COMMERCE STUDY NOTES FORM THREE TOPIC 6-8.

TOPIC 6: International Trade 

The Meaning of International Trade
Explain the meaning of international trade
International trade, economic transactions that are made between countries. Among the items commonly traded are consumer goods, such as television sets and clothing; capital goods, such as machinery; and raw materials and food. Other transactions involve services, such as travel services and payments for foreign patents (see service industry). International trade transactions are facilitated by international financial payments, in which the private banking system and the central banks of the trading nations play important roles.
International trade and the accompanying financial transactions are generally conducted for the purpose of providing a nation with commodities it lacks in exchange for those that it produces in abundance; such transactions, functioning with other economic policies, tend to improve a nation’s standard of living. Much of the modern history of international relations concerns efforts to promote freer trade between nations.
This article provides a historical overview of the structure of international trade and of the leading institutions that were developed to promote such trade.
How International Trade Arises
Point out how international trade arises
REASONS FOR INTERNATIONAL TRADE
  • Differences in Technology; Advantageous trade can occur between countries if the countries differ in their technological abilities to produce goods and services. Technology refers to the techniques used to turn resources (labor, capital, land) into outputs (goods and services).
  • Differences in Resource Endowments; Advantageous trade can occur between countries if the countries differ in their endowments of resources. Resource endowments refer to the skills and abilities of a country’s workforce, the natural resources available within its borders (minerals, farmland, etc.), and the sophistication of its capital stock (machinery, infrastructure, communications systems).
  • Differences in Demand; Advantageous trade can occur between countries if demands or preferences differ between countries. Individuals in different countries may have different preferences or demands for various products. For example, the Chinese are likely to demand more rice than Americans, even if consumers face the same price. Canadians may demand more beer, the Dutch more wooden shoes, and the Japanese more fish than Americans would, even if they all faced the same prices.
  • Existence of Economies of Scale in Production; The existence of economies of scale in production is sufficient to generate advantageous trade between two countries. Economies of scale refer to a production process in which production costs fall as the scale of production rises. This feature of production is also known as “increasing returns to scale
  • Existence of GovernmentPolicies; Government tax and subsidy programs alter the prices charged for goods and services. These changes can be sufficient to generate advantages in production of certain products. In these circumstances, advantageous trade may arise solely due to differences in government policies across countries.
The Advantages and Disadvantages of International Trade
Mention the advantages and disadvantages of international trade
ADVANTAGES OF INTERNATIONAL TRADE
  • It encourages specialization: international trade enables countries to specialize in production of goods in which they have comparative advantages.
  • technological transfer; international trade can facilitate the transfer of technology from one country to another country.
  • It reduce scarcity of goods
  • it stimulates international understanding.
  • it is important during calamities; international trade enables a country to obtain various necessities during calamities such as floods and drought.
DISADVANTAGES OF INTERNATIONAL TRADE.
  • Decline of domestic industries: international trade obliges local firms to enter into competitions with foreign giant firms which use more efficient techniques of production.
  • Some of the imports are harmful to the citizen.
  • Dependency: international trade influences specialization among countries. Too much specialization may be dangerous to a country since it makes a country dependent on other countries for the supply of essential goods. This causes difficulties to a country when it faces problems of foreign currency in which it can fail to import essential goods, dependency may also be a source of new colonialism.
  • Problem of unequal exchange. Most of time less developed countries is facing unfavorable terms of trade because they export primary products which have low price elasticity and import manufactured goods which have high price elasticity.
Difference between Visible from Invisible Trade
Differentiate visible from invisible trade
VISIBLE TRADE; is a trade on physical goods that can be touched and seen such as television, radio, cloth, food etc
INVISIBLE TRADE;Is a trade on invisible items. It consists of services which vcannot be seen, touched or counted.
Difference between Balance of Trade and Payments
Distinguish between balance of trade and balance of payments
BALANCE OF TRADE; this is the difference between the value of exports of goods and the value of import of goods.
BALANCE OF PAYMENT; can be defined as the difference between the receipts of a country frim abroad and the payment of a country abroad.
TOPIC 7: Import Trade  
The Meaning of Importance of Import Trade
Explain the meaning and importance of import trade
Import trade is the trade that involves buying goods from abroad. Examples of goods in Tanzania they are bought from abroad are cars, petrol and computer.
There are basically five main reasons for which a country may decide to import a certain good or service:
  1. it simply does not exist in the country: a mineral which is not in the country's soil, an agriculture product that can't be produced there, an innovation that has been introduced in other countries;
  2. it does not exist at a specific level of quality; thus, a country imports better products than domestic production, also as far as advertising or packaging are concerned;
  3. it represent a product variety that is appreciated domestically but not produced exactly in this horizontal or mixed differentiation;
  4. it is cheaper abroad, since producers there are more efficient, are faced by lower costs, better exploit economies of scale and/or accept lower profits;
  5. at the current domestic price, producers do not supply enough good or service as the demand requires, also because of ex ante coordination problems; accordingly, consumers buy abroad for insufficient domestic production.
IMPORTANCE OF IMPORT TRADE
  • Enable a country to obtain goods it cannot produce due to geographical and technological reasons.
  • Goods are imported to satisfy certain cultural, religious and sentimental feeling.
  • It encourage specialisation
  • Stimulating international understanding
  • Foreign earning; international trade enables a country to earn foreign currencies and revenue through tariffs.
The Main Organizations Involved in Import Trade in (Tanzania)
Identify the main organizations involved in import trade in (Tanzania)
Import procedures
Introduction
Import means goods and services brought to Tanzania from a foreign country. Importprocedures have to be followed in order to clear goods from Customs control as per the East Africa Community Customs Management Act (EACCMA) 2004.
Imports to Tanzania are subjected to different stages whereby the importer is advised to make declaration through his appointed Clearing and Forwarding Agent by lodging documents at least seven days before arrival of the vessel.
Importation procedures to Tanzania
  • The importer is required to appoint a Licensed Clearing and Forwarding Agent (CFA) to clear goods
  • List of Clearing and Forwarding Agents
  • Documentation process is done online through Tanzania Customs Integrated System (TANCIS) and can be completed before arrival of thegoods
  • Customs agents/importers are urged to complete a Declaration and self assessment through Tanzania Customs Integrated System (TANCIS) and attach along with other relevant import/ supporting documents at least 7 days prior to the arrival of the goods
Import documents include:
  • Final Invoice
  • Agent’s Authorization Letter from the importer
  • Import permits from TFDA, TBS etc
  • Exemption documents (If applicable)
  • Packing List
  • Transport documents i.e Bill of Lading/Airway Bill/Road Consignment note
Note
TRA rejects illegible and incomplete with insufficient descriptions through Integrated Query System (IQS) which is available in TANCIS. Pre – Arrival Declaration Procedure
What is Pre – Arrival Declaration?
Pre – Arrival Declaration (PAD) is the system used by Customs and Excise department to process importation documents during clearance of goods. However the initial process starts with the importer through his/her appointed Clearing and Forwarding Agent. (CFA)
Note: The following regimes do not undergo Pre – Arrival Declaration Process
  • Diplomatic cargos
  • Qualified returning residents Baggage Declaration forms
  • Post Parcel and courier services
  • ZNZ cases
  • Temporary Importation
  • EPZD
  • Export declarations
  • Petroleum products
  • Goods cleared under Provision declarations
  • Transit declarations
The importer hands over the importation documents either manually or electronically to the CFA who uploads them in the PAD system and lodges the same to TRA; whereby a reference number is automatically generated; these include:
  • Final Invoice
  • Declaration Form C 36
  • Agent’s Authorization Letter
  • Import permits i.e. TFDA, TBS, chemical permit etc
  • Exemption documents
  • Packing List
  • Transport documents i.e Bill of Lading/Airway Bill/Road Consignment
  • TIN Certificate (importer)
Note: Legible copies of Pro-forma invoices are acceptable for verification and registration purposes only but not for issuance of any clearance report (P-PAD, A-PAD etc.)
Note: Current other stations exclude Dar es salaam and Tunduma
TRA will verify the submitted PAD application for completeness, legality and confirm acceptance by registering the number generated upon lodgment by the agent. An automatic email notification is sent to the CFA.
  • TRA performs Customs Tariff Classification and Valuation and issues a Pre-Assessed PAD (P-PAD) for PADs registered with complete set of final documents. PAD registered with incomplete set of final documents are held pending for submission of same.
  • TRA issues a Pre-Assessed PAD (P-PAD) which is available for download by CFAs from the TRA PAD online for review.
  • The agent is supposed to pass over the P- PAD to the importer to go through and check for correctness for accepting the P-PAD or reject the same through IQS
  • If P-PAD is accepted by the importer; CFA will apply for an Assessed PAD (A-PAD) via www.trapad.co.tz along with scanned documents as applicable, such as permits and/or certificates issued by Other Governments Departments (TBS, Government Chemist, TDFA etc.) and supporting documentation to justify tax exemptions, if any.
  • TRA verifies the application and issues an Assessed PAD (A-PAD) available for download by CFA’s from this website. An automatic email notification is sent to the CFA.
  • The A-PAD EDI data becomes available for download by CFAs from this website for upload into On the basis of the A-PAD issued the CFA will assess Duties and Taxes through TANZANIA SINGLE ADMINISTRATIVE DOCUMENT(TANSAD)
  • The agent will hand over TANSAD to the importer ready for payment of duties and taxes to the Bank.
  • TRA perform the selectivity process by subjecting the TANSAD to Computerized Risk Management System (CMRS); basing on the results.
Note: GREEN color signifies direct release while YELLOW documentary check/SCANNER and RED physical examination or scanner.
  • Goods are examined and released from Port or Airport
Note: For TANCIS users (Currently Dar es salaam and Tunduma)
  • If declaration is “Rejected” CFA is supposed to submit a fresh declaration to accommodate TANCIS requirement.
  • TANSAD will be processed to payment stage before manifest is submitted.
  • Cargo Manifest write-off is shifted to a Customs Release Order stage (CRO).
  • CFA will get Acceptance Notice with a Payment Notice generated based on declared Values.
  • CFA will get Amendment Acceptance Notice once amendment they sent passes the validation check. If the officer rejects the amendment CFA will get Amendment Rejection Notice for TANSAD; otherwise officer will work on the document classification, valuation and verification.
  • Once verification is completed, the results will be registered by the officer.
  • Verification results will be submitted to the supervisor for approval.
  • CFA will receive Assessment Notice.
  • CFA has to accept or object the Assessment Notice
  • CFA has to object the officer Assessment through Integrated Query System (IQS)
  • If CFA accept the Notice and the assessment have increased compared to the declared values, an Additional Payment Notice will be generated within the assessment notice. This payment notice value will be the difference of the final amount and initial generated payment notice.
  • If there is a discrepancy between manifest data and declaration, CFA will receive Clearance Suspension Notice. CFA will need to amend the declaration as guided by inspection results and re-submit.
  • When Payment is received, inspection completed accordingly, CFA will receive Release Order for the respective goods.
How long does this process take before getting my goods?
  • A total number of 48hours (4 days) has been set for processing of Pre-Arrival Declarations from registration to issuance of the necessary clearance report (A-PAD) for PADs submitted with or upon receipt of sufficient documentation that meet the required standard.
  • The P-PAD for PADs submitted with complete set of final documents should be processed and issued within 48 hours.
  • Note: The P-PADs for PADs registered without complete set of final documents should be processed and issued 48 hours after receipt of the same, i.e if the final documents are received after two weeks, the process starts that day.
  • A-PADs should be processed and issued within 24 hours after receipt of an A-PAD application together with complete set of the required documents.
  • After lodgement of TANSAD and payment of duties if any, selectivity will be conducted within 24 hrs.
  • Goods are selected for direct release, green will get the release order from the port or entry point, those selected for documentary check will be checked at CSC, and those selected for physical verification are examined and release at the port and point or entry
Difference between Two Types of Imports Direct and Indirect
Differentiate, the two types of imports direct and indirect
TYPES OF IMPORT TRADE
  • Direct import-in these case goods are imported for the sole use of the importer himself for the furtherance of his production programme. For instance, if a company wants to operate a bottling plant and requires machinery for that specific purpose, it has to import all that is wanted in its name directly, without making use of middlemen.
  • Indirect import these are channelled through wholesale import merchants. The merchant in this case do not use the goods themselves; but sell them at a profit to shopkeepers who operate the retail business.
The Import Procedure and Formalities with Special emphasis on: Documentation; Terms of Payment; Terms of delivery
Explain the import procedure and formalities with special emphasis on: Documentation; term of payment; Terms of delivery
Some of the most important documents used in import trade are as follows: (i) Indent (ii) Bill of Lading (iii) Bill of Entry (iv) Letter of Credit (v) Bill of Sight (vi) Dock Challan (vii) Dock Warrant.
There are many documents used in import trade which have already been discussed in the Import Procedure.
To name a few, the most important documents used in import trade are:
  1. Indent: An indent is an order placed by an importer with the exporter for the supply of certain goods. It is usually prepared in duplicate or triplicate. The indent may be of several types like open indent, closed indent and confirmatory indent. An indent contains the following information: (a) Quantity of goods to be imported (b) Quality of goods (c) Method of forwarding the goods (d) Nature of packing (e) Mode of setting payment (f) Price to be charged (g) Sale of delivery
  2. Bill of Lading: It is an acknowledgement of receipt of goods on board of the ship. It contains terms and conditions on which the goods are to be taken to the port of destination. The exporter sends one copy of bill of lading to the importer enabling him to clear the goods from the ship.
  3. Bill of Entry: This is a form supplied by the custom office to the importer and is to be filled in triplicate. The bill of entry contains following particulars: (a) Name and address of the importer (b) Name of the ship (c) Package number (d) Marks on the package (e) Description of goods (f) Quantity and value of goods (g) Name, address and country of the exporter (h) Port of destination (i) Custom duty payable
  4. Letter of Credit: A letter of credit, popularly known as ‘L/C or ‘L.C:’ is an undertaking by the issuer (usually importer’s bank) that the bills of exchange drawn by the foreign dealer on the importer will he honoured on presentation up to a specified amount. Letter of credit is needed because exporter wants to be sure that payments will be made as agreed by the importer.
  5. Bill of Sight: If the importer is not in a position to supply the detailed particulars of goods because of insufficient information supplied by the exporter, he (importer) has to prepare a statement called ‘bill of sight’. The bill of sight contains only the information possessed by the importer along-with a remark that he is not in a position to give complete information about the goods. The bill of sight enables him to open the package and examine the goods in the presence of custom officer so as to complete the bill of entry.
  6. Dock Challan: It is a form to be filled by the importer or his clearing agent in the dock for payment of dock charges. Dock charges are paid when all the formalities of the customs are completed. The goods imported will be delivered only when dock charges are paid.
  7. Dock Warrant: This is document issued by Warehouse keepers to the persons who have deposited the goods with them. Transport Documents
  • Shipping Order S/O; A document with details of the cargo and the shipper's requirements, and is the basic document for preparing other transport documents such as bill of lading, air waybill, etc. Prepared by: shipper / transport companies
  • Dock Receipt D/R or Mate's Receipt; A receipt to confirm the receipt of cargo on quay / warehouse pending shipment. The dock receipt is used as documentation to prepare a bill of lading. It has no legal role regarding processing financial settlement. Prepared by: shipping company
  • Bill of Lading (B/L); An evidence of contract between the shipper of the goods and the carrier. The customer usually needs the original as proof of ownership to take possession of the goods. There are two types: a STRAIGHT bill of lading is non-negotiable and a negotiable or shipper's ORDER bill of lading (also a title document) which can be bought, sold or traded while goods are in transit and is used for many types of financing transactions. Prepared by: shipping company
  • House Bill of Lading (Groupage) A bill of lading issued by a forwarder and, in many cases, not a title document. Shippers choosing to use a house bill of lading, should clarify with the bank whether it is acceptable for letter of credit purpose before the credit is opened. Advantages include less packing, lower insurance premiums, quicker transit, less risk of damage and lower rates than cargo as an individual parcel / consignment. Prepared by: forwarder
  • Sea Waybill A receipt for cargo which incorporates the contract of carriage between the shipper and the carrier but is non-negotiable and is therefore not a title document. Prepared by: shipping company
  • Air Waybill (AWB) A kind of waybill used for the carriage of goods by air. This serves as a receipt of goods for delivery and states the condition of carriage but is not a title document or transferable / negotiable instrument. Prepared by: airline
  • House Air Waybill (HAWB) An air consignment note issued by an air freight agent to provide the cargo description and records. Again, it is not a title document. Prepared by: forwarding agent
  • Shipping Guarantee Usually a pre-printed form provided by a shipping company or the bank, given by an importer's bank to the shipping company to replace the original transport document. The consignee may then in advance take delivery of goods against a shipping guarantee without producing the original bill of lading. The consignee and the importer bank will be responsible for any loss or charges occurred to the shipping company if fault is found in the collection. It is usually used with full margin or trust receipt to protect the bank's control to the goods. Prepared by: importer's bank / shipping company / consignee
  • Packing List (sometimes as packing note) A list providing information needed for transportation purpose, such as details of invoice, buyer, consignee, country of origin, vessel / flight date, port / airport of loading, port / airport of discharge, place of delivery, shipping marks / container number, weight / volume of merchandise and the fullest details of the goods, including packing information. Prepared by: shipper
Financial Documents
  • Documentary Credit D/C A bank instrument (issuing or opening bank), at the request of the buyer, evidencing the bank's undertaking to the seller to pay a certain sum of money provided that specific requirements set out in the D/C are satisfied. Prepared by: the issuing bank upon an application made by the importer
  • Standby Credit An arrangement between a customer and his bank by which the customer may enjoy the convenience of cashing cheques, up to a value. Or a credit set up between the exporter and the importer guaranteeing the exporter will pay the importer a certain amount of money if the contract is not fulfilled. It is also known as performance bond. This is usually found in large transactions, such as crude oil, fertilizers, fishmeal, sugar, urea, etc. Prepared by: exporter / issuing bank
  • Collection Instruction An instruction given by an exporter to its banker, which empowers the bank to collect the payment subject to the contract terms on behalf of the exporter. Prepared by: exporter
  • Bill of Exchange (B/E) or Draft An unconditional written order, in which the importer addressed to and required by the exporter to pay on demand or at a future date a certain amount of money to the order of a person or bearer. Prepared by: exporter
  • Trust Receipt (T/R) A document to release a merchandise by a bank to a buyer (the bank still retains title to the merchandise), the buyer, who obtains the goods for processing is obligated to maintain the goods distinct from the remainder of his / her assets and to hold them ready for repossession by the bank. Prepared by: importer
  • Promissory Note A financial instrument that is negotiable evidencing the obligations of the foreign buyer to pay to the bearer. Prepared by: importer
Government Documents
  • Certificate of Origin (CO) This certifies the place of manufacture of the exported goods to meet the requirements of the importing authorities. Prepared by: Trade and Industry Department and five Chambers of Commerce [1]
  • Certificate of Origin Generalized Systems of Preferences (GSP) Form A (or as Form A) A CO to support the claim for preferential tariff entry (a reduced or zero rate) of the exporting country's products into the GSP donors under the GSP they operate. In general, a Form A is issued only when the goods concerned have met both the origin rules of the preference receiving country as well as the origin criteria of the respective donor country's GSP. Prepared by: Trade and Industry Department and five Chambers of Commerce
  • Import / Export Declaration A statement made to the Director of Customs at port of entry / exit, declaring full particulars of the shipment, eg. the nature and the destination / exporting country of the ship's cargo. Its primary use is for compiling trade statistics. Prepared by: exporter / importer
  • Import / Export Licence A document issued by a relevant government department authorising the imports and exports of certain controlled goods. Prepared by: Trade and Industry Department, Customs & Excise Department, etc
  • International Import Certificate (IIC) A statement issued by the government of country of destination, certifying the imported strategic goods will be disposed of in the designated country. In Hong Kong, it is issued only to meet an exporting country's requirement. Prepared by: Trade and Industry Department
  • Delivery Verification Certificate (DVC) A statement issued by the government of country of destination, certifying a specific strategic commodity has been arrived in the designated country. In Hong Kong, it is issued only to meet an exporting country's requirement. Prepared by: Trade and Industry Department
  • Landing Certificate A document issued by the government of country of destination, certifying a specific commodity has been arrived in the designated country. In Hong Kong, it is issued by the Census and Statistics Department. Application requirements include letter stating the reason for the application, import declaration & receipt; bill of lading, sea waybill & land manifest; supplier's invoice; and packing list (if any). Prepared by: Census and Statistics Department
  • Customs Invoice A document specified by the customs authorities of the importing countries stating the selling price, costs for freight, insurance, packing and payment terms, etc, for the purpose of determining the customs value. Prepared by: exporter
RULES FOR SEA AND INLAND WATERWAY TRANSPORT
  • FAS Free Alongside Ship; “Free Alongside Ship” means that the seller delivers when the goods are placed alongside the vessel (e.g., on a key or a barge) nominated by the buyer at the named port of shipment. The risk of loss of or damage to the goods passes when the goods are alongside the ship, and the buyer bears all costs from that moment onwards.
  • FOB Free On Board ; “Free On Board” means that the seller delivers the goods on board the vessel nominated by the buyer at the named port of shipment or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel, and the buyer bears all costs from that moment onwards.
  • CFR Cost and Freight; “Cost and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. the seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
  • CIF Cost, Insurance and Freight; “Cost, Insurance and Freight” means that the seller delivers the goods on board the vessel or procures the goods already so delivered. The risk of loss of or damage to the goods passes when the goods are on board the vessel. The seller must contract for and pay the costs and freight necessary to bring the goods to the named port of destination.
‘The seller also contracts for insurance cover against the buyer’s risk of loss of or damage to the goods during the carriage. The buyer should note that under CIF the seller is required to obtain insurance only on minimum cover. Should the buyer wish to have more insurance protection, it will need either to agree as much expressly with the seller or to make its own extra insurance arrangements.
INTERMEDIARIES IN IMPORT TRADE
  • Clearing agent
  • Freight forwarder, forwarder, or forwarding agent, also known as a non-vessel operating common carrier (NVOCC), is a person or company that organizes shipments for individuals or corporations to get goods from the manufacturer or producer to a market, customer or final point of distribution.[1] Forwarders contract with a carrier or often multiple carriers to move the goods. A forwarder does not move the goods but acts as an expert in the logistics network. These carriers can use a variety of shipping modes, including ships, airplanes, trucks, and railroads, and often multiple modes for a single shipment. For example, the freight forwarder may arrange to have cargo moved from a plant to an airport by truck, flown to the destination city, then moved from the airport to a customer's building by another truck.
Role of Clearing Agents
A clearing agency assume the following duties:
  1. furnish, whenever required by Customs Administration, an authorization from each of the firms or persons by whom he is employed to act as their Customs Agent;
  2. not represent a client in Customs in any matter which the licensee dealt as an officer or employee of Tanzania Revenue Authority or of the facts of which he gained knowledge while in Government service;
  3. where he knows that a client has not complied with the law or has made any error in or omission from any document which the law requires such client to execute, advise his client promptly of the fact of such non-compliance, error or omission and immediately bring the matter to the notice of the appropriate officer of Customs in writing;
  4. Exercise due diligence to ascertain the correctness of any information which he imparts to a client with reference to any Customs operations;
  5. Not withhold information relating to Customs operations from a client who is entitled to such information;
  6. promptly pay over to Government when due, all sums received for payment of any duties, taxes or other debts or obligations owing to the Government and promptly account to his clients any money received for them from Government, or received from them in excess of Governmental, or the other charges properly payable in respect of the clients Customs operations
  7. not attempt to influence the conduct of any officer of Customs in any matter pending before the Customs by the use of threat, false accusation, duress or the offer of any special inducement or promise of advantage, or of any gift or favour or other thing of value;
  8. not procure or attempt to procure, directly or indirectly, information from Customs records or other Government sources of any kind to which access is not granted by proper authority;
  9. not employ in any capacity, with power of attorney, by delegation or otherwise, for the promotion of or in connection with the work relating to the licence: (a) any person whose application for licence or Customs Clearance identity card has been refused; or (b) any person whose licence or Customs clearance identity card has been revoked or whose conduct as a partner, manager, director, officer or servant has been the cause of the revocation of the licence or Customs Clearing agent identity Card;
  10. Not lend money to any officer or employee in the service of the Rwanda Revenue authority or become surety for the repayment of money borrowed by any such officer or employee; and
  11. Inform the Customs administration any change of address before such change is affected.
TOPIC 8: Export Trade
The Meaning and Importance of Export Trade
Explain the meaning and importance of export trade
Is the selling of goods, materials or services to foreign markets. An export is a function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation's gross output.
IMPORTANCE OF IMPORT TRADE
  • Increasing sales;Exporting is one way of increasing your sales potential; it expands the "pie" that you earn money from, otherwise you are stuck trying to make money only out of the local market. In the case of South Africa, our market is relatively small in comparison to the markets of North America, Europe and Asia. While the local market may represent enough sales potential for smaller firms, for medium and larger companies the local market is just too small and the only way to expand sales is to export. It should be said, however, if you are not yet selling regionally and nationally, then you should first aiming at expanding your market share within the local market. Once you have saturated the national market, only then should you look beyond the borders of South Africa. It has been said that there are no sales barrier that automatically begins where your border ends. Increased sales also impact upon your profitability (although not always positively), your productivity by lowering unit costs, and may increase your firm's perceived size and stature, thereby affecting its competitive position compared with other similar-sized organisations. What is more, research and development (R&D) and other costs can also be offset against a larger sales base, or the move into exports may contribute to the company's general expansion. For others, exports may be a way of testing the opportunities for overseas licensing, franchising or production.
  • Increasing profits;Clearly, you are not likely to enter the export market in order to make a loss. Companies generally strive to make profits and the bigger the profits the better. In many instances, exports can contribute to increased profits because the average orders from international customers are often larger than they are from domestic buyers, as importers generally order by the container instead of by the pallet (thereby affecting both total sales and total profits). Some products - especially those that are unique or very innovative in nature may also command greater profit margins abroad than in the local market. Having said this, it is also not uncommon - indeed, it is highly likely - that you may receive smaller profit margins from your export sales compared with the local market. The reason for this is the highly competitive nature of global markets that forces exporters to lower prices, squeeze profits and reduce costs. You may also find that in some markets you generate higher profit margins, while in other markets your profit margins are considerably lower.
  • Reducing risk and balancing growth;It is risky being bound to the domestic market alone. Export sales to a variety of diverse foreign markets can help reduce the risk that the company may be exposed to because of fluctuations in local (and foreign) business cycles. At any one time, the UK, Australia and Germany will be enjoying different growth rates. By selling in all of these countries, the risk of low growth in one or more of these countries will be offset by increased growth in the others, thus resulting in a balanced portfolio of growth overall. In addition, with the challenging labour conditions that many firms in South Africa face today, exports may help to create and/or maintain jobs thus reducing the risk of a labour dispute that could otherwise cripple the company.
  • Lower unit costs;Exports help to put idle production capacity to work. This is generally achieved the more efficient utilisation of the existing factory, machines and staff. What is more, because you are now selling more products without increasing total costs to the same extent, this has the effect of lowering your unit costs which represents a more productive overall operation. Lower unit costs make a product more competitive in the local marketplace as well as in foreign markets, and/or can contribute to the firm's overall profitability.
  • Economies of scale;Exporting is an excellent way to enjoy pure economies of scale with products that are more "global" in scope and have a wider range of acceptance around the world (in other words, they can be used in other parts of the world without much adaptation). This is in contrast to products that must be adapted for each market, which is expensive and time consuming and requires more of an investment. The newer the product, the wider range of acceptance in the world, especially to younger "customers," often referred to as the "global consumer". With increased export production and sales, you can achieve economies of scale and spread costs over a larger volume of revenue. You reduce average unit costs and increase overall profitability and competitiveness. Long-term exports may enable a company to expand its production facilities in order to achieve an economic level of production. (This should not be confused with increased throughput on existing capacity, as discussed above.)
  • Minimising the effect of seasonal fluctuations in sales;Being in the Southern Hemisphere, South Africa has seasons that are opposite to those in the Northern Hemisphere. For companies that sell seasonal goods such as fruit growers, and swimwear or suntan lotion manufacturers, being able to sell these goods in the Northern Hemisphere when our season ends, helps achieve a longer and more stable sales pattern. This increases the sales potential for these goods and also helps reduce risk.
  • Small and/or saturated domestic markets;One good reason to begin exporting is when the local market is too small to support a firm's output or when the market becomes saturated. For companies that produce heavy industrial machinery or that have invested in large factories, they need to be able to sell enough of their manufactured goods to justify the investment and to insure that the unit price of goods are kept acceptably low. With relatively small markets such as South Africa, it is usually not long before the local market becomes saturated and offers limited additional opportunities for sales. Many of South Africa's larger manufacturers have had to turn to foreign markets to justify their existence. Examples include most of the motor vehicle manufacturers such as Opel, VW and BMW; the paper producers such as Mondi and Sappi; and mining houses such as Anglo-American and De Beers. The same is true of international firms such as Volvo, Philips and Roche. They only way firms such as these can justify their investment is to sell abroad because their respective local markets are just too small.
  • Overcoming low growth in the home market;It is not uncommon for a recession in the local market to act as a spur for companies to enter export markets that may offer greater opportunities for sales. While this may have the benefit of offering ongoing sales potential for the firm in question, the danger with this approach is that when the local market improves, these companies abandon their export markets to focus on the now buoyant local market. Overseas importers become disillusioned with this type of exporter and often see all firms from South African being the same and will want nothing more to do with South African exporters, even if they are serious.
  • Extending the product life-cycle;All products go through a product life-cycle. In the beginning they are novel and sales increase quite dramatically, then sales level off and they become what is referred to as mature products and eventually sales start to decrease and the product goes into decline. Now, a product that has entered its decline stage may have a life elsewhere in the world and by finding a market where this product could be sold anew, you are essentially extending the life-cycle of the product. Alternatively, even if it is a fairly common product, it may also be nearing the end of its life cycle in other overseas markets (particularly in bigger markets such as Germany, the UK and the US) and they may decide to discontinue the product. Although the market may have declined to a point that makes it uneconomical for these companies to continue manufacturing the product in question, the market may still be big enough for you to supply the declining market. This has the effect of making more efficient use of the existing factory infrastructure and other investment spent on producing the product. This extends sales, lowers the unit costs even further and may allow for higher margins to be generated. When you have a product that is nearing its life cycle, you should always strive to see if you can find a market for the product abroad.
  • Improving efficiency and product quality ;The global market is a highly competitive place and by participating in this marketplace, you need to become equally efficient and quality conscious. It is generally the case that successful exporters are also very successful in their home markets because of their heightened efficiency and focus on product quality.
Untapped markets
A company may have a very unique product that is not yet available elsewhere in the world. In this instance, these untapped markets are likely to drive the firm's export activities. Other firms may want to take advantage of high-volume purchases in large markets overseas, such as in the US, Europe and Asia.
Addressing customer, competitor and cost factors
The more formal theory of internationalisation discusses customer, competitor and cost factors that drive the internationalisation process. The theory argues that in some cases companies may go global in response to their customers moving abroad. Alternatively, they may follow their competitors abroad, or may decide to enter a particular foreign market in order to attack an overseas competitor that has entered the firm's domestic market, in the competitor's own home market. Finally, companies may go international to take advantage of lower labour costs, skilled workers or other cost factors (such as lower telecommunication or energy costs) that are much better in a particular foreign market. For example, expanding into India to take advantage of programming skills and lower salaries could translate into a major advantage for a local software development firm. It should be said, however, that these factors are more likely to be relevant to larger firms, instead of small scale export operations.
Status as an exporter
For some companies, the status of being involved in international trade is very important to them.
The wrong reasons for exporting
Too often, however, many local South Africa companies simply follow their domestic competitors into exports or they turn to export markets because of the difficulties encountered in the local marketplace(see low growth in home market mentioned above). Alternatively, a company may use exports as means of offloading excess production capacity. None of these reasons are very solid reasons for moving into exports. In the latter case, when local sales pick up again the "fair-weather" export firm then ignores its export markets to concentrate on domestic sales again, often leaving foreign companies in the lurch thereby creating a bad impression and a resistance to future export sales.
The Organization Involved in the Export Trade
Identify the organization involved in the export trade
INSTITUTIONS WHICH ARE INVOLVED IN EXPORT TRADE
MARKETING BOARD
The following are the some of the marketing board in Tanzania
  • Cotton marketing board,
  • Coffee marketing boards,
  • Cashew marketing board
FUNCTIONS OF MARKETING BOARD
  • Pooling Resources;Marketing boards provide an opportunity for member businesses to pool their marketing resources. Boards frequently run ads in several media including television, radio, newspapers, magazines and websites including social media. Individually, member businesses might not be able to afford such comprehensive or even partial media campaigns. However, when teamed up with other growers, producers or companies, businesses can reap the benefits of a well-coordinated media marketing program.
  • Demand;Many agricultural producers sell their products to large food companies or directly to commercial buyers, including restaurants and distributors. However, consumer taste and demand for their product still impacts sales. Consumers with a positive regard and taste for cheese cause restaurants and other food businesses to incorporate cheese in their offerings, which in turn drives business for producers.
  • Branding;Particularly in agriculture, both small and large farming and food-producing operations lack a brand. That's in part because consumers don't need to know the names of all the businesses that produce hazelnuts or shrimp, since these companies sell to larger distributors, not the public. However, branding can inspire consumer demand. Marketing board media campaigns can turn a general product such as Louisiana shrimp into a brand in itself. The Louisiana Seafood Marketing Board tries to make it so that supermarket shoppers check packages for Louisiana shrimp, rather than foreign imports -- which helps its relatively anonymous member businesses.
  • Networking;Although marketing boards are not chambers of commerce or even necessarily industry associations, member organizations can become involved in meetings and campaign direction. As a result, marketing boards provide opportunities for companies within an industry to network, form alliances and learn about opportunities. Developing industry contacts can have long-term benefits, as members who don't need anything today can find someone to call for assistance or cooperation at some unexpected point in the future
  • Conducting research
  • Collection and storage
BOARD OF INTERNAL TRADE
The board of internal trade was established by the act of parliament in 1973 to replace the state trading company.
FUNCTIONS
  • Setting and revising internal trade policies
  • Conducting market research
  • Supervising and coordinating internal trade activities.
  • Supervising,designing the accounting and operating system
Exporters are required to obtain a valid trading/business license from the city/town council where the business will be conducted. The license is valid for one year.
The Documents for Export and the Export Procedures in Tanzania
Mention the documents for export and the export procedures in Tanzania
EXPORT PROCEDURES AND DOCUMENTATIONS
Obtain an Export License
Some products require specific license/permit from the Government departments/institutions or a controlling body legally empowered to do so, exporters therefore have to contact the following:
  • Forest department for Forestry products
  • Fisheries department for Fisheries products
  • Wildlife department for Wildlife products
  • Mining department for Minerals/Gemstone products
  • Marketing Boards for Coffee, Tobacco, Cotton, Sisalfibre, Raw Tea, and Raw Pyrethrum.
  • Ministry of Agriculture for Food (staple) products.
Documentation:
Once an exporter has obtained an order from a buyer abroad and an agreement has been reached to export goods to the buyer and mode of shipment determined, the following steps are necessary:
Shipment by air:
The exporter applies for an export license/permit for the export product if it falls under the above-mentioned product groups otherwise other products call no license. After confirmation of cargo space an airway bill is prepared by the carrier or its agent on presentation of the following:
  • A commercial invoice,
  • An export license/permit (if required),
  • Technical documents (if required) on health, quality, weight, certificate of origin etc
  • Process a Single Bill of Entry (SBE) by attaching all the above documents at the customs long room. A customs release/approval is obtained.
  • Goods are taken to the Airport for air freighting vide the cleared documents by customs
Shipment by sea:
  • Apply/obtain a license/permit (if required).
  • Apply/obtain technical documents for your product
  • Apply for shipping space to an agent/shipping company
  • Then obtain a single bill of entry from customs, complete it and then attach all the previous or required documents for processing the SBE at the long room.
  • A shipping company/agent will finally prepare a bill of lading after accomplishing customs verification/approval, port charges and procedures, cargo loading (FOB).
New procedures for Payment of Duty and Taxes on PSI Consignments:
As from 1st November 2000, payment of duty and taxes on PSI consignments has been made according to the following procedures:
  • On receiving a request for an SBE from the importer, the Inspection Agent (IA) shall give three copies of the SBE printed on non-security paper. For ease of identity this printout shall be stamped "Tax Assessment Notice" (TAN).
  • The importer shall go to the relevant bank and pay the assessed duties and taxes.
  • The bank shall stamp the three copies of TAN and give one copy back to the importer along with a receipt of payment.
  • The importer shall return to IA and present the stamped copy and the bank receipt.
  • The IA shall keep the stamped copy and a copy of the receipt for their record and issue to the importer an SBE printed on security paper.
  • The importer shall use the SBE printed on security paper for clearance of good as usual.
  • Twice a day the IA shall collect one of the copies retained by the bank for bank reconciliation.
Export Documents
This section covers documents that are commonly used in exporting, but specific requirements vary by destination and product. It is divided into the following subsections: common export documents, transportation documents, export compliance documents, certificates of origin, other certificates for shipments of specific goods, other export-related documents, and temporary shipment documents. Learn more about export documentation. For additional assistance with country-specific documentation requirements, please email the Trade Information Center
COMMON EXPORT DOCUMENTS
  • Commercial Invoice A commercial invoice is a bill for the goods from the seller to the buyer. These invoices are often used by governments to determine the true value of goods when assessing customs duties. Governments that use the commercial invoice to control imports will often specify its form, content, number of copies, language to be used, and other characteristics.
  • Export Packing List Considerably more detailed and informative than a standard domestic packing list, an export packing list lists seller, buyer, shipper, invoice number, date of shipment, mode of transport, carrier, and itemizes quantity, description, the type of package, such as a box, crate, drum, or carton, the quantity of packages, total net and gross weight (in kilograms), package marks, and dimensions, if appropriate. Both commercial stationers and freight forwarders carry packing list forms. A packing list may serve as conforming document. It is not a substitute for a commercial invoice. In addition, U.S. and foreign customs officials may use the export packing list to check the cargo.
  • Pro Forma Invoice A pro forma invoice is an invoice prepared by the exporter before shipping the goods, informing the buyer of the goods to be sent, their value, and other key specifications. It also can be used as an offering of sale or price quotation.
TRANSPORTATION DOCUMENTS
  • Airway BillAir freight shipments require airway bills. Airway bills are shipper-specific (i.e., USPS, Fed-Ex, UPS, DHL, etc.).
  • Bill of LadingA bill of lading is a contract between the owner of the goods and the carrier (as with domestic shipments). For vessels, there are two types: a straight bill of lading, which is non-negotiable, and a negotiable or shipper's order bill of lading. The latter can be bought, sold, or traded while the goods are in transit. The customer usually needs an original as proof of ownership to take possession of the goods. See also: straight bill of lading and liner bill of lading.
  • Electronic Export Information Filing (formerly known as the Shipper’s Export Declaration) Electronic Export Information (EEI) is the most common of all export control documents. It is required for shipments above $2,500* and for shipments of any value requiring an export license. It has to be electronically filed via the AES Direct online system, which is a free service from Census and Customs. 
 COMMERCE O'LEVEL ALL TOPICS 
FORM ONE TOPICS
FORM TWO TOPIC 1-2.
FORM TWO TOPIC 3-4.
FORM TWO TOPIC 5-6.
FORM THREE TOPIC 1-2.
FORM THREE STUDY NOTES TOPIC 3-5
STUDY NOTES FORM THREE TOPIC 6-8.
FORM FOUR STUDY NOTES, TOPIC 1-2.
FORM FOUR STUDY NOTES, TOPIC 3-4.

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