BENEFITS OF INTERNATIONAL BUSINESS

TO COUNTRIES(EMI2)

1.EARNING OF FOREIGN EXCHANGE-

International business helps a country to earn foreign exchange which can be used to import capital
goods,technology ,petroleum products etc .

2.MORE EFFICIENT USE OF RESOURCES-

Every country possess some or the other resources.Every country tries to use the resources in the best possible
manner and gradually become more efficient and specialised in using these resources than other countries.Eg-
Japan may produce electronic products more efficiently than India and India may produce agricultural products
more efficiently than Japan .So with international business,countries can get the benefit of specialisation .

3. INCREASES STANDARD OF LIVING –

In the absence of international business,it would not have been possible for the world community to use the goods
and services produced in other countries.The people living in developing and underdeveloped countries can use the
products and increase their standard of living .

4.IMPROVING GROWTH PROSPECTS AND EMPLOYMENT POTENTIAL –

International business boosts up the economic growth of a county as the firms of developing countries increase their
production capacity to supply goods in foreign countries .Increased production results in increase in GDP leading to
economic growth of the country .International business also creates employment opportunities for the people.

TO FIRMS(13P2)

1.INCREASED CAPACITY UTILISATION-

Companies involved in International business increase their production capacity .With increase in production
capacity these firm can get the benefits of large scale production and reduce cost of production .

2.WAY OUT FROM INTENSE COMPETITION IN THE DOMESTiC MARKET-

High competitive domestic market drives many companies to go international in search of markets for their products
.This helps them to grow and expand.

3.IMPROVED BUSINESS VISION –

The vision to become international comes from the urge to grow.Companies get strategic and technical advantage by
going international .

4.PROSPECTS FOR HIGHER PROFIT

Generally international business is more profitable than domestic business.When the prices in domestic market are
low then firms can sell at high price in international market .

5.PROSPECTS FOR GROWTH-

When the demand for products starts becoming saturated in domestic countries then such firms can enhance their
business by approaching international market.This is the main motivation for many MNC’S at developed
countries to enter in the market of developing countries.
 IMPORT PROCEDURE
1) Trade enquiry and sending quotations

 The domestic buyer who wishes to buy goods from other countries sends an inquiry relating to
price, desired quality, terms and conditions for the export of the goods.
 The exporter sends a reply to the inquiry in the form of ‘Quotation’.
 The quotation is also known as ‘Proforma Invoice’ which contains information about the selling
price, quantity, quality, mode of delivery, etc.

(2) Procurement of import license

 Goods can be imported only upon the license, the importer requires to obtain an import license.
 In India ,it is obligatory for every importer and exporter to get registered with DGFT (Directorate
General Foreign Trade ) or Regional Import Export Licensing Authority and obtain an IEC no .

(3) Obtaining foreign exchange

 The overseas supplier asks for payment in a foreign currency.

 The payment requires the exchange of Indian currency into foreign currency.
 In India, transactions related to foreign exchange are governed by the Reserve Bank of India
(RBI) under the Exchange Control Department.

(4) Placing order or indent

 The importer places an order or indent with the exporter .The import order contains
information such as price,quantity ,size ,grade ,quality of goods ordered ,instructions
related to packaging ,shipping ,delivery schedule,mode of payment etc .

(5) Obtaining letter of credit

 A letter of credit is a guarantee issued by importers bank that it will honour payment upto
certain amount of export bills to the bank of the exporter .
 Letter of credit is the most appropriate and secured method of payment adopted to settle
international transactions .

(6) Arrangement of finance

 The importer makes the finance settlements in advance to remunerate the exporter when the
shipment arrives at the destination.

(7) Receipt of shipment advice

 After storing the consignment on the ship, the exporter sends the shipment advice to the
importer.
 The shipment advice contains information about the shipment of the goods .It includes :-
Invoice number ,bill of lading or airway bill , port or destination of export , Classification of goods
and quantity, Date of the sailing of the vessel etc

8)Retirement of Import documents –

  After shipment of goods ,the exporter submits various documents to his banker
.The set of documents includes-Bill of exchange ,Invoice ,Bill of lading /airway
bill,marine insurance policy ,packing list ,certificate of origin .
 Bill of exchange is of 2 types-Documents against payment(sight draft ) and
documents against acceptance(usance draft )
 Once the retirement is over ,the bank hands over the import documents to the
importer .

(9) Arrival of goods

 The person in charge of the carrier, whether it be a ship or an airline,

notifies the person in charge at the dock or the airport of the arrival of
goods in the importing country. The import general manifest document is
presented by him.Import General Manifest is the document on the basis of
which unloading of cargo takes place .It is the document that contains
details of the imported goods .
(10) Customs clearance and release of goods-

 All the goods imported to Indi ahas to pass through custom clearance after they
cross indian borders .Importers appoint C& F agent (Clearing and Forwarding agent )
who are well versed with all the formalities and play an important role in getting the
goods custom cleared .
 Bill of entry is a form supplied by custom office to the importer .The importer fills in
the bill of entry for assessment of custom duty .
Export Procedure
(i) Receipt of enquiry and sending quotations:
The exporter sends a reply to the enquiry of the importer in the form of a quotation referred to as proforma
invoice. The proforma invoice contains information about the price at which the exporter is ready to sell the
goods and also provides information about the quality, grade, size, weight, mode of delivery, type of packing
and payment terms.

(ii) Receipt of order or indent:

In case the importer finds the export price and other terms and conditions acceptable, it places an order for
the goods to be despatched. This order is known as indent. Exporter receive the order/indent from the
importer.

(iii) Assessing importer’s creditworthiness and securing a guarantee for payments:

After receipt of the indent, the exporter makes necessary enquiry about the creditworthiness of the
importer.Most exporters demand a letter of credit from the importer. A letter of credit is a guarantee issued
by the importer’s bank that it will honour payment up to a certain amount of export bills to the bank of the
exporter. Letter of credit is the most appropriate and secure method of payment adopted to settle
international transactions.

(iv) Obtaining export licence:

Important pre-requisites for getting an export licence are as follows:
• Opening a bank account in any bank authorised by the Reserve Bank of India (RBI) and getting an account
number.
• Obtaining Import Export Code (IEC) number from the Directorate General Foreign Trade (DGFT)
• Registering with appropriate export promotion council.
• Registering with Export Credit and Guarantee Corporation (ECGC) in order to safeguard against risks of non
payments.

(v) Obtaining pre-shipment finance:

Preshipment finance is the finance that the exporter needs for procuring raw materials and other
components, processing and packing of goods and transportation of goods to the port of shipment.

(vi) Production or procurement of goods: Having obtained the preshipment finance from the bank, the
exporter proceeds to get the goods ready as per the specifications of the importer. Either the firm itself
goes in for producing the goods or else it buys from the market.

vii) Pre-shipment inspection: The Government of India has initiated many steps to ensure that only good
quality products are exported from the country. One such step is compulsory inspection of certain products by
a competent agency as designated by the government. The government has passed Export Quality Control
and Inspection Act, 1963 for this purpose. and has authorised some agencies to act as inspection agencies

viii) Excise clearance: The exporter, therefore, has to apply to the concerned Excise Commissioner in the
region with an invoice. If the Excise Commissioner is satisfied, he may issue the excise clearance.
(ix) Obtaining certificate of origin:
The certificate of origin acts as a proof that the goods have actually been manufactured in the country from
where the export is taking place. This certificate can be obtained from the trade consulate located in the
exporter’s country.

(x) Reservation of shipping space: The exporting firm applies to the shipping company for provision of
shipping space. It has to specify the types of goods to be exported, probable date of shipment and the port of
destination. On acceptance of application for shipping, the shipping company issues a shipping order. A
shipping order is an instruction to the captain of the ship that the specified goods after their customs
clearance at a designated port be received on board.

(xi) Packing and forwarding: The goods are then properly packed and marked with necessary details such as
name and address of the importer, gross and net weight, port of shipment and destination, country of origin,
etc. The exporter then makes necessary arrangement for transportation of goods to the port. On loading
goods into the railway wagon, the railway authorities issue a ‘railway receipt’ which serves as a title to the
goods.

(xii) Insurance of goods: The exporter then gets the goods insured with an insurance company to protect
against the risks of loss or damage of the goods due to the perils of the sea during the transit.

(xiii) Customs clearance: The goods must be cleared from the customs before these can be loaded on the
ship. For obtaining customs clearance, the exporter prepares the shipping bill. Shipping bill is the main
document on the basis of which the customs office gives the permission for export. Shipping bill contains
particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged,
country of final destination, exporter’s name and address, etc.
(xiv) Obtaining mates receipt:
A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board,
and contains the information about the name of the vessel, berth, date of shipment, descripton of packages,
marks and numbers, condition of the cargo at the time of receipt on board the ship, etc.

(xv) Payment of freight and issuance of bill of lading-

After receipt of the freight, the shipping company issues a bill of lading which serves as an evidence that the
shipping company has accepted the goods for carrying to the designated destination. In the case the goods
are being sent by air, this document is referred to as airway bill.

(xvi) Preparation of invoice: After sending the goods, an invoice of the despatched goods is prepared. The
invoice states the quantity of goods sent and the amount to be paid by the importer. The C&F agent gets it
duly attested by the customs.

(xvii) Securing payment: After the shipment of goods, the exporter informs the importer about the shipment
of goods. The importer needs various documents to claim the title of goods on their arrival at his/her country
and getting them customs cleared. The documents that are needed in this connection include invoice, bill of
lading, packing list, insurance policy, certificate of origin ,Bill of exchange and letter of credit. The exporter
sends these documents through his/her banker with the instruction that these may be delivered to the
importer after acceptance of the bill of exchange — a document which is sent along with the above
mentioned documents. Bill of exchange is an order to the importer to pay a certain amount of money to, or to
the order of, a certain person or to the bearer
of the instrument. It can be of two types: document against sight (sight draft) or document against
acceptance(Usance Draft ) .

WORLD TRADE ORGANISATION

 WTO is the only global organisation that deals with rules and regulations of trade beyween different
nations .
 WTO was established in the year 1995
 Headquarters is in Geneva ,Switzerland

OBJECTIVES OF WTO
 To ensure reduction of tariffs and trade barriers imposed by different countries
 To promote an integrated ,more viable and durable trading system
 To facilitate optimal use of resources for sustainable development
 To engage in activities which improve the standard of living ,create employment ,,increase
income and facilitate higher production .