Basic Terms in Trade

Date: 2015-10-07; view: 746.

Countries buy and sell various goods as well as various services. Goods bought from abroad, such as food, cars, machines, medicines, books and many others, are called visible imports. Goods sold abroad are called visible exports. Services, such as insurance, freight, tourism, technical expertise and others, are called invisible imports and invisible exports. The total amount of money a country makes including money from visible and invisible exports, for a certain period of time, usually for a year, is Gross National Product, or GNP. The difference between a country's total earnings or GNP, and its total expenditure is called its balance of payments. The difference between what a country receives for its visible exports and what it pays for its visible imports is its balance of trade. If a country sells more goods than it buys, it will have a surplus. If a country buys more than it sells, it will have a deficit.

Many import or export deals are arranged through an exporter's agentor distributorabroad - in this case the importer buys from a company in his own country and this company imports the goods. Alternatively, the deal may be arranged through an importer's buying agentor a buying houseacting for the importer, or through an export housebased in the exporter's country. In this situation, the exporter sells directly to a company in his own country, who will then export the goods.

Prices for exports may be quoted in the buyer's currency, the seller's currency or in a third 'hard' currency (e.g. US dollars). The price quoted always indicates the terms of delivery,which conform to the international standard known as incoterms.The terms of delivery that are most common depend on the kinds of goods being traded and the countries between which the trade is taking place.

CFR –this price includes Cost and Freight,but not insurance, to a named port of destination in the buyer's country.

CIF –thisprice covers Cost, Insurance and Freight toa named port of destination in the buyer's country.

EXW –this price is the Ex-Workscost of the goods. The buyer arranges collection from the supplier and pays for freight carriage and insurance.

FOB –this price includes all costs of the goods Free On Boarda ship for aircraft) whose destination is stated in the contract. The buyer pays for onward shipment and insurance.

An import/export transaction usually requires a lot of complicated documentation. Many different arrangements have to be made and this can be difficult when one firm is dealing with another firm on the other side of the world. Different documentsmay be needed, for example: Bill of Lading; Dangerous Goods Note; Sea Waybill; Air Waybill; Shipping Note; Certificate of Insurance.