International Trade Basics

Basics of international trade

International trade only seems complicated at first glance. In essence it is buying or selling goods across a border with a set of rules on documents, payment and customs. Let us break down the basics for those just starting foreign trade.

What international trade is

It is the exchange of goods and services between companies from different countries. If you bring in goods it is import, if you send them out it is export. Every deal relies on a contract and goes through customs clearance in both countries.

Who takes part in the deal

Besides the seller and buyer, international trade involves banks (settlements), carriers and freight forwarders (delivery), customs (control), brokers (clearance) and insurers. Understanding the roles helps not to get lost in the process.

Stages of a foreign trade deal

  1. Finding a partner
    We find a supplier or buyer and agree the terms.
  2. Contract
    We sign a foreign-trade contract with price, basis and deadlines.
  3. Payment and delivery
    We make the payment and arrange transport.
  4. Customs
    We clear the goods and receive them at the warehouse.

Main documents

The basic set is a foreign-trade contract, invoice, packing list, transport document (CMR, bill of lading, air waybill) and, if needed, a certificate of origin and permit documents. An incomplete set is a common cause of delays at the border.

Incoterms delivery terms

The delivery basis determines who pays for transport, insurance and customs and where the risk passes. For a beginner it is important to choose the right term so as not to overpay or argue with the counterparty. More details — Incoterms 2020.

Methods of payment

International deals use prepayment, payment on the fact (open account), a letter of credit or collection. Prepayment favors the seller, an open account the buyer, and a letter of credit balances the risks of both parties. The choice affects the price and trust.

Logistics and customs

After signing the contract the goods must be delivered and cleared. Here the correct goods code, customs value and payments matter. Clearance at customs is handled by the customs broker, and the general rules are in foreign trade regulation.

Risks and how to reduce them

The main risks for a beginner are an unreliable counterparty, an error in the code or value, a wrong delivery basis and violation of currency deadlines. They are reduced by checking the partner, a well-drafted contract and cargo insurance.

Where a beginner should start

Start by determining the goods and their UKT ZED code, calculating the payments and checking whether permits are needed. We handle these questions at foreign trade consulting so the first deal goes without surprises.

Frequently asked questions

Help for beginners

Trans-Hope accompanies the first foreign trade deals from contract to release of the goods: we calculate payments, choose the scheme and handle clearance. Send the description of the goods and the country — we will help make the first step.