What are the specifics of import or export deals

Import and Export

Task 1. Report the dialogue. Use the following reporting verbs:

Task 2. Work with a partner. Look at the dialogue and discuss what A. and B. say about the following subjects.

a.documentation, required by an import/export transaction

b.who takes responsibility for the documentation and arranges for the goods to be shipped

c.different methods of payment and people arranging them

d.the need for an insurance company or insurance broker

e.the specifics of import or export deals

Task 3. Say it in English:

• организовывать перевозку грузов по железной дороге

• я не очень разбираюсь в этом вопросе

• страховать транспортируемые товары

• к тому же, в дополнение

• компания, страхующая экспортное кредитование

• сертификат происхождения товара

• транспортная морская накладная

• расставим точки над «i»

• экспедиционное агентство, организующее перевозки партий грузов или перерабатывающее экспортно-импортные грузы

• налог на добавленную стоимость в разных странах разный

• железнодорожное или автодорожное агентство

• оплата с наличным расчетом при выдаче заказа

• экспедитор, агент по погрузке и отправке товаров

• соответствовать принятой в мире международной торговой терминологии

• взимать таможенную пошлину и/или налог на добавленную стоимость (НДС)

• доставлять товары за границу

• указывать цены в твердой валюте «третьей страны»

Task 4. Produce your own dialogue about documents needed in international trade and the meaning of Incoterms. Make a full use of the underlined helpful phrases from Dialogue 1 and Supporting Materials:

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Explain why exports and imports are the main characteristics of an interaction in world markets.

Exports increase the size of the market for producers. Imports stimulate competition in local markets and provide a wider choice for consumers.

The key macroeconomic variables that describe an interaction in world markets are exports, imports, the trade balance, and exchange rates. Economies buy and sell goods and services in world product markets, and buy and sell capital assets in world financial markets.

Whenever a country imports or exports goods and services, there is a resulting flow of funds: money returns to the exporting nation, and money flows out of the importing nation.

International trade allows countries to expand their markets for both goods and services that otherwise may not have been available domestically.

Account for the need for an insurance company or insurance broker when export or import arrangements take place.

When a company makes export and import operations, its goods may also be damaged or stolen, which will create financial losses for the company. Therefore, it is necessary to insure the goods in such cases so that losses can be compensated.

Say how the exchange rates of Major currencies influence investment decisions of ordinary people and professional investors.

The exchange rate is one of the most important determinants of a country’s relative level of economic health. Exchange rates play a vital role in a country’s level of trade, which is critical to most every free market economy in the world. Exchange rates impact the real return of an investor’s portfolio. Also, company can lose enormous amount of money because of the assets overestimation or if they have debts in foreign currency.

Assume how you as an individual and a business may counteract the effect of currency fluctuations.

1. Adjust to the exchange rate

This option implies drawing up schemes and plans for trade flows in such a way as to minimize their possible losses or to relieve themselves of responsibility. For example, the delivery contract should clearly indicate who bears the currency risks. This method does not need to involve additional funds, so it is ideal for entrepreneurs who do not have savings, but want to protect themselves from exchange rate fluctuations.

2. conduct operations on the international financial exchange

In this case, you will need to purchase futures and options on the international financial exchange. These are special agreements that can «freeze» the exchange rate at a certain value. This manipulation will allow you to purchase foreign currency at a fixed rate for the duration of the contract.

3. The simplest method to avoid losses from exchange rate fluctuations is to use the national currency. In other words, you can buy products in Russia or specify rubles as the payment currency when entering into a contract.

4. Limit your liability

To do this, you need to link the cost of all your products to the exchange rate. In other words, the contract must specify that when the exchange rate changes, the price tags on the goods change in the same ratio

5. To eliminate risks

You can cooperate with countries that allow you to buy and sell goods for the same currency. For example, the European Union market. In Catherine’s case, she could buy vegetable oil in Italy and sell it in France. So all monetary payments would be made in one currency – the Euro. And Catherine would have been able to avoid currency fluctuations.

International Trade: A Nation’s Balance of Payments. Investments in international trade. (1.3)

Documents Needed in International Trade and Incoterms. (1.6)

Analyze the case when in 1980s when the strong dollar caused severe problems for the US economy. Describe how the cost competitiveness of domestic produce decreased and what measures were taken to control inflation.

Inflation is generally controlled by the Central Bank and/or the government. The main policy used is monetary policy (changing interest rates). However, in theory, there are a variety of tools to control inflation including:

1. Monetary policy – Higher interest rates reduce demand in the economy, leading to lower economic growth and lower inflation.

2. Control of money supply – Monetarists argue there is a close link between the money supply and inflation, therefore controlling money supply can control inflation.

3. Supply-side policies – policies to increase the competitiveness and efficiency of the economy, putting downward pressure on long-term costs.

4. Fiscal policy – a higher rate of income tax could reduce spending, demand and inflationary pressures.

5. Wage controls – trying to control wages could, in theory, help to reduce inflationary pressures. However, apart from the 1970s, it has been rarely used.

In 1980 in the Us in order to combat rising inflation, recently appointed chairman of the Federal Reserve, Paul Volcker, elected to increase the federal funds rate. In order to combat rising inflation, recently appointed chairman of the Federal Reserve, Paul Volcker, elected to increase the federal funds rate. This caused an economic recession beginning in January 1980, and in March 1980, President Jimmy Carter created his own plan for credit controls and budget cuts to beat inflation. In order to cooperate with these new priorities, the federal funds rate was lowered considerably from its April peak. Later Ronald Reagan, who had assumed office in January 1981, brought his own economic plan to the table. In August 1981, the president signed the Economic Recovery Tax Act of 1981, a three-year tax cut plan. In July 1983, the official end of the recession was announced as November 1982.

Cost competitiveness is influenced by the inflation rate, the cost of basic services, infrastructure costs, access to raw resources, transport costs, the value of the currency, and labour and productivity levels.

The strong dollar caused severe problems by decreasing the cost competitiveness of United States exports. The rise of the dollar was associated with a large rise in the production costs of United States firms relative to foreign competitors. This rise in relative costs has at least temporarily reduced the international competitiveness of United States industry dramatically.

Explain why many big companies and investment funds use hedging techniques to reduce their exposure to various risks and hedge in some form, for example, against fluctuations in foreign-exchange rates.

Big companies and investment funds subject a large quantity of the risks which potentially can lead to serious financial losses. New risks arise because an increasing of scale of economic activity. For instance, the company becomes subject to fluctuations in foreign-exchange rates in result expansion of activity and entering foreign markets. Also big and mature companies are skeptical of risk and value the stability. So they use different instruments of hedging to reduce risks. For example, they use forward contract and swops against fluctuations in foreign-exchange rates.

Types of securities. (2.6)

Import and Export: Meaning & Key Difference Between Import and Export

September 9, 2019 By Hitesh Bhasin Tagged With: Business

The international trade of a country with other countries is referred to as import and export. The word import refers to international trade where a country buys goods and services from another country, whereas the word export refers to international trade where a country sells goods and services to other countries.

The process of import and export is important for countries to exist as there is no country which has all the resources that it needs to survive. Hence, countries need to depend on other countries for the goods and services that they lack.

For example, the United States of America rely on countries like Iran, Kuwait, and United Arabia Emirates, etc. and the major exports of USA are Computers, Mineral fuels, and electrical equipment, etc.

In this article, you will learn about both Import and export and key differences between both of them.

Table of Contents

What is import?

Import stands for the purchase of goods and services that a country lacks from other countries to use in the domestic country. The goods and services bought from foreign countries are either used by the government for public welfare or is resold in the domestic market.

The import of goods and services put a direct impact on the economy of the country. Higher the import trade means weaker the economy. With the high import of things, high money flows out of the country.

For example, many countries, including the United States of America, rely on middle east countries for crude oil and fuel, and these countries are becoming rich because of the high rate of exports.

Selling oil to other countries bring more money to the economy. Because of this reason, countries want to achieve a balance between import and export so that there will be less burden on the economy. However, it is hard for countries to achieve.

A country usually avoids to import goods and services and try to produce as much as possible at home. However, only the goods which are either impossible to produce in the home country (such as crude oil) or prove to be expensive when produced at home are imported from other countries.

The process of importing goods in the country:

1) Making an inquiry in the global market for the goods:

The process of importing begins with inquiry in the global market. The information can be obtained from Trade associations and trade directories, etc. finally the inquiry is made with the companies which export the goods you need to export about the rate and delivery terms and conditions, etc.

2) Getting Import license:

In the next step, the importer needs to obtain an import license. There are a few goods which require importing license while others don’t need any license. One needs to have information about whether the license is needed or not and how to obtain it.

3) Obtaining Foreign currency:

Next, you need to obtain currency of the country they want to import goods from.

4) Order Placement:

Place an order with the exporters. Your order must contain detailed information about the color, design, quantity, etc. about the product.

5) Letter of credit:

It is an important step in the process of import. It saves you from problems at a later stage. You obtain a letter of credit from the bank, which shows your credibility. The letter of credit proves your authenticity and terms and conditions for the order.

6) A receipt containing information related to shipment:

Your exporter will send you a receipt containing the information about the shipment such as vessel name, invoice number, description of goods dispatched, etc.

7) Documents for the retirement of import:

Import document is sent to the bank to take further action according to the delivery of goods.

8) Receiving the delivery:

The export documents are received from the delivery officer.

9) Customs clearance and release:

Last and the most tiring process of import is to the customs clearance process. You need to fulfill a large number of legal formalities to get a hold on the goods imported.

What is the export?

Export stands for selling goods and service which are produced in the home country to other countries. A country usually exports those things to other countries which are in abundance in it. The export trade is healthy for a country. It helps the economy and makes it stronger.

The country which exports more and import less has a good economy. The countries need to share their resources to able to acquire things which cannot be produced in those countries. For example, India is known for export IT manpower all around the world.

Many countries like the USA import services of India in the IT sector. The export of services helps the economy of the country.

Countries try to export more than the things they import so that more money flow in the country rather than flowing out of the country. The country which exports more than importing has a healthy economy.

The process of exporting goods:

1) Receiving inquiry and sending quotation:

Buyers send inquiry request to all potential seller. The seller is required to send the quotation for the order, and the buyer accepts the proposal of the seller that suits him or with least market price.

2) Receipt of order:

In case, buyer likes your order; he will send you the order receipt. The receipt contains information related to order.

3) Making an inquiry about the credibility of the buyer:

In this step, the seller enquires about the credibility of the buyer and ask the buyer to send a letter of credit to start processing order.

4) Obtaining an export license:

An exporter is required to have a license to be able to export goods.

5) Obtaining pre-shipment finance:

Exporter request for pre-shipment finance from the bank or financial institution in order to carry out the production activities.

6) Production:

The goods are being produced as per the requirement of the importer.

7) Inspection of the goods produced:

Once the first batch of the goods produced, the inspection of goods is made in order to make sure the good quality of products. If there is any fault, the production process is changed.

8) Certificate of origin:

A certificate of origin is sent to the importer to certify that the goods are actually produced in the country.

9) Making a reservation of shipping space with the exporting firm:

You need to take service of a shipping company in order to deliver goods to your seller. You need to make a reservation in advance with the shipping company and also tell them the what kind of goods you want to export, the number of goods, the date of shipment and the destination of delivery, etc.

10) Preparing your order and packing them to forward to the shipment company:

Once your order is ready. You need to pack the goods so that they don’t get damaged in the process of shipment and don’t forget to mention the destination address and nature of goods on the packaging.

11) get insurance:

You can be sure of the natural calamities or accidents when your goods are in transit. Therefore, you must get insurance for the goods in order to avoid future loss.

12) Custom clearance:

Get your goods cleared from the customers so that they can be delivered to the buyer without any interruption in the transit.

13) get mates receipt:

A mate’s receipt is generated by the port superintendent when he loads goods.

14) generate invoice:

Once the goods are sent. The next immediate step you need to follow is to prepare an invoice to send to the buyer.

15) Receiving payment:

Once the goods are delivered to the buyer. Next, you are required to receive all related documents such as invoice, bill of lading, certificate of origin, and letter of credit, etc. these documents are delivered to the seller in exchange of bill.

The Key differences between Import and Export

Conclusion

Import and export processes are important processes of all countries. Countries need to export goods that they can’t produce and import products to help the economy. However, every country makes sure that they export more than importing in order to have an upward economy.

There are two ways to carrying out importing and exporting processes one is direct, and the other is indirect. Indirect process, both importing and exporting firms participate and carry out the whole process on their own and in-direct process intermediate firms carrying out the whole process with no or little interaction between the participating firms.

From the above article, you learned about the import and export processes.

How Importing and Exporting Impacts the Economy

In today’s global economy, consumers are used to seeing products from every corner of the world in their local grocery stores and retail shops. These overseas products—or imports—provide more choices to consumers. And because they are usually manufactured more cheaply than any domestically-produced equivalent, imports help consumers manage their strained household budgets.

Key Takeaways

When there are too many imports coming into a country in relation to its exports—which are products shipped from that country to a foreign destination—it can distort a nation’s balance of trade and devalue its currency. The devaluation of a country’s currency can have a huge impact on the everyday life of a country’s citizens because the value of a currency is one of the biggest determinants of a nation’s economic performance and its gross domestic product (GDP). Maintaining the appropriate balance of imports and exports is crucial for a country. The importing and exporting activity of a country can influence a country’s GDP, its exchange rate, and its level of inflation and interest rates.

Effect on Gross Domestic Product

Gross domestic product (GDP) is a broad measurement of a nation’s overall economic activity. Imports and exports are important components of the expenditures method of calculating GDP. The formula for GDP is as follows:

In this equation, exports minus imports (X – M) equals net exports. When exports exceed imports, the net exports figure is positive. This indicates that a country has a trade surplus. When exports are less than imports, the net exports figure is negative. This indicates that the nation has a trade deficit.

A trade surplus contributes to economic growth in a country. When there are more exports, it means that there is a high level of output from a country’s factories and industrial facilities, as well as a greater number of people that are being employed in order to keep these factories in operation. When a company is exporting a high level of goods, this also equates to a flow of funds into the country, which stimulates consumer spending and contributes to economic growth.

How Imports And Exports Affect You

When a country is importing goods, this represents an outflow of funds from that country. Local companies are the importers and they make payments to overseas entities, or the exporters. A high level of imports indicates robust domestic demand and a growing economy. If these imports are mainly productive assets, such as machinery and equipment, this is even more favorable for a country since productive assets will improve the economy’s productivity over the long run.

A healthy economy is one where both exports and imports are experiencing growth. This typically indicates economic strength and a sustainable trade surplus or deficit. If exports are growing, but imports have declined significantly, it may indicate that foreign economies are in better shape than the domestic economy. Conversely, if exports fall sharply but imports surge, this may indicate that the domestic economy is faring better than overseas markets.

For example, the U.S. trade deficit tends to worsen when the economy is growing strongly. This is the level at which U.S. imports exceed U.S. exports. However, the U.S.’s chronic trade deficit has not impeded it from continuing to have one of the most productive economies in the world.

However, in general, a rising level of imports and a growing trade deficit can have a negative effect on one key economic variable, which is a country’s exchange rate, the level at which their domestic currency is valued versus foreign currencies.

Impact on Exchange Rates

The relationship between a nation’s imports and exports and its exchange rate is complicated because there is a constant feedback loop between international trade and the way a country’s currency is valued. The exchange rate has an effect on the trade surplus or deficit, which in turn affects the exchange rate, and so on. In general, however, a weaker domestic currency stimulates exports and makes imports more expensive. Conversely, a strong domestic currency hampers exports and makes imports cheaper.

If the dollar were to strengthen against the Indian rupee to a level of 55 rupees (to one U.S. dollar), and assuming that the U.S. exporter does not increase the price of the component, its price would increase to 550 rupees ($10 x 55) for the Indian importer. This may force the Indian importer to look for cheaper components from other locations. The 10% appreciation in the dollar versus the rupee has thus diminished the U.S. exporter’s competitiveness in the Indian market.

The result of the 10% appreciation of the dollar versus the rupee has rendered U.S. exports of electronic components uncompetitive, but it has made imported Indian shirts cheaper for U.S. consumers. The flip side is that a 10% depreciation of the rupee has improved the competitiveness of Indian garment exports, but has made imports of electronic components more expensive for Indian buyers.

When this scenario is multiplied by millions of transactions, currency moves can have a drastic impact on a country’s imports and exports.

Impact on Inflation and Interest Rates

Inflation and interest rates affect imports and exports primarily through their influence on the exchange rate. Higher inflation typically leads to higher interest rates. Whether or not this results in a stronger currency or a weaker currency is not clear.

Traditional currency theory holds that a currency with a higher inflation rate (and consequently a higher interest rate) will depreciate against a currency with lower inflation and a lower interest rate. According to the theory of uncovered interest rate parity, the difference in interest rates between two countries equals the expected change in their exchange rate. So if the interest rate differential between two different countries is two percent, then the currency of the higher-interest-rate nation would be expected to depreciate two percent against the currency of the lower-interest-rate nation.

However, the low-interest-rate environment that has been the norm around most of the world since the 2008-09 global credit crisis has resulted in investors and speculators chasing the better yields offered by currencies with higher interest rates. This has had the effect of strengthening currencies that offer higher interest rates.

Of course, since these investors have to be confident that currency depreciation will not offset higher yields, this strategy is generally restricted to the stable currencies of nations with strong economic fundamentals.

A stronger domestic currency can have an adverse effect on exports and on the trade balance. Higher inflation can also impact exports by having a direct impact on input costs such as materials and labor. These higher costs can have a substantial impact on the competitiveness of exports in the international trade environment.

Economic Reports

A nation’s merchandise trade balance report is the best source of information to track its imports and exports. This report is released monthly by most major nations.

These reports contain a wealth of information, including details on the biggest trading partners, the largest product categories for imports and exports, and trends over time.

Difference Between Import and Export

March 28, 2011 Posted by Olivia

The key difference between import and export is that import refers to buying goods or services from any other country to the home country while export refers to selling goods or services of the home country to another country of the world.

Import and export are terms that are commonly heard in international trade and these are activities that are carried out by all countries of the world. Since no country in the world is self-sufficient, all countries both import as well as export.

CONTENTS

What is Import?

Import means receiving items or services to the home country from another country on the financial basis. Basically, import is buying products and services from other countries. It directly affects the economic status of the receiving country. A lot of countries import the crude oil and fuel from Middle East countries that are rich with them. Therefore, the importing countries have to spend a lot of their national income to import these necessary resources to their countries.

Figure 01: Container Ship importing Goods

It is the endeavor of all countries of the world to achieve parity in their exports and imports. But in reality, it is never so and this is where the balance of payment creeps in. In an ideal situation, where exports equal imports, a country can utilize the money earned through exports to import goods and services it requires. Today there is so much of interdependency in the world that companies and nations prefer to import items that they cannot manufacture or which prove to be costlier if they try to produce themselves.

Therefore, there should be a balance between a country’s imports and exports. If a country imports more and exports less, that means there is an imbalance in buying and selling resources of that country and it can lead to serious economic fluctuations of the country.

What is Export?

Export means sending items or services from one country to the home country on a financial basis. If a country is rich in a particular ore as it has natural reserves of that ore in the form of mines, the country can export that ore to other countries of the world. This is particularly true of oil-producing countries that are exporters of crude oil. However, all such countries are dependent on other countries for many other products and services which is why they need to import such items from other countries of the world.

Exports earn money for a country, while imports mean expenses. For example, India is a country that has a huge number of qualified manpower in the IT sector. This manpower exports its services to companies doing business in other countries thus earning foreign currency for India. On the other hand, India is dependent for oil and arms on other countries and needs to import them for its energy requirements as well as its army. It can spend the foreign currency it earns through exports to import goods and services it is deficient in. This is the basic concept behind exports and imports.

In fact, there are companies that specialize in exporting and importing and can arrange goods for any company from a foreign country on a short notice as it has a well developed liaising network. Similarly, the massive companies in China export products in large quantities making China, the leading exporting country in the worlds.

What is the Difference Between Import and Export?

Import and Export are significant activities in the international trade. Import basically means buying goods and services from other countries to fulfill the demand for the goods or services that are absent or in shortage in the home country.

On the contrary, Export basically means selling goods and services from the home country to other countries so that their global presence and their global market will increase and new demands for their domestic goods and services will similarly flourish.

Summary – Import vs Export

Both import and export are essential for the development of any country as no nation is self-sufficient. The difference between import and export is that import means buying goods or services from a different country to the home country while export means selling goods or services of the home country to another country in the world. Therefore, there should be a proper balance between the imports and exports of a country since problem arises when imports are too high while exports are too low leading to a serious balance of payment in a country.

Image Courtesy:

1.’Ever Given container ship’ By NOAA’s National Ocean Service (CC BY-SA 2.0) via Commons Wikimedia