Introduction
Countries worldwide are witnessing a shift in production and marketing due to growing cross-border trade and investments. This change is driven by technological advancements, improved communication, and infrastructure, making international collaboration essential. Nations that once focused on self-reliance are now interdependent on both the supply and demand of goods and services.
Technological Advancements: Innovations in communication and transportation have bridged geographical distances, allowing even distant countries to interact and trade.
Global Trade Organizations: Institutions like the World Trade Organization (WTO) and economic reforms have further facilitated global trade, helping reduce trade barriers and promote cooperation.
Integration into a Global Village: Due to fewer barriers, national economies are merging into a borderless world economy, creating what is often called a "global village." This makes it easier for businesses to operate internationally, offering them vast opportunities for growth and profit.
Meaning of International Business
- A domestic business involves transactions occurring within a country's borders and is also known as internal or home trade.
- In contrast, international business refers to activities conducted across national boundaries, including the exchange of goods, services, capital, personnel, technology, and intellectual property such as patents and trademarks.
- While international trade—comprising imports and exports—has traditionally defined international business, its scope has significantly expanded.
- Today, it includes trade in services like travel, banking, and advertising, along with foreign investments and overseas production.
- Many companies now invest in foreign markets to produce goods and services closer to international customers, reducing costs and enhancing service.
- Thus, international business encompasses both trade and production activities beyond borders.
Question for Chapter Notes - International Business
Try yourself:
Which of the following best defines international business?Explanation
- International business involves activities conducted across national boundaries, including the exchange of goods, services, capital, personnel, technology, and intellectual property.
- It goes beyond transactions within a country's borders and encompasses trade, foreign investments, and overseas production to cater to international markets.
Report a problem
Reasons for International Business
- The main reason for international business is that countries cannot produce everything they need equally well or cost-effectively.
- This is due to the unequal distribution of natural resources and variations in productivity, labour, capital, and raw materials among nations.
- Productivity and production costs also differ because of various socio-economic, geographical, and political factors.
- Some countries are better positioned to produce certain goods or services more efficiently and at a lower cost.
- As a result, they produce what they can do best and trade with other countries for what they need, leading to international trade.
- This principle, called geographical specialization, is also seen within countries; for example, West Bengal specializes in jute, and Maharashtra in cotton textiles.
- Similarly, labor-abundant developing countries often export garments while importing advanced machinery from developed nations.
- Firms engage in international business to buy goods at lower costs abroad and to sell in markets where their products fetch higher prices.
- Besides price advantages, other benefits motivate both nations and firms to participate in international business, which we’ll explore further.
International Business vs. Domestic Business
- Managing international business operations is more complex than domestic business due to differences in political, social, cultural, and economic environments across countries.
- These variations make it challenging for companies to directly apply their domestic strategies in foreign markets.
- For success overseas, firms must adapt their product, pricing, promotion, distribution, and overall business plans to fit the unique demands of each target market.
- Key differences between domestic and international business lie in how these aspects are managed and adapted to diverse environments.
1. Nationality of Buyers and Sellers
- International Business: Buyers and sellers come from different countries.
- Domestic Business: Buyers and sellers are from the same country.
2. Nationality of Other Stakeholders
- International Business: Stakeholders belong to various countries, resulting in a wider set of values and aspirations.
- Domestic Business: Stakeholders belong to one country, ensuring consistency in their value system and behaviour.
3. Mobility of Factors of Production
- International Business: Mobility is subject to various restrictions.
- Domestic Business: Free mobility.
4. Customer Heterogeneity Across Markets
- International Business: Differences in taste and preference complicate the task of designing products for international markets.
- Domestic Business: Differences in taste and preference do not complicate the task of designing products for domestic markets.
5. Differences in Business Systems and Practices
- International Business: Considerable differences in business systems and practices among different countries.
- Domestic Business: Less significant differences in business systems and practices within a country.
6. Political System and Risks
- International Business: The political environment varies from one country to another, requiring special efforts to manage risks.
- Domestic Business: Easier to predict the impact of the political environment on business operations.
7. Business Regulations and Policies
- International Business: Business laws, regulations, and economic policies differ among different countries.
- Domestic Business: Business laws, regulations, and economic policies are more or less uniformly applicable within a country.
8. Currency Used in Business Transactions
- International Business: Currency exchange rates fluctuate, complicating transactions.
- Domestic Business: No such problem as only home currency is used.
Scope of International Business
1. Merchandise exports and imports
- Merchandise exports mean sending tangible goods abroad,
- Merchandise imports mean bringing tangible goods from a foreign country to one’s own country.
- Merchandise exports and imports, also known as trade in goods, include only tangible goods and exclude trade in services.
2. Service exports and imports
- Service exports and imports involve trade in intangibles.
- It is because of the intangible aspect of services that trade in services is also known as invisible trade.
- A wide variety of services are traded internationally.
3. Licensing and franchising
- Permitting another party in a foreign country to produce and sell goods under your trademarks, patents or copyrights instead of some fee is another way of entering into international business.
- Franchising is similar to licensing, but it is a term used in connection with the provision of services.
4. Foreign investments
- Foreign investment involves investments of funds abroad in exchange for financial return.
- Foreign investment can be of two types: direct and portfolio investments.
- Direct investment takes place when a company directly invests in properties such as plants and machinery in foreign countries with a view to undertaking the production and marketing of goods and services in those countries.
- A portfolio investment, on the other hand, is an investment that a company makes into another company by way of acquiring shares or providing loans to the latter, and earns income by way of dividends or interest on loans.
Major Difference between Domestic and International Business
Benefits of International Business
Benefits to Countries
(i) Earning foreign exchange: International business enables a country to earn foreign currency, which can be used to import essential items like capital goods, technology, petroleum products, fertilizers, and pharmaceuticals that may not be produced domestically.
(ii) Efficient resource utilization: By following the principle of producing what each country does best and trading the surplus, international business allows countries to specialize, increasing overall production. This efficient trade benefits all participating nations when goods and services are shared fairly.
(iii) Boosting growth and employment: Relying solely on domestic markets can limit a country’s growth and job creation. Many developing countries could not scale up production due to limited local demand. However, nations like Singapore, South Korea, and China adopted an "export to grow" strategy, significantly boosting their economies and creating more employment.
(iv) Raising living standards: International trade allows people worldwide to enjoy goods and services from other countries, contributing to a higher standard of living.
Benefits to Firms
(i) Higher profit potential: International business often yields greater profits than domestic markets. Firms can capitalize on price differences by selling in countries with higher prices, boosting profitability.
(ii) Better capacity utilization: Many companies have production capabilities exceeding domestic demand. By expanding internationally and securing foreign orders, they can use excess capacity, lower production costs through economies of scale, and improve profit margins.
(iii) Growth opportunities: When demand saturates in the home market, overseas markets provide fresh growth prospects. This is why many multinationals enter developing countries, where demand for their products is growing.
(iv) Alternative to domestic competition: Intense competition at home may push companies to explore international markets. This allows firms facing domestic challenges to achieve growth abroad.
(v) Enhanced business vision: International expansion often aligns with a company’s strategic goals, driven by a desire for growth, competitiveness, diversification, and strategic advantages.
Question for Chapter Notes - International Business
Try yourself:
Which of the following is NOT a benefit of international business?Explanation
- International business offers various benefits including earning foreign exchange, higher profit potential, and efficient resource utilization.
- Limited growth opportunities are not associated with international business as it provides companies with fresh growth prospects and alternative markets to explore.
Report a problem
Modes of Entry Into International Business
Exporting and Importing
Meaning
- Exporting involves sending goods and services from a home country to a foreign country while importing is the purchase of foreign products for use in the home country. Firms can export or import in two main ways: direct and indirect.
- In direct exporting/importing, the firm itself manages the entire process, including contacting overseas buyers or suppliers, handling shipment, and financing.
- Indirect exporting/importing, however, involves minimal firm participation. Here, intermediaries such as export houses, overseas buying offices, or local wholesale importers manage most tasks, so the firm doesn’t directly deal with foreign buyers or suppliers.
Advantages
- It is the easiest way of gaining entry into international markets.
- Business firms are not required to invest that much time and money.
- Since exporting/importing does not require much of investment in foreign countries, exposure to foreign investment risks is nil or much lower.
Limitations
- Expenses and payments like custom duty, transportation, and other charges substantially increase product costs and make them less competitive.
- Exporting is not a feasible option when import restrictions exist in a foreign country. Opt for modes like licensing or franchising.
- Export firms basically operate from their home country. Few visits are made to promote the product which lags them in understanding and serving the customer better.
Contract Manufacturing
Meaning
Contract manufacturing is an international business model where a firm partners with local manufacturers in foreign countries to produce components or goods based on specific requirements. Often called outsourcing, this arrangement takes three primary forms:
- Component Production: Local manufacturers produce parts, like automobile components or shoe uppers, used in final products like cars and shoes.
- Assembly: Local manufacturers assemble components, such as those in computers (hard drive, motherboard), into finished goods.
- Complete Product Manufacture: Local manufacturers produce entire products, such as garments.
In these cases, the foreign firm provides technology and management support, and the local manufacturer delivers the goods, which the foreign firm may sell under its brand in various markets. Companies like Nike, Reebok, and Levis widely use contract manufacturing in developing countries.
Advantages
- They make use of the production facilities already existing in foreign countries, thus, investment is not required.
- As no investment, no investment risk.
- Gives an advantage to international companies to manufacture or assemble the products at lower costs.
- Idle production capacities in foreign country, obtains manufacturing jobs on contract basis in a way provide a ready market for their products.
- Gets the opportunity to get involved with international business and avail incentives.
Limitations
- Non-adherence to production design and quality standards causes product quality problems to the international firm.
- Local manufacturers lose their control over the manufacturing process because goods are produced strictly as per the terms and specifications.
- They are not free to sell the contracted output as per its will. It has to sell the goods to the international company at a predetermined price.
Licensing and Franchising
Meaning
Licensing is a contractual arrangement where a firm (licensor) grants another firm (licensee) in a foreign country the right to use its patents, trade secrets, or technology in exchange for a royalty fee.
Licensing isn't limited to technology; fashion designers, for example, often license their names for use.
In some cases, there’s a mutual exchange of technology or knowledge between firms, called cross-licensing.
Franchising is similar to licensing but typically applies to service industries, like restaurants or hotels. It is also more structured; franchisers set detailed rules for how franchisees must operate.
A franchising agreement involves a payment for the right to use trademarks, technology, or patents for a specific period. The original company is the franchiser, while the other party is the franchisee. Notable global franchises include McDonald's, Pizza Hut, and Wal-Mart.
Advantages
- As such, the licensor/franchiser has to virtually make no investments abroad. Licensing/franchising is, therefore, considered a less expensive mode of entering into international business.
- No or very little foreign investment is involved, the licensor/ franchiser is not a party to the losses.
- There are lower risks of business takeovers or government interventions.
- Licensee/franchisee being a local person has greater market knowledge and contacts which can prove quite helpful to the licensor/franchiser in successfully conducting its marketing operations.
- Make use of the licensor’s/ franchiser’s copyrights, patents, and brand names.
Limitations
- There is a danger that the licensee can start marketing an identical product under a slightly different brand name.
- If not maintained properly, trade secrets can get divulged to others in the foreign markets.
- Conflicts over maintenance of accounts, payment of royalty and non-adherence to norms relating to the production of quality products.
Joint Ventures
Meaning
A joint venture is a common strategy for entering foreign markets, involving the creation of a firm jointly owned by two or more independent companies. It can be broadly defined as any long-term collaboration. A joint venture can be formed in three main ways:
- A foreign investor buys an interest in a local company.
- A local firm acquires an interest in an existing foreign firm.
- Both foreign and local firms jointly form a new enterprise.
Advantages
- Financially less burdensome for the international firm as the local partner also contributes to the equity capital.
- Possible to execute large projects requiring huge capital outlays and manpower.
- The foreign business firm benefits from a local partner’s knowledge of the host country regarding competitive conditions, culture, language, political systems, and business systems.
- Sharing costs and risks avoids burden on one.
Limitations
- Dual ownership arrangements may lead to conflicts, resulting in a battle for control between the investing firms.
- Share of technology and trade secrets poses a threat of disclosing them to others.
Wholly Owned Subsidiaries
Meaning
A wholly owned subsidiary is preferred by companies seeking full control over their overseas operations. The parent company invests 100% of the equity capital to establish control. This can be done in two ways:
- Setting up a new firm in a foreign country, known as a greenfield venture.
- Acquiring an existing firm in a foreign country to manufacture and/or promote products.
Advantages
- Full control over operations.
- Not required to disclose its technology or trade secrets to others.
Limitations
- Not suitable for small and medium-sized firms that do not have enough funds to invest abroad.
- Has to bear the entire losses resulting from the failure of its foreign operations
- They are subject to higher political risks
Export-Import Procedures And Documentation
- A key difference between domestic and international business is the complexity of international operations.
- Exporting and importing goods is not as simple as buying and selling within a country.
- Since international trade involves moving goods across borders and using foreign currency, there are several steps to complete before goods can leave one country and enter another.
- The following sections explain the important steps involved in export and import transactions.
Export Procedure
The number of steps and the order in which they are carried out can vary for each export transaction. However, the typical steps in an export transaction are as follows:
1. Receipt of Enquiry and Sending Quotations
- Exporters can be informed of such an enquiry by way of an advertisement in the press put in by the importer.
- The exporter sends a reply to the enquiry in the form of a quotation referred to as a proforma invoice.
- The proforma invoice contains information about the price, quality, grade, size, weight, mode of delivery, type of packing, and payment terms.
2. Receipt of Order or Indent
- When export price and other terms and conditions are acceptable, the importer places an order for the goods to be dispatched.
- The order, also known as an indent, contains a description of the goods ordered, prices to be paid, delivery terms, packing and marking details, and delivery instructions.
3. Assessing the Importer’s Creditworthiness and Securing a Guarantee for Payments
- The exporter makes an enquiry about the creditworthiness of the importer.
- To minimize risks, most exporters demand a letter of credit from the importer.
- A letter of credit is a guarantee issued by the importer’s bank that it will honour payment up to a certain amount of export bills to the bank of the exporter.
4. Obtaining Export Licence
- Export of goods in India is subject to customs laws which demand that the export firm must have an export licence before it proceeds with exports.
- Prerequisites for getting an export licence:
1. Opening a bank account in any bank authorized by the Reserve Bank of India.
2. Obtaining an Import Export Code (IEC) number from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority.
3. Registration with the appropriate export promotion council.
4. Registration with Export Credit and Guarantee Corporation (ECGC) to safeguard against risks of non-payment. - To obtain the IEC number, a firm must apply to the DGFT with documents such as an exporter/importer profile, bank receipt for the requisite fee, a certificate from the banker on the prescribed form, two copies of photographs attested by the banker, details of the non-resident interest, and declaration about the applicant’s non-association with caution listed firms.
- It is obligatory for every exporter to get registered with the appropriate export promotion council.
- Registration with the ECGC is necessary to protect overseas payments from political and commercial risks.
5. Obtaining Pre-shipment Finance
- The exporter approaches his banker to obtain pre-shipment finance to undertake export production.
- Pre-shipment finance is needed for procuring raw materials and other components, processing and packing of goods, and transportation of goods to the port of shipment.
6. Production or Procurement of Goods
- The exporter proceeds to get the goods ready as per the specifications of the importer. The firm either produces the goods itself or buys from the market.
7. Pre-shipment Inspection
- Compulsory inspection of certain products by a competent agency as designated by the government.
- The government has passed the Export Quality Control and Inspection Act, 1963 for this purpose and has authorized some agencies to act as inspection agencies.
- The pre-shipment inspection report is required to be submitted along with other export documents at the time of export.
- Inspection is not compulsory if the goods are being exported by star trading houses, trading houses, export houses, industrial units set up in export processing zones/special economic zones (EPZs/SEZs), and 100 per cent export-oriented units (EOUs).
8. Excise Clearance
- Excise duty is payable on the materials used in manufacturing goods. The exporter must apply to the concerned Excise Commissioner in the region with an invoice.
- The refund of excise duty is known as duty drawback.
- This scheme of duty drawback is administered by the Directorate of Drawback under the Ministry of Finance, responsible for fixing the rates of drawback for different products.
9. Obtaining Certificate of Origin
- To avail trade concessions and other benefits, the importer may ask the exporter to send a certificate of origin.
- The certificate of origin acts as proof that the goods have actually been manufactured in the country from where the export is taking place.
- This certificate can be obtained from the trade consulate located in the exporter’s country.
10. Reservation of Shipping Space
- The exporting firm applies to the shipping company for the provision of shipping space, specifying the types of goods to be exported, the probable date of shipment, and the port of destination.
- Upon acceptance of the application, the shipping company issues a shipping order.
11. Packing and Forwarding
- The goods are then properly packed and marked with necessary details such as the name and address of the importer, gross and net weight, port of shipment and destination, country of origin, etc.
- The exporter makes necessary arrangements for the transportation of goods to the port.
- Upon loading goods into the railway wagon, the railway authorities issue a ‘railway receipt’ which serves as a title to the goods.
- The exporter endorses the railway receipt in favour of his agent to enable him to take delivery of goods at the port of shipment.
12. Insurance of Goods
- Goods are insured by an insurance company to protect against the risks of loss or damage during transit.
13. Customs Clearance
- Goods must be cleared from customs before they can be loaded on the ship.
- For customs clearance, the exporter prepares the shipping bill.
- The shipping bill is the main document based on which the customs office gives permission for export.
- Five copies of the shipping bill along with the following documents are submitted to the Customs Appraiser at the Customs House:
1. Export Contract or Export Order
2. Letter of Credit
3. Commercial Invoice
4. Certificate of Origin
5. Certificate of Inspection
6. Marine Insurance Policy - After submission of these documents, the Superintendent of the concerned port trust is approached for obtaining the carting order. The carting order is the instruction to the staff at the gate of the port to permit the entry of the cargo inside the dock.
14. Obtaining Mate’s Receipt
- A mate’s receipt is issued by the commanding officer of the ship when the cargo is loaded on board, containing information about the name of the vessel, berth, date of shipment, description of packages, marks and numbers, and the condition of the cargo at the time of receipt on board the ship.
- The port superintendent, on receipt of port dues, hands over the mate’s receipt to the C&F agent.
15. Payment of Freight and Issuance of Bill of Lading
- The C&F agent surrenders the mate’s receipt to the shipping company for computation of freight.
- Upon receipt of the freight, the shipping company issues a bill of lading which serves as evidence that the shipping company has accepted the goods for carrying to the designated destination.
- If the goods are sent by air, this document is referred to as the airway bill.
16. Preparation of Invoice
- The invoice states the quantity of goods sent and the amount to be paid by the importer. The C&F agent gets it duly attested by the customs.
17. Securing Payment
- The importer needs various documents to claim the title of goods on their arrival at his/her country and get them customs cleared.
- The necessary documents include a certified copy of the invoice, bill of lading, packing list, insurance policy, certificate of origin, and letter of credit.
- Submission of the relevant documents to the bank for the purpose of getting the payment from the bank is called ‘negotiation of the documents’.
- On receiving the bill of exchange, the importer releases the payment in case of sight draft or accepts the usance draft for making payment on maturity of the bill of exchange. The exporter’s bank receives the payment through the importer’s bank and credits it to the exporter’s account.
- The exporter can get immediate payment from his/her bank on the submission of documents by signing a letter of indemnity.
- Having received the payment for exports, the exporter needs to get a bank certificate of payment.
Import Procedure
1. Trade Enquiry
- The importing firm approaches the export firms with a trade enquiry to collect information about their export prices and terms of exports.
- A trade enquiry is a written request by an importing firm to the exporter for a supply of information regarding the price and various terms and conditions on which the latter is ready to export goods.
- The exporter prepares a quotation and sends it to the importer. The quotation is known as a proforma invoice.
2. Procurement of Import Licence
- The importer needs to consult the Export Import (EXIM) policy in force to know whether the goods he or she wants to import are subject to import licensing.
- If goods can be imported only against a licence, the importer needs to procure an import licence.
- In India, it is obligatory for every importer (and also for exporter) to get registered with the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority and obtain an Import Export Code (IEC) number.
3. Obtaining Foreign Exchange
- Payment in foreign currency involves exchanging Indian currency for foreign currency.
- In India, all foreign exchange transactions are regulated by the Exchange Control Department of the Reserve Bank of India (RBI).
- Every importer is required to secure the sanction of foreign exchange.
- To obtain such a sanction, the importer has to make an application to a bank authorized by RBI to issue a foreign exchange.
4. Placing Order or Indent
- The importer places an import order or indent with the exporter for the supply of the specified products.
- The import order contains information about the price, quantity size, grade and quality of goods ordered, and the instructions relating to packing, shipping, ports of shipment and destination, delivery schedule, insurance, and mode of payment.
5. Obtaining Letter of Credit
- If the payment terms agreed between the importer and the overseas supplier is a letter of credit, then the importer should obtain the letter of credit from its bank and forward it to the overseas supplier.
6. Arranging for finance
- The importer should make arrangements in advance to pay to the exporter on arrival of goods at the port.
- Advanced planning for financing imports is necessary so as to avoid huge penalties.
7. Receipt of shipment advice
- After loading the goods on the vessel, the overseas supplier dispatches the shipment advice to the importer.
- Shipment advice contains information about the shipment of goods.
8. Retirement of import documents
- The overseas supplier prepares a set of necessary documents as per the terms of the contract and letter of credit and hands it over to his or her banker for their onward transmission and negotiation to the importer in the manner specified in the letter of credit.
- The set of documents normally contains a bill of exchange, commercial invoice, bill of lading/airway bill, packing list, certificate of origin, marine insurance policy, etc.
9. Arrival of goods
- The person in charge of the carrier (ship or airway) informs the officer in charge at the dock or the airport about the arrival of goods in the importing country.
- He provides the document called import general manifest. An import general manifest is a document that contains the details of the imported goods.
10. Customs clearance and release of goods
- Firstly, the importer has to obtain a delivery order which is otherwise known as an endorsement for delivery. Generally, when the ship arrives at the port, the importer obtains the endorsement on the back of the bill of lading. This endorsement is done by the concerned shipping company. In some cases instead of endorsing the bill, the shipping company issues a delivery order. This order entitles the importer to take the delivery of goods.
- The importer has to submit to the ‘Landing and Shipping Dues Office’ two copies of a duly filled-in form — known as ‘application to import’. The ‘Landing and Shipping Dues Office’ levies a charge for services of dock authorities which has to be borne by the importer. After payment of dock charges, the importer is given back one copy of the application as a receipt. This receipt is known as a ‘port trust dues receipt’.
- The importer then fills in a form ‘bill of entry’ for assessment of customs import duty.
- After payment of the import duty, the bill of entry has to be presented to the dock superintendent.
- The importer or his agent presents the bill of entry to the port authority. After receiving the necessary charges, the port authority issues the release order.
Question for Chapter Notes - International Business
Try yourself:
Which mode of entry into international business involves a firm partnering with local manufacturers in foreign countries to produce components or goods based on specific requirements?Explanation
- Contract manufacturing involves a firm partnering with local manufacturers in foreign countries to produce components or goods based on specific requirements.
- This mode of entry allows the firm to utilize existing production facilities in foreign countries without making significant investments.
Report a problem
Major Documents needed in Connection with Export Transaction
A. Documents Related to Goods
- Export Invoice: A seller's bill detailing the goods being exported, including information on quantity, value, packaging, shipment, delivery terms, and payment conditions.
- Packing List: A detailed list showing the number of packages and the contents of each, specifying the goods and their shipping format.
- Certificate of Origin: Specifies the country where the goods were produced, allowing the importer to claim tariff concessions or exemptions, especially if goods are not subject to restrictions from certain countries.
- Certificate of Inspection: A certificate ensuring that certain goods meet quality control standards, issued by authorized agencies like the Export Inspection Council of India (EICI).
B. Documents Related to Shipment
- Mate’s Receipt: A receipt from the ship's commanding officer confirming that the goods have been loaded onto the ship, listing details like the ship’s name, berth, and condition of the cargo.
- Shipping Bill: The document that customs uses to grant export permission, detailing goods, destination, vessel, and exporter’s information.
- Bill of Lading: An official receipt from a shipping company acknowledging receipt of goods for shipment, and a document of title to the goods that can be transferred.
- Airway Bill: Similar to a bill of lading but for air shipments, it confirms receipt of goods and commitment to transport them.
- Marine Insurance Policy: An insurance contract that covers potential losses incurred due to sea-related risks.
- Cart Ticket: A pass indicating export cargo details, such as the shipper’s name, package count, and vehicle number.
C. Documents Related to Payment
- Letter of Credit: A bank guarantee ensuring the importer’s bank will pay the exporter up to a specified amount. It is a secure payment method in international trade.
- Bill of Exchange: A document directing the importer to pay a specified amount to the exporter or a designated party. The export documents are released once the bill is accepted.
- Bank Certificate of Payment: A certificate from the bank confirming that the export documents have been presented for payment and that payment has been made in compliance with exchange control regulations.
Major Documents used in an Import Transaction
Trade Enquiry: A written request by an importer to an exporter, asking for details about prices and terms of sale for goods.
Proforma Invoice: A document containing details about the quality, grade, size, weight, and price of the goods, as well as the terms for their export.
Import Order or Indent: A document where the importer places an order for goods, specifying details such as quantity, price, payment method, and shipping terms.
Letter of Credit: A document from the importer's bank guaranteeing that it will pay the exporter's bank up to a specified amount for the goods.
Shipment Advice: A document sent by the exporter to the importer, informing them that the shipment has been made. It includes shipping details like the bill of lading number, vessel name, and description of goods.
Bill of Lading: A document issued by the ship's master acknowledging receipt of goods on board and outlining the terms of their transport to the destination port.
Airway Bill: Similar to a bill of lading, but for air shipments. It acknowledges receipt of goods and promises their transport to the destination.
Bill of Entry: A form submitted to customs by the importer when receiving goods, containing details such as the goods' description, quantity, and customs duty payable.
Bill of Exchange: A written order by the exporter directing the importer to pay a specified amount. The export documents are transferred once the importer accepts the bill.
Sight Draft: A type of bill of exchange where the importer must pay immediately to receive the documents.
Usance Draft: A type of bill of exchange where the importer must accept the bill before receiving the documents, typically with a delay.
Import General Manifest: A document that lists the details of all the goods being imported, used for unloading cargo.
Dock Challan: A form used to specify the amount of dock charges to be paid after completing customs formalities.