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Class 11 Business Studies Chapter 12 International Business – II
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18. Your firm is planning to import textile machinery form Canada. Describe the procedure involved in importing.
Ans: As my firm already has planned to import textile machinery from Canada, So, the step of Trade enquiry is no needed. I should maintain the following steps.
(i) Procurement of import licence: There are some goods, against importing of which import licence is needed. So, in this step I should need to consult the Export-import policy in force to know whether the textile machinery needs the import licence or not. Moreover in India, it is obligatory for every importer (and also for exporter) to get registered with the Directorate General foreign Trade (DGFT) or Regional Import-Export licensing Authority and obtain an Import-
Export code (IEC) number. This number is required to be mentioned on most of the Import documents.
(ii) Obtaining foreign Exchange: In this Step, I have to exchange Indian currency into foreign currency. In India, all foreign exchange transactions are regulated by the exchange control department of the Reserve Bank of India (RBI). As per the rules in force, I am, required to secure the sanction of foreign exchange. For obtaining such a sanction, I have to make an application to a bank authorized by RBI to issue foreign exchange.
The application is made in a prescribed form along with the import licence as per the provisions of exchange Control Act. After proper scrutiny of the application, the bank sanction the necessary foreign exchange for the import transaction.
(iii) Placing order or indent: After obtaining the import licence, I have to place an import order on indent with the exporter for supply of the Specified products. The import order contains information about the price, quantity size, grade and quality of goods ordered and the instructions relating to packings, shipping, port of shipment and destination, delivery schedule, insurance and mode of payment.
(iv) Obtaining letter of credit: If the payment terms agreed with the exporters then I should obtain the letter of credit from its bank and forward it to the overseas Supplier.
(v) Arrangement for finance: In this step I should make arrangements in advance to pay to the exporter on arrival of goods at the port. In this connection, advanced planning for financing imports is necessary to avoid huge demurrage (ie.. penalties) on the imported goods lying uncleared at the port for want of payments.
(vi) Receipt of shipment advice: In this step I should receive the shipment advice which was sent to me by supplier after loading the goods on the vessel. Various information laid down in the shipment advice are invoice number, bill of lading/airways bill number and date, name of the vessel with date, the part of export, description of goods and quantity and the date of date of sailing of vessel.
(vii) Retirement of Import documents: Having shipment the goods, the overseas supplier prepares a set of necessary documents as per the terms of contract and letter of credit and hand it over to his or her banker for their award transmission and negotiation to the importer in the manner as specified in this letter of credit.
(viii) Arrival of goods: Goods are shipped by the overseas supplier per contract. The person in change of the carriage (ship or airway) informs the officer in charge at the dock or the airport about the arrival of good in the importing country.
(ix) Customs clearances and release of goods: All the goods imported into India have to pass through customs clearance after they cross the Indian borders. So I Should appoint C & F agents who are well versed with such formalities and play an important role in getting the goods customs cleared.
19. Discuss the principal documents needed in exporting.
Ans: Following are the principal documents used in exporting
(i) Export invoice: It is a Sellers bill for merchandise and contain all necessary information of goods.
(ii) Parking list: It is a statement of the number of cases or packs and the details of the goods contained in these packs.
(iii) Certificate of origin: This document specifies the country in which the goods are being produced.
(iv) Certificate of Inspection: Govt. authorized agency like Export inspection Council of India (EICI) issue this Certificate meeting the quality of goods.
(v) Mate’s receipt: This receipt is given by the commanding officer of the ship to the exporter after the cargo is loaded on the ship.
(vi) Shipping Bill: It is the main document on the basis of which customs office grants permission for export.
(vii) Bill of lading: It is a document wherein a shopping company gives the official receipt of the goods put on board its vessel.
(viii) Airway Bill: Like a bill of lading, an airway bill is a document where in an airline company gives its official receipts of the goods on board its aircraft.
(ix) Marine insurance policy: It is a certificate of insurance contract whereby the insurance Company agrees in consideration of a payment called permission to indemnify the insured against loss.
(x) Cart ticket: A cart ticket is also known as a cart chit, vehicle or gate pass.
(xi) Letter of Credit: A letter of credit is a guarantee issued by the importer’s bank that it will honour up to a certain amount the payment of export bills to the bank of the exporter.
(xii) Bill of exchange: It is a written instrument whereby the person issuing the instrument directs the other party to pay a specified amount to a certain person or the bearer of the instrument.
(xiii) Bank certificate of payment: Bank certificate of payment is a certificate that the necessary documents relating to the particular export consignment has been negotiated.
20. List and explain various incentives and schemes that the government has evolved for promoting the country’s export.
Ans: The Govt. of India has taken the various incentives and schemes for promoting the countrys export as mentioned below-
(i) Duty drawback scheme: Since goods meant for export are not consumed domestically, these are not subjected to payment of various excise and customs duties. Any such duties paid on export goods are therefore, refunded to exporter on production of proof of exports of these goods to the concerned authorities such refunds are called duty draw backs.
(ii) Export manufacturing under bond scheme: This facility entitles firms to produce goods without payment of excise and other duties. The firms desirous of availing such facility have to give an undertaking that they are manufacturing goods for export purposes and will export such products on their production.
(iii) Exemption from payment of sale taxes: Goods meant for export purpose are not subject of sales tax. Even for a long time, income derived from export operations had been exempt from payment of income tax.
(iv) Advance licence scheme: Under this scheme on exporter is allowed duty for supply of domestic as well as inputs imports required for the manufacture of export goods.
(v) Export Promotion Capital Goods Scheme (EPCG): The main objective of this scheme is to encourage the import of capital goods for export promotion.
(vi) Scheme of recognising export firms as export house, trading house: The main objective of this scheme is to promote established exporters and assists them in marketing their products in international markets, the Governments grants the status of export House, Trading House, Star Trading house to select export firms.
(vii) Export of Services: On the basis of export performance of the services, Various categories of services houses have been recognized for the purpose of boosting the export of services.
(viii) Export Finance: Exporters require finance for the manufacture of goods. Finance is also needed after the shipment of the goods because it may take sometime to receive payment from the importers. Both pre-shipment finance and post shipment finance are made available to the exporters by authorized banks.
(ix) Export Processing Zones: Export Processing Zones are industrial estates. Which from calves from the Domestic Tariff Areas (DTA). These are usually situated near seaports or airport. They are intended to provide an internationally competitive duty free environment for export productions of EPZ to be competitive.
(x) 100 percent Export Oriented Units: The 100 percent export oriented unit scheme, introduced in early 1981, is complementary to the EPZ schemes. The main purpose of EOU, is to generating additional production capacity for exports by providing an appropriate policy framework, flexibility of operations and incentives.
21. Identify various organizations that have been set up in the country by the government for promoting country foreign trade.
Ans: Following are the various organizations that have been set up in the country by the govt. for promoting country’s foreign trade-
(i) Department of commerce: Department of Commerce in the Ministry of commerce, Govt. of India is the apex body responsible for the external trade of the country and all matters connected with it.
(ii) Export Promotion Councils: The objective of this organisation is to promote and develop the country’s export of particular products falling under their jurisdiction.
(iii) Commodity Boards: The main Purpose of this organisation is to develop production of traditional commodities and their exports.
(iv) Export Inspection Council (EIC): This organisation was set up under section 3 of the export quality Control and inspection Act 1963. The aim of the Council is to develop export trade. Through quality control and pre-shipment inspection.
(v) Indian Trade Promotion Organisation (ITPO): This organization was setup on 1st January 1992 under the Indian Companies Act. 1956 by the Ministry of commerce. This organization serves Industries by organization trade fairs and exhibitions both within the country and outside.
(vi) Indian Institute of foreign Trade: It was set up in 1963 by the Government of India as an autonomous body registered under the societies Registration Act. The main purpose of the organization is to professionalise the country’s foreign trade management
(vii) Indian Institute of Packaging (IIP): The Indian Institute of Packaging was set up as a national Institute Jointly by the by the Ministry of commerce, Govt. of India. Its headquarters and principal laboratory is situated at Mumbai and three regional laboratories are located at Kolkata, Delhi and Channai.
(viii) State Trading Organisation: The State Trading Organisation was setup in May 1950. The main objective of the STC is to stimulate trade, primarily export trade among different trading partners of the world.
22. What is world Bank? Discuss its various objectives and role of its affiliated agencies.
Ans: World bank is also known as the International bank for reconstruction and development. The organization was result of the Bretton Woods Conference.
The various objectives of world Bank are to aid the task of reconstruction of the war affected economic of Europe and assist in the development of the underdeveloped nations of the world. For the first few years the world Bank remained preoccupied with the task of restoring war torn nations in Europe. After successful achievement of this task by late 1950s, the world Bank turned its attention to the development of underdeveloped nations. The main purpose of investment of world bank in underdeveloped nations is to bring the needed social and economic transformation of the developing countries. For this purpose the world Bank established International Development Association in the year 1960. The main objective of IDA is to provide loans on concessional terms and conditions to those countries whose per capita income are below a critical level.
At present, under the world Bank there are five international organizations responsible for providing finance to different countries. These are –
(i) International Finance Corporation.
(ii) International Development Association.
(iii) Multi lateral Investment Guarantee Agency.
(iv) International centre for settlement of Investment Disputes.
The world Bank is entrusted with the task of economic growth and widening of the scope of International trade. World Bank also attempts to develop infrastructure to the Agriculture and small Industries. World bank provides resources for education, sanitation, health care and small scale enterprises. This organization provides not only financial assistance but also industry, removal of rural poverty through productivity, increase income, providing technical support and initiating research and cooperative venture.
All the above roles and functions to be done by the world bank is possible because of its various affiliated agencies. World Bank provides various guidelines, directive and suggestion to the affiliated agencies for which they have been established.
23. What is IMF? Discuss its various objective and functions.
Ans: International Monetary fund is the second International Organisation next to the world Bank. IMF was setup in 1945. Its headquarters located in Washington DC,
Its various objectives are as follows-
(i) To promote international monetary cooperation through a permanent Institution.
(ii) To facilitate expansion of balanced growth of international trade and to contribute thereby to the promotion employment and real income.
(iii) To promote exchange stability with view to maintaining orderly exchange arrangements among members countries.
(iv) To assist in the establishment of a multilateral system of payments in respects of current transactions between members.
Function of IMF
Following are the various functions of IMF
(i) Acting as a short term credit institution.
(ii) Providing machinery for the orderly adjustment of exchange rates.
(iii) Acting as a reservoir of the currencies of all the member countries.
(iv) Acting as lending institution of foreign currency and current transaction.
(v) Determining the value of a country’s currency and altering it.
(vi) Providing machinery for international consultations.
24. Write a detailed note on features, structure, objectives and functioning of WTO.
And: Features of WTO:
(i) WTO was established as a result of Uruguay Round of GATT negotiations as a permanent institution.
(ii) The purpose of WTO is to look after the promotion of free and fair trade amongst nations.
(iii) Though, WTO is a successor to GATT, it is a much more powerful body than GATT.
(iv) It governs trade not only in goods but also in services and intellectual property rights.
(v) It has a global status similar to that of the IMF and the world Bank.
Structure of WTO: WTO is a successor to GATT having global status. Its head quarters are situated at Geneva, Switzerland. WTO is a permanent organisation created by an international treaty ratified by the Government and legislatures of member states. It is a member driven rule-based organization in the sense that all the decisions are taken by the member government on the basis of a general consensus.
Objectives of WTO-
(i) To ensure reduction of tariffs and other trade barriers imposed by different countries.
(ii) To engage in such activities which improve the standards of living, created employment, increase income and effective demand and facilitate higher production and trade.
(iii) To facilitate the optical use of the world’s resources for sustainable development and
(iv) To promote an integrated more viable and durable trading system.
Functioning of WTO:
(i) Promoting an environment that encouraging to its member countries to come forward to WTO.
(ii) Laying down a commonly accepted code of conduct with a view to reducing trade barriers including tariffs and eliminating discriminations in international trade relations.
(iii) Acting as a dispute settlement body.
(iv) Ensuring that all the rules regulation prescribed in the Act are duly followed by the member countries for the settlement of their disputes.
(v) Holding consultations with IMF and IBRD and its affiliated agencies so as to bring better understanding and cooperation in global economic policy making.
(vi) Supervising on a regular basis the operations of the revised agreements and Ministerial declarations relating to goods, service and Trade Related Intellectual property Rights (TRIPS).
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