Trade: Internal and International
Internal trade
Internal (domestic) trade takes place within a country. Wholesalers buy in bulk from producers and sell to retailers, bearing storage and price risk; retailers sell to final consumers. Retail formats include itinerant traders, fixed shops, departmental stores, multiple or chain stores, mail-order and e-commerce.
International trade
Import brings goods in; export sends goods out; entrepot imports goods for re-export after processing or repacking. Balance of trade covers only visible goods (exports minus imports); balance of payments records all transactions - visible, invisible (services, remittances) and capital. A trade deficit can coexist with a BOP surplus.
Documents and terms
An IEC (Importer-Exporter Code) from DGFT is mandatory. Key documents: indent, proforma invoice, letter of credit, bill of lading, shipping bill, certificate of origin, insurance policy. Incoterms allocate cost and risk: under FOB the seller delivers on board and the buyer pays freight and insurance; under CIF the seller pays cost, insurance and freight to the destination port.
Worked example
A Guwahati exporter sells tea to a buyer in Dubai on CIF terms and the ship sinks mid-voyage. Reasoning: under CIF, risk passes when goods are on board, but the seller arranged insurance, so the buyer claims on the policy. Under FOB, the buyer's own insurance would respond instead.
Traps that cost marks
- Defining balance of payments as only goods.
- Saying entrepot trade is the same as returning rejected goods.
- Mixing FOB and CIF responsibility for freight.
- Forgetting that a letter of credit is a bank's payment guarantee, not a transport document.