ENGLISH FOR BUSINESS

INTERNATIONAL TRADE
OPERATIONS
MODULE

11
Course: English for Business
Module: International Trade Operations

© Universidad Privada del Norte, 2021

Educación Virtual
Av. El Derby 254, Lima Central Tower, Piso 14, Surco - Lima, Perú
www.upn.edu.pe

Primera edición digital

Todos los derechos reservados. Prohibida la reproducción total o parcial
de esta publicación sin previa autorización de la universidad.
Content

1. International Trade 3
1.1. Definition 3
1.2. Why does international trade exist? 3
2. International Trade Operations 4
2.1. Imports 4
2.2. Exports 4
3. Incoterms 4
3.1. Definition 4
3.2. Types of Incoterms 4
4. Conclusions 7
Bibliography 8
 ENGLISH FOR BUSINESS

INTERNATIONAL TRADE OPERATIONS

1 INTERNATIONAL TRADE

1.1. DEFINITION
International trade is defined as the exchange of products and services from one country to
another; in other words, imports and exports. It consists of goods and services moving in
two directions: first, imports (flowing into a country from abroad) and second, exports
(flowing out of a country and sold abroad).

There are many reasons why we buy goods from foreign companies, such as: the imported
options are cheaper, their quality can be better, as well as their availability.

When a person or company purchases a cheaper product or service from another country,
living standards in both nations rise.

1.2. WHY DOES INTERNATIONAL TRADE EXIST?

Nations trade internationally when there are not enough resources or capacity to satisfy
domestic needs. By developing and exploiting their domestic resources, countries can
produce a surplus and, with this, they can buy goods from abroad, through international
trade.

Module 11: International Trade Operations p. 3

 ENGLISH FOR BUSINESS

2 INTERNATIONAL TRADE OPERATIONS

2.1. IMPORTS
Imports are foreign goods and services bought by citizens, businesses, and the government
of another country. It doesn't matter what the imports are or how they are sent (shipped, by
email, or even hand-carried in personal luggage on a plane). If they are produced in a foreign
country and sold to domestic residents, they are imports.

IMPORTS AND THE TRADE DEFICIT

If a country imports more than it exports, a trade deficit occurs. But if it imports less
than it exports, a trade surplus is generated. When a country has a trade deficit, it will
have to borrow money from other countries to pay for the extra imports.

2.2. EXPORTS
Exports are goods and services that are produced in one country and sold to buyers in
another.

3 INCOTERMS

3.1. DEFINITION
Incoterms is an abbreviation for International
Commercial Terms. They prevent doubts in
foreign trade contracts by clarifying the They prevent doubts
obligations of buyers and sellers. Parties
in foreign trade
involved in domestic and international trade
contracts by clarifying
commonly use them as a kind of shorthand to
help understand the exact terms of their
the obligations of
business arrangements. Some Incoterms buyers and sellers.
apply to any means of transportation, others
apply strictly to transportation across water.

3.2. TYPES OF INCOTERMS

a EXW: Ex-Works or Ex-Warehouse. Ex works is when the seller places the goods at the
disposal of the buyer at the seller’s premises or at another named place (i.e., works, factory,
warehouse, etc.). The seller does not need to load the goods on any collecting vehicle.

b FCA: Free Carrier. The seller delivers the goods to the carrier or another person nominated by
the buyer at the seller’s premises or another specific place.
The parties must specify as explicitly as possible the place of delivery, since the risk passes to
the buyer at that point.

Module 11: International Trade Operations p. 4

 ENGLISH FOR BUSINESS

c FAS: Free Alongside Ship. The seller delivers when the goods are placed alongside the vessel
(e.g., on a quay or a barge) nominated by the buyer at the specific port of shipment.
The risk of loss or damage can occur when the products are alongside the ship. The buyer
bears all costs since that moment.

d FOB: Free On Board. The seller delivers the goods on board the vessel nominated by the buyer
at the specific port of shipment, or procures the goods already delivered.
The risk of loss of or damage to the goods passes when the products are on board the vessel.
The buyer bears all costs from that moment onwards.

e CFR: Cost and Freight. The seller delivers the goods on board the vessel or procures the
goods already delivered.
The risk of loss of or damage to the goods passes when the products 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.

f CIF: Cost, Insurance and Freight. The seller delivers the goods on board the vessel or
procures the goods already delivered. The risk of loss of or damage to the goods passes when
the products are on the ship.
The seller must contract for and pay the costs and freight necessary to bring the goods to the
named port of destination, but also contract an insurance cover against the buyer’s risk of
loss of or damage to the goods during the carriage.

Module 11: International Trade Operations p. 5

 ENGLISH FOR BUSINESS

g CPT: Carriage Paid To. The seller delivers the goods to the carrier or another person
nominated by the seller at an agreed place.
The seller must contract for and pay the costs of carriage necessary to bring the goods to the
named place of destination.

h CIP: Carriage and Insurance Paid To. The seller has the same responsibilities as CPT, but they
also contract for insurance cover against the buyer’s risk of loss of or damage to the goods
during the carriage.

i DAP: Delivered at Place. The seller delivers when the goods are placed at the disposal of the
buyer on the arriving means of transport, ready for unloading at the named place of
destination.
The seller bears all risks involved in bringing the goods to the named place.

j DPU: Delivered at Place Unloaded. The seller delivers when the goods, once unloaded, are
placed at the disposal of the buyer at a named place of destination.
The seller bears all risks involved in bringing the goods to, and unloading them at the named
place of destination.

k DDP: Delivered Duty Paid. The seller delivers the goods when they are placed at the disposal
of the buyer, cleared for import on the arriving means of transport ready for unloading at the
named place of destination.
The seller bears all the costs and risks involved in bringing the goods to the place of
destination. They must pay any duty for both export and import, and to carry out all customs
formalities.

Module 11: International Trade Operations p. 6

 ENGLISH FOR BUSINESS

4 CONCLUSIONS
International trade is the exchange of products and services from one country to another.

Import occurs when a country buys a product from other countries. Its purpose is to make
products available because they are not found in the domestic country.

Export occurs when a country sells its products in foreign countries. Its purpose is to
increase global presence by selling their products to another country.

Incoterms is an abbreviation for International Commercial Terms. Each incoterm sets the
tasks, costs and risks for transactions, so it is necessary to familiarize with them. They are:
EXW (Ex-Works or Ex-Warehouse), FCA (Free Carrier), FAS (Free Alongside Ship), FOB (Free
On Board), CFR (Cost and Freight), CIF (Cost, Insurance and Freight), CPT (Carriage Paid To),
CIP (Carriage and Insurance Paid To), DAP (Delivered At Place), DPU (Delivered At Place
Unloaded), and DDP (Delivered Duty Paid).

Module 11: International Trade Operations p. 7

 ENGLISH FOR BUSINESS

BIBLIOGRAPHY

Amadeo, K. (2020, August 28). Imports and How They affect the Economy. Why Souvenirs are
Imports. The Balance.

Market Business News. (n.d.). What is international trade? Definition and meaning.

Piana, V. (2001). Exports. Economics Web Institute.

Piana, V. (2001). Imports. Economics Web Institute.

Segal, T. (2020, September 29). Export Definition. Investopedia.

Thompson, B. (2020, January 20). Incoterms 2020 Explained – The Complete Guide. IncoDocs.

Module 11: International Trade Operations p. 8

2021 © UPN. Todos los derechos reservados