INTERNATIONAL

COMMERCE
TERMS
TECHNICAL ENGLISH 4
VOCABULARY
TRADE
TRADE
 Trade refers to the act or process of buying, selling, or exchanging commodities
from one person or entity to another, and the network that allows trade is a
market.
 Trade can be either wholesale or retail, within a country or between countries.
Retail trade consists of the sale of goods to the people who will use them, the end
users, as opposed to wholesale which is selling to someone who sells to
consumers. Retailing takes place at department stores, malls and markets, online
or by mail, while wholesaling occurs in large warehouses, where wholesalers store
and repack the goods they buy from the producer to redistribute them in smaller
lots.
LOCAL AND INTERNATIONAL TRADE

Markets are available locally as well as internationally.

 Local trade is carried out within countries, cities, towns or villages and it takes
place in markets and stores where items of local needs are traded.

 On the other hand, international trade is the exchange of commodities between

two or more countries.
INTERNATIONAL COMMERCE – EXPORTS AND IMPORTS -

International commerce can be defined as trade between states or nations. In the

trade process, products or services are exchanged.

 Exports are goods and services sold to one country from another.

 Imports are goods or services bought by one country from another country.
IMPORTANCE

 Almost no human being lives with things manufactured in their home country, and
there is no single country in the world which is self-reliant.

 With international exchanges of goods and services, countries get to enjoy a wider
variety of goods that may have a better quality. Besides that, the key reason for
trade is that by trading goods, countries can afford to specialize in producing only
some items that they are relatively better at producing.
HISTORY
 In 1947 the General Agreement on Tariffs and Trade (GATT) was created to reduce
tariffs between 23 nations, and it was replaced by the World Trade Organization
(WTO) in 1995. In 1957 the European Economic Community was formed, and in
the 1980s and early 90s European leaders signed agreements that would create
a unified European economy in 1993. In 1992 leaders from the United States,
Canada, and Mexico signed a treaty to form a North American free trade zone
(NAFTA).
INTERNATIONAL TRANSACTIONS

 The import-export process involves a lot of documentation, which plays an

extensive role in international transactions.

 The process starts at the origin. Once the products are ready, the manufacturer
will issue a certificate of manufacture certifying that the goods have been made
to the buyer’s specifications. Before shipping, the goods will be inspected and
they will be given a certificate of inspection, which certifies that the merchandise
meets the required standards
 Once the merchandise is given the certificate of manufacture, the seller will issue
a proforma invoice and the buyer may obtain a letter of credit to finance the
payment. Next, the seller will draw up a bill of lading and arrange shipment under
internationally agreed terms, known as incoterms.

 When a shipment reaches its destination, merchandise is often stored in a

bonded warehouse until the import tax or duty is paid. The importer or the
designated licensed customs broker files the entry documents for the goods port
of entry. Imported goods are not legally entered only after the shipment has
arrived within the port of entry, delivery of the merchandise has been authorized
by the customs, and estimated duties have been paid. Finally, the importer has to
arrange for examination and release of the goods.
LOGISTICS

 Logistics is the process of planning, implementing, and controlling procedures for

the efficient and effective transportation and storage of goods from the point of
origin to the point of consumption for the purpose of conforming the customer’s
requirements. The concept of logistics involves the integration of information,
transportation, inventory, warehousing, material handling and packaging.
THE MODES OF TRANSPORT IN LOGISTICS

 The choice of one or more means of transport depends upon the quantity of
product to be shipped, the type of product, the distance between the source and
the destination, the price, etc. Transportation may take place via air, water, rail,
road, pipelines or cables.
HAULAGE

Haulage is the business of transporting the goods by road or rail. Road

transportation is done through lorries or trucks, and it plays a major role in handling
cargo. It is cost effective and ideal for short distances and for transporting
perishables.
 Trucks have different capacities and they can reach small towns which do not
have railway stations.
 On the other hand, through rail freight transport, a larger volume of cargo can be
handled in a short period of time. It is energy and cost effective and very reliable.
It has the downside of lack of flexibility, being subject to rail freight operators
timetable. Moreover, suppliers and customers are not always located near a rail
freight depot, which is a limitation in final destinations.
WATERWAYS
 Waterways is the cheapest means of transportation, large volume of world trade
is done through ships. It is used by businesses for the delivery of goods from
distant suppliers. It is ideal for transporting heavy and bulky goods, suitable for
products.

 Unlike the road transport, when you can contact the driver at any time, ships are
difficult to monitor, so you do not know the exact location of the goods in transit.
Additionally, bad weather can put the cargo at risk.

 While sea transportation is the cheapest, airways is the most costly, though the
fastest. It is normally used for valuable goods having less volume.
BUSINESS AGREEMENTS

 Merchandise being transported internationally is usually subject to the Incoterms

standards issued by the International Chamber of Commerce.
 In order to avoid disagreements resulting from differences in trading practices in
different countries, the International Chamber of Commerce (ICC) created
incoterms in 1936 describing clearly the duties of the seller and the buyer.
THE INTERNATIONAL CHAMBER OF COMMERCE (ICC)

 The International Chamber of Commerce (ICC) is an international organization

that works to promote and support global trade and globalization. It serves as an
advocate of world business in the global economy, in the interests of economic
growth, job creation, and prosperity. As a global business organization, made up
of member states, it helps the development of global outlooks on business
matters. ICC has direct access to national governments worldwide through its
national committees among others.
INCOTERMS

 The word incoterms is an abbreviation of International Commercial Terms.

Incoterms are a set of international rules for the interpretation of the most
commonly used terms in international trade and are used to divide transaction
costs and responsibilities between buyer and seller and reflect state-of-the-art
transportation practices.
Incoterms deal with questions related to the delivery of the products from the seller

to the buyer. This includes:

 the transport of products

 export and import clearance responsibilities

 who pays for what

 who has risk for the condition of the products at different locations within the

transport process
Agreement

 Expenses: who is responsible for the expenses involved in a shipment at a given

point in the shipment’s journey

 Control: who owns the goods at a given point in the journey

 Responsibility: who is responsible for paying damage to goods at a given point in a

shipment’s transit
Incoterms categories Incoterms are standard trade definitions and grouped in four
different categories:

 Terms beginning with E: a seller’s responsibilities are fulfilled when goods are
ready to depart from their facilities.

 Terms beginning with F: refer to shipments where the primary cost of shipping is
not paid for by the seller.

 Terms beginning with C: deal with shipments where the seller pays for shipping.

 Terms beginning with D: cover shipments where the shipper/seller’s responsibility

ends when the goods arrive at some specific point.
 Because shipments are moving into a country, D-terms usually involve the
services of a customs broker and a freight forwarder. In addition, D-terms also
deal with the docking charges found at virtually all ports and determining who is
responsible for each charge
 INCOTERMS

1. INCOTEREMS https://youtu.be/eA88qkSliQ0

2. EXW https://youtu.be/ENffiby27_M

3. FOB https://youtu.be/qF_xIBd9Njk

4. C GROUP https://youtu.be/2NvZk1tjdxY

5. D GROUP https://youtu.be/JRl5l-SoIvw