Introduction:
Trade
is an act of transferring goods or services from one channel to another
channel with a profit motive. The objective of trade must be profit
motive, otherwise, it cannot be trade. There are two types of trade
'Home trade' and 'Foreign trade'. The act of buying and selling goods
and services between buyers and sellers of the same country is called
home trade where as foreign trade involves the exchange of goods and
services across international borders or territories. There are certain
procedure, terms and conditions; and documents in both home as well as
foreign trade. There are different organizations which are established
for facilitating trade.
Q1) What is trade? What are the different types of trade?
Ans:
The act of buying and selling goods and services with a motive to earn
profit is called trade. There are two types of trade, they are;
a) Home Trade and
(b) International Trade.
Q2) Define Home trade and explain its procedures in brief.
Ans: The process of buying and selling goods and services within the country itself is called home trade.
Its procedures are explain below;
Enquiry:
The process of making enquiry to the suitable suppliers regarding the
price, quantities, qualities, cash and trade discount, and other terms
and conditions of trade.
Quotation: It is the letter written by supplier to the buyers in
response to the inquiry made by them, which includes the details of
price of the goods, quantity and other terms and conditions.
Purchase order letter: After receiving the letter of quotation letter, if the buyer is satisfied with the price and other terms and conditions of trade, the buyer write a letter of order with the details of quantities of goods, their brands, quality, delivery time and means/mode of transport. Letter of acknowledgement: After receiving the order letter from the buyers, the supplier write a letter of confirmation to inform the buyers about the delivery of required goods at the particular time.
Purchase order letter: After receiving the letter of quotation letter, if the buyer is satisfied with the price and other terms and conditions of trade, the buyer write a letter of order with the details of quantities of goods, their brands, quality, delivery time and means/mode of transport. Letter of acknowledgement: After receiving the order letter from the buyers, the supplier write a letter of confirmation to inform the buyers about the delivery of required goods at the particular time.
Collection of goods:
In this steps, the supplier collects the necessary goods form his
stock, if it is not available, he/she will manage from different sources
to supply to the buyers.
Packing of Goods: In this step, the collected goods are packed up in
wrappers, sacks, box, cartoon according to the demand of the buyer. The
necessary instruction such as handle with care, breakable, etc are
written on the pack.
Invoice:
An invoice is simply a document which contains the details of the goods
like the quantity, price, discount to be offered and other terms of
payment which is sent along with the delivery of goods.
Sending the goods to the carrier: After the required quantity of goods
have been packed, the goods are handed to the particular transport
company for the delivery of goods in time.
Receipt of goods: This is the step in which buyer received the goods from the transport company and tally the goods received with invoice.
Payment of bill: This is the last step of the home trade where buyer will made the payment of the bill of the goods.
Foreign Trade
Q3) What is foreign trade? What are the procedures of foreign trade? Explain.
Ans: The process of purchase and sales of goods and services between two countries is known as foreign trade.
The following are the procedures of foreign trade;
Enquiry:
It is the process of making enquiry to the exporter regarding price,
quantities, qualities, trade and cash discount and other terms and
conditions of trade.
Quotation: It is the letter written by exporter to the importer in
response of the enquiries made on Enquiry letter.
Purchase order letter: After receiving the quotation letter from
exporter, the importer writes a letter ordering the goods along with
quantities, quality, brands, delivery time and means of transport.
Letter of Acknowledge: In this step, the exporter writes a letter of
confirmation to inform the importer about the the delivery of required
quantities of goods at a particular time.
Collection of goods: After receiving purchase order letter, the
exporter collects goods from his/her stock, if not available he/she will
manages from different sources to supply to the importers.
Packing of goods: After collecting all the quantities of goods, the
exporter pack the goods with wrappers, sacks, box, cartoon as per the
demand of the importer.
Invoice:
After packing of goods, the invoice is prepared which contains details
of goods like quantity, price, discount offered and other terms of
payment. It is send along with delivery of goods.
Sending the goods to the carrier:
When the required goods haven been packed and made ready along with
invoice, the goods are send to a particular transport company for
delivery of goods.
Payment of bill:
This is the last procedure. Here the invoice is well verified and
payment is made through prescribed means such as cash, bank, bills of
exchange etc.
Q4) Point out the different rules, terms and conditions of foreign trade.
Ans: The required terms and conditions of foreign trade are as follow;
Ans: The following are the different types of foreign trade;
Export trade: Selling goods and services to another country is called export trade. The person or organization who sells goods or services to another country is called exporter.
Import trade: Purchasing the goods and services from other countries is called import trade. The person or organization who purchase goods or services from another country is called exporter. Entreport trade: Importing the goods and services from one or more countries with a motive to export them to other countries is called entreport trade.
What are the documents used in foreign trade?
Ans: The following are the documents used in foreign trade;
a) Enquiry Letter
b) Reply Letter
c) Order Letter
d) Confirmation Letter
e) Invoice
f) Bills of lading
What are the documents used in foreign trade?
Ans: The following are the documents used in Home Trade;
a) Letter of enquiry
b) Quotation (Reply Letter)
c) Order Letter
d) Confirmation Letter
e) Receipt of goods
f) Invoice or bill
- The importers and exporters should fix the types and nature of goods.
- The quantity of the goods to be purchased should be mentioned in the order letter clearly by the importer.
- Importer and exporter must have transparent regarding the terms and means of payment.
- The importer should also clearly mention to the exporter regarding the type of packing for the goods.
- The terms regarding payments of insurance premium for the goods should also be clarified.
- The percentage of cash and trade discount on the purchase or sales of goods have to be clearly negotiated.
- The importer and exporter need to decide the required means of transportation.
What are the difference between Home trade and Foreign trade?
| S.No | Home Trade | Foreign Trade |
| 1 | It take place within the country boundary. | It takes place between two or more countries. |
| 2 | The people and business organizations of the same country are involved. | The people and business organizations of two or more countries are involved. |
| 3 | Little restriction in home trade. | Many restrictions in foreign trade. |
| 4 | Local currency is used for payment. | Foreign currency is used for payment. |
| 5 | Payment can be made through cash and bank. | Payment can be made through bank only. |
Importance of Foreign Trade:
- It helps to exchange the goods and services between different countries.
- Exporting goods and services helps to earn foreign currency.
- It promotes the indigenous products and services in other countries.
- Relationship with other countries get enhances through foreign trade.
Ans: The following are the different types of foreign trade;
Export trade: Selling goods and services to another country is called export trade. The person or organization who sells goods or services to another country is called exporter.
Import trade: Purchasing the goods and services from other countries is called import trade. The person or organization who purchase goods or services from another country is called exporter. Entreport trade: Importing the goods and services from one or more countries with a motive to export them to other countries is called entreport trade.
What are the documents used in foreign trade?
Ans: The following are the documents used in foreign trade;
a) Enquiry Letter
b) Reply Letter
c) Order Letter
d) Confirmation Letter
e) Invoice
f) Bills of lading
What are the documents used in foreign trade?
Ans: The following are the documents used in Home Trade;
a) Letter of enquiry
b) Quotation (Reply Letter)
c) Order Letter
d) Confirmation Letter
e) Receipt of goods
f) Invoice or bill
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