International Business

Concept Explanation: International Business refers to all commercial transactions, including sales, investments, and transportation, that take place between two or more countries. It involves the exchange of goods, services, and capital across international borders.

Key Definitions / Features:

• Domestic Business: Business transactions within a country's geographical boundaries.
• International Business: Business activities that cross national borders.
• Geographical Specialisation: Countries focus on producing goods where they have an advantage due to resources or productivity.
• Differences between Domestic and International Business: Nationality of buyers/sellers, stakeholders, mobility of factors of production, customer heterogeneity, business systems, political risks, regulations, and currency used.

Illustrative Example: India exporting textiles to the USA and importing machinery from Germany.

Practice Set:

• Level 1: Define international business and domestic business.
• Level 2: List three differences between domestic and international business.
• Level 3: Explain how geographical specialisation leads to international business.

Answer Key:

• International business involves cross-border transactions; domestic business is within one country.
• Differences include nationality of buyers, political risks, and currency used.
• Geographical specialisation means countries produce goods efficiently, leading to trade.

Quick Reference: International business = cross-border trade; domestic business = within country.

Glossary:

• Geographical Specialisation: Focus on producing goods where a country has an advantage.
• Stakeholders: Individuals or groups involved in business activities.

Import Trade and Export Trade - Meaning and Procedure

Concept Explanation: Export trade is selling goods and services produced in one country to another, while import trade is buying goods and services from other countries for domestic use.

Key Definitions / Features:

• Export: Sale of domestic goods/services to foreign countries.
• Import: Purchase of foreign goods/services for domestic consumption.
• Methods: Direct (firm handles all formalities) and Indirect (middlemen handle transactions).
• Advantages of Export/Import: Easy market entry, less investment, expanded market reach.
• Limitations: Additional costs, import restrictions, limited market contact.

Export Procedure:

1. Receipt of enquiry and sending quotations
2. Receipt of order or indent
3. Assessing importer’s creditworthiness and securing payment guarantee
4. Obtaining export license
5. Pre-shipment finance
6. Production/procurement of goods
7. Pre-shipment inspection
8. Excise clearance
9. Certificate of origin
10. Reservation of shipping space
11. Packing and forwarding
12. Insurance of goods
13. Customs clearance
14. Obtaining mate’s receipt
15. Payment of freight and issuance of bill of lading
16. Preparation of invoice
17. Securing payment

Import Procedure:

1. Trade enquiry
2. Procurement of import license
3. Obtaining foreign exchange
4. Placing order or indent
5. Obtaining letter of credit
6. Arranging finance
7. Receipt of shipment advice
8. Retirement of import documents
9. Arrival of goods
10. Customs clearance and release

Illustrative Example: A company in India exporting garments to the UK following the export procedure.

Practice Set:

• Level 1: Define export and import trade.
• Level 2: List the steps involved in export procedure.
• Level 3: Explain advantages and limitations of exporting.

Answer Key:

• Export: Selling goods abroad; Import: Buying goods from abroad.
• Steps include enquiry, order, license, finance, inspection, customs clearance, and payment.
• Advantages: easy market entry, less investment; Limitations: extra costs, restrictions.

Quick Reference: Export = selling abroad; Import = buying from abroad; follow procedures for smooth trade.

Glossary:

• Indent: Document ordering goods from supplier.
• Letter of Credit: Bank guarantee for payment in export/import.

Documents Involved in International Trade

Concept Explanation: Various documents are essential in international trade to ensure smooth transactions, legal compliance, and payment security.

Key Documents in Export Transactions:

• Goods Related: Export invoice, packing list, certificate of origin, certificate of inspection.
• Shipment Related: Mate’s receipt, shipping bill, bill of lading, airway bill, marine insurance policy, cart ticket.
• Payment Related: Letter of credit, bill of exchange, bank certificate of payment.

Key Documents in Import Transactions:

• Trade enquiry, proforma invoice, import order/indent, letter of credit, shipment advice, bill of lading, airway bill, bill of entry, bill of exchange, sight draft, usance draft, import general manifest, dock challan.

Illustrative Example: An exporter uses a bill of lading as proof that goods have been shipped.

Practice Set:

• Level 1: Name two documents related to goods in export trade.
• Level 2: Explain the purpose of a letter of credit.
• Level 3: Differentiate between sight draft and usance draft.

Answer Key:

• Export invoice and packing list are goods-related documents.
• Letter of credit guarantees payment from importer’s bank to exporter.
• Sight draft requires immediate payment; usance draft allows payment after a specified period.

Quick Reference: Documents ensure legal, financial, and shipment security in trade.

Glossary:

• Bill of Lading: Document evidencing receipt of goods by carrier.
• Letter of Credit: Bank’s payment guarantee.

World Trade Organisation

Concept Explanation: The World Trade Organisation (WTO) is an international body that regulates global trade to ensure it is smooth, predictable, and free from unfair barriers.

Key Definitions / Features:

• Established on 1st January 1995, succeeding GATT.
• Member-driven, rule-based organisation with decisions by consensus.
• Provides a forum for multilateral trade negotiations and dispute resolution.
• India is a founding member.

Major Objectives of WTO:

• Reduce tariffs and trade barriers.
• Improve standards of living, employment, income, and demand.
• Facilitate optimal use of world resources for sustainable development.
• Promote an integrated, viable, and durable trading system.

Illustrative Example: WTO resolving trade disputes between member countries.

Practice Set:

• Level 1: What does WTO stand for?
• Level 2: List two objectives of WTO.
• Level 3: Explain the role of WTO in international trade.

Answer Key:

• World Trade Organisation.
• Objectives include reducing tariffs and improving living standards.
• WTO facilitates trade negotiations, resolves disputes, and promotes fair trade.

Quick Reference: WTO governs global trade rules and dispute resolution.

Glossary:

• GATT: General Agreement on Tariffs and Trade, predecessor to WTO.
• Tariff: Tax on imports or exports.