Export Trade Mechanism

Introduction
Exporting is indispensable part of international business.
Goods manufactured in one country , destined for another
, must be moved across border to enter the distribution
system of the target market.
Most countries control the movement of goods crossing
their borders, whether leaving(export) or entering(import).
Export and Import documents , tariffs ,quotas and
other barriers to the free flow of goods between
nations are requirements that must be met by either
the exporter or the importer or both.
The mechanism of exporting adds extra steps and costs to
an international business process.
 In addition to selecting a target
market, designing an appropriate
product , establishing a price,
planning a promotional program
and selecting a distribution
channel, the international marketer
must meet the legal requirements
of moving goods from one country to
another.
 The Exporting Process
Leaving the Physical Entering the
Exporting Country Distribution importing country
Licenses International shipping Tariffs, Taxes
General and logistics
Validated
Documentation Packing Nontariff barriers
Export declaration Insurance Standards
Commercial invoice Inspections
Bill of lading Documentation
Consular invoice Quotas
Special Certificates Fees
Other documents Licences
Subsidy
Exchange permits
Other barriers
 Need for these regulations
There are many reasons why countries impose
some form of regulation and restriction on the
exporting and importing of goods.
Export regulations can be designed to conserve
scarce goods for home consumption or to
control the flow of strategic goods to actual
or potential enemies.
Import regulations may be imposed to protect
health ,conserve foreign exchange, serve as
economic reprisals, protect home industry,
or provide revenue in the form of tariffs.
 Export Documents
Each export shipment requires
various documents to satisfy
government regulations
controlling exporting as well as to
meet requirements for
international commercial
payment transactions.
The most frequently required
documents are :
 Licenses
A general license permits exportation of
certain commodities with nothing more than a
declaration of the type of product, its value
,and its destination.
A validate license is issued only on formal
application, is a specific document
authorizing exportation within specific
limitations.
It is required for exporting strategic goods or
when exporting to unfriendly countries.
For eg. Arms and ammunition.
 Other Export Documents
In addition to a validated license, certain
shipment must be supported by
documents supplied by the prospective
purchaser or the government of the
country of destination.
International Import Certificate certifies that
the exported products will be disposed of
responsibily in the designated country. This
form is ordinarily obtained by the importer
from his or her government.
 Export Declaration To maintain a statistical
measure of the quantity of goods shipped
abroad and to provide a means of determining
whether regulations are being met , most
countries require shipments abroad to be
accompanied by an export declaration.

Usually such a declaration , presented at the

port of exit, includes the names and the
addresses of the principals involved, the
destination of the goods, a full
descriptions of the goods, and their
declared value.
 Consular Invoice or Certificate of Origin Some
countries require consular invoices. Proper forms
must be obtained from the countrys
consulate and returned with two to eight
copies in the language of the country, along
with the copies of other required documents,
before certification is granted.
Bill of Lading The bill of lading is the most
important document required to establish legal
ownership and facilitate financial
transactions. It serves the following purposes:
1. As a contract for shipment between the carrier
and shipper.
2. As a receipt from the carrier for shipment, and
3. As a certificate of ownership or title to the
goods.
 Commercial Invoice Every international
transaction requires a commercial invoice , that
is a bill or statement for goods sold. This
document often serves several purposes; some
countries require a copy for customs
clearance and it is one of the financial
documents required in international
commercial payments.
Insurance Policy or Certificate The risks of
shipment due to political or economic unrest
in some countries, and possibility of damage
from sea and weather, make it absolutely
necessary to have adequate insurance covering
loss due to damage, war or riots.
 Terms of Sale
Contracts involving international transportation often
contain abbreviated trade terms that describe matters
such as the time and place of delivery, payment, when the
risk of loss shifts from the seller to the buyer and who pays
the costs of freight and insurance.
The most commonly known trade terms are Incoterms,
published by the International Chamber of Commerce
(ICC).
The most commonly used international trade terms are-
CIF-(cost, insurance, freight) to a named overseas port of
import.A CIF quote is more meaningful to the overseas
buyer because it includes the cost of goods, insurance and
all transportation and miscellaneous charges to the named
place of debarkation. A trade term requiring the seller to
arrange for the carriage of goods by sea to a port of
destination, and provide the buyer with the documents
necessary to obtain the goods from the carrier.
 C & F (Cost and Freight) to named
overseas port. The price includes the cost
of the goods and transportation costs to
the named place of debarkation.The cost
of insurance is borne by the buyer.
FAS ( Free alongside) at a named port of
Export. The price includes cost of goods
and charges for delivery of goods
alongside the shipping vessel. The buyer
is responsible for the cost of loading on
to the vessel, transportation and
insurance.
 Importing in a Country
Despite the theoretical support for
free trade, governments, more often
have interfered with international
movement of goods.
These restricted measures consists
of chiefly- Tariffs and Non tariffs trade
barriers.
Tariff or customs duty may be called
a tax imposed by a government
on physical goods as they move
 Tariffs are levied either purely to collect revenue
to meet the government expenditure or to protect
domestic industries against foreign competition.
At times tariff rates may be raised to meet the
balance of payments difficulties.
The protection function of tariff depends upon a
partial or complete restriction of imports.
Complete protection is afforded when duty is
levied at a level to meet the difference in the
marginal cost of production between the domestic
product and foreign (imported) product.
In case of partial protection, goods will continue
to be imported( to meet the demand and supply),
but in quantities required to meet the local
demand.
 Non Tariff Barriers
Tariff Quota Under this a specified quantity of
product is permitted to enter the country at a
given rate of duty or even duty free. Any additional
quantity may be imported ,however,may pay a
higher duty.
Antidumping Regulations- Dumping of goods by
an exporter denotes that a product is sold in
another countrys market at a lower price than in
exporting countrys market.
Antidumping duty is intended to nullify the harmful
effects of the lower dumping price on domestic
producers.
 Subsidy Another form of non tariff
is grant of subsidy to domestic
producers or exporter to stimulate
the expansion of indigenous industry.
Subsidy may be granted by way of
cash payment or by way of tax
exemption or any other form of
favorable treatment.