Foreign Trade

Q1) What is foreign trade? What are the procedures of foreign trade? Explain.

Ans: The process of purchase and sales of goods and services between two countries is known as foreign trade.
The following are the procedures of foreign trade;

• Enquiry: It is the process of making enquiry to the exporter regarding price, quantities, qualities, trade and cash discount and other terms and conditions of trade.
• Quotation: It is the letter written by exporter to the importer in response of the enquiries made on Enquiry letter.
• Purchase order letter: After receiving the quotation letter from exporter, the importer writes a letter ordering the goods along with quantities, quality, brands, delivery time and means of transport.
• Letter of Acknowledge: In this step, the exporter writes a letter of confirmation to inform the importer about the the delivery of required quantities of goods at a particular time.
• Collection of goods: After receiving purchase order letter, the exporter collects goods from his/her stock, if not available he/she will manages from different sources to supply to the importers.
• Packing of goods: After collecting all the quantities of goods, the exporter pack the goods with wrappers, sacks, box, cartoon as per the demand of the importer.
• Invoice: After packing of goods, the invoice is prepared which contains details of goods like quantity, price, discount offered and other terms of payment. It is send along with delivery of goods.
• Sending the goods to the carrier: When the required goods haven been packed and made ready along with invoice, the goods are send to a particular transport company for delivery of goods.
• Payment of bill: This is the last procedure. Here the invoice is well verified and payment is made through prescribed means such as cash, bank, bills of exchange etc.

Q2) Point out the different rules, terms and conditions of foreign trade.

Ans: The required terms and conditions of foreign trade are as follow;

1. The importers and exporters should fix the types and nature of goods.
2. The quantity of the goods to be purchased should be mentioned in the order letter clearly by the importer.
3. Importer and exporter must have transparent regarding the terms and means of payment.
4. The importer should also clearly mention to the exporter regarding the type of packing for the goods.
5. The terms regarding payments of insurance premium for the goods should also be clarified.
6. The percentage of cash and trade discount on the purchase or sales of goods have to be clearly negotiated.
7. The importer and exporter need to decide the required means of transportation.