International Trade 3

Documents used in International trade

i) Enquiry/Inquiry.

A letter sent by an importer to the exporter asking about the supply of the goods and the terms of sale.

ii) Order of Indent.

This asks the supplier to supply goods. It may specify the goods to be supplied and suggest the preferred mode of transport for them.

An indent may be open or closed

Open Indent. Here the importer does not specify the supplier and the goods to be bought and therefore the exporter or export agent is
free to choose the supplier

Closed Indent. Here the importer specifies the supplier and the goods to be bought.

iii) Letter of Credit. A document issued by the importers bank to the exporter’s bank to assure the exporter of the payment for the goods
ordered.

The exporter can then be paid by his bank on the basis of this letter.

iv)Import Licence.

A document issued by the country to allow the importer to buy goods from abroad.

v) Bill of Lading.

A document of title to goods being exported issued by the shipping company to the importer who should use it to have goods released at the port of entry.

vi)Freight Note.

A document prepared by the shipping company to show the transportation charges for goods.

vii)Certificate of insurance.

A document issued by the insurance company
or agent, undertaking to cover the risk against the loss or damage to goods being exported.

viii) Certificate of Origin.

A document that shows the country from
which the goods are being imported have originated from.

ix)Commercial Invoice.

A document issued by the exporter to demand for
the payment for the sold on credit to the importer.

It shows the following;

The name and address of the exporter

The name and the address of the importer

The price charged

The terms of sale

The description of the consignment

The name of the ship transporting the consignment
x) Consular Invoice.

A document that shows that the prices of the goods that have been charged is fair as certified by the consul with the embassy of the exporting country.

xi)Proforma Invoice.

A document sent by the exporter to the importer if he/she is not willing to sell goods on credit.

It may be used to serve the following purposes;

Serve as a formal quotation

Serve as a polite request for payment before the goods are released for the customer

To enable the importer to initiated the clearing of the custom duty early enough to avoid delays

Used to by the importer to obtain permission from the Central Bank to import goods

xii)Airway Bill.

Issued by the airline company to show the charges for the goods being transported

xiii) Letter of Hypothecation.

A letter written by the exporter to his/her
bank authorizing it to resell the goods being exported.

This occurs if the bank fails to get payment on the bill of exchange drawn on the importer that it has discounted for the exporter.

Should there be a deficit after the resale, the exporter pays the deficit.

xiv) Weight note.

A documents that shows the weight and other
measurements of the goods being delivered at the dock.

xv)Shipping advice note.

A document issued by the exporter to his/her
shipping agent containing instruction for shipping goods.

International Financial Institutions

Some of the institutions that play a role in international monetary system include;

i. International Monetary Fund (I.M.F)

ii. African Development Bank (A.D.B)

iii. African Development Fund (A.D.F)

iv. International Bank For Reconstruction and Development (World Bank)

i. International Monetary Fund (I.M.F)

This bank operates like the central bank of the central banks of the member countries.

Its objective includes the following;

Ensuring that the member country maintains a stable foreign exchange rates for their currencies.

This it does by advising the country to raise or increase the supply of their currency

to devalue them or increase their value internationally.

Provide financial support to the member country to alleviate poverty and boost their income.

Relieving heavily indebted countries of debt repayment so that it can use that fund to raise the living standards of its people.

Providing funds to the member countries to finance the deficits in their balance of payment.

Provide forum through which the member country can consult and cooperate on matters concerning trade among them Maintaining currency reserves of the different countries, enabling
member countries to buy foreign exchange to be used to import goods and services.

ii. African Development Bank (A.D.B)

This bank was formed to promote the economic and social progress of its regional member countries in Africa. It main source of finance is the
members’ contributions and the interest charged on the money they lend members.

Its functions include;

Providing loans for economic and social
development to member countries

Provide technical advice in planning and implementation of the development plans.

Assist member country to appropriately exploit it resources.

To encourage co-operation among African countries in order to bring economic growth.

To co-operate with various economic institutions in order to bring about development especially in Africa countries.

iii.African Development Fund (A.D.F)

This was formed to provide long term financial assistance to the low income countries that cannot obtain loan from other financial institutions at the prevailing terms and condition.

Their loans may recover a longer repayment
periods with no interest except the commitment fees and service charge which is minimal.

They fund activities, which includes;

Education and research activities

Offer technical advice to the member countries

iv.International Bank For Reconstruction and Development (WorldBank)

The World Bank was formed to carry out the following functions;

Giving loans to countries at very low interest rates to finance economic development activities.

Provision of grants to finance the provision of social amenities and basic
infrastructural development in developing countries.

Fighting against corruption and poor governance which may lead to misuse of public funds in different countries.

Advancing money to countries to finance balance of payment deficit.

Giving advice on economic challenges that countries may face.

Availing technical assistance and personnel to help countries run their economic programmes

Economic Integration

This occurs where two or more countries enter into a mutual agreement to cooperate with each other for their own economic benefit.

They may do this by allowing free trade or relaxing their existing trade barriers for the member countries.

Economic integration may occur in the following forms;

A. Free Trade Area

This is a case where the member countries agree to abolish or minimize tariffs and other trade restrictions but the individual countries are free to impose restrictions on non-member countries.

They includes;

Preferential Trade Area (P.T.A), European Free Trade Area (E.F.T.A),
Latin America Free Trade Area (L.A.F.T.A), etc.

B. Custom union

This is where the members of the free trade area may agree not only to abolish or minimize their tariffs, but also establish a common tariff for
the exchange of goods and services with the non member countries.

They include;

Economic Community of West Africa States
(E.C.O.W.A.S), East Africa Custom Union (E.A.C.U), Central Africa
Custom and Economic Union (C.A.C.E.U)

C. Common Market

This is where the member countries allow for free movement of factors of production across the borders. People are free to move and establish their business in any member country.

They include; East Africa Common Market (E.A.C.M), European Economic Community (E.E.C),
Central American Common Market (C.A.C.M), Common Market for Eastern and Southern Africa (COMESA).

D. Economic Union

This is where the members of the common market agree for put in place a common currency and a common central bank for the member countries.

They even develop common infrastructures which includes railways, communication networks, common tariffs, etc

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