Import trade is the process of importing goods and services from another country. A country import good in following situations
They can’t manufacture/ produce goods.
They have a deficit of raw material to produce.
The technology/process is inefficient and costly.
Understanding Import Trade
Before delving deep into the concept of Import trade, you need to get familiar with and understand several other terms. Have a look.
Trade – Trading is a process which involves the exchange of goods or services from one entity to another in exchange for something worth the cost (usually money).
International trade – In the international trading process, goods, services, or capitals are exchanged between international borders or territories depending upon the demand and supply. Such trades contribute to a considerable share of GDP (gross domestic product).
Import – It is a process of receiving goods and services from another country.
Export – It is a process of delivering goods and services to another country.
Balance of trade (BOT) – It is the difference in monetary value between export and import trade figures of a country.
Task for you: What are some of the goods that India exports to other countries? Also, name some of India’s most commonly imported goods?
Trade Examples –
Countries have to depend on trades for certain goods which their country has a deficit of. For example, India gets its crude oil from Middle-East countries like Iraq, Saudi Arabia. Similarly, almost half of the electronic goods imported to India are from China.
However, if a country’s import value exceeds the export value, then it is said to have a negative balance of trade (BOT) which shows a deficit of trading.
Questions to Learn
Q 1: What are Objectives of Import Trade?
A country opts for import trading to achieve following objectives –
To meet their demand for products and services.
Growth in industrialisation.
Improved living standard.
Overcome difficult situations like natural calamities.
Procedure of Import Trade
A country has to follow the procedure mentioned below for import trade.
1. Trade Enquiry
In this step, a country that needs imported goods sends a query to exporter countries requesting them to disclose information regarding price, quality, terms and conditions, etc. for goods. In return, exporters send the details in the form of quotations.
2. Getting an Import License
It is vital to procure an import license first to proceed.
3. Obtain Foreign Exchange
The exporter country asks to pay for import goods in foreign exchange which is governed by RBI.
4. Placing Order
After the above steps, the importer country needs to place an order mentioning the quantity of purchase.
5. Arranging a Letter of Credit
The importer country needs to send the letter of credit from their concerned bank to the overseas supplier.
6. Arranging Finance
The importer needs to arrange funds in foreign currency before the shipment arrives.
7. Acquiring Shipping Documents
Once the exporter ships a consignment, they send a shipping document to the importer mentioning all the necessary details. These usually include –
Date of arrival
Name of the ship and date
Classification of commodities and quantity, etc.
8. Goods Arrival & Release of Goods
The goods are dispatched by the exporter after seeking clearance from customs before they cross Indian borders. Here, the importer needs to arrange the unloading charges, import duty, custom duty etc. for the clearance.
This gives you an overview of the import trading and its procedure which a country has to deal with. Furthermore, you can learn in detail the trade in meaning by following the study materials available at our website. Don’t forget to install Vedantu’s app!
1. What is Import Trade?
It is the process wherein a country receives goods or services from another country in exchange for money. Countries import essential commodities that aren’t present in abundance in their nation.
2. Who Regulates Import Trade?
The Department of Commerce oversees bilateral commercial relations between India and other countries.
3. What is an IEC?
IEC, or Importer Exporter Code Number, is a unique identification code allocated by the Director General of Foreign Trade to authorised organisations. It helps them keep track of the volume and goods arriving in different shipments.