Trade

Trade refers to the voluntary exchange of goods or services between economic

actors. Since transactions are consensual, trade is generally considered to benefit
both parties. In finance, trading refers to purchasing and selling securities or
other assets.
Trade is a branch of business which deals with the exchange of goods, services,
or both. The original form of trade was barter-the direct exchange of goods and
services. Modem traders use money in business as a medium of exchange, As a
result, buying can be separated from selling. The invention of money (and later
credit, paper money) greatly simplified and promoted trade. Trade between two
traders is called bilateral trade, while trade between more than two traders is
called multilateral trade.

Trade plays an important role in the economy, as it allows for the efficient
allocation of resources and enables individuals and businesses to specialize in the
production of goods and services in which they have a comparative advantage. By
trading with others, individuals and businesses can access a wider range of goods
and services at lower prices than they could produce on their own.

Overall, trade is a fundamental aspect of human society that enables individuals,

businesses, and countries to interact and exchange goods and services, leading to
increased prosperity and economic growth.

Procedure of Import Trade

What is Import Trade?

Import trade refers to the process of bringing goods or services into a

country from another country for the purpose of selling or distribution. It
involves purchasing products or services from foreign markets and importing
them into a country for domestic use or resale.
 Procedures of Import

i. |Getting Import License (IRC)| vi. |Receiving shipment Advice|

ii. |Collecting price & other information| vii. |Payment of Bill|

iii. |Placing order & booking exchange rate| viii. |Completing custom
formalities|
iv. |Procuring Foreign exchange|
ix. |Taking Delivery of goods|
v. |Opening letter of credit (L/C)|
x.|Closing Transactions|
i) Getting Import License: Intending importer is to apply to the office of
the Controller of Import & Expon with necessary documents for license along with
prescribed fees.

ii) Collecting price & other information: After getting license the import will
collect information as to source of supply price quality etc. to decide about his
order. Here he can take help of indentor.

iii) Placing Order & Booking exchange rate-Indenting: After collecting

information as to price, quality etc, he select the source & place order for import.
At the time of order he is to fix exchange rate depending on current rate & fixes
the time of import.
iv) Procuring foreign exchange: For import, payment is to be made in foreign
currency. So he is to arrange foreign currency from Bangladesh bank or his
banker.
v) Opening letter of credit: L/C may be of various types like revocable,
irrevocable, confirmed, transferable, Back to Back, revolving etc. The importer is
to apply for L/C for his import. Bankers after examine documents & getting
margin (If required) issue L/C to importer.
vi) Receiving shipment Advice: After the foreign producer/business house gets L/
C from importer, he ships the goods & send documents thereof to importer. On
receieving the documents importer can be confirmed as to receiving the goods in
his country.
vii) Payment of Bill: After shipment the foreign exporter send Bill of Exchange to
importer with necessary documents & the importer accept the Bill. It is then send
to exporter who can then collect his payment from his banker.
viii) Completing custom formalities: When goods arrive at port, the importer is
to pay taxes & perform necessary tariff and custom formalities to take delivery of
the goods. Here he can take help of C&F Agent.
ix) Taking delivery of goods: When custom formalities are completed taxes are
paid. Then the importer can take delivery of goods for his purpose.
x) Settlement of transactions: If the goods received are as per order & everything
found correct then importer gives a letter to foreign exporter in this regard which
culminates the transaction.

Procedure of Export Trade

What is Export trade?

When goods are exported from one country to another, it is called export trade.
According to Skinner and Evancevich-Exporting is selling domestic made
goods in another country.

Procedures of Export

1. |Receipt of order|
2. |Getting license/permit|
3. |Acceptance of order|
4. |Request for opening LC|
5. |Fixing Exchange Rate|
6. |Completing shipping Agreement (charter party)|
7. |Procurement of goods|
8. |Getting insurance policy|
9. |Completing custom formalities|
10. |Shipping goods|
11. |Sending Invoice & Other documents & Negotiation by bank|
12. |Receiving price of goods|
13. |Settlement of transactions|
1. Receipt of order: The first step of export is the receipt of order by the exporter
from foreign intending importer i.e. buyer. This can be of two types - Open order
& Fixed order.
2. Obtaining license/permit: For exporting goods from one country to another,
exporter needs to apply for license to the office of Controller of Import & Export.
The authority on receipt of application examines the necessary documents and
materials & sue license called ERC.
3. Acceptance of Order: After getting order & obtaining license from authority
the exporter if finds the order profitable then accept the order & send a letter to
the importer thereof.
4. Request for opening UC: L/C is a guarantee given by the banker of importer as
to payment of price to the exporter. Thus after the exporter accept the order he
requests the importer to open & send L/C to the exporter.
5. Fixing Exchange Rate: Exchange rate fluctuate. So it is necessary to fix rate of
foreign currency, as to price of goods, that is in force with reference to export time
fixed.
6. Shipping Agreement: Exporter needs to hire ship or space in the ship for
exporting goods & an agreement by him or C&F agent is to be made for this with
shipping agent/company. This is called charter party. When agreement is made
the importer can be sure about shipment in time.
7. Procurement of goods: In the mean time the exporter will arrange finance,
procure or manufacture goods & make it ready for shipment through required
packing.
8. Getting insurance: In export-import insurance is a must which may be of
various types. The exporter after procurement of goods & before shipping it will
have to obtain necessary insurance policy.
9. Custom formalities: After goods are ready for shipment, it is necessary to clear
dues to custom house as to tax, duties & tariffs and get a clearance certificate
thereof.
10.Shipping goods: At this stage a prescribed form from shipping company is to
be taken & filled up. Then the captain will issue a receipt stating description of
goods, ship's space, loading & unloading port along with the name & destination
of exporter & importers etc. Then the goods are in process of shipment.
11.Sending documents to importer: On shipment, the exporter will send invoice,
shipping & non-shipping necessary documents to importer & inform date of
dispatch & probable date of arrival of goods. This is done by bank of the export.
12. Receiving price of goods: On receipt of goods & necessary documents the
importer will accept the bill of exchange (B/E) & send it to exporter. On receipt
of the bill the exporter will get payment after maturity or discount it with a
banker and get money for exported goods.
13. Settlement of Transactions: On receipt of the goods & payment made for
the same, the importer will send a letter to exporter which will lead to the
settlement of transaction.

Documents used & Necessary in Import trade

Different documents are necessary for import business. These documents can be
classified into two group:

A. Shipping Documents:

1) Bill of Lading: A bill of lading is a receipt for goods delivered to a ship for
carriage. Through this letter the importer gets title of ownership over the goods.

2) Bill of Exchange: It is a direction of the foreign exporter to the importer of

goods to pay a sum of money shown in L/C, The exporter prepare this
document & sends it to the importer who sign it & send back to exporter. On
acceptance by importer to pay the sum it becomes document.

B. Non-Shipping Documents:

1. Indent: It is the first requirement that an importer under take to import goods
from abroad. This indent can be send directly by importer but generally it is send
through indentor. It contains detail as to the description of goods to be imported,
price, number of L/C, packaging, shipping, insurance, mode of payment etc.

2. Sale contract: After getting indent, if hers sprees with description & conditions
of indent, he prepares a contract & send it to importer/indent may be send on
telex, cables, etc. too.
3. Letter of credit (L/C): It is very important document. Through it suppliers get
garantee from bank of importer that he will receive the money in time for supply
of goods. The main features of L/C are as follows a) It is a loan document b) It is
a guarantee document c) Through it bank of importer represents importer d)
It guarantees, payment of fixed sum of money e) It can be of different maturity
& of different kinds f)It is negotiable.
4. Ship Report: It is a document issued by captain of ship to custom authority of
importing country. Till this report is submitted to custom authority, no goods/
Passangers can be unloaded For any false or misstatement, the captain will be
liable & punishable
5. Trust Letter: It is a type of receipt through which an importer promise to pay
the fender of the sum received as loan & gives to the lender the tile of ownership
on goods imported by firm. It is also called Trustworthy Receipt.
6. Bill of Entry: When imported goods reach the port or before it reach the port,
the importer or his C&F agent prepare a report in a prescribed form stating
description of the goods as to quality, price, packets etc. & submit this report to
the custom authority. It is prepared based on Invoice price, category etc. Based on
this custom authority determines duty payable on goods. It is to be noted that is
Bill of entry is to he submitted compulsorily for dutiable or non-dutiable goods. 8
copies of Bill of entry be prepared, one copy to be retained by importer or his
agent and 7 copies to be deposited to custom.
7. Respondentia Bond: This is a receipt given by the captain of a ship to
dockyard by mortgaging goods of a ship for expenses of repair. In case of carrying
goods, a ship may be damaged or go out of order in a sea & repair become a
necessity. But the captain usually do not carry money relevant to repair. What he
does in such a case that be carry the ship to nearby dockyard, gets it repair & for
the cost relevant to repair he gives this Respondentia bond to the owner of the
dockyard & the dockyard based on this documents gets his money form the
owner of ship.
8. Letter of indemnity: It's a promise letter jointly signed by Importer and banker
given to the captain of the ship promising to pay the captain any damage that may
occur due to delay in delivery of goods.
9. Dock warrant: Importer may not take delivery of goods as an when it reaches
the port. In such a case goods are kept with the dock. Then the dock owner gives a
receipt to the importer describing the particulars of the goods and ownership title
to the importer about the goods kept in the godown. Importer can use the receipt
to sell the goods to the customer. This letter issued by the godown owner is called
Dock warrant.
 Documents used & Necessary in Export trade
Different documents are necessary for import business. These documents can be
classified into two group:
(A) Shipping Documents:
1. Invoice: It is one of the important shipping document in export trade. It contains
the description of goods exported along with price and relevant particulars. It is
prepared by exporter & send to importer. This document containing description &
price of goods exported is called invoice.
2. Consular Invoice: Basically it is a copy of Invoice submitted to the embassy of
importing country situated in exporter's country. It is submitted to the commercial
consular to determine import duty of the product in the importing country. The
consular examines it and certify it. It is prepared in 3 copies, one is retained by
consular, one copy is forwarded to importer & another copy is delivered to exporter
3. Certificate of Origin: It is a declaration made by the exporter as to the origin or
source of product that is going to be exported. It shows the origin of product i e
from which source the product has been collected which tells about quality of
product. This document is to be attested by the chamber of commerce & industry of
the country of export
4. Insurance policy: For sea borne export, marine insurance policy is a must to
avoid risk associated with voyage. Importer himself or at the request of importer, the
export takes this policy. There are various clauses under marine policy which are
suitably inserted in the policy-Hall, Cargo, fright etc.
(B) Non-Shipping Documents:
1. Proforma Invoice: In many cases, on the request of the importer, the concerned
exporter before sending goods send a description of goods, quantity, price etc. to the
importer to acquaint him with goods to be exported. Based on this inital statement
of goods called proforma invoice the importer takes measure as to sale, opening L/C
and other necessary steps.
2. Bill of exchange: This is a fill send by the exporter to the importer for payment of
money stated in LC. Importer sign it & send it back to exporter. This bill can be of
various types like (a) Time hill-payable after certain time, (b) After date bill- the
bill whose due date start after preparation date of bill (c) Demand bill-the bill
whom payment will be made on demand of the holder at the time he presents it
for payment (d) Bill at sight- the payment of which will be due on presentation.
According to Foreign exchange control Act of Bangladesh, the Bill is to be drawn on
any bank of Bangladesh.
3. Charter Party: For exporting goods through sea, the exporter is to hire in full or
hire a space in the ship & come to an agreement with shipping agent or the owner of
the ship This agreement is called chartered party. This chartered party can be of two
types, viz., times based and voyage based.
4. Packing list: This is a list prepared by exporter. It is prepared in 3 copies - one is
kept by exporter, one is handed over to the captain of the ship & one copy is sent to
importer. It contains number of case/bale, gross & net weight of each packet & that
of total packets, shipping mark, etc. As a result both personnel in the ship &
importer can identify goods & take proper delivery.
5. Inspection certificate: Before export, importer requires that goods to be exported
be inspected by a recognized inspecting local agency of the export. Some times
importer can also fix an agent for inspection. This inspection certificate must be
procured by exporter. Thus, prior to export of the goods agents will examine the
quality of goods and issue a pre-shipment certificate. This certificate is very essential
to the exporter.
6. Quality control certificate: This is a certificate issued by concerned agency of
exporting country charged with quality control like BSTI Sometimes, importer
requires that exporter will take such certificate & send it with other documents. This
is required to ensure quality of products / goods exported.
7. GSP Certificate: Sometimes, Developed countries provide some concessions
(general system of preference) to exporter of developing countries as to duty & other
matters. In such a case, for Bangladesh, Export Promotion Bureau issue this
certificate to exporter which is to be sent to importer for placement of the same to
custom authority of his country.
8. Shipping Advice: After goods are boarded on a ship, exporter send information
to importer as to shipment of goods. This letter is called shipping advice. This letter
contains details about the quantity of goods sent, number of packet, shipping marks,
date of starting the voyage, expected date of arrival, name of ship & its captain etc.
9. Mate's Receipt: It is a receipt issued by the captain of the ship to the exporter
acknowledging that he has received such & such goods on such a date. This receipt
so issued to exporter is to be deposited to ship owner or his agent & a copy is also
sent to importer.
10. Dock Receipt: Before goods are exported, these are to be taken to dock & dock
authority issue a receipt acknowledging the receipt of goods. This is called Dock
receipt.