
pertaining to payments, invoicing,
and financial reporting

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The green path

Thanks
for your
attention!