Archive for international trade

Role of Banks in International Trade

admin / August 26, 2011 / No comments

It is impossible to be in international trade without involving your bank for all the services they provide such as advice on financial issues and the potential risks involved. It is true that one critical hurdle for SMEs is the lack of information on international trade processes, documentation and banking procedures necessary to carry on with business abroad. For result oriented and cost effective international trade, you will very definitely need access to accurate and timely information and a sound knowledge of banking.

Payment Options in International Trade

Quite obviously all payments in an international trade are made through bank either by way of wire transfer or check with the latter not being preferred for not being the quickest. The following are some of the common ways of payment modes in international trade.

1. Banker’s Draft is a cheaper option and easier to obtain but there is a risk of loss in transit. The only advantage it has against check is quicker credit that the exporter gets.

2. Letter of Credit. This international trade instrument is mutually convenient for both the parties. The exporter gets paid once he produces the copy of BoL (bill of lading) which he receives from the shipping company and the LoC, to the bank, regardless of whether the consignment as arrived at destination or not.

3. Wire transfer is by far the fastest and the cheapest option in which the importer will instruct his bank to transfer the amount to the exporter’s bank account. The first time, the transfer happens in about 10-15 days depending on the destination country and the routing bank. International wire transfers are made through intermediary banks/correspondent banks.

4. Although not in a big way, some China manufacturers accept Paypal for smaller amounts such as US$5,000 but require 3% extra to compensate for the charges. Paypal is the quickest and easiest mode of payment in international trade.

Banks that are serving international trade, understand the crucial role they are required to play. Many large banks maintain worldwide correspondents to provide quick delivery of actual currency, wired money or drafts. You may choose your bank for international trade account on the basis of whether the bank can extend advances against the account receivables. Bank may, however, require your account secured through export credit insurance provided by Export Import Bank of United States. Banks also let you enter into forward exchange contract with your bank and fix the amount of the foreign exchange you receive when you are dealing in convertible currencies. You need your bank to be with you as long as you are in international trade.

Category: international trade / Tags: ,

International Trade: Effect of Liberalization

admin / August 20, 2011 / No comments

There are about forty thousand multinational companies operating world wide and almost 200,000 overseas joint ventures that run across the continents. Many of these collaborations and joint ventures have concerns, directly or indirectly, with China business enterprises. The access to China through world-wide international trade investments is increasing day by day.

Moreover, due to globalization the extent to which China’s international trade and investments bears an impact is very wide. It is due to globalization that the international market has a direct approach to acquire modern technology and consequently reduce the problems of distribution and stumpy internal coordination expenses. It has opened the doors for the specialization of network services and products with collective support of companies. Business process outsourcing for both internal activities and external activities is the result of globalization of international trade and global investments. Business process outsourcing is the common concept in the entire world and China is one of the leading countries that provide such services. For quality work and performance the outsourcing companies often select China as their business collaborators.

With the increasing ratio of communication and exchange of technologies between China and other countries, it has now become easy for companies to get access to new technologies. With the changing liberalization policies in the whole world including China, a good number of companies are garnering benefits from international trade and investments. From expansion point of view many multinational companies in China are increasing their level of work so that they can gain maximum share of international trade and investments. These corporations are also busy in increasing the goodwill of their brand name and are continuously striving to make their presence felt in international trade. On account of increasing competitiveness in international market, multinational corporations are paying sufficient heed to provide quality work at low price.

As such they are investing on reasonable price raw materials and labor. However the main reason for all these activities is to get access to a wider market. Although there are some drawbacks of expansion of international trade and investments but if rules of international trade are followed then the problems can be minimized and properly handled. The big size of the Chinese market is a major attraction to many prospective new entrants in international trade and investments.

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International Trade Process

admin / August 12, 2011 / No comments

Your success in international trade process requires you to master the documentation apart from banking procedures. For SMEs, streamlining of international trade process makes things easier to obtain the info and documents essential for conducting business abroad. A tip here would be useful that, create a seamless mechanism to search & gather leads, and conduct as much transactions as possible on-line because your ability to handle customs, banks and international trade directly impacts your customers’ satisfaction.

-The International Trade Process Routines

You are dependent upon customs for fast clearance of goods in an international trade scenario. Dealing with this issue requires your complete understanding of how international trade works, marketing, managing the channels, source identification, contract terms, risk minimization, logistics, credit insurance and mode of payment. This calls for carefully building clear visions of your international trade process. In the next step, you got to crystallize objectives for your international trade. Having identified your target market and assessed product viability, you can summarize the ensuing process.

1. Understanding the contents of the trade contract document

2. Examining the applicability and penetration depth of information and communication

3. Including techno-legal aspects, so as to analyze the possibility of creating digital links in the foreign-trade with your vendor/importer.

-Role of Customs in International Trade

At times, frustrations may lead to imagining things about customs. In reality, customs facilitate legitimate international trade to the highest permissible extent with the adaptation of relevant international conventions and instruments devised by the World Customs Organization. Customs also maintains effectual controls in order to fight illegal trafficking of goods. Perhaps this is the reason why customs calls the shots in determining the rates of duty, not the importer. While the way you handle customs in your international trade not just impacts customer satisfaction, savings on account of customs duty definitely will have an impact on your bottom line.

Other institutions of key nature are insurers, banks and financial services, other government authorities and international carriers.

As an international trader you must be prepared to face several rocking challenges which include

1. Being able to identify and pay the lowest amount of legally permitted duties and taxes for each country you are trading in

2. Recognizing and making sure that customs authorities are compliant with regulations

3. Networking with experts to interpret myriad and complex regulations for different countries

4. Ability to capture data for planning with efficiency and report trade and custom costs just in time

5. Putting in place a standardized routine to minimize duty and effortlessly move goods across international borders

Remember, although most of the things have been automated, human intervention is still pretty much an essential part of an international trade process. Playing your cards carefully, at every step is the lonely way to success.

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Category: international trade / Tags: ,
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