International Trade

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Export/Import Procedures and International Trade

Contents
1) Outline on International Trade
2) Problems and Barriers to Trade
3) International Trade Terms
4) Trade Financing & Payment
5) International Trading Pricing
6) Shipping Documents
7) Cargo Insurance
8) Shipping Organizations
9) Containerisation
10) Freight Market
11) Shipping Operation
12) International Organizations
13) Physical Distribution
14) Modes of Transportation

Chapter 1
Outline on International Trade
1. Introduction
‘No country is an island’, so goes the common saying. Whether it is a socialist or a democratic country, every nation needs to trade. Every country is dependent on each other for a variety of products that they cannot produce locally. International trade is essentially the buying and selling of goods across different countries and boundaries. It involves the transportation of goods from one place to another. If the goods are brought into the country, it is known as import trade. If the goods are sent to another country, it is known as export trade. A country that has more import than export is known to have a trade deficit. Vice versa, if the country’s export were more than import, the country would have a trade surplus. Products traded can be in the form of finished goods, goods in process, or raw materials. Products can be in solid, liquid, or even gaseous form. Goods can be shipped by conventional means or in container. The mode of transportation can vary from sea, air, land or rail. In addition, international trade also requires other forms of arrangement such as the mode of payment, types of cargo insurance for the goods, warehousing,, and packing. 2. Why Import and Export?

Why is import and export so important in international trade? There are multitudes of reasons. Here are some of them: Why import?
a) Some goods are not available locally.
b) Products are produced more cheaply overseas. Sometimes, they are even of better quality. c) It complements existing goods.
d) Reciprocal trading or buy back.
e) Availability of new products from other countries.
f) Helps to improve standard of living.
Why export?
a) Export brings in revenue for the company.
b) It creates a wider opportunities for the exporter.
c) It lessens the dependency on local market.
d) The life span of the product can be extended.
e) Manufacturer can keep the production going.
3. Procedure on International Trade Transaction
International trade often begins with an offer and an acceptance of the offer. In most cases, the seller may offer to sell and the buyer accepts the offer. Before the acceptance stage, appropriate negotiation on pricing, cargo quantity, cargo specifications, terms of sale, delivery terms, mode of transportation, types of payment and other related requirements are necessary. These conditions will enable both parties to eventually draw a contract of purchase or sale. The buyer will proceed to issue a purchase order to the seller. Once everything is finished, buyer goes to the bank to open a Letter of Credit nominating the seller as the beneficiary. The approved Letter of Credit will be sent to the seller through the advising bank. The seller must agree to the terms in the Letter of Credit. If he disagrees with any term therein, he must make known the issue before the shipment is made. If no issue is raised, it is implied that he has fully accepted the terms and conditions. The seller proceeds to prepare the cargo for shipment. When ready, the goods will be shipped on an appropriate date. This is usually before the expiry of the Letter of Credit. After the shipment, seller prepares the necessary shipping documents such as the invoice and packing list. The shipping documents are for submission to the bank for the purpose of negotiation for payment. It is important that the documents do not contain any discrepancy. Otherwise, the bank will hold back the payment. The bank remits the documents to the buyer...
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