DA NANG OF UNIVERSITY

DA NANG UNIVERSITY OF ECONOMICS

------

REPORT 1

IDENTIFYING ON BUSINESS OPPORTUNITY IN THAILAND

AND ANALYZING THE SAMPLE CONTRACT

Lecturer : MSc. Lê Mỹ Linh

Group : RUOY

Members : Hồ Thị Diệu Ánh

Nguyễn Ngọc Bích

Hoàng Trương Phương Diệu

Nguyễn Thị Mỹ Linh

Trương Mai Thục Nhi

Nguyễn Thị Nhật Nguyên

Da Nang, 2024
REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

TABLE OF CONTENTS
1. IDENTIFY BUSINESS OPPORTUNITIES ............................................................... 1
1.1. Overview of Thai economy ................................................................................... 1
1.2. Analysis of key economic sectors of Thailand ...................................................... 2
1.2.1. Export-Driven economy ................................................................................... 2
1.2.2. Thailand’s top export sectors............................................................................ 2
1.3. Thailand's advantages in exporting wood and wood products ........................... 5
1.4. Evaluate companies in the industry and identify potential partners .................. 5
1.5. Introduction of Advance Agro Public Company Limited ................................... 8
1.6. Introduction of product ........................................................................................ 8
2. RESEARCH AND ANALYZE CONTRACT ........................................................... 10
2.1. Summarize sample contract ............................................................................... 10
2.2. Describe the contract structure .......................................................................... 11
2.2.1. General structure of a sales contract ............................................................... 11
2.2.2. Sample contract structure ............................................................................... 13
2.3. Identify key terms that may lead to conflict and explain .................................. 14
2.4. Predict potential resolutions for terms that could lead to conflict .................... 16

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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

TABLE OF FIGURES
Figure 1: Macroeconomic Indicators ..................................................................................... 2
Figure 2: Illustration of wood pulp’s packaging ..................................................................... 9

TABLE OF TABLES

Table 1: Identify and compare three potential partners........................................................... 5

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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

1. IDENTIFY BUSINESS OPPORTUNITIES

1.1. Overview of Thai economy

Thailand is located in the center of mainland Southeast Asia. The current population of
Thailand is 71,898,374 as of September 7, 2024, based on the latest United Nations estimates.
Thailand's population is equivalent to 0.88% of the world's total population (Thailand Population
2024 (Live), n.d.). According to the World Bank's data in 2023, Thai GDP stood at nearly 514.94
billion USD, increasing about 20 billion USD compared to 2022.

Over the last four decades, Thailand has made remarkable social and economic
development, moving from a low-income to an upper-middle-income country in less than a
generation. As such, Thailand has been a widely cited development success story, with sustained
strong growth and impressive poverty reduction. Thailand’s economy grew at an average annual
rate of 7.5% in the boom years of 1960-1996 and 5% during 1999-2005 following the Asian
Financial Crisis (The World Bank In Thailand, n.d.). This growth created millions of jobs that
helped pull millions of people out of poverty. Gains along multiple dimensions of welfare have
been impressive: more children are getting more years of education, and virtually everyone is now
covered by health insurance while other forms of social security have expanded.

“Thailand’s economic growth is expected to accelerate in 2024, driven by sustained

consumer spending, the tourism industry’s measured recovery, and a rebound in exports”, the
World Bank said in a new report.

Gross domestic product is projected to advance 2.4% in 2024, up from 1.9% growth in
2023, according to the World Bank’s Thailand Economic Monitor. The latest forecast is a 0.4
percentage point downgrade from figures released in April, largely due to weaker-than-expected
exports and public investment early in the year (Secondary Cities Vital for Thailand’s Economy
as World Bank Projects 2.4% Growth for 2024, 2024).

Inflation is projected to decline to 0.7% in 2024, down from 1.2% the previous year and
the lowest in the region due to lower-than-expected food and energy prices alongside the gradual
pace of recovery, before rising to 1.1% in 2025 (Secondary Cities Vital for Thailand’s Economy
as World Bank Projects 2.4% Growth for 2024, 2024).

In 2024, tourist arrivals are expected to surge to 36.1 million, well above the 28.2 million
arrivals in 2023 and nearing their pre-pandemic peak. Total arrivals are expected to reach 41.1
million next year, surpassing the pre-pandemic level, as Chinese visitors return in larger numbers
(Secondary Cities Vital for Thailand’s Economy as World Bank Projects 2.4% Growth for 2024,
2024).

Economic growth is expected to reach 2.8% in 2025, supported by stronger demand at

home and overseas, as well as increased government spending. While Thailand’s public debt is
projected to remain sustainable, the government faces increasing pressure for social spending and
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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

public investments to support an aging population (Secondary Cities Vital for Thailand’s Economy
as World Bank Projects 2.4% Growth for 2024, 2024).

Figure 1: Macroeconomic Indicators

1.2. Analysis of key economic sectors of Thailand

1.2.1. Export-Driven economy

Thailand’s exports accounted for approximately 65% of its GDP, export sector is
characterized by diversification. While electronics and vehicles remain crucial, the country is
expanding into new markets with processed foods, textiles, and renewable energy products. The
country's strategic location within Asia makes it a hub for regional trade and supply chain
integration. Thailand's major export partners comprise China (12% of total exports), Japan (10%),
the United States (10%), and the European Union (9.5%). Other significant export destinations
include Malaysia, Australia, and Singapore (The Thailand Import-Export Market, 2023).

1.2.2. Thailand’s top export sectors

The following export product groups represent the highest dollar value in Thai global
shipments during 2023. Also shown is the percentage share each export category represents in
terms of overall exports from Thailand (Top Exports from Thailand in 2024 - DHL Express
Thailand, 2024) (Thailand’s Top 10 Exports, n.d.).

a. Electrical machinery, equipment: US$ 49.5 billion (17.7% of total exports)

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Electrical machinery and equipment are set to continue to be one of Thailand's major
exports. This sector includes a wide range of products such as integrated circuits, semiconductors,
and telecommunications equipment.

Thai manufacturers are known for their extremely high-quality standards and innovative
technologies, which makes their products highly sought after by most of the global market.

The international reputation of Thai electrical machinery is built on stringent quality

controls and adherence to international standards. Major markets for these exports include the
United States, China, and Japan, where demand for advanced electronics continues to rise.

The growth of the technology sector worldwide ensures sustained demand for Thai
electrical machinery, which helps to solidify its position as one of the top exports from Thailand.

b. Machinery including computers: $40.4 billion (14.4%)

The manufacturing sector in Thailand is highly competitive due to several factors, such as
the abundance of raw materials, low-cost labor, and innovative technologies. The manufacturing
industry is one of the main drivers of the Thai economy. Although the manufacturing sector's
contribution to Thailand's gross domestic product (GDP) has fluctuated in the past decade, it
contributed approximately 4.4 trillion Thai baht in 2021. Compared to other important economic
sectors, the manufacturing sector makes a greater impact on the Thai economy. It accounts for the
majority of Thailand’s total exports and generates a large volume of jobs, amounting to almost 6.3
million workers in 2021. As of the first quarter of 2023, the manufacturing sector's contribution to
the Thai economy was 34 percent, preceding other major industries like service and trade

c. Vehicles: $33.4 billion (12%)

The automotive industry is another cornerstone of Thailand's export economy. Known as

the "Detroit of Asia," Thailand is a major hub for vehicle manufacturing, producing a diverse range
of cars, trucks, and motorcycles.

The country’s automotive sector is characterized by its advanced manufacturing

capabilities, skilled labor force, and strategic location, which facilitate efficient export operations.

Thai exporters ship vehicles to numerous countries, including Australia, Japan, and the
ASEAN region. The types of vehicles exported vary, from eco-friendly electric vehicles (EVs) to
robust pickup trucks, catering to the market's diverse needs.

The ongoing shift towards sustainable transportation, and the growing demand for EVs
globally, present significant opportunities for Thai vehicle exports, ensuring their prominence in
the international market in the future.

d. Rubber, rubber articles: $16.7 billion (6%)

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Thailand is one of the world’s leading producers and exporters of natural rubber. This
sector encompasses a variety of products, including rubber gloves, tires, and other industrial rubber
goods. The high quality of rubber, as well as the by-products, that Thailand produces has earned
the country a strong reputation among other nations in the market.

Global demand for Thai rubber is driven by its essential role in the automotive, healthcare,
and manufacturing industries. Tires are a significant contributor to Thailand’s export economy,
frequently showing up as one of the most exported products on Thailand’s export products list,
with major markets in the United States, Japan, and China.

As these industries continue to expand and innovate, the demand for Thai rubber and
rubber articles remains robust, making it one of the most promising Thai exports in the not-distant
future.

e. Gems, precious metals: $14.5 billion (5.2%)

Thailand's gem and jewelry industry is renowned for its exquisite craftsmanship and
diverse range of products, which is recognized all over the world as well. Thai gem and precious
metal exports include gems like sapphires, rubies, and emeralds, as well as gold and silver jewelry.

Thai artisans specifically are celebrated for their meticulous attention to detail and
innovative designs, which have earned them a prominent place in the global jewelry market,
making this category one of the major exports of Thailand.

The international demand for Thai gems and precious metals is also fueled by their quality,
beauty, and affordability. Major markets that Thailand ships gems and jewelry to include the
United States, Europe, and China, where they’re used in several settings and occasions.

f. Plastics, plastic articles: $13 billion (4.6%)

Thailand's expertise in the plastics industry is another key driver of its export economy.
The country produces a wide range of plastic products, from household items to industrial
components, which are exported to markets all around the world. In 2023, Thailand's trade
statistics indicate that the nation exported $13 billion worth of plastic products globally.

Two of the key factors that make Thai plastic exports extremely attractive to international
buyers are its high quality, and its competitive prices compared to others in the industry.

The global demand for plastic products spans several sectors, including packaging,
construction, and automotive industries. Thailand's ability to produce innovative and sustainable
plastic solutions, such as biodegradable plastics, also positions it well to meet the growing
environmental concerns of consumers, likely further increasing the industry’s revenue. For these
reasons, the export of plastic products from Thailand continues to be strong and is expected to be
a strong category.

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1.3. Thailand's advantages in exporting wood and wood products

Besides export product groups representing the highest dollar value in Thailand, we must
mention major products generating the highest surpluses. Whereas vehicles, rubber, machinery
and meat/seafood... sectors went down, by -7.6%, -12%, -36.3% and -8.6% respectively, sugar,
cereals and wood/ wood products ones increased significantly. Remarkably, the percentage for
wood and wood products rose by 18.5% in 2023. It showed that wood and wood product exports
in Thailand have developed dramatically. The value of Thailand’s wood exports achieved a
milestone in 2022, totaling 104 billion Thai baht. In the first four months of 2023 alone, export
value has already surged to 36.4 billion Thai baht, reflecting a remarkable 5.31% increase
compared to the same period last year (Thailand’s wood exports surged first four months of 2023,
2023). In addition, Thai wood products are generally competitively priced compared to other
sources of wood products. This is due to factors such as efficient production methods, abundant
timber resources, and favorable government policies.

The Thai government provides various forms of support to the wood industry, including
subsidies, tax incentives, and technical assistance. This can help Thai wood exporters remain
competitive and expand their market share. One of the remarkable points is that many Thai wood
products brands have established a strong reputation for quality and reliability, leading to a
competitive advantage.

1.4. Evaluate companies in the industry and identify potential partners

As mentioned above, Thai wood and wood products are experiencing significant growth,
driven by evolving consumer lifestyles and increased demand for both domestic consumption and
export processing. Thailand is one of the big partners of Vietnam in exporting them. There are
three partners that we people should consider cooperating in this sector.

Table 1: Identify and compare three potential partners

Advance Agro Public Phoenix Pulp and

Marubeni Thailand
Partners Company Limited Paper Public
Company Limited
Company Limited
Year of
1974 1989 1975
establishment
Lifestyle (Medical,
Textiles), Rubber, Food, Pulp, paper products,
Major Pulp, tapioca starch,
Chemical Products, foodservice packaging
businesses and hardboard, printing
Forest Products (biomass products, and bio
products and writing paper...
pellet, pulp, paper and solutions products.
paperboard) ...

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 One of Thailand’s  A pioneer in pulp

 A subsidiary of
two major products.
Marubeni Corporation
integrated pulp and  One of the only
- a leading Japanese
paper producers. businesses in the
general trading
 After 1997 with the world to market
company.
pulp line into pulp made from
 Company
production, it bamboo and kenaf
manufactures high-
became the largest (a non-wood
quality pulp using
Some fully integrated plant).
carefully selected
information pulp and paper  The company has
wood fibers as raw
manufacturer in developed
materials.
Thailand. partnerships with
 Thanks to its energy-
 Member of Soon farmers by offering
efficiency equipment,
Hua Seng (SHS) training, as well as
company contributes
Group - Thailand's seedlings,
to a better society and
largest rice fertilizer, and
the environment with
exporter. guaranteed prices
the pulp business.
for trees.
Europe, Asia, USA,
Asian countries, Mexico, Africa and countries Thailand and abroad
Markets
Colombia... in the Middle East (a minimal amount)

Production
about 230,000
capacity of ______________ 500,000 tons/per year
tons/per year
wood pulp
 Company has many  An integrated  The company
reforestation projects producer, access to mainly focuses on
 a steady supply of abundant supplies pulp production,
wood resources of high-quality with little diversity
 Marubeni is an wood, advanced  optimize
international production technology,
Advantages corporation technologies production
 financial and  globally cost- processes in this
commercial reliability. competitive on a industry.
 Strong partner sustainable basis.
network  distribute  Company range:
products effectively. 1000 - 4999
employees  large

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scale, many
advantages
 Strong international
presence and export
network: Europe,
Asia, USA, Africa
and countries in the
Middle East.
 more trustworthy.
 Company mainly
specializes on
wood pulp and
paper sector.
 Raw material
 Number of  Phoenix is smaller
mainly is
Employees: 108 in scale  unlikely
eucalyptus, though
persons (As of April to meet large
it has high quality
2023)  small scale. demand.
consistency
 High variety of  Main market in
Disadvantages  reliance.
products  it does not domestic Thailand
 Big company
specialize in pulp and  low trust and
 less chances for
environmentally credibility with
negotiation on
friendly products foreign partners.
flexible price and
 likely to be high price.
contract terms.
 Making a choice
When comparing potential partners, including Marubeni Thailand Company Limited,
Advance Agro Company and Phoenix Pulp and Paper, it is clear that Advance Agro Company has
more potential advantages. Currently Advance Agro is one of Thailand’s two major integrated
pulp and paper producers. The company is constantly improving the quality of its products and
services to meet the increasing demands of its customers. With strong international presence and
export network: Europe, Asia, USA, Africa and countries in the Middle East, this is one of the
most competitive features with other partners providing instantly products to customers.
Meanwhile, Marubeni Thailand Company Limited and Phoenix Pulp and Paper are also strong
competitors, with the coverage of Advance Agro Company in Thailand showing that it is
dominating. It is notable that the employee range is over 1000, showing a strong ability to meet
customers' needs.

In terms of prices, perhaps Advance Agro Company is making up an advantage compared

to other brands in the same segment, an integrated producer, access to abundant supplies of high-
quality wood, advanced production technologies, leading to globally cost-competitive on a
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sustainable basis, maybe the best choice for cooperating. As mentioned above, Advance Agro
Company was founded in 1989, it is relatively the same time as two potential partners. However,
with constant development, Advance Agro Company gradually asserted its position after many
years of operation.

In short, compared to other partners in pulp field in Thailand, Advance Agro Company
may have been more successful overall, considering brand recognition, and scale of company,
potential development...As a Vietnamese business, evaluating and choosing the bright target
partners are very crucial so it is reasonable that Advance Agro Company is the best choice of
partner.

1.5. Introduction of Advance Agro Public Company Limited

Advance Agro Public Company Limited (AA) is one of Thailand’s two major integrated
pulp and paper producers and the only firm with sizable areas of company-owned plantations. AA
belongs to the Soon Hua Seng (SHS) Group - the largest rice exporter in Thailand. The company
was established in March 1989, and successfully brought a second pulp and paper line into
production in 1997, making it the largest integrated producer in Thailand. AA was also the first
pulp company in Thailand certified under the ISO 14000 system and ISO 9001 certifications. AA
sells its products in Thailand and international markets. Exports currently account for
approximately 70 percent of total sales. The company's portfolio includes pulp and paper products
(printing and writing paper, hardboard, …).

The scale of enterprise is large. Along with its subsidiaries (High Tech Paper and Advance
Paper), Advance Agro has an annual production capacity of 500,000 tonnes/per year, remaining
the highest amount.

Seventy percent of the company’s production is exported. It has a strong international

presence and export network: Europe, Asia, USA, Africa, and countries in the Middle East. The
two largest export markets are China and Japan.

AA obtains its wood from four sources:

 From its own plantations.

 From plantations owned by the SHS Group.

 From local farmers under contract to Agro Lines - another member of SHS Group.

 From individual farmers.

1.6. Introduction of product

HS code: 47050000

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Wood pulp is wood fiber reduced chemically or mechanically to pulp - a soft, wet,
shapeless mass of material - used in the manufacture of paper and other products (Naturallywood,
n.d.).

Some of wood pulp characteristics:

 Chemical properties: Wood pulp is primarily composed of 60%–85% cellulose, 10%–30%

hemicellulose, and 0%–10% lignin.

 Color: The color of wood pulp can vary depending on the type of wood used and the
processing methods. It can range from white to brown.

 Absorbency: Wood pulp has high moisture content and therefore is sensitive to water. If
bales become seriously wetted, the cellulose will absorb water like blotting paper and
swell.

Wood pulp is used in many industries, mainly for paper manufacturing. This natural basic
material can be used to produce cardboard packaging or food and beverage packaging. Special
grades of chemical pulps can be used to make non-paper materials, such as textiles. High-yielding
mechanically treated pulp produces newsprint, specialty papers, tissue, toweling, containerboard
and paperboard (Pulp and paper, n.d.). The more unusual sectors for the use of wood pulp are the
car filters, LCD screens, renewable fuel, and stickers.

Packaging:

 Wood pulp is pressed into bales under compression using special equipment and then
packed in the paper bags or PE bags.

 Note in packaging: For overseas trade, it is normally further dried to a moisture content
of about 10%, before bailing in hydraulic presses and banding (Woodpulp, n.d.).

Figure 2: Illustration of wood pulp’s packaging

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Notes when carrying:

 All holds are in top condition: clean, dry, no loose paint and no rust (Standard Club, n.d.).

 Ventilation of the holds is of crucial importance for the cargo. The high moisture content
means that during the carriage of the cargo the moisture will migrate outwards from the
heart of the stow from warm to cold areas. Some of the moisture will be absorbed into the
air and condensed on the cold areas of the hold and cargo. The process of condensation in
itself is not harmful, but the wood pulp will expand as a result (Standard Club, n.d.).

 It is imperative that no smoking is allowed in or near a cargo of wood pulp and stringent
precautions must be taken to avoid sparks from any source entering cargo holds.

Documents required: Wood pulp requires Fumigation Certificate and Phytosanitary

Certificate for import-export activities.

2. RESEARCH AND ANALYZE CONTRACT

2.1. Summarize sample contract

 Parties involved:

o Seller: WOODLAND STOCK Co. Ltd (Thailand)

o Buyer: ABC MERCHANT Co. Ltd (Vietnam)

 Commodity: Wood Flour

 Quantity: 100 MTs

 Price: 80.000 USD

 Payment terms: Irrevocable L/C

 Delivery terms: CIF - HAIPHONG PORT (Incoterms 2020)

 Latest date of delivery: 26/11/2021

 Insurance: Class B as seller cost

 Inspection: The Seller must inspect the goods prior to the shipment, all charges and
expenses shall be borne by The Seller

 Legal terms:

o Force majeure: The Seller shall not be held responsible for the delay in shipment or
non-delivery of the goods due to force majeure, which might occur during the process
of manufacturing or in the course of transit

o Arbitration

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 Validity of the contract from the signing date

 Number of originals: 02 originals in English version

 Amendment: must be mutually agreed previously and made in writing

2.2. Describe the contract structure

2.2.1. General structure of a sales contract

There are 3 main parts of a sales contract:
a. Introduction - includes the following contents:

 Title

 Contract number: used to maintain accurate records of business transactions

 Dates and places of making contract (can be at the beginning or end of the contract)

 Parties: Names of the parties to the contract, including their full name, transaction
name, short name, address, telephone and fax, email, representatives who have the
signatory power, account number and bank name…

 Preamble: explain the rights and obligations of the parties

 Recitals/Whereas clause: state the intention of the parties when signing the contract

b. Clauses

Based on the role of the terms in a contract, they can be divided into the following 5 groups:

 General Definitions: This clause is used to unify the terms used throughout the
contract. It is often used in complex contracts and terms that are repeated many
times will be defined.

 Description of Goods: This clause is intended to describe the issues relating to the
goods purchased and the accompanying services (if any). This group usually
includes the following terms:

o Article 1 - Commodity: name of commodity helps parties identify accurately

what is being traded, so it must be specific to avoid confusion with similar
goods. Usually, it is followed by characteristics, main usage, origin, brand,
specification, HS code…

o Article 2 - Quality: Used to determine the responsibilities of the seller. Depends

to the kinds of commodities, there are several methods of quality stipulation:

 By description: specification, standard, grade, technical data

 By sample: seller’s sample, buyer’s sample, counter sample

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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

 By actual commodities

o Article 3 - Quantity: This term include:

 Unit of measurement

 Method of stipulating quantity: accurate or with tolerance

o Article 4 - Packing and Marking: These terms ensure that the products are
properly prepared, transported, and received in good condition.

o Article 5 - Delivery/Shipment: set out the conditions for the delivery and receipt
of goods between the seller and the buyer. It usually includes the following
terms:

 Time of shipment
 Port of shipment and destination
 Notice of shipment
 Other shipment information:
 Partial shipment allowed or not?
 Transshipment allowed or not?
 State bill of lading acceptable or not?
 Loading/discharging terms?

 Price and Payment Terms: This is an important part of any sales contract that sets
the rules for when and how money should be exchanged for goods. It usually
includes:

o Article 6 - Price: price currency, unit price, amount, ...

o Article 7 - Payment:

 Time of payment: immediate payment, deferred payment, and advance

payment

 Payment methods: Cash, remittance, open account, collection, letter of

credit, ...

 Legal terms: Specify how to deal with unexpected problems that may arise during
the performance of the contract. This may include:

o Article 8 - Warranty
o Article 9 - Penalty
o Article 10 - Insurance
o Article 11 - Force Majeure
o Article 12 - Claim
o Article 13 - Arbitration

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c. Ending: This part includes:

 Validation of contract

 Number of originals

 Amendment

 Signature and seal

2.2.2. Sample contract structure

As a general structure, the sample contract also has a three-part structure.

a. Introduction:

 Includes content: title, contract number, date, parties and recitals

b. Clauses/Terms: includes 9 articles

 Article 1 - Commodity, quality

 Article 2 - Shipment/Delivery

 Article 3 - Payment

 Article 4 - Insurance

 Article 5 - Inspection

 Article 6 - Force Majeure

 Article 7 - Validity of the contract

 Article 8 - Arbitration

 Article 9 - General condition

c. Ending:

 Validation of contract

 Number of originals

 Amendment

 Signature and seal

 Comments:

 In the “Introduction” part, although there is no “Preamble” as in the general structure, this
does not affect the contract because it is not mandatory.

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 In the “Clauses/Terms” part, the contract has all the necessary articles. In addition, the
contract also has additional articles that are not included in the general structure:

o Article 5 - Inspection: Confirm whether the quality of the actual goods is in

accordance with the agreed requirements.

o Article 7 - Validity of the contract: Determine the effective date of the contract. If
the parties have not mentioned this, the contract will take effect at the time of
signature.

o Article 9 - General condition: Usually refers to the contents of the “Ending” part

 Conclusion: The structure of a contract does not have to be the same as the general
structure. In fact, the parties can completely change, add or remove the contents or article
if both parties agree. However, it is still necessary to ensure that the contents of important
articles such as “Commodity”, “Price”, “Delivery”, etc. are clearly stated to avoid conflicts
during the contract implementation process.

2.3. Identify key terms that may lead to conflict and explain
In import and export activities, controlling the terms in business contracts to avoid conflicts
is very important. After studying the sample contract and regulations on exporting wood flour to
Thailand, below are the key terms that can lead to conflicts:

 Quantity of goods: Wood flour is calculated using a specific weight unit called Metric
Ton (MT). In the sample contract example above, the quantity of the product is recorded
with exact numbers. This can easily lead to disputes when the goods are not delivered to
the buyer in sufficient quantity. Because of long-distance shipping by sea and the
characteristics of the product, quantity differences when the buyer receives the goods are
likely to occur.

 Packing and Marking: According to the sample contract, packing and marking will
follow the manufacturer's packaging standards. This can lead to disputes over packaging
standards when the two sides do not agree specifically from the beginning but let the seller
decide. In some cases, the seller packs substandard packaging to reduce costs, affecting
product quality when the buyer receives the goods. In addition, with the nature of wood
pulp being small in size, capable of absorbing water, easily dirty and flammable, combined
with long-distance sea travel, such general provisions in the contract Goods will be
guaranteed during transportation, easily causing disputes.

 Commodity's type and code: During the process of buying and selling goods, accurately
determining the type of commodities and product code is extremely important. This applies
not only to wood flour but also to all other types of goods, especially those with many
different types and specifications.

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o However, the commodity name "wood flour" is not set according to international
standards. This name is quite vague and lacking in specificity, easily causing confusion
about the type of wood pulp, leading to conflict.

o Besides, the contract does not specifically state the commodity code (such as HS code).
The lack of detailed information about commodity codes in the contract will create a
legal gap, easily leading to misunderstandings and disputes between the parties. For
example, the two parties may misunderstand the type of goods to be traded, or it may
create opportunities for fraudulent behavior, such as the supplier intentionally
delivering the wrong type of wood flour. This has the potential to cause damage to the
buyer and lead to conflict later.

 Shipment terms: This term basically has all the necessary provisions. However, there are
no clear provisions on loading/discharging. Without this provision, the exact laytime will
not be defined, leading to conflicts if loading and unloading takes too long, increasing
costs. In addition, the penalty fee for delayed loading/discharging is not specified, which
may lead to conflicts regarding penalty fees in the future.

 Terms of Payment: Payment method (Irrevocable L/C)

Despite being an optimal payment method for contracts, Letters of Credit also have
limitations that can lead to conflict between parties:

o For Vietnamese importers:

 Vietnamese importing companies are not directly involved in verifying the

documentary set. Banks primarily examine the documents, not the goods
themselves. Consequently, even if there are issues with the goods upon delivery,
the bank will still make the payment to the seller as long as the presented documents
comply with the L/C terms. The bank is not responsible for ensuring that the
delivered goods meet the contractual terms. In many cases, after the bank has paid
the beneficiary, the importer brings the documents to receive the goods only to
discover that the quality of the goods is not as agreed in the contract.

 Banks also bear no legal responsibility in cases of forged documents. This can pose
a significant risk to the buyer, as the seller may forge documents to obtain payment
from the bank without actually delivering the goods, or delivering goods in the
wrong quantity or violating other agreed-upon terms

o For Thai exporters:

 Thai sellers may encounter some problems in preparing accurate and complete
transport documents. Sometimes, they may make small mistakes such as
misspelling names, names, addresses, or even missing some important documents.
This may result in the bank refusing to pay.
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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

 Besides, if the seller is sometimes subjective or trusts the buyer, he does not
carefully check the L/C. Can lead to the buyer requesting to issue a L/C with terms
and conditions that are inconsistent with the content agreed in the contract (such as
increasing the insurance amount, changing the destination port or goods
description). using misleading terms), leading to the bank refusing to pay the seller.

 Despite its limitations, L/C is still a safe and reputable payment method, so the
cost for this payment method is always quite high. Therefore, it can lead to conflicts
when the buyer delays or refuses to open an L/C because the cost is too high than
expected.

 Moreover, the establishment of an L/C must strictly adhere to international

regulations and guidelines, particularly UCP 600 and ISBP 745. However, the
contract does not clearly state the UCP, which can lead to conflict about which
regulations apply in case there are many different versions of the UCP.

 Arbitration: According to the sample contract, “If a settlement cannot be reached, the
dispute shall be referred to arbitration under the Arbitration Rules of the International
Chamber of Commerce in a third country and the rules of this Commission shall apply.”
The problem here is which country is the third country? When a dispute occurs, certainly
both parties want to choose a country with which they have a close relationship to gain
advantages for themselves. Surely this will be a major controversial issue when a dispute
arises.

 Insurance: Despite stipulating the use of insurance clause B, the contract lacks clarity on
the specific insurance agency responsible for the insurance. Furthermore, there are no clear
provisions regarding insurance coverage.

2.4. Predict potential resolutions for terms that could lead to conflict
To minimize possible conflicts in commercial contracts, our team has made predictions
and proposed solutions as follows:

 Quantity of goods: To process the implementation of commercial contracts happened

quickly and smoothly. When drafting a contract, it is important to consider using tolerance
recording. For example, the following structure, “Tolerance to ship 3% more or less than
the contracted weight” ...

 Packing and marking: First, the two parties need to discuss and carefully agree on
packaging standards. Those standards need to be clearly stated in the contract so that when
a dispute occurs, both parties can rely on it to resolve. If the contract has been approved
but when delivering the goods, there is a dispute between the two parties regarding the
packaging, then a third agency should be asked to check whether the packaging quality
performed by the seller meets the corresponding standards and is appropriate.

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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

 Commodity's type and code:

o Instead of using the generic name 'wood flour', the parties should use specialized terms
such as 'cellulose fiber', 'wood pulp' or 'lignocellulosic material' to accurately describe
the type of wood flour they need (specifically object in this transaction is wood pulp).
Moreover, in the description of the commodity name, the main component must be
clearly stated (pulp is made from hard wood or soft wood. If it is hard/soft wood, what
type of wood specifically?)

o To avoid confusion about product types and items, the buyer first needs to clearly
identify the product code they want to buy. It is necessary to accurately determine HS
codes (an international coding system used to classify goods during international
transactions) between countries. Each type of goods, including wood flour, will be
assigned a specific HS code to facilitate statistics, customs management and other trade
activities.

o In addition, the buyer should request the seller to provide detailed information about
the product and check it thoroughly before signing the contract. If possible, you should
ask the seller to provide a sample of the goods to compare and ensure the correct type
of goods as agreed.

 Shipment terms: The contract should add additional provisions on loading/discharging.

For example:

o When Notice of Readiness tendered before noon. Laytime shall be commenced from
13:00 on the same date. When Notice of Readiness tendered before afternoon. Laytime
shall be commenced from 08:00 on the next date.
o Discharging term: 50 MTS/day WWDSHEX EIU: USD 2,000/Half (The buyer must
unload a minimum of 50 tons of goods per day. If the unloading process is delayed, the
buyer will be charged a penalty fee of USD 2,000 for each half-day delay).

 Terms of Payment:

o Before making L/C their payment method, the parties need to be consulted by
individuals and organizations with expertise in records and documents. Parties should
equip themselves with knowledge about payment methods by L/C and avoid relying
on banks to learn about international laws and practices.

o Both parties should choose a reputable bank with extensive experience in L/C
processing to improve transaction safety. The bank will clearly understand the
regulations and procedures and can provide better support during the transaction
process.

o The seller needs to carefully check before sending the documents, ensuring there are
no errors in spelling, name, address or any missing documents. Besides, there needs to
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REPORT 1-GROUP RUOY-THAILAND-WOOD PULP

be a process to check and compare the sales contract with the L/C and current
regulations.

o To avoid conflicts, both parties should have clear and detailed agreements on L/C
issuance date, document presentation deadline... and set out necessary penalty
provisions.

o In addition, the contract should clearly state which UCP version will be used (according
to UCP regulations, which UCP parties want to apply, they must clearly state in the
L/C.)

 Arbitration:

When the two parties agree to make a contract, they need to agree on one choice Arbitration
Rules of the International Chamber of Commerce at the third country. So that when a dispute
arises, the two sides will not spend much time making this choice. And the most optimal solution
is to choose Arbitration rules of the International Chamber of Commerce in a country with which
neither party wants to have a relationship to ensure fairness to both parties.

 Insurance:

In the insurance terms, it is necessary to fully and comprehensively cover the following issues:
Insurance is covered by which party? Which insurance agent? Institute Cargo Clauses (in this
situation is B), and Insurance Coverage. For example: Insurance cover by the seller, covering
clause B for 110% of invoice value. Insurance certificate showing claim payable at Ho Chi Minh
city, Vietnam by the Vietnam Insurance Company, Ho Chi Minh city Branch.

18
APPENDIX: SAMPLE CONTRACT

SALES CONTRACT
No: 01/ABC-WL
Date: 06 November 2021
The seller: WOODLAND STOCK Co. Ltd
Add: 83/1 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand
Tel: +86 523-84616148
Fax: + 86 523-84616126
Hereinafter called the Seller
Represented by: Thaksin Shinawatra – Manager
The Buyer: ABC MERCHANT Co. Ltd
Add: Điǹ h Vũ Port, Đông Hải 2, Hải An, Hải Phòng.
Tel/Fax: +84 8 3740 6783/ +84 8 3740 6738
Hereinafter called the Buyer
Represented by: Mr Duong Tuan Anh - Director
The two parties have mutually agreed and concluded to sell and buy the goods under the
following terms and conditions:
ARTICLE 1: COMMODITY - QUALITY
1.1 Commodity and specifications:
No Mode Unit Quantity Amount (USD)
1 Wood Flour MTs 100 80.000

TOTAL AMOUNT: CIF - HAIPHONG PORT (INCOTERMS 2020) USD 80.000

In words: US dollars eighty thousand only.

1.2 Quality: 100% brand new, produced in 2021, humidity <3%.
1.3 Country of origin: Thailand.
1.4 Packing: As per manufacturer standard packing, and safety for long-sea transportation.
1.5 Marking: As per manufacturer standard packing.
1.6 Allowable defects: When transporting, if the transportation distance is less than 1000 km, the
natural loss rate is: 3%; distance from 1000 - 2000 km: 4% and distance over 2000 km is 5%.
ARTICLE 2: SHIPMENT - DELIVERY
2.1 Latest date of delivery: 26/11/2021
2.2 Partial Shipment: not allowed.
2.3 Trans - Shipment: not allowed.
2.4 Port of loading: Bangkok Port, Thailand.
2.5 Port of destination: Haiphong Port, Vietnam
2.6 Notice of shipment: within 02 working days after shipment.
The Seller shall notify by fax or email to the Buyer the shipping information including bill of
lading, invoice, packing list, certificate of origin, certificate of quantity and quality,...
ARTICLE 3: PAYMENT
3.1. All payment shall be in US Dollar without any rights to offset.
 Payment after 60 days from the date of delivery.
 100% payment by irrevocable L/C.
WOODLAND STOCK Co. Ltd
Add: 83/1 Wireless Road, Lumpini, Pathumwan, Bangkok 10330, Thailand
Beneficiary bank: BANGKOK BANK PUBLIC COMPANY LIMITED
Add: 30/3, KHAOSAN, BANGKOK, THAILAND
Swift Code: BKCHCNBJ940
3.2. All following documents will be sent to the Buyer within 07 working days:
 (3/3) original Ocean Clean On-Board Bill of Lading, marked "Freight to collect".
 Signed Commercial Invoice: 03 originals.
 Detailed Packing list: 03 originals.
 Certificate of Quality and Quantity issued by the seller: 03 originals.
 Certificate of Origin issued by Thailand Chamber of Commerce: 1 original and 2 copies.
ARTICLE 4: INSURANCE
 The seller must purchase a class B insurance for the goods.
 Hire a third party to transport the goods.
ARTICLE 5: INSPECTION
5.1. The Seller must inspect the goods prior to the shipment (The first Inspection). All charges
and expenses shall be borne by The Seller.
5.2. The final inspection shall be carried out by VINACONTROL within 3 days after arrival date
at discharge port. All related costs will be borne by The Buyer.
5.3 The Seller shall settle the suitable claim of The Buyer within a maximum of 30 days after
receipt of the claim.
ARTICLE 6: FORCE MAJEURE
1. The Seller shall not be held responsible for the delay in shipment or non- delivery of the goods
due to force majeure, which might occur during the process of manufacturing or in the course of
transit. Seller shall advise Buyer immediately of the above-mentioned occurrence and within 14
days thereafter, Seller shall send by air mail to Buyer for their acceptance a certificate of the
accident issued by local police department where the accident occurred as evidence thereof.
2. Under the above circumstances, the Seller however is still under the obligation to take all
necessary measures to hasten the delivery of the goods. In case the accident lasts for more than
10 weeks, the Buyer shall have the right to cancel the contract.
ARTICLE 7: VALIDITY OF THE CONTRACT
The contract comes into force from the signing date.
ARTICLE 8: ARBITRATION
All disputes in connection to this contract or execution thereof shall be settled by negotiation
between two parties. If no settlement can be reached, the case of dispute shall be submitted for
arbitration pursuant to the Rules of Arbitration of the International Chamber of Commerce in a
third country and the rules of this Commission shall be applied. The award of the arbitration
shall be final and binding between two parties.
All charge and expenses for Arbitration shall be borne by the losing party unless otherwise
agreed.
ARTICLE 9: GENERAL CONDITION
1. Incoterms 2020 is applicable.
2. The two parties undertake to carry out completely and strictly this contract. If there is any
difficulty, both parties will discuss how to solve the problem. Any amendment or alternations of
the terms of this contract must be mutually agreed previously and made in writing.
3. This contract is made into 02 originals in English version, 01 of which for each party with
equal value. Contract signed through fax is acceptable.
FOR THE BUYER FOR THE SELLER
(singed) (singed)
Duong Tuan Anh Thaksin Shinawatra
REFERENCES
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paper/&sa=D&source=docs&ust=1726403476582724&usg=AOvVaw1_Yff8yZCAM8Z
KONURip-e

Pulp and paper. (n.d.). Retrieved from Naturally wood:

https://www.naturallywood.com/products/pulp-and-paper/

Secondary Cities Vital for Thailand’s Economy as World Bank Projects 2.4% Growth for 2024.
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projects-2-4-growth-for-2024

Standard Club. (n.d.). Retrieved from Standard Club: https://www.standard-

club.com/knowledge-news/web-alert-the-carriage-of-wood-pulp-546/

Thailand Population 2024 (Live). (n.d.). Retrieved from World population review:
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Thailand’s Top 10 Exports. (n.d.). Retrieved from World's Top Exports:

https://www.worldstopexports.com/thailands-top-10-exports/#google_vignette

Thailand’s wood exports surged first four months of 2023. (2023, 10 26). Retrieved from
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exports-surged-first-four-months-of

The Thailand Import-Export Market. (2023, 11 09). Retrieved from TENDATA:

https://www.tendata.com/blogs/insight/4537.html

The World Bank In Thailand. (n.d.). Retrieved from World Bank:

https://www.worldbank.org/en/country/thailand/overview

Top Exports from Thailand in 2024 - DHL Express Thailand. (2024, 08 22). Retrieved from
Discover: https://www.dhl.com/discover/en-th/b2b-advice/b2b-e-commerce-advice/top-
exports-from-thailand-2024

Woodpulp. (n.d.). Retrieved from Cargo Handbook:

https://www.cargohandbook.com/Woodpulp#Woodpulp