1. FOREIGN TRADE. Meaning: Foreign Trade is the. trade between one country and. another country. i.e.,. In between

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1 1. FOREIGN TRADE Meaning: Foreign Trade is the trade between one country and another country. i.e.,. In between the countries.

2 It is also called International Trade or External Trade.

3 2. Need A. Due to possession of different natural resources by different countries.

4 Each county is not best suited to produce all the goods at lowest possible costs.

5 3. Forms / Kinds 1. Imports (purchase of goods and services from abroad) 2. Exports (sale of goods and services to other countries)

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

7 Differences between Points Home Foreign 1.Geographical Same Different boundaries National Nations 2.Volume 3.Specializa- 95% National 5% Inter - tion Level National

8 Differences between Points Home Foreign 4.Documenta -tion 5. Rules & Regulations Number of less Of one country Documents More Of two or more countries

9 Differences between Points Home Foreign 6.Restrictions Free from Subject 7. Transport Cost. 8. Transitory Period Less Less to More More

10 Differences between Points Home Foreign 9. Risks and Less More Insurance 10. Balance Do not There Of payments. 11. Trade policies have Unifor m is Differe nt

11 Importance / Advantages of foreign trade Key Points 1.Territorial specialization. 2. Better utilization of the available resources.

12 Importance / Advantages of foreign trade 3. Sale of surplus goods (Export). 4. Purchase of deficit goods (Import). 5. Widens the market

13 Importance / Advantages of foreign trade 6. Importation of latest technology, machines etc. 7. Direct foreign investment.

14 Importance / Advantages of foreign trade 8. Stability in prices. 9. Improvement in quality. 10. Development in transportation.

15 Importance / Advantages of foreign trade 11. Greater Employment ment opportunities. 12. International economic cooperation and peace.

16 Disadvantages / Defects of foreign Trade 1. Difficulties at times of war. 2. Reckless utilization of natural resources. 3. May ruin domestic industries.

17 Disadvantages / Defects of foreign Trade 4. Encourages importation of luxury goods. 5. Practice of dumping. 6. One sided development.

18 Disadvantages / Defects of foreign Trade 7. Adverse balance of payments. 8. Exporting only raw materials. 9. Interference in the domestic affairs 10. Business rivalry.

19 Export Procedure Stages or steps involved in exporting goods from one country to another country. i.e. India to America.

20 Export Procedure 1. Receipt of Enquiry 2. Sending of Quotation. 3. Receiving an Indent. 4. Obtaining IEC No and Export Licence.

21 5. Assembling of goods. 6. Packing and Marking of goods. 7. Appointment of a Forwarding agent.

22 Export Procedure 8. Formalities of Forwarding agent. a. Taking delivery of goods b. Securing shipping space shipping order, charter party c. Customs formalities

23 d. Obtaining Dock Receipt e. Obtaining Mate s Receipt f. Obtaining Bill of lading g. Marine Insurance Policy h. Advice to the exporter

24 Export Procedure 9. Other Relevant Documents a. Certificate of Origin b. Consular Invoice

25 Export Procedure 10. Preparation of Export Invoice 11. Securing the Payment 12. Advice to the importer

26 Import Procedure Steps or Stages involved in importing goods by one country from another country. i.e., by India from China.

27 Import Procedure Steps or Stages: 1. Obtaining IEC Number and Import License. 2. Obtaining Foreign Exchange. 3. Placing an Indent.

28 Import Procedure Steps or Stages: 4. Receipt of Letter of Advice and Shipping Documents. 5. Formalities to be performed by the Cleaning Agent.

29 Steps or Stages 5) Formalities: A. Permission from the shipping company. B. Customs formalities: i) Bill of Entry Forms.

30 Steps or Stages 5) Formalities: ii)bill of Sight. iii) Application to Import. iv) Payment of import duty (if any).

31 Steps or Stages 5) Formalities: c) Dispatch of goods d) Letter of Advice. 6)Receiving ing delivery er of goods.

32 Insurance Meaning of Important Terms 1) Insurance Device, tool, (may be contract, General or undertaking, Life) solution 2) Insurer, assurer.

33 Insurance 3) Insured or Assured 4) Premium 5) Risk 6)Policy Who is indemnified or compensated. Consideration. Contingency, Event. Documents containing the terms & conditions

34 Insurance 7) Insurable interest Likely to gain or lose. 8) Subject matter A thing on which insurance is covered. 9) Principle All contracts except of life. Indemnity

35 General Principles of Insurance 1. Utmost good faith: Full disclosure of material facts. 2. Insurable interest: Is a must, necessary to know the time. 3. Principle of Indemnity: Applicable to all contracts except-life Ins

36 General Principles of Insurance 4. Principle of subrogation: extension, right of the insurer against damaged d property & third party. 5. Double insurance / principle of contribution: applicable, extn, right. 6. Reinsurance: All types, insurer & re-insurer, purpose.

37 Types of 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 loss, whichever is lower is payable.

38 Fire Insurance Policies 3. Average Policy Amt of compensation= Actual loss X Sum of insured Value of the property 4. Floating Policy a) Single policy covers properties in different localities.

39 Fire Insurance Policies b) Used by business organizations, whose 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.

40 Types of policies B. Kinds of Marine Insurance Policies: 1. Valued Policy. 2. Unvalued Policy. 3. Voyage Policy. Eg. Mumbai to Goa. 4. Time Policy. Definite period of time. E.g. from 1 st Apr 2011 to 31 st Mar 2012.

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

42 Kinds of Marine Insurance Policies c. Value of the policy is reduced by the declared amount. 7. Wager Policy or Honor Policy without having insurable interest.

43 Types of Life Insurance Policies 1. Whole Life Policy or Ordinary Life Policy. Features: a. Payment of premium till to the death. b. Compensation will be paid to the dependents.

44 Whole Life Policy Features: c. No fixed period d. Low rate of premium. e. May be with profit policy (Bonus) or without profit policy.

45 Types of Life Insurance Policies 2. Endowment Policy: Sum assured 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. Janata Policy.

46 5. Children education policy. 6. Annuity Policy. 7. Term assurance policy. 8. Group insurance policy.

47 Differences between Points General Life Insurance Insurance 1. Contract Indemnity Guarantee 2. Event Uncertain Certain 3. Insurable MI-At time At time of Interest of loss FI-At both taking out policy time

48 Differences between Points General Life Insurance Insurance 4. Period Short Long 5. Surrender of Policy Cannot be Can be

49 Differences between Points General Life Insurance Insurance 6. Rights of Exists Do not Contribution Exists & Subrogation 7. Purpose Only Both Protection of Loss

50 Differences between Points 8. Rate of Premium General Insurance Degree of Risk Life Insurance Age, Health 9. Claim May or There will may not be

51 Differences between Points General Life Insurance Insurance 10. Double Not Common Insurance common 11. Under Insurance Common No Question

INTERNATIONAL TRADE FINANCE SERVICES

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