COMMERCE STUDY NOTES FORM THREE TOPIC 6-8.

0
31

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.

LEAVE A REPLY

Please enter your comment!
Please enter your name here