Barriers to international trade

Two basic kinds of tariffs exist

1. Advalorem duties This is the duty expressed as a percentage of the value of goods e.g. 10% of import size. It is a customs duty levied according to the value of goods.
2. Specific duties It is a customs duty levied according to the weight or volume of goods. These duties are expressed as a specific amount of the currency per unit of quantity e.g. shs 100 per pen.

1. National security Countries need to have food, industries etc to satisfy their needs. Tariffs would present the entrance of imported goods hence force citizens to produce in their own.
2. To protect infant industries Most young countries cannot compete with developed countries' products hence impose tariffs to give local industries a chance to grow.
3. To promote employment Government should impose restriction this will result to increase domestic production which in turn will increase domestic employment.
4. To generate revenue for government through import and export duties. Governments charge tariffs as a source of income, especially in developing countries where other tax systems may be less effective.
5. To prevent consumption of harmful commodities to the lives of the people. Tariffs or bans can be imposed on goods such as drugs, toxic substances, or unsafe foods to protect public health.
6. To avoid dumping and its effects. Tariffs help prevent foreign companies from selling goods below market value (dumping), which can destroy local industries by creating unfair competition.

Is the buying of goods and services from other countries. Those firms wishing to import goods from abroad may go through the whole process for themselves but only the large firms can do so. Firms use the following ways they import

1. Import merchants These merchants deal on their own behalf. They keep a watch on goods offered for sale by foreign producers, buy them, store them if necessary and dispose them on the home market.
2. Import agents. These agents represent a number of overseas exporters in this country.
   • They work on behalf of a number of overseas exporters and earn or receive commission by selling their principals' goods.
   • They are called "del-credere agents" and they receive an extra commission to cover the risk that they may have in case goods are left in their hands.
3. Import brokers
   • Import broker usually specialize in particular products.
   • They act on behalf of manufacturers wishing to obtain supplies of goods or raw materials from abroad, or on behalf of overseas producers wishing to sell here in this country.

a. Shipping note This is the document which is issued by the shipping company which contains instructions to the captain of the ship to receive on board the vessel with the specified quantity of goods from the exporter concerned.

b. Weight note This document states the weight and volume of the goods delivered at the dock.

c. Invoice This is the bill which states the kind of goods that have been sent to the buyer, their weight, volume, making value, price per unit, insurance freight and other charges to be paid to the exporter.

d. Consular invoice

1. This is an invoice signed by consul office for importing country verifying that the price quoted on the invoice is the exporters' country. This document enables the importer to obtain prompt clearance of goods after they reach the port of destination. Or
2. This is an invoice that has been signed by the embassy of the country to which the goods are being exported.

e. Bill of lading This is a commercial document signed by the ship owner or ship master or by an agent of the ship owner, stating the condition under which the goods are being carried. The bill contains

1. The name of the ship.
2. The quantity.
3. The type of the goods.
4. Special marking on the package.
5. The name of the part of embarkation and that of unloading etc.

Types of bill of lading

1. A clean bill of lading This states that the goods and packages of goods were in good condition at the time of loading them in a ship.
2. The dirty bill of lading It is also called a "foul" or "clause" bill of lading. This bill of lading states that some of the packages or part of the container were not in good condition e.g. damaged.

1. It is the semi negotiable instrument being a document of title of goods.
2. It acknowledges the receipt of goods on board or ship.
3. It is a proof of a contract between the shipping company and exporter of the goods which covers all terms of contract of freight between the two parties.
4. It provides the information to interested parties as it discloses many details of goods.

f. Certificate of origin. This states the original place of production. This is supplied because some countries have natural agreements to charge or to charge less customs duties on goods imported from one to another.

g. Letter of hypothecation. Is a letter from an exporter to his bank authorizing the bank to sell goods being exported for the best possible price if the bank cannot obtain payment on a bill of exchange.

h. Certificate of insurance. Is usually enclosed together with the other documents assures interested parties that the goods have properly insured.

i. Packing list. This is a document written by the supplier to the buyer of the goods informing the buyer of the goods and specification of the packing materials or packages given to the transporter.

j. The indent. This is a form of order which is sent to the foreign agents for goods to be imported. It states the exact details of goods requiring date of delivery, methods of packing, quantity of goods, quality of goods, the price at which the importer is willing to pay etc.

k. Letter of credit It is a document issued by the importer's bank in favour of the foreign dealer (seller). It contains an undertaking by the bank concerned that the bill of exchange drawn by the foreign dealer on the importer will be honoured on presentation to the extent of the amount specified in the letter of credit.

Quotation for the goods imported The quotation of goods is a reply to an inquiry made by the importer. Special terms called "incoterms" are used in quotation of price in international trade. These terms include:

1. EX-WORKS Price is quoted just when the buyer has to incur all expenses from the place of the producer up to his place of business.
2. F.O.R (FREE ON RAIL) OR F.O.T (FREE ON TRUCK) Price includes all expenses until the goods are loaded on rail or truck. The buyer has to pay all subsequent expenses until the goods reach his premises.
3. FREE ON DOCK (F.O.D) The price quoted includes ex factory price plus all charges until the goods are delivered at the dock. It includes all other subsequent charges like dock.
4. FREE ALONG THE SHIP (F.A.S) The price quoted includes all charges until the goods are placed at the side of the ship but any other charges of loading etc are excluded.
5. FREE ON BOARD (F.O.B) The exporter incurs all the risk involved in the transportation of goods until they are loaded into the ship. The importer takes over from that point.
6. COST AND FREIGHT (C.F) The exporter incurs all costs involved in transportation of the goods until the port of destination. The importer doesn't pay for the insurance.
7. COST, INSURANCE AND FREIGHT (C.I.F) The quotation of the price of goods includes freight and insurance charges hence the seller pays insurance premium and transport cost up to the port of destination e.g. c.i.f DSM, but it excludes offloading charges. The exporter is responsible for the cost until the port of destination. In addition, the exporter pays for the insurance.
8. COST, INSURANCE, FREIGHT AND FREE OUT (C.I.F.F.O) The exporter is responsible for all charges until the goods have been discharged at the port of destination.
9. COST, INSURANCE, FREIGHT AND INTEREST (C.I.F.I) The quotation includes the interest on the value of shipment. When the agent is acting on behalf of the importer, then the agent's commission is added and thus (c.i.f.i).
10. FRANCO DOMICILE, RENDU OR FREE The exporter pays for all costs until the goods arrived at the buyer's place of business.
11. DUTY PAID The price quoted includes the charges plus import duty. It may or may not include the charge for warehousing to the date of withdrawal.
12. IN BOND It means that delivery is to be made into the customer's bonded warehouse at the port of destination but any other charges for withdrawal from there has been borne by the buyer.

Problems of international trade

1. Geographical distance Long distances between trading countries increase transport costs, time delays, and risks of damage or loss during shipping.
2. Language differences Misunderstandings can occur in contracts, communication, and labeling due to differences in language between trading partners.
3. Documentation processing problems International trade involves complex paperwork (e.g., invoices, bills of lading, certificates), which can delay shipments and increase errors if not handled properly.
4. Cultural and religious differences Different beliefs, values, or customs may affect product acceptance, marketing strategies, and business negotiations.
5. Tariffs / barriers Taxes and restrictions like quotas or bans make imported goods more expensive and can limit trade volumes.
6. Customs regulation Every country has its own customs rules, which can cause delays, additional inspections, or rejection of goods at the border.
7. Monetary system Fluctuations in exchange rates, currency instability, and differences in payment methods can create uncertainty and financial losses in international transactions.