Beginners Guide for International Trade and International Trade with Pioneer General Trading Co LLC

Table Of Contents

• Overview on International Trade
• Definition on Importing and Exporting
• Advantages of Imports - Exports
• Export Procedures and Documentation
• Trade Agreements
• Foreign Trade Promotion Measure and Schemes
• International Joint Ventures
• Indian Institutions for making International Trade more effective
• Overview about Pioneer General Trading Co LLC (PGT)

Overview on International Trade

International trade is the exchange of capital, goods, and services across international borders or territories because there is a need or want of goods or services. In most countries, such trade represents a significant share of gross domestic product.

Importing and Exporting

Importing and Exporting are means of Foreign Trade. Foreign trade is carried out in goods and services – which includes imports, exports, and the balance of foreign trade – is presented separately for goods and for services. The total imports, exports, and balance of foreign trade are presented as summaries of goods and services.

Exporting refers to the selling of goods and services from the home country to a foreign nation. Whereas, Importing refers to the purchase of foreign products and bringing them into one’s home country. 

Why businesses prefer importing and exporting?

Businesses prefer importing and exporting because it is one of the simplest routes of entering into global trade. It requires less investment in terms of time and money. when contrasted with other methods of entering into the global trade. It is comparatively less risky when compared with different routes of entering the international business.

Advantages of Import and Export

• It is one of the simplest routes of entering into global trade and import and export generate huge employment opportunities.
• Requires less investment in terms of time and money when contrasted with other
• methods of entering into the global trade.
• Is comparatively less risky when compared with different routes of entering in international business.
• As no nation can be 100% self-sufficient, import and export are very crucial for the functioning and growth of that nation.
• Can help Countries to access the best technologies available and best products and services in the world.
• It gives better control over the trade than setting up a market and the risk is considered low.

Export Procedures and Documentations

Export Procedures

1. Exporter gets a request from the potential buyer asking for data with respect to cost, standard and different terms & conditions for transportation of merchandise. The exporter answers with a citation known as a proforma invoice.
2. In the event that the purchaser approves of the parts of terms and conditions, he puts in the request or ‘indent’ for the merchandise.
3. In the wake of getting the request or indent, the exporter attempts an inquiry with respect to the financial soundness of the importer to evaluate the danger of non-payment by the importer.

• As indicated by customs laws, the exporter or the export firm should have a fare permit before continuing with the export. The following steps are taken after acquiring the export license. opening record in any approved bank
• To acquire import-export code (IEC) number from Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority (RIELA).
• Register with a suitable export-promoting committee.
• To get enrolled with Export Credit and Guarantee Corporation (ECGC).

1. After getting the export license the exporter meets with his banker to get pre-dispatch finance for carrying out production.
2. Exporter, after getting the pre-shipment fund from the bank, looks at to prepare the merchandise according to the importer.
3. The law of India ensures that very selective and incredible quality products are exported out of India. The exporter needs to introduce a pre-shipment examination report along with various papers at the time of dispatch.

8. As demonstrated by the Central Excise Tariff Act, excise duty on the material used as a part of creating the merchandise is to be paid. For a similar cause, the exporter applies to the concerned Excise Commissioner in the area with a receipt.

9. Remembering the ultimate objective to get Tariff concessions or diverse exclusions the importer may ask for the exporter to send an authentication of origin.

10. The exporter applies to the logistics organization for the plan of transportation space. He needs to give full information as for the merchandise to be dispatched, conceivable date of shipment, and port of destination. The logistics organization issues a transportation course of action. Which is a guideline to the captain of the ship, after accepting an application for dispatching.

11. The merchandise is stuffed and set apart with crucial data like name and address of the importing person, gross and net weight, port of shipment and destination, etc. After this, the exporter makes the strategy for the transportation of merchandise to the port.

12. To protect the merchandise amid the ocean travel, the exporter gets great guaranteed with the insurance agency.

13. Before stacking the merchandise on the ship they must be cleared by the client. For this reason, the exporter makes the bill and submits 5 duplicates of the bill along with:

1. Certificate of origin
2. Commercial Invoice
3. Export Order
4. Letter of credit
5. Certificate of Inspection, where essential.
6. Marine Insurance Policy.

On presenting the mentioned documents, the director of the concerned port trust approaches to obtain to be sent order which is the guideline to the staff at the entryway of the port to allow the cargo within the dock.

Also,

14. After the merchandise has been stacked on the ship, the captain issues mate’s receipt to the port administrator which contains data with respect to the vessel, bill, information about the merchandise, date of shipment denotes, the state of the merchandise.

15. The clearing and forwarding specialist (C&F operator) hands over the mate’s receipt to the transportation organization for analyzing the cargo. On accepting the cargo the transportation organization issues a bill of lading.

16. The exporter readies a receipt for the outgoing merchandise. The receipt contains data with respect to the quantity of merchandise sent and the sum to be paid by the importer. It is properly confirmed by the customs.

17. After dispatching the merchandise, the importer is given details by the exporter. Different reports like an attested duplicate of the receipt, bill of lading packing list, Insurance arrangement, certificate of origin, and letter of credit are sent by the exporter through his bank. These records are required by the importing merchant for getting the products cleared from customs.

Documents Used in Export Transactions

A. Documents Related to Goods

• Seller Bill

It is a seller’s bill data about products like amount, the number of packages, blemishes on packing, the name of the ship, port of destination, terms of delivery and payment, and so on.

• Certificate of Inspection

For guaranteed quality, the government has made an inspection of specific products necessary by some approved organization like the trade Inspection board of India (EICI) and so forth. In the wake of reviewing the merchandise, the organization issues a certificate of inspection that the merchandise has been reviewed as required under the export (Quality Control and Inspection) Act, 1963.

• Packing List

This document is with respect to the number of cases or packs and the details of products contained in these packs. It gives finish insights with respect to the products sent out and the condition in which they are being sent.

• Testament of Origin

This authentication indicates the nation in which the merchandise is being produced. This authentication empowers the importer to claim levy concessions or different exemptions. This declaration is likewise required in the event that when there is a prohibition on imports of a few products in specific nations.

B. Documents Related to Shipment

• Transportation Bill: It is the basic document based on which consent is allowed for the export of merchandise by the customs office. It contains details of as to whom the merchandise being sent, the name of the vessel, exporter’s name and address, a nation of definite goal, and so on.
• Mate’s Receipt:- This receipt is issued by the captain or mate of the ship to the exporter after the merchandise is stacked on board the ship. It contains the name of the vessel, quantity, marks, condition of the freight at the time of receipt on board the ship, and so on.
• Bill of lading – It is a record issued by the shipping organization. It goes about as proof with respect to the acknowledgment of the delivery organization to convey the merchandise to the port of destination. It is additionally referred to as the title to the merchandise and is openly transferable by underwriting and delivery.
• Airway Bill: Similar to a shipping bill, it is a record issued by the airline organization on getting the products onboard.
• Cart Ticket:- Also known as cart chit or gate pass, it is established by the exporter. It contains insights with respect to sending out payloads like the number of items, shipping charge number, port of destination, and so forth.
• Marine Insurance Policy: It is a document containing a contract between the exporter and the Insurance Company to reimburse the safeguarded against the misfortune brought in regard to products presented to the risks of the ocean travel in light of an installment called premium

C. Document Related to Payment

• Letter of credit:- It is an assurance letter issued by the importer’s bank expressing that it will respect the export bills to the bank of the exporter up to a specific sum.
• Bill of Exchange: In export and import exchange, the exporter draws the bill on the importer requesting that he pay predefined money to someone in particular or the owner of the instrument. The records required by the importer for guaranteeing the title of exported merchandise are passed on to him just when the importer acknowledges this bill.
• Bank Certificate of Payment:- It is a declaration that the required documents identifying with the specific export deal have been arranged and payment has been gotten related to the exchange control regulation.

Trade Agreements

Let us take a look at some of the important trade agreements that are a part of the World Bank.

1. Agreement Forming Part of GATT :

The recent General Agreement on Tariffs and Trade (GATT) after a significant alteration in 1994 is especially part of the WTO assertions. GATT likewise incorporates certain particular agreements developed to manage particular non-tariff hindrances. It is one of the important trade agreements of the WTO.

2. Agreement on Textile and Clothing (ATC) :

Trade agreements were developed under WTO to phase out the quota restrictions as imposed by the developed nations on the supply of textiles and clothing from the developing countries. The developed countries were imposing different kinds of quota hindrances under the Multi-Fibre Arrangement (MFA) that itself was a major departure from the GATT’s basic principle of free trade in goods.

3. Agreement On Agriculture (AOA)

It is an agreement to make sure free and fair trade in agriculture. Although original GATT rules were applicable to trade in agriculture, these suffered from certain loopholes such as an exemption to member countries to use some non-tariff measures such as customs tariffs, import quotas, and subsidies to protect the interests of the farmers in the home country. AOA is a significant step towards a systematic and fair trade in agricultural products.

4. General Agreement on Trade Services (GATS)

Services mean acts or performances that are essentially intangible and can not be as touched or smelt as goods. GATS is regarded as a landmark achievement of the Uruguay Round as it extends the multilateral rules and disciplines to services. It is because of GATS that the basic rules governing ‘trade-in goods’ have become applicable to ‘trade-in services’.

5. Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

The WTO’s agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) was negotiated in 1986-1994. It was the Uruguay Round of GATT negotiations where for the first time the rules relating to intellectual property rights were discussed and introduced as part of the multilateral trading system. Intellectual property means information with commercial values such as ideas, inventions, creative expression, and others.

Foreign Trade Promotion Measure and Schemes

1. Duty Drawback Scheme

Merchandise that is to be export is not conditional for payment of different excise, levy charges, and customs duties. On showing verification of export of these products to the concerning authority such charge returns. Such refunds are ‘Duty Drawbacks.’

2. Export Manufacturing under the Bond Scheme

Under this freeway, Organizations can manufacture merchandise without giving excise duty and different charges. The organizations can benefit from this facility after giving an endeavor (i.e. bond) that they are producing commodities for the export goal.

3. Exemption from Payment of Taxes

Merchandise manufactured for the sole reason of exporting is not conditional upon the payment of sales tax. Money received from exporting operations has been absolved from giving of Income-tax for a long time now. This exemption is only available to 100% Export oriented units and units set up in Export Processing Zones / special economic zones.

4. Advance Licence Scheme

This government policy permits the supplier duty-free supply of local and also in addition imported resources required for the manufacturing of export merchandise. The firms exporting irregularly can likewise acquire these licenses against particular export orders.

5. Export Processing Zones

They are industrial domains, which shape enclaves from the Domestic Tariff Areas. These are generally located close to seaports or air terminals. They intend to provide an internationally competitive duty-free environment for export production at a low cost. There are different measures, for example, availability of export fund, export promotion, capital merchandise scheme is in use for foreign trade promotion.

What are duty drawbacks?

Merchandise that is to be export is not subjected to the payment of different excise, levy charges, and customs duties. Any such charges paid are returned to the exporter on showing verification of export of these products to the concerned authority. Such refunds are called duty drawbacks.

International Joint Ventures (IJV) :

An International Joint Venture (IJV) occurs when two businesses based in two or more countries form a partnership.

A company that wants to explore International Trade without taking on the full responsibilities of cross-border business transactions has the option of forming a joint venture with a foreign partner.

A joint venture implies establishing an organization that is mutually owned by two or more independent firms.

It can be brought into reality in three noteworthy ways:

• A foreign investor buying an interest in a local company.
• Local firm acquiring an interest in an existing foreign firm.
• Both the foreign and local entrepreneurs jointly forming a new enterprise.

For example, a Joint venture is between Mahindra-Renault, founded in 2007 brings together India’s largest automobile manufacturer Mahindra & Mahindra, and world-renowned vehicle maker, Renault SA of France.

Companies considering JVs should consider many things, such as:

Strategy/objectives: 

How much control do you want, and how should it be exercised? What programs and processes must your partner have in place? How much oversight can you realistically provide? Will the J.V. have its own employees or simply “loaned” to the J.V.? What functions are essential that you provide, and how will you do that? Is it important for you to book the sales from the J.V.? On what operational decisions do you want a say or the final say?

Partner fit:  

How well does your partner’s business culture match yours? What is their reputation locally? How risk-averse or risk-taking is your partner? What is their willingness to invest?

Operational clarity: 

What investments will be made, and by whom? Whom will the employees report to? How will success be measured, and rewards shared? How will disputes and disagreements be resolved?

Indian Institutions for making International Trade more effective:

- Indian Trade Promotion Organisation

- Indian Institute of Foreign Trade (IIFT)

- State Trading Organisation

- Indian Institute of Packaging (IIP)

Websites and Wikipedia Links are in the References section for better understanding.

International Trade Opportunities For India to Grow:

Article: https://www.dhirubhai.net/pulse/international-trade-opportunities-india-grow-kunal-sevak/

Overview about Pioneer General Trading Co LLC (PGT):

PGT is dedicated to providing reliable and effective services to businesses in the United Arab Emirates and worldwide.

About Us:

Our company is established in the United Arab Emirates. We are a provider of trading products working in partnership with top brands of the world for a complete and trusting customer experience.

Article by

Kunal Sevak - Corporate Partner at Pioneer General Trading Co LLC (PGT)

References and Web Links:

https://pioneertrades.com/

https://www.toppr.com/guides/business-studies/international-business/importing-and-exporting/

https://www.globaltrademag.com/pros-cons-international-joint-ventures/

https://www.iip-in.com/

https://en.wikipedia.org/wiki/Indian_Institute_of_Packaging

https://www.stclimited.co.in/

https://en.wikipedia.org/wiki/State_Trading_Corporation_building

https://tedu.iift.ac.in/iift/index.php

https://en.wikipedia.org/wiki/Indian_Institute_of_Foreign_Trade

https://www.indiatradefair.com/

https://en.wikipedia.org/wiki/India_Trade_Promotion_Organisation