In this class, we will discuss foreign trade – structure and procedures.
Foreign Trade – Structure and Procedures
Documents used in international trade
Indent:
This is an order by an importer to an agent requesting the agent to buy goods on behalf of the importer.
There are two types:
a. Open indent: This is an order that gives the agent freedom to buy goods from any firm or manufacturer he considers suitable
b. Closed indent: In this order, the importer specifies the firm or manufacturer from whom the agent should buy the goods required.
Bill of lading:
This is a document of title giving the holder a right to take possession of the goods to which it refers. It is the document of the contract between the exporter and the shipping company (shipowner) for the carriage of goods to their destination. It is made out in triplicate.
The bill of lading contains the following information:
1. The name of the ship carrying the goods (consignment)
2. The shipper’s name – i.e., the name of the person sending the goods. In other words, the consignor’s name.
3. Full description of the goods i.e., quantity, type, etc.
4. The names of the ports of embarkation (i.e., the port from which the ship is taking off and disembarkation (i.e., the port to which the ship is taking the goods)
5. The rate of freight
6. The name of the consignee i.e., the person receiving the goods
7. The date of the shipment etc.
A bill of lading could be either:
1. A clean bill of lading: This is a bill of lading signed without any qualification clause i.e., without any words to the effect that the goods are damaged. It is taken as proof that the goods were in good condition when loaded.
2. A dirty bill of lading (or foul bill of lading): Where a bill of lading bears qualifying clauses such as “two-sack broken” or “one case damaged”, the bill of lading is referred to as a foul bill or dirty bill.
3. A dirty bill of lading: It is, therefore, a bill of lading that bears an endorsement by the master of a ship to the effect that the goods are defective.
Evaluation
1. List five information contained in a bill of lading.
2. State two uses of indent in international trade.
Importance (functions or purpose) of the bill of lading
1. It is a contract between the exporter and the shipping company. It is, therefore, evidence of the contract to carry the goods.
2. It is a document of title that shows the owner or buyer of the goods. It, therefore, gives power to the owner or consignee to obtain delivery of the goods.
3. It serves as a receipt for the goods and thus establishes that the goods are on board the ship
4. It is a document of evidence that the goods have been shipped
5. It is a negotiable instrument. It is transferable only by endorsement and can, therefore, be used as security for loans.
Consular Invoice:
This is an invoice that has been signed by the consul of the country to which the goods are to be consigned. The invoice is signed to prevent understating the price to pay less customs duty. A consular invoice is, therefore, a special invoice which customs authorities request from the importer to enable them to know the appropriate duties chargeable. The invoice will ensure correct payment of duties by showing the correct price of the goods. It is a special form of invoice legalized by a consul in an importing country.
Purpose of consular invoice
1. To prevent understatement of prices
2. To ensure correct payment of customs duties
Evaluation
1. List three documents used in foreign trade
2. Explain the use of the consular invoice in international trade.
General evaluation
1. Give five examples of small-scale retail outlets
2. Explain five reasons for the survival of small-scale retailers
3. State five aids to trade and explain how each facilitates trade
4. Explain any five reasons why commerce is important in the life of a nation
5. Illustrate with a labelled diagram the main divisions and subdivisions of production
In our next class, we wil discuss Foreign Trade – Stages and Documentation.
Send your questions in the comment section below, and we will respond.