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Q. What is ‘Bill of Lading’? State its features.

Ans.  When goods are sent by ship, shipping company issues a document named as bill of lading. Bill of lading may be defined as a receipt given by the shipping company to the exporter for carrying the goods to the importer. When goods reach the destination, the importer gets them from the shipping company in return of bill of lading.

Bill of lading contains the following information:

1) Name of exporter;

2) Name of importer;

3) Name of notifying party;

4) Identification marks on packages;

5) Description of goods including number of packages, goodsweight and volume, condition of goods at the time of loading;

6) Freight charges;

7) Name of the ship;

8) Port of shipment;

9) Port of destination;

10) Date of shipment.


Features of bill of lading are:

a) Receipt of goods: Bill of lading implies that goods have been received by the shipping company.

b) Document to title of goods: Bill of lading serves as a document of title to the goods. A bonafide holder of bill of lading has the title to the goods.

c) Contract of affreightment: Bill of lading is an evidence of the contract between the shipper and the shipping company to carry the goods in consideration of freight.


 Q. Your firm is planning to import textile machinery from Japan. Describe the procedure involved in importing.

Ans.  Following procedure would be followed for importing textile machinery from Japan:

1.    IEC number, RCMC and import license: First step would be to obtain Import Export Code (IEC) number from Directorate General Foreign Trade Authority and Registration cum Membership Certificate (RCMC). I will also apply for import license.

2.    Trade Enquiry: I will seek trade enquiry from various suppliers about the price and terms and conditions. Based on the quotations from suppliers, I will identify from whom I should import the goods.

3.    Foreign Exchange: I will apply to a bank authorized by Reserve Bank of India to issue foreign exchange.

4.    Placing the Order: After receiving the sanction of RBI for release of foreign exchange, I will place the order called ‘indent’ for the required goods.

5.    Sending Letter of Credit: Usually, the exporter asks the importer to send a letter of credit, to be sure about the creditworthiness of the importer. I will obtain a letter of credit from his banker.

6.    Receiving Shipping Documents: Now I will approach the custom authorities to make payment of custom duties. On payment of custom duties, I will receive the delivery order or release order.

7.    Taking Delivery of Goods: Having completed all the formalities, I or my clearing agent will take the delivery of goods from the dock.


Q. Mention the steps that need to be followed in export trade.

Ans.  The steps that need to be followed in export trade are:

a.    Receipt of enquiry and sending quotation

b.   Obtaining an order or indent

c.    Getting letter of credit

d.   Obtaining export license

e.   Settlement of rate of exchange

f.     Production or procurement of goods

g.    Packing and marking

h.   Insurance of goods

i.      Arrangement for shipping the goods

j.     Customs formalities

k.    Mate’s receipt

l.      Preparation of commercial invoice

m. Sending documents to the importer.

n.   Receiving payment from the importer.


Q. Why was WTO set up? Briefly explain its objectives and functions.

Ans.  World Trade Organisation was set up on January 1, 1995 replacing GATT with the sole objective of solving trade problems between countries and providing a forum for multilateral trade negotiations.

Following are its objectives:

a) Raising standard of living;

b) Employment generation;

c) Optimal use of world resources;

d) Sustainable development

e) Ensuring that LDC (Least Developed Countries) secures a better share of growth in international trade.


The main functions of WTO are:

a.    WTO provides a forum for further negotiations for trade liberalization in the framework of the various agreements concluded.

b.   The countries might prevent imports even after they have negotiated their free entry. They may set arbitrary health or safety standards that favour their home country production. In such cases, WTO administers the dispute settlement procedure.

c.    WTO establishes and directs a trade policy review mechanism so as to examine the trade policies and practices of the member countries and to suggest measures of reform.

d.   WTO undertakes research and publishes information and studies for the international community.

e.   WTO cooperates on equal footing with the World Bank and the International Monetary Fund for the purpose of economic policy making.


Q. What was the need to establish IMF? State its main functions.

Ans. IMF was established on December 27, 1945, to institute an open and stable monetary system in the world. Its headquarters are in Washington DC. IMF is an autonomous body and had 191 member countries in 2005. The major idea underlying the setting up of the IMF is to evolve an orderly international monetary system, i.e. facilitating system of international payments and adjustments in exchange rates among national currencies.

Its main functions are:

a.    IMF acts as a short-term credit institution for the benefit of member countries.

b.   It keeps reserves of the currencies of all member countries.

c.    It lends to the borrowing countries the currencies which they require.

d.   It provides mechanism for the orderly adjustment of exchange rates, i.e. the rates at which different currencies could be purchased and sold.

e.   It provides machinery for international consultations.

It promotes the expansion of international trade for the mutual benefits of member countries.
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