Q. Describe the
advantages and disadvantages of joint venture as a mode of entry into foreign
Ans. A joint venture means
any form of association that is jointly owned by two or more independent firms.
Its advantages are:
Joint venture makes it possible to undertake a big project
requiring huge capital.
Joint venture permits a firm with limited resources to enter more
The foreign partner is benefited from the local partner’s
knowledge of economic, social and political environment of the host country.
By entering into a joint venture agreement, the competitive
strength of a smaller firm is increased. It also benefits as its risk is shared
by the multinational company.
the disadvantages of joint venture are:
There is possibility of disclosure of trade secrets.
Dual ownership may lead to conflicts.
The foreign partner may not bring the latest technology because of
lack of full trust in the local partners.
It can only succeed when both the partners have something to offer
to the advantage of the other.
Q. What are the benefits
of international business to nations?
Ans. The benefits of
international business to nations are:
Optimum use of resources
Growth of economy
Economies of large scale
Increased employment opportunities
Stabilisation of prices
Increase in standard of living
Enhancement of competition
Opportunity to import the essential goods.
Q. What is an IEC number?
Ans. IEC (Import Export Code)
number is issued by the Directorate General Foreign Trade (DGFT) or Regional
Export Licensing Authority for export/import documents.
Q. What do you mean by
EXIM Policy and who regulates it?
Ans. EXIM Policy means export and
import policy and it is regulated by the Central Government.
Q. What is entrepot
Ans. When goods are imported with
a view to re-export them, it is known as entrepot trade.
Q. How is Bill of Lading
different from Bill of Entry?
Ans. Bill of lading differs from
Bill of entry in following respects:
Bill of lading is a document related to export transaction while
bill of entry is a document related to import transaction.
Bill of lading is a receipt given
by the shipping company to the exporter for carrying the goods to the importer.
Bill of entry is a form supplied by the customs office to the importer for
assessment of customs duties.
Q. Briefly explain letter
of credit. Why does an exporter need this document?
Ans. A letter of credit may be
defined as a letter issued by the importer’s bank in favour of the exporter
containing an undertaking that the bills drawn by the exporter upon the
importer up to the amount specified therein will be honored by banker on
letter of credit is a proof of the credit worthiness of the importer. The
letter of credit is an assurance that bill will be paid by the bank. This
method is favored by the exporter as it ensures a quick and guaranteed payment
from the importer.
Q. What is a green card
and why is it issued?
Ans. A green card is issued
to an exporter to reduce his transaction costs. It enables the eligible
exporter to avail the following facilities:
Automatic issue of import licenses.
Automatic customs clearance for exports.
Automatic customs clearance for imports related to exports.
Submission of legal undertaking in place of bank guarantee for the
issue of duty free licenses.
Q. What is UNCTAD? Why
was it formed?
Ans. UNCTAD stands for United
Nations Conference on Trade and Development and was formed in 1964. The
widening trade gap between the developed and developing countries, the general
dissatisfaction of the developing countries with the GATT and the need for
international economic cooperation led to the setting up of UNCTAD.
Q. What do you mean by
Export Processing Zone?
Ans. An Export Processing Zone (EPZ) is
an industrial estate usually situated near an international port and/or airport
with a view to encourage units meant for production or processing of export
items. The entire production of units is exported. The procedure is very simple
and speedy. It emphasises on processing and value addition
Q. What is the
significance of Special Import License (SIL)?
Ans. Special Import License
enables an exporter to import specified items to be used in the manufacture of
items meant for export.Certain specified categories of exporters have been
granted this facility.
Q. Define Special
Ans. Special Economic Zones
are specifically delineated duty free enclaves and shall be deemed to be
foreign territory for the purposes of trade operations, duties and tariffs.
They are set up to encourage free trade for the purpose of promotion of
exports. It is created by Indian government and goods forwarded to such a zone
are considered as "Deemed Exports”. Goods coming from SEZ are treated as import
Q. What do you mean by
certificate of origin?
Ans. Certificate of origin may be
defined as a document certifying that the goods under export contract have been
produced in the exporting country. The purpose of this certificate is to charge
customs at concessional rates if there is a trade agreement between importing
and exporting countries to charge customs at lower rate on each other’s goods.
It is issued by a Trade Council or some other authorised person.
Q. Name the organisations
that have been set up in the country by the government for promoting country’s
Ans. Various organisations
have been set up in the country by the government for promoting country’s
foreign trade. They are:
1) Department of Commerce; 2) Export Promotion Councils; 3) Export
4) Indian Trade Promotion Organisation; 5) Indian Institute of
Foreign Trade; 6) Indian Institute of Packaging; 7) State