Foreign Trade

The trade which is carried on between two or more countries is called foreign trade. It is conducted between the individuals or organizations of two or more countries. It is the international trade in which the payment is made in foreign currencies. It is divisible into import trade and export trade. The purchase of goods from a foreign country is called importing and the sale of goods to a foreign country is called exporting. The foreign trade exists because all types of goods necessary for human beings cannot be produced by a single country due to the lack of raw materials, skilled manpower, capital and technology.

Documents used in Foreign Trade

1. Enquiry letter

   

   
   It is the first step in which the importer writes and sends a letter of enquiry to the exporter, asking about the quality, quantity, price and other conditions of trade like credit facility, modes of payment, etc. This is the letter which contains full questions in regard of goods and terms and conditions of trade.
   
   
2. Reply letter
   It is the second step of the trade. After receiving the letter of enquiry from importers, the exporters sends a letter to the buyer which is called reply letter. It is also called Quotation Letter or Price List. In this letter, all the answers to the enquiry in regard of goods and terms and conditions of trade are given to the importer.
   
   
3. Order letter
   After receiving quotation letter from different exporters, the importer analyzes them carefully and selects the most favorable one. Then, the importer sends purchase order through a letter which is called order letter. Since, it is the ordering for the purchase of goods, an importer should draft it very carefully by stating the quality and quantity of goods clearly and correctly.
   
   
4. Acknowledgement letter
   After receiving the order of purchase of goods, the exporter then writes a letter to inform to the importer about the receipt of the order and its acceptance. This letter also confirms the right delivery of goods on right time.
   
   
5. Invoice

   

   
   After making the goods ready for delivery, a bill is prepared according to L.C. number to give details about the unit price, total price, qualities, and quantities of goods being dispatched and other information like discount which is called invoice. So, an invoice is a bill of goods prepared by an exporter and sent along with dispatched goods. It is generally prepared by four copies – 1 copy for an importer, 2 copies for the transport company and 1 copy is kept by the exporter himself.
   
   
6. Bill of Lading

   

   
   The sixth document used in foreign trade is a bill of lading. In foreign trade, the exporter generally dispatches the goods to the importer through the ship with the help of a special document known as a bill of lading. The exporter obtains the bill of lading on placing the goods on board the ship from the shipping company. The bill of lading contains the full description of the type, quantity and condition of the goods placed on board the ship and the name of the place where the goods are to be carried.