Thursday, September 1, 2011

10 Fundamental Points of International Trade

1) Buying and selling between nations, has been in existence since 2500 BC.

2)The governing body responsible for overseeing trade agreements relating to goods, services, and intellectual property is the World Trade Organization which came into existence in the 1986-1994 Uruguay Round (8th multilateral trade negotiations) held in Uruguay.

3) There are many international and regional trade agreements that have been formulated to liberalize trade between nations by eliminating tariffs, import quotas etc. If you have not done so already, it is a good idea to familiarize yourself with these agreements. The U.S. Trade Representative's Office states: the United States takes part in 17 Free Trade Agreements i.e. North American Free Trade Agreement (NAFTA), Australian FTA, CAFTA-DR (Dominican Republic-Central America FTA) among others.

4) According to the World Customs Organization the Harmonized Commodity Description and Coding System also known as "Harmonized System" or simply "HS" is a multipurpose international product nomenclature which comprises about 5,000 commodity groups; each identified by a six digit code. The system is used by more than 200 countries and over 98 % of the merchandise in international trade is classified in terms of the HS.

5) The relation between a product and money in any business transaction is the price of the goods. In the foreign exchange market the relation between one currency to another is the exchange rate. The law of supply and demand apply to foreign exchange rates just as any other commodity traded in the world therefore a lack of understanding of currency fluctuations can hamper your profitability (Seyoum 461).

6) Choosing the right business partner can be a risky undertaking. You have a lot lose: time, money, and your reputation. The best way to minimize risk in selecting suppliers and or overseas partners for your products is through the subscriptions of a database such as Trade Mining. These type of services can help you find quickly and economically the types of products that you want to sell and more importantly help you assess the trustworthiness of potential suppliers.

7) The ideal payment method for a buyer is a consignment or an open account type of an arrangement, and the best payment method for a supplier is cash in advance. The middle grounds for both parties is the use of a letter of credit.(Seyoum 461)

8 ) Once the transactions has been consummated between you and your supplier you have three choices to move your goods (inventory): air, water, land or a combination of these. If you are looking for economy and you do not have a sense of urgency to get your inventory your best bet is ocean shipping. Airfreight though more expensive can deliver advantages in the form of speed, reduce storage cost, and insurance cost (Seyoum 461). Hiring a freight forwarder can deliver your company an ROI and peace of mind. Freight forwarders can save you time and money in locating the best rates for your cargo, booking space with the air, ocean, and truck carriers, handling documentation, and the local transfer of goods to the port of loading.

9) All goods purchase abroad must be filed by the destination country Custom Authorities. If you are importing into the United States it is the U.S. Custom Border Protection (CBP). A Customs broker or an attorney can be a great ally to your company, they can help you properly classify and assess the correct valuation of your imported merchandise and avoid you hefty fines. In the United States an importer can file an entry on their own, however for what it cost I would not consider doing business without a Customs broker.

10) Many new importers lose money in their international purchases because they forget to take into account the total landed cost and all expenses associated with their transactions (Seyoum 461).

Trade Mining provides Customs trade intelligence solutions that helps businesses engage more effectively  in global trade,  support decisions, and reach objectives. To learn more about us please visit


Seyoum, Belay. Export-Import Theory, Practices, and Procedures. Binghamton, NY 13904: The Haworth Press, Inc, 2000. 461. Print.

United States Trade Representative /> trade agreements
World Customs Organization /> Harmonized System
World Trade Organization /> What is the WTO