Introduction to Foreign Trade

Question 1

Define Foreign Trade.

Answer 1

The process of exchanging goods and services among individuals and firms from two different countries.

Question 2

Why does Foreign Trade occur?

Answer 2

• Interdependence between nations, human wants and different resources.
• various countries have different factors of contribution.
• Variations in technical development, hence different type of production.
• Variations in labour and entrepreneurial skills.
• Factors of production cannot be moved.

Question 3

What is a G.R. Form?

Answer 3

A document issued by the Reserve Bank of India.
It is an exchange control form.
The exporter is requires to submit the form with other documents at the customs

Question 4

Within what time must the exporter submit a GR Form?

Answer 4

Within six months of the goods being shipper or exported from India.

Question 5

What is an inspection certificate?

Answer 5

It is a document that certifies that the goods are in a good condition at the time of inspection. Making sure the goods are fit to be exported to foreign countries.

Question 6

What conditions must the export consignment fullfil?

Answer 6

The conditions of Quality and Inspection Act, 1963.

Question 7

Who issues the inspection certificate in the United States Of America?

Answer 7

The Department of Agriculture

Question 8

What goods require an inspection certificate?

Answer 8

1. Livestock animals - sheep, cattle, poultry, etc.
2. fruits and Vegetables
3. Grains, pulses and other food items.

Question 9

When goods are shipped to the European Union, what authority must provide an inspection certificate?

Answer 9

CE ( Conformite Europeene ) mark

The CE mark is a guarantee that the merchandise is safe and healthy.

Question 10

What is Bill of Lading?

Answer 10

It is a receipt for shipment and a summary of freight charges. It serves as a contract between the exporter and the carrier. It states the terms in which the goods are to be carried.

Question 11

What is Bill of Exchange?

Answer 11

It is a document used in international trade to pay for goods & services.

It is signed by the person promising to pay and given to the person entitled to receive the payment.

The bill is made payable on demand or after a definite period of time.

Question 12

Who orders to pay/ the one that creates the bill?

Answer 12

Drawer

Question 13

Who is directed to pay the bill / accept it?

Answer 13

Drawee

Question 14

What is certificate of origin?

Answer 14

It is a certification in which the name of the country is specified, where goods have been manufactured or produced.

Question 15

Why is a certificate of origin required?

Answer 15

To ensure that products from banned countries are not imported, the importing authorities seek for a certificate of origin.

Question 16

What does a certificate of origin contain?

Answer 16

1. The name of the country of origin, where the shipped goods have been produced.
2. Name and address of the exporter.
3. Name and address of the importer.
4. Brief description of the goods being shipped.
   5.Tax identification number of the exporter
5. Tax identification number of the importer
6. Type of tariff which the trader is applicable

Question 17

Explain the Marine Insurance Policy

Answer 17

The Marine Insurance Policy refers to the protection of goods which are being transported from one place to another for trading purposes.

It covers all risks associated with loss or damage of goods which carries from one place to another.

Question 18

What is a Marine Declaration Form (MDF)?

Answer 18

It is the first step for initiating the Marine Insurance Policy. It is signed by an insurance personnel and contains the following information:
- proposer individual’s name and address.
- the voyage period of the marine insurance policy.
- Amount to be insured
- Complete details of the cargo to be insured.
- subject matter of insurance policy.

Question 19

Define Visible Trade.

Answer 19

It is the trade of physical or tangible goods.
It is trading of physically touched goods.

Question 20

What are international merchandise trade transactions?

Answer 20

international merchandise trade transactions are visible trades in one of the type of external foreign trade.

Question 21

What are the types of Marine Insurance Policy?

Answer 21

• Port Policy
• Fleet Insurance Policy
• Blanket Policy
• Floating Policy

Question 22

Explain the types of Marine Insurance Policies.

Answer 22

Port Policy-
When a loss is occurred to a ship when stationed or anchored to a port, it is compensated by port policy.

Fleet Insurance Policy -
Covers all passenger boats (liners) and steamers owned by the policy holder.

Blanket Policy-
It covers the risks for a fixed amount. A premium is paid by the insured at the time of making the contract. When a mishap occurs, loss is compensated by the insurer and the premium amount is re-adjusted based on the loss.

Floating Policy -
This policy is used by cargo owners who are required to make periodic cargo shipment. They take insurance for for a certain amount of time. Each time they send out a shipment, they announce it to the insurer, who deducts it from the total value of the policy.

Question 23

What is Entrepot Trade?

Answer 23

It refers to a trade where imported goods are being exported again to some other country.

Question 24

What does Entrepot Trade require?

Answer 24

Large storage warehouses, packaging and sorting infrastructures near the sea port.

Question 25

Who are involved in a bill of exchange?

Answer 25

Drawer
Drawee
Endorser
Holder
Acceptor
Payee
Endorsee