What is Import Trade?

The import trade refers to goods and services purchased into one nation from another. The word ‘import’ originates from the word ‘port’ considering the fact that the products are frequently transported via ship to foreign countries. Similar to exports, imports are also the backbone of international trade.

Here, if the expense of a country’s imports is more than the value of its exports, then the country has a negative balance of trade (BOT), which is also known as a trade deficit.

Also Read: What is Export Trade?

Every country imports goods and services that the domestic country cannot manufacture, maybe because the country cannot produce effectively or cheaply like another exporting country. Few countries sometimes import commodities and raw materials that are not available on their premises.

For instance, many nations import oil as they cannot manufacture locally or cannot provide it in sufficient amounts to meet the demand.

Objectives of Import Trade

(1) To speed up industrialisation

•       Developing countries import scarce raw materials, capital goods, and advanced technology required for rapid industrial development.

(2) To meet domestic demand

•       The goods that are in demand but are not available in the country are imported.

(3) To overcome natural disasters

•       During drought, flood, earthquake, and other natural calamities, countries import food grains and other essential commodities to prevent starvation.

(4) To improve standard of living

•       Imports enable consumers in the home country to enjoy a wide variety of products of high quality.
•       It helps in improving the standard of living of the masses.

(5) To ensure national defence

•       The importer must get the receipt of credit from his concerned bank and send it to the foreign supplier.

Important Steps Involved in a Typical Import Transaction

(1) Trade enquiry and sending quotations

•       The domestic buyer who wishes to buy goods from other countries sends an inquiry relating to price, desired quality, terms and conditions for the export of the goods.
•       The exporter sends a reply to the inquiry in the form of ‘Quotation’.
•       The quotation is also known as ‘Proforma Invoice’ which contains information about the selling price, quantity, quality, mode of delivery, etc.

(2) Procurement of import license

•       Goods can be imported only upon the license, the importer requires to obtain an import license.

(3) Obtaining foreign exchange

•       The overseas supplier asks for payment in a foreign currency.
•       The payment requires the exchange of Indian currency into foreign currency.
•       In India, transactions related to foreign exchange are governed by the Reserve Bank of India (RBI) under the Exchange Control Department.

(4) Placing order or indent

•       After the receipt of the ‘Quotation’, if the prospective buyer finds the information suitable to him, then he places the ‘Order/Indent’ for the import of goods.

(5) Obtaining letter of credit

•       The importer must get the receipt of credit from his concerned bank and send it to the foreign supplier.

(6) Arrangement of finance

•       The importer makes the finance settlements in advance to remunerate the exporter when the shipment arrives at the destination.

(7) Receipt of shipment advice

•       After storing the consignment on the ship, the foreign supplier sends the shipment advice to the importer.
•       The shipment advice includes data about the shipment of products such as:
•       Invoice number
•       Landing or airways bill date and number
•       Name of the ship with date
•       Port or destination of export
•       Classification of goods and quantity
•       Date of the sailing of the vessel

(8) Arrival of goods

•       The overseas supplier dispatches the goods as per the contract.

(9) Customs clearance and release of goods

•       In India, all the imported goods have to have a clearance from the customs after they pass the Indian borders.
•       When the ship arrives at the port, the importer has to obtain a delivery order/endorsement for delivery on the back of the bill of landing from the concerned shipping company.

For more data on Business Studies Class 11 Syllabus, relevant notifications, and sample papers, stay tuned to our website.