Chapter 7

International Trade Practices: The

Parties
 INTRODUCTION

• The parties involved in the practice of international trade

• The operating environment of international trade
• Major parties in an import-export transactions and their
roles
• The primary participants are:
o The exporter
o The importer
o The freight forwarder
o The bank
o The common carrier
o And the insurer
CHINA INTERNATIONAL TRADE IN
GOODS AND SERVICES
 CHINA INTERNATIONAL TRADE IN
GOODS AND SERVICES
• China is a global economic powerhouse known for its
significant role in international trade.
• The country has a diverse trade portfolio encompassing
goods and services.
Goods Trade
• Exports: China is one of the world's largest exporters of goods,
including electronics, machinery, textiles, and consumer products.
• Imports: Imports consist of commodities, machinery, and raw materials
to support its manufacturing sector.
Services Trade
• China's services trade has been growing rapidly, with key sectors
including technology, tourism, and financial services.
• E-commerce, tech giants, and fintech have played a major role in this
expansion.
 CHINA INTERNATIONAL TRADE IN
GOODS AND SERVICES
Global Significance
•China's trade has a significant impact on global supply
chains and international commerce.
•The country's Belt and Road Initiative (BRI) aims to enhance
trade connectivity with nations along the Silk Road.
Challenges and Opportunities
•Challenges include trade tensions, intellectual property
concerns, and environmental sustainability.
•Opportunities arise from expanding consumer markets,
innovation, and emerging service sectors.
China's international trade in goods and services is a dynamic
and influential component of the global economy, with far-
reaching implications for the world.
 The Operating Environment
• Over 300 distinct political entities are engaged in trade
throughout the world. Each has its own rules and regulations
• It is difficult for one company to be familiar with trading
customs everywhere
• However there are practices that are fairly common to all
nations
• Viva la difference
• Confusion and conflict
• Reliance on specialized services
THE PARTIES TO AN IMPORT-EXPORT
TRANSACTION
The Exporter
•The exporter is considered to be the seller and shipper of
goods
•Most product manufacturers are also exporters
•When is in export and export?
•When is an export not an export? (Assignment)
•Export trading companies (ETC): Buying from local suppliers and
selling it overseas
THE PARTIES TO AN IMPORT-EXPORT
TRANSACTION
The Importer
•The importer is the buyer or ultimate consignee
•Importer and exporter are not stranger to each other
•“Arms-length” rule of law: buyer and seller are considered
“unrelated” persons even if the importer and exporter are Samsung Korea
and Samsung China
•Importers have different shapes: parties importing directly from an
exporter are not always those that plan to use or consume the items
purchased. They may be a distributors or dealers that resell to consumers
or end users
 The Freight Forwarder
• The freight forwarder is to the exporter what a travel agent
is to a traveler
• The freight forwarders function is to arrange for the
transportation of goods from the exporter’s warehouse to
the importer’s port of entry and/or warehouse
• The freight forwarder is also responsible for all the
documentation for exporter
 The Customs Broker
• The customs broker’s function is to help clear imported
merchandise through local customs on behalf of the buyer
• This includes the payment of all import taxes and charges
and arranging for the transport of the goods to the buyers
facility
• Customs broker is as important as the freight forwarder
 International Banks
• International banks are designed to facilitate trade by
helping exporters and importers expedite the flow of
documents payment
• It is important that the seller’s and buyer’s banks have
corresponding relationship
The correspondent relationship
• The exporter’s bank should have power of attorney to act
on behalf of the importer’s financial institution
• For example, if an importer in China banks at Bank of
China and an exporter banks at Citibank in the United
States, then Citibank and Bank of China will act as
correspondent banks for one another
 International Banks

The correspondent relationship

•Most multinational banks, like Bank of China and Citibank,
maintain correspondent banking affiliations with most major
banks around the world
•If a correspondent relationship between two banks is not
possible than bank will usually locate a third-party bank, with
which both original banks have a correspondent relationship
 The Common Carrier
• The common carrier is the transportation form that carry
the freight
• Goods move via truck, airfreight, ocean freight, or through
any combination of these modes
• Most shipments are now containerized or bulk/tanker
shipped
• Airfreight is the preferred method of shipment because of
speed and safety, but it is expensive compared with other
modes
• Containerized ocean freight shipment are commonly used
today. They are slower than airfreight, but have many other
advantages.
Insurance
 Insurance
• In-transit insurance is rarely legally required, but it makes
good business sense to have good insured against loss
and/or damage while moving from one country to another
• In-transit insurance is a type of coverage that protects
goods and cargo while they are being transported from one
location to another.
Key Features
• Coverage During Transit: Protects against damage, theft, or
loss during the transportation of goods by land, sea, or air.
• Coverage Duration: Typically covers goods from the
moment they leave the shipper's location until they reach
their destination.
 Insurance
Importance
•Risk Mitigation: Helps businesses and shippers mitigate the
financial risks associated with the transportation of valuable
goods.
•Peace of Mind: Provides peace of mind, ensuring that goods
remain protected, even in the event of unforeseen accidents or
theft.
Types of In-Transit Insurance
•Marine Cargo Insurance: Covers goods transported via water.
•Land Transit Insurance: Protects goods transported by land
(e.g., trucks, trains).
•Air Cargo Insurance: Covers goods transported by air.
 CONCLUSION AND SUMMARY
• International trade is an arena in which small and
large companies can compete effectively.
• Modern information and communication technology
make it possible to enter the import-export business
with a home office and computer
• Trade is an indispensable part of a national economy
• Society would come to standstill without trade
• Most of the labor force in China is directly or indirectly
related to import and export
 KEY TERMS AND CONCEPTS
• Common carrier
• Custom broker
• Exporter
• Freight forwarder
• Importer
• Insurance
• International Banks
• Merchandise trade
• Trade in services
 DISCUSSION QUESTIONS

1. Why is exporting more actively

supported by the Chinese government
than importing

1. What are the alternatives to exporting if

importing is banned in some countries?