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

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 the exporter meet through different means, for example, a consultation letter.

2. The next step is for the producer to send quotes to the buyer in response to the inquiry letter. The quote will show the description and characteristics of the products.

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

4. The next step is to make arrangements for payment through any agreed payment method, eg letter of credit, telegraphic mail transfer, etc.

5. Then, an agreement will be made for the merchandise to be shipped through a shipping company. The shipping agent will get all the necessary documents such as consignment note, forwarding note, etc. the goods will be packed and well arranged in containers.

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

7. When the merchandise arrives, the clearing agent will process and complete all the necessary documents. The agent will check the manifest to verify that the merchandise is on board. Customs personnel will assess the shipment and calculate the duties to be paid.

8. The merchandise will be taken to the warehouse after all the necessary documentation has been completed.

International Trade Divisions

International trade can be divided into three: import, export and warehouse trade:

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 payments. Goods are imported either in response to direct orders or on consignment. The import can be visible or invisible. Visible imports consist of goods that can be seen and touched, that is, tangible goods that come from other countries, for example cars, electronics, plants and machinery, etc. Invisible imports, on the other hand, consist of services provided 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 can be defined as the act of selling goods and services to other countries. It is the sale of the products of a country abroad. Some governments frequently try to encourage exporters by introducing export subsidies. The export can be equally divided into visible and invisible exports.

Deposit: This is a form of foreign trade in which goods shipped to one port are subsequently re-exported to another port. If customs duties have been paid on imported goods that are later re-exported, the customs duty can be claimed. In a nutshell, the warehouse is the re-export of imported goods from other countries.

Balance of Trade and Balance of Payments

The trade balance refers to the total value of goods sold and purchased by a country during a given period, usually one year. When visible exports are equal to visible imports in monetary terms, we have a trade balance. A positive trade balance means that a country exports more in monetary terms than it imports, while a negative or unfavorable trade balance means that a country imports more in monetary terms than it exports.

Balance of payments is a statement or record that shows the relationship between the total payments of a country to other countries and the total receipts from them in a year. The balance of payments of a country can be grouped into three parts, namely current account, capital account and money movement account.

There are many technicalities when processing an international trade, but these are the simple basics to get an idea that foreign trade is not just about buying from or selling to another country.