International Business

International business is the field in which we study about export and import of product by the mode of transportation. For exporting or importing of the product we need certain documents. These documents include letter of credit, invoice, packing list, bill of entry, bill of lading, GR form, inspection certificate. Let us understand what is exporting and importing of product. Exporting of the product means to export the product which is manufactured in exporter’s own country. For example, if India exports Gems and Jewellery to USA, in that case India is the exporter. Importing of the product means to import the product from other country as per requirements. By the help of above example, we understand what the import of product is. In above example, USA is the importing country because it is taking Gems and Jewellery for their needs.

Before exporting and importing the product we need to market it. The product is marketed by the help of exporter or by its agent. An agent of the exporter shows the catalogue of different products, its quality and its price to importer. Online marketing of products can be done. If importer needs are satisfied then exporter can export products.

After marketing of the products is completed, then exporter and importer decide to have a contract between them. A contract is the legal agreement which is made by the consent of two parties. For exporter and importer, the most essential document is Letter of credit. Letter of credit is a document made between exporter and importer for a particular product for a particular period at definite price with help of different modes of transportation. The mode of .transportation can be land, air or road. By the help of letter of credit, the payment can be made easily because the letter of credit is submitted in bank of both parties. Letter of credit can be divided into its types. Letters of credit used in international transactions are governed by the International Chamber of Commerce Uniform Customs and Practice for Documentary Credits. The general provisions and definitions of the International Chamber of Commerce are binding on all parties. These are different types of letter of credit.

Revocable: A revocable letter of credit is one which can be amended or cancelled by the applicant or the issuing bank at any time, without prior notice, discussion or agreement with the beneficiary.

Irrevocable: An irrevocable letter of credit can not be amended or revoked without the agreement of ALL the parties to the letter of credit, so it provides the assurance that providing the beneficiary complies with the terms, he/she will be paid for the goods or services.

Unconfirmed: An unconfirmed irrevocable letter of credit provides a commitment by the issuing bank to pay, accept, or negotiate a letter of credit. The beneficiary is not protected from the credit risk of the issuing bank or the country risk.

Confirmed: A confirmed irrevocable letter of credit is one to which the advising bank adds its confirmation, makes its own independent undertaking to effect payment, negotiation or acceptance, providing documents are presented which comply with the terms of the letter of credit.

Transferable Credit

Under a transferable letter of credit a beneficiary (the first beneficiary) can ask the issuing/advising/confirming bank to transfer the letter of credit in whole or in part to another parties such as supplier/s (second beneficiaries). A transferable letter of credit is usually used when the beneficiary is not the manufacturer/original supplier of some/all of the goods/services. If the bank agrees, this bank, referred to as the transferring bank, advises the letter of credit to the second beneficiaries in the terms and conditions of the original letter of credit with certain constraints defined in Article 48 of UCP 500.

Assignment of Proceed: The right to the proceeds of a letter of credit can sometimes be assigned where the beneficiary of a letter of credit is not the actual supplier of all or part of the letter of credit and wants the bank to pay the supplier out of funds received from the letter of credit. The beneficiary may choose this option if he or she

• Does not want to request a transferable letter of credit from a buyer in order to keep the buyer from knowing who the actual supplier of the goods is.
• Does not have the necessary credit with the bank to issue a new letter of credit to a supplier.

Revolving: Although infrequently used today, revolving letters of credit were a tool created to allow companies conducting regular business to issue a letter of credit that could “roll-over” without the company having to reapply, thus enabling business flow to continue without interruption as long as the terms and conditions, quantities, and other transaction details did not change.

Standby: As is the case with the revolving letter of credit, standby letters of credit are infrequently used today. A standby letter of credit is one which is issued as a back-up or form of insurance for the seller should the buyer default on the agreed-upon payment terms.

After understanding Letter of credit and it types, we are ready to export and import the products. For India, the document used for importing any product is bill of entry. A bill of entry is a formal declaration describing goods which are being imported or exported. The bill of entry is examined by customs officials to confirm that the contents of a shipment conform to the law, and to determine which taxes, tariffs, and restrictions may apply to the shipment. This document must be prepared by the importer or exporter, with many companies hiring a clerk specifically to handle the process of preparing bills of entry.