Business Studies for Class 11 Chapter 11 International Trade

Learn CBSE Business Studies Index Terms for Class 11, Chapter 11 Including Definitions and Meanings

1. International Business – Manufacturing and trade beyond the boundaries of one’s own country are known as international business. International business is defined as those business activities that take place across the national frontiers. It involves not only the international movements of goods and services but also capital, personnel technology, and intellectual property like patents, trademarks, know-how, and copyrights.

2. Contract Manufacturing – Contract manufacturing refers to a type of international business a firm enters into a contract with one or a few local manufacturers in foreign countries to get certain components or goods produced as per its specifications.

3. IEC and Registration Number Cum Membership Certificate – An export firm must obtain an IEC (Importer Exporter Code) from the Directorate General for Foreign Trade (DGFT) or the Regional Import Export Licensing Authority by submitting documents such as the exporter’s profile, prescribed certificates, two attested photographs and details of non-resident interest. An export firm should get itself registered with the appropriate export promotion council, such as the Engineering Export Promotion Council (EEPC) and the Apparel Export Promotion Council (AEPC), and obtain a registration-cum-membership certificate (RCMC).

4. Certificate of Origin – A certificate of origin is proof that goods are actually being manufactured or procured in the country from where these goods are imported. The certificate of origin acts as proof that the goods have been manufactured in the country from where the export is taking place. This certificate can be obtained from the trade consulate located in the exporter’s country. For availing trade concessions and other benefits, the importer may ask the exporter to send a certificate of origin.

5. International Trade – International trade is referred to as the exchange or trade of goods and services between different nations. This kind of trade contributes to and increases the world economy. The most commonly traded commodities are television sets, clothes, machinery, capital goods, food, raw material, etc.

International trade has exceptionally increased, which includes services such as foreign transportation, travel and tourism, banking, warehousing, communication, distribution, and advertising. Other equally important developments are the increase in foreign investments and the production of foreign goods and services in an international country.

6. Licensing – Licensing means permitting other parties in a foreign country to produce and sell goods under trademarks and patents. Licensing is an agreement between the licensor and licensee. Licensing is a form of licensing where a parent company grants another independent entity the right to do business prescribed by the parent company.

7. Franchising – A franchise is a kind of permit that concedes a franchisee’s admittance to a franchisor’s exclusive business information, cycles, and brand names, consequently permitting the franchisee to sell a product or service under the franchisor’s business name. In return for getting a franchise, the franchisee, as a rule, pays the franchisor an underlying initial start-up expense and yearly permitting charges or licensing fees. Franchising depends on an advertising idea that can be taken on by an association as a methodology for business extension.

8. Letter of Credit – A letter of credit is a conventional report or a financial document that a bank issues for the benefit of the purchaser to the vendor. The record or the document expresses that the bank will respect the drafts drawn on the purchase or the buyer, for the products provided to him, given the circumstances composed on the archive or document, are fulfilled by the provider, supplier, or the seller (merchant).

9. Shipping Bill – The shipping bill is the main document on the basis of which the customs office gives permission for export. The shipping bill contains particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged, the country of final destination, the exporter’s name and address, and so on. Exporter prepares the shipping bill for obtaining customs clearance. Thus, we can say that the shipping bill is the bill that is prepared by the exporter and required for customs clearance.

10. Merchandise Trade – According to United Nations guidelines, international merchandise trade statistics record all goods which add to, or subtract from, the stock of material resources of a country by entering (as imports) or leaving (as exports) its economic territory.

11. Invisible Trade – Invisible trade refers to trade in services. Service exports and imports involve trade in intangibles, and trade in services is also known as invisible trade. Trade in services includes trade in tourism and travel, boarding and lodging, entertainment and recreation, transportation, professional services, communication, construction and engineering, marketing, and educational and financial services.

12. Outsourcing – Outsourcing or re-appropriating is an understanding wherein one organisation recruits one more organisation to be liable for an arranged or existing activity that is or should be done internally, and in some cases includes moving workers and resources starting with one firm then onto the next. Offshoring usually lowers costs, improves the availability of skilled people, and gets work done faster through a global talent pool. Usually, companies outsource to take advantage of specialised skills, cost efficiencies, and labour flexibility.

13. Pre-shipment Finance – Pre-shipment finance is the finance that the exporter needs before shipment of the order for procuring raw materials and other components, processing and packing of goods, and transportation of goods to the port of shipment. In other words, one can say pre-shipment finance is the finance that is required to undertake export production.

14. Mate Receipt – A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board; it contains the information about the name of the vessel, berth, date of shipment, description of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc. The port superintendent, on receipt of port dues, hands over the mate’s receipt to the C and F agents.

15. Bill of Lading – Bill of lading is a document prepared and signed by the master of the ship acknowledging the receipt of goods on board. It contains terms and conditions on which the goods are to be taken to the port of destination.

16. Foreign Investment – Foreign investment is the inflow of capital into a country through individuals/institutions from a different country. The flow of capital is from one organisation, with its headquarters in a foreign nation, into another company that belongs to the home nation. The investment helps companies based abroad to set up their offices or manufacturing units in another country. Since the foreign entity gets a stake in the domestic company in exchange for providing capital, they have to follow local government rules and regulations regarding such investments.

In other words, the money that is invested by the MNCs into companies belonging to other countries is known as foreign investments. This is done to get power over the companies that are from another country. The money flows outside the country.

17. Joint Venture – A Joint Venture (JV) is a business course of action in which at least two parties consent to pool their assets to achieve a particular undertaking. This undertaking can be a new task or some other business movement. In a JV, all of the members are liable for benefits, misfortunes, and expenses related to it. Notwithstanding, the business has its own entity, separate from the members’ and other financial matters.

18. Foreign Direct Investment – Foreign direct investment (FDI) is an investment made by a company or an individual in one country into business interests located in another country. FDI is an important driver of economic growth. Generally, FDI is when a foreign entity acquires ownership or controlling stake in the shares of a company in one country, or establishes businesses there. In FDI, the foreign entity has a say in the day-to-day operations of the company. It is not just the inflow of money but also the inflow of technology, knowledge, skills, and expertise/know-how.

19. Wholly Owned Subsidiaries – A wholly-owned subsidiary is one whose 100% shares are held by the parent company. Whereas a company can become a wholly-owned subsidiary through an acquisition by the parent company or having been spun off from the parent company, a regular subsidiary is 51% to 99% owned by the parent company.

20. Pre-shipment Inspection – Pre-shipment inspection refers to the inspection of goods before their final shipment in order to ensure that only quality goods are exported. The government has initiated measures such as compulsory inspection of certain goods by promulgating the Export Quality and Inspection Act, 1963, and designating various agencies to undertake the inspection. Exporters are required to contact the Export Inspection Agency (EIA) or another designated agency and obtain an inspection certificate after getting the goods checked. However, in the case of goods exported by star trading houses, export houses, 100% export-oriented units, and industrial units set up in Export Processing Zones (EPZs) or Special Economic Zones (SEZs), no such inspection is required.

21. Airway Bill – An airway bill is a document wherein an airline/shipping company gives its official receipt of the goods on board it’s aircraft and at the same time gives the undertaking to carry them to the port of destination.

22. Invoice – When a seller sells goods on credit, he prepares an invoice or bill with the details of a party to whom goods are sold with the number of goods and total amount.

23. Foreign Portfolio Investment (FPI) – Foreign portfolio investments consist of securities and other financial assets that are held passively by a foreign investor. This does not provide the foreign investor with direct ownership of the financial asset in question. Foreign portfolio investments can be made by individuals, companies, or even government agencies. Such investments help entrepreneurs diversify their portfolios, giving them an edge in international markets. An FPI will be featured in a country’s capital account and is part of the balance of payments which takes stock of money flowing in and out of the country over a specific period of time.

24. Exporting – Exports are explained as the goods and services manufactured in one country and acquired by citizens of another country. The export of goods or services can be anything. This trade can be done through shipping, e-mail, and transmitted in private luggage on a plane. Basically, if the product is manufactured domestically and traded in a foreign country, it is known as an export.

In international trade, exports are one of the components. The other component is imported, which means the goods and services purchased by a country’s citizens that are manufactured in a foreign country.

25. Importing – The import trade refers to goods and services purchased into one nation from another. The word ‘import’ originates from the word ‘port’, considering the fact that the products are frequently transported via ship to foreign countries. Similar to exports, imports are also the backbone of international trade. Every country imports goods and services that the domestic country cannot manufacture, maybe because the country cannot produce effectively or cheaply like another exporting country. Few countries sometimes import commodities and raw materials that are not available on their premises.

26. Performa Invoice – It is a quotation sent by an exporter containing details regarding the price of goods, weight, quality, mode of delivery, size, type of packing, and payment terms. A proforma invoice ensures that the buyer will receive the best quality of goods.

27. Receipt of Order or Intent – After the receipt of the ‘Quotation’, if the prospective buyer finds the information suitable to him, he places the ‘Order/Indent’ for the import of goods.

28. Sight Draft – A sight draft is a kind of bill of exchange wherein the exporter instructs his banker to hand over the relevant documents to the importer only against payment.

29. Export Licence – After satisfying the payment, the exporter has to get an export licence. To receive the export licence, the exporter has to apply to the office of the controller of imports and exports. Along with the application, the exporter has to deposit a certain fee also. The Controller of Imports and Exports checks the application thoroughly, and after having satisfied themselves, the controller then issues an export licence to the exporter. The exporter can apply for a Pre-Shipment Finance on the basis of Confirmed Indent, Letter of Credit, and Export Licence.

30. Excise Clearance – Before the final loading of goods for export, it is necessary for the exporter to get the goods cleared by customs. This is known as securing customs clearance. In this regard, an exporter is first required to submit the following documents to the customs appraiser at the customs house: shipping bill, export order, letter of credit, commercial invoice, certificate of origin, certificate of inspection (if necessary), and marine insurance policy.

After the submission of the documents, a carting order is obtained from the superintendent of the port concerned. The carting order acts as a gate pass for the cargo to enter the dock as it gives the necessary instructions to the staff. The physical movement of cargo then takes place from the dock to the port area, and finally, the goods are stored in appropriate storage. It may not be possible for the exporter to be present at all times for performing these formalities, and therefore the task is assigned to a clearing and forwarding (C and F) agent.

31. Usance Draft – A usance draft is a kind of bill of exchange wherein the exporter instructs his banker to hand over the relevant documents to the importer even against acceptance of the bill of exchange.

32. Negotiations of Bills – A negotiation bill is when the bill is being transferred from one party to another in such a way that the bill holder becomes the bill’s transferee. A bill payable to order is negotiated by the endorsement of the holder and completed by delivery. A bill payable to the bearer is negotiated by delivery.

33. Delivery Order – There are two parties engaged in sending and receiving products, so data connected with the conveyance of the merchandise should be obviously expressed to guarantee that the merchandise is received by the intended party. To explain, a record called a conveyance request or delivery order is given.

The meaning of a conveyance request or delivery order is a legal authoritative record utilised by a dispatcher (consignor) of products starting with one spot and then onto the next. Conveyance or delivery might happen between two organisations or from the vendor to the customer.

The conveyance request is normally conveyed by the driver or field official who delivers the products. This document is known as the identity of the trip and understanding evidence between the two parties. At the point when the vehicle shows up at the representative’s (consignee) area, they can coordinate the received merchandise with the rundown (list) from the conveyance request. On the off chance that it doesn’t coordinate, the beneficiary can record a complaint. Subsequently, the exactness of the data in this document is vital.

34. Export Promotion Capital Goods (EPCG) – The EPCG Scheme promotes the import of goods for the production of export goods. Under the scheme, exporters are allowed to import goods at concessional rates of customs duties. However, to avail themselves of this scheme, exporters must fulfil certain export obligations stated under the scheme.

35. Commodity – A commodity is a fundamental product utilised as a contribution to the creation of services and products that implies organisations use wares in the assembling system to transform them into ordinary merchandise. Commodities are found in most of the products that end up in the possession of customers, including tires, tea, ground meat, oranges, and attire.

36. Bill of Entry – Bill of entry is an application form supplied by the customs office to the importer. At the time of receiving the goods, the importer has to fill in three copies of this form and submit the same to the customs office. It contains information like the name of the ship, number of packages, marks on the packages, name and address of the exporter, etc.

37. Cart Ticket – A cart ticket is otherwise called a cart chit. This is arranged by the exporter, which contains the particulars of the vehicle number, depiction of products, amount, name of the transporter, delivering (shipping) bib number, and port of destination. The driver of the vehicle conveys the cart ticket. At the time of passage or entry into the port, the cart ticket is checked by the Port Authorities to ensure that the vehicle is delivering just the merchandise which is referenced in the cart ticket. In the wake of being fulfilled, the inspector/gatekeeper/warden issues the gate pass to the driver and of the vehicle into the premises of the port.

38. Bank Certificate of Payment – It is a certificate given by the negotiating bank to the exporter that the bill covering the shipment has been haggled (negotiated) through it, and proceeds of the export have been obtained from the merchant (importer). The authentication demonstrates the particulars of the product sent out. The exporter presents this authentication of payment for laying out that the product exchange has been finished absolutely by him. This authentication is expected to consent to the necessities for the release of commodity commitments or discharge of export obligations.

39. Certificate of Inspection – A report which guarantees that the product (like perishable merchandise) was in great shape at the time of examination, ordinarily immediately before shipment. Pre-shipment assessment or pre-shipment inspection is a necessity for the importation of merchandise into many developing nations. When utilised as a necessary record under a letter of credit terms, the identity and details of the party providing the investigation ought to be referenced.

40. Trade Inquiry – The international buyer who wishes to buy goods from the other country sends an inquiry relating to price, desired quality, terms, and conditions for the export of goods which is known as a trade inquiry. The exporter sends a reply to the inquiry in the form of ‘Quotation’. The quotation is also known as ‘Proforma Invoice’, which contains information about the selling price, quantity, quality, mode of delivery, etc.

41. Shipment Advice – Shipment advice contains information about the shipment, such as invoice, bill of lading, date, and name of the vessel through which the goods are coming. After loading the goods on the vessels, the exporter despatches the shipment advice to the importer.

42. Import General Manifest – It is a document that provides complete details regarding the imported goods. The unloading of the cargo takes place on the basis of this document. An import general manifest is issued by the person in charge of the carrier (ship or airliner) in which the goods are being imported. The document informs the officer in charge at the dock or the airport about the arrival of the goods, and it is on the basis of this document that the cargo will be unloaded.

43. C and F Agent – Clearing and forwarding (C and F) agents are specialists with regards to getting the merchandise cleared through customs conventions, organising with the transporter (carrier), and dealing with all transportation and conveyance-related exercises. The presence of a C and F specialist permits the exporter to focus on their centre business exercises or core business activities.

44. Port Trust Dues Receipt – The ‘Landing and Shipping Dues Office collects a charge for services of dock authorities which must be borne by the shipper or importer. After the payment of dock charges, the shipper (importer) is offered back one duplicate of the application as a receipt. This receipt is known as a ‘port trust dues receipt’.

45. Post-shipment Finance – Post-shipment Finance is obtained after the shipment of goods. This finance is utilised for financing activities from the date of receiving credit till payment is received from the importer.

46. Duty Drawback Scheme – Under the duty drawback scheme, exporters are either exempted from payment of excise duties or are refunded a certain percentage of the excise duty paid earlier. In cases where inputs are used for export production, the customs duties paid on the import of raw material and machines are refunded.

47. Export Manufacturing – A manufacturer exporter infers to an individual who makes or manufactures products and commodities or means to export such merchandise. As such, the manufacturer exporter is the individual who trades or exports the merchandise made by them. Here, the producer exporter gets the product order and exports in their own name.

48. Export Manufacturing Under Bond Scheme – This facility entitles firms to produce goods without payment of excise and other duties if the firms give an undertaking, i.e. bond that they are manufacturing goods for export purposes and will export such products or their production.

49. Advance Licence Scheme – An advance licence scheme is a scheme under which an exporter is allowed the duty-free supply of domestic as well as imported inputs required for the manufacture of export goods.

50. Export Processing Zones (EPZs) – Export processing zones are industrial estates usually situated near seaports or airports with an objective to provide an internationally competitive duty-free environment for export production at a low cost. EPZs are now converted to Special Economic Zones (SEZs), which are free from all rules and regulations governing imports and export units except those relating to labour and banking.

51. 100% Export Oriented Units – Export Oriented Units (EOUs) have been characterised under the Foreign Trade Policy (FTP) as those units undertaking to trade and export their whole production of services and products, except allowable sales in the Domestic Tariff Area (DTA) for the production of merchandise, including repair, re-production, reconditioning, re-designing, delivering of services, development of software, horticulture including agro-processing, biotechnology, animal husbandry, aquaculture, pisciculture, viticulture, poultry, and sericulture. Trading units are not covered under the EOUs.

52. Export Promotion Council – Export Promotion Councils (EPCs) are associations set up by the Government of India to help Indian exporters by giving admittance to global business sectors, advancing Indian products through different activities, and expanding the general commodities from India.

53. Indian Institute of Foreign Trade (IIFT) – Established in 1963 under the Societies Registration Act, the IIFT is an autonomous body responsible for the management of the country’s foreign trade. It is also a deemed university that provides training in international trade, conducts research in areas of international business, and disseminates data related to international trade.

54. Indian Institute of Packing (IIP) – The IIP is a training and research institute established in 1966 by the joint efforts of the Ministry of Commerce of the Government of India, the Indian packaging industry, and allied industries. The institute caters to the packaging needs of domestic manufacturers and exporters.

55. Export Inspection Council – The EIC was established by the Government of India under Section 3 of the Export Quality Control and Inspection Act, 1963, with the objective of promoting exports through quality control and pre-shipment inspections. According to this act, all goods that are meant for exports (except some commodities) must pass through the EIC for quality inspection.

56. State Trading Organisations – The State Trading Organisation was set up in May 1956 with the main objective to stimulate trade, primarily export trade among different trading partners of the world. Later, the government set up many more organisations, such as Metals and Minerals Trading Corporation (MMTC) and Handloom and Handicrafts Export Corporation (HHEC).

57. Indian Trade Promotion Organisation (ITPO): The ITPO was formed on January 1, 1992, under the Companies Act, 1956. Its main objective is to maintain close interactions among traders, industry, and the government. In order to fulfil this objective, the ITPO organises trade fairs and exhibitions within and outside the country, thereby helping export firms to interact with international trade bodies.

58. Department of Commerce – The Department of Commerce is the apex body in the Ministry of Commerce of the Government of India and is responsible for formulating policies related to foreign trade as well as evolving import and export policies for the country. It is responsible for all matters related to the country’s external trade.

59. Commodity Boards – Commodity boards are the boards that have been specially established by the Government of India for the development of the production of traditional commodities and their exports and to supplement the EPCs. At present, there are seven commodity boards in India: Coffee Board, Rubber Board, Tobacco Board, Spice Board, Central Silk Board, Tea Board, and Coir Board.

We hope that the offered Business Studies Index Terms for Class 11 with respect to Chapter 11: International Trade, will help you.

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