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Division of and Procedures for International Trade, Balance of Trade and Balance of Payments

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Vital steps are taken when processing an international trade. Considering import trade, export trade and entreport, balance of trade and balance of payments are also essential elements in making an international trade successful.

Procedures for International trade

For international trade to take effect, certain procedures must be followed. The step by step procedures are:

1. The importer and exporter are brought together through difference means e.g, letter of inquiry.

2. The next step is for the producer to send quotations to the buyer in response to the letter of inquiry. The quotation will show the description and features of the products.

3. After receiving the quotation, the importer will place an order with the manufacturer. The indent will show details of goods, prices and date of delivery.

4. The next step is to make arrangement for payment through any agreed means of payment e.g, documentary credit, telegraphic mail transfer, etc.

5. Then, an agreement for the goods to be shipped through a shipping company will be made. The shipping agent will get all the necessary documents like shipping note, calling forward note, etc; the goods will be packed and well arranged in containers.

6. The exporter will then prepare and send copies of bill of lading to the importer in advance. Other documents that will accompany the consignment will be prepared and sent.

7. When the goods arrive, the clearing agent will process and complete all necessary documents. The agent will check the manifest to endure that the goods are on board. The customs personnel will assess the consignment and compute the duties to be paid.

8. The goods will be taken to the warehouse after all necessary documentations have been completed.

Divisions of international Trade

International trade can be divided into three: import, export and entrepot trades:
Import trade: This is the act of buying goods and services from other countries. It is sometimes restricted to control a country’s balance of payment. The goods are imported either in response to direct orders or on consignment. Import can either be visible or invisible. Visible imports consist of goods that can be seen and touched I.e, tangible goods which come from other countries for example, automobiles, electronics, plants, and machinery etc. Invisible imports on the other hand consists of services rendered by other countries that cannot be seen or touched. Examples of invisible imports are banking, tourism, aviation, etc. This will appear in the balance of payments.

Export trade: Export trade may be defined as the act of selling goods and services to other countries. It is the selling of a country’s products abroad. Some governments frequently attempt to encourage exporters by introducing export subsidy. Export can equally be divided into visible and invisible exports.

Entrepot: This is a form of foreign trade in which goods shipped to one port are subsequently re-exported to another port. If customs duty had been paid on imported goods which are later re-exported, the duty can be claimed back. Simply put, entrepot is the re-exporting of goods imported from other countries.

Balance of trade and Balance of payment
Balance of trade refers to the total value of goods sold and bought by a country during a given period, usually a year. When visible exports equal visible imports in monetary terms we have balance of trade. A positive balanced of trade means that a country is exporting more in monetary terms than it is importing while negative or unfavorable balance of trade means that a country is importing more in monetary terms than it is exporting.

Balance of payment is a statement or record showing the relationship between a country’s totally payments to other countries and its total receipts from them in a year. A country’s balance of payment can be grouped into three parts, namely current account, capital account and monetary movement account.

There are lots of technicalities when processing an international trade, but here are the simple basics just to have an idea that foreign trade is not just about buying from another country or selling to them.