1. FOREIGN TRADE

Meaning: Foreign Trade is the

trade between one country and

another country. i.e.,. In between

the countriesthe countries.

It is also called InternationalIt is also called International

Trade or External TradeTrade or External Trade.

2. Need

A. Due to possession of different natural resources by different ycountries.

Each county is not best suited to produce all the goods at lowest possible g pcosts.

3. Forms / Kinds

1. Imports (purchase of goods and services from abroad))

2. Exports (sale of goods and services to otherservices to other countries)

Entrepot Trade (purchase from one country and sale of the same another country)

Diff b tDifferences between

Points Home Foreign1.Geographical

boundariesSameNational

DifferentNations

2.Volume3.Specializa-

95%National

5%Inter -

tion Level National

Diff b tDifferences between

Points Home Foreign4.Documenta

-tionNumber of less

DocumentsMore

5. Rules &Regulations

Of one country

Of two ormore countries

Diff b tDifferences between

Points Home Foreign6 Restrictions Free from Subject6.Restrictions

7 Transport

Free from

Less

Subject toMore7. Transport

Cost.8 Transitory

Less

Less

More

More8. TransitoryPeriod

Less More

Diff b t

Points Home Foreign

Differences between

Points Home Foreign9. Risks and Less MoreInsurance10. Balance Do not There Of payments.11 Trade

haveUnifor

isDiffere11. Trade

policiesUniform

Different

Importance / Advantagesof foreign trade

Key PointsKey Points1.Territorial specialization.2. Better utilization of the available

resources.

Importance / AdvantagesImportance / Advantagesof foreign trade

3. Sale of surplus goods (Export).(Export).

4. Purchase of deficit goods (I t)(Import).

5. Widens the market

Importance / Advantagesof foreign trade

6. Importation of latest

g

ptechnology, machines etc.

7 Direct foreign investment7. Direct foreign investment.

Importance / Advantages

8 Stabilit in prices

of foreign trade

8. Stability in prices.

9 Improvement in quality9. Improvement in quality.

10 Development in10. Development in

transportation.p

Importance / Advantages

11 Greater Emplo ment

p gof foreign trade

11. Greater Employment

opportunitiesopportunities.

12. International economic12. International economic

cooperation and peace.

Disadvantages / Defectsof foreign Trade

1 Diffic lties at times of ar1. Difficulties at times of war.

2 Reckless utilization of natural2. Reckless utilization of natural

resources.resources.

3. May ruin domestic industries.y

Disadvantages / Defects

4 Enco rages importation ofof foreign Trade

4. Encourages importation of

luxury goodsluxury goods.

5. Practice of dumping.5. Practice of dumping.

6. One sided development.p

Disadvantages / Defectsof foreign Trade

7. Adverse balance of payments.of foreign Trade

8. Exporting only raw materials.

9. Interference in the domestic

affairs

10. Business rivalry.

Export Procedure

Stages or steps involved in

exporting goods from one

country to another country.

i I di t A ii.e. India to America.

Export Procedure

1. Receipt of Enquiry 2 Sending of Q otation2. Sending of Quotation.3. Receiving an Indent.g4. Obtaining IEC No and

E t LiExport Licence.

5. Assembling of goods.

6. Packing and Marking of goods.

7. Appointment of a Forwarding agent.

Export Procedure

8. Formalities of Forwarding agent.

a. Taking delivery of goods

b. Securing shipping space

shipping order, charter party

C t f litic. Customs formalities

d. Obtaining Dock Receiptg p

e. Obtaining Mate’s Receipt

f. Obtaining Bill of lading

g. Marine Insurance Policy

h. Advice to the exporter

Export Procedure

9. Other Relevant Documents

a. Certificate of Origin

b. Consular Invoice

Export Procedure

10. Preparation of Export

Invoice

11. Securing the Payment

12. Advice to the importer

Import Procedure

Steps or Stages involved in

importing goods by one country

from another country. i.e., by India

from China.

Import Procedure

Steps or Stages:

1. Obtaining IEC Number and

Import LicenseImport License.

2 Obtaining Foreign Exchange2. Obtaining Foreign Exchange.

3 Placing an Indent3. Placing an Indent.

Import Procedure

Steps or Stages:

4. Receipt of Letter of Advice and

Shipping DocumentsShipping Documents.

5 Formalities to be performed by the5. Formalities to be performed by the

Cleaning Agent.Cleaning Agent.

Steps or Stages

5) Formalities:

A. Permission from the shipping

companycompany.

B Customs formalities:B. Customs formalities:

i) Bill of Entry Formsi) Bill of Entry Forms.

Steps or Stages

5) Formalities:

ii)Bill of Sight.

iii) A li ti t I tiii) Application to Import.

i ) Pa ment of import d t (if an )iv) Payment of import duty (if any).

Steps or Stages

5) Formalities:

c) Dispatch of goods

d) L tt f Ad id) Letter of Advice.

6)Recei ing deli er of goods6)Receiving delivery of goods.

InsuranceInsuranceMeaning of Important Terms

1) Insurance Device, tool, (may be General or

contract, undertaking,General or

Life)2) Insurer

undertaking, solution

2) Insurer, assurer.

InsuranceInsurance

3) Insured or Assured

Who is indemnified or compensated.Assured

4) Premium5) Risk

compensated.Consideration.Contingency Event5) Risk

6)PolicyContingency, Event.Documents containing the terms &the terms & conditions

Insurance7) Insurable

interestLikely to gain or lose.

interest

8) Subjectmatter

A thing on which insurance is covered.

9) Principle All contracts except9) PrincipleofIndemnity

All contracts except life.

Indemnity

General Principles of InsuranceGeneral Principles of Insurance

1 Utmost good faith:1. Utmost good faith:Full disclosure of material facts.

2. Insurable interest:Is a must necessary to know theIs a must, necessary to know the time.

3. Principle of Indemnity:Applicable to all contractsApplicable to all contracts except-Life Ins

General Principles of InsuranceGeneral Principles of Insurance

4. Principle of subrogation:4. Principle of subrogation:extension, right of the insurer

i t d d t & thi dagainst damaged property & third party.

5. Double insurance / principle of contribution: applicable extn rightcontribution: applicable, extn, right.

6. Reinsurance: All types, insurer & ire-insurer, purpose.

Types of policiesTypes of policies

A Fire Insurance Policies:A. Fire Insurance Policies:1. Valued Policy – Value agreed & stated at time of entering into contract.2. Specific Policy – Either specific amount or actual lossspecific amount or actual loss, whichever is lower is payable.

Fire Insurance PoliciesFire Insurance Policies3. Average Policy –

Amt of compensation=Actual loss X Sum of insuredActual loss X Sum of insured

Value of the property

4 Floating Policy – a) Single policy4. Floating Policy a) Single policy covers properties in different localitieslocalities.

Fire Insurance Policies

b) Used by business organizations, whose business is spread overwhose business is spread over.

5.Re-instalment or Replacement policy: Compensation either in cash or in kind. In case of cash –equivalent to the cost of the property.property.

Types of policiesyp pB. Kinds of Marine Insurance

Policies:Policies:1. Valued Policy.2. Unvalued Policy.3 Voyage Policy Eg Mumbai to3. Voyage Policy. Eg. Mumbai to Goa.

4. Time Policy. Definite period of time. E.g. from 1st Apr 2011 to 31stg pMar 2012.

Kinds of Marine InsuranceKinds of Marine Insurance Policies

5. Mixed Policy – Voyage & Time.6. Floating Policy (declaration /open cover))a. No mention is made of the ship or cargoor cargo.b. Taken out for a certain sum.

Kinds of Marine Insurance Policies

c. Value of the policy is reduced by the declared amount.

7 W P li H P li7. Wager Policy or Honor Policy –without having insurable interest.

T f Lif ITypes of Life InsurancePolicies

1. Whole – Life Policy or Ordinary Life PolicyLife Policy.Features:a. Payment of premium till to the deathdeath.b. Compensation will be paid to the dependents.

Whole – Life Policy

Features:c. No fixed periodd Low rate of premiumd. Low rate of premium.e. May be with profit policy (Bonus)

or without profit policy.

Types of Life Insurance Policies

2. Endowment Policy: Sum assured becomes payable either.becomes payable either.a. After the expiry of a fixed period.b. or on the death of the assured whichever is earlier.

3. Joint Life Policy.4 J t P li4. Janata Policy.

5 Child d ti li5. Children education policy.

6 A it P li6. Annuity Policy.

7 Term assurance policy7. Term assurance policy.

8 Group insurance policy8. Group insurance policy.

Differences between

Points General LifeInsurance Insurance

1. Contract Indemnity Guarantee

2. Event

y

Uncertain Certain

3. Insurable MI-At time At time of Interest of loss

FI-At both taking out policy

timep y

Differences between

Points General LifePoints GeneralInsurance

LifeInsurance

4 P i d Sh t L4. Period

5 S d

Short

C t b

Long

C b5. Surrenderof Policy

Cannot be Can be

Differences betweenPoints General Life

Differences between

Insurance Insurance6 Rights of Exists Do not6. Rights of

Contribution &

Exists Do not Exists

&Subrogation

7 Purpose Only Both7. Purpose Only Protection of Loss

Both

of Loss

Differences between

Points GeneralInsurance

LifeInsurance

8. Rate of Premium

Degree of Risk

Age, Health

9. Claim May or There will may not be

Differences between

Points General Life

Differences between

Points GeneralInsurance

LifeInsurance

10 Double Not Common10. Double Insurance

Not common

Common

11. UnderInsurance

Common No QuestionInsurance Question