Department of Management Studies

Semester - 03
BA1729 - INTENATI!NA" TADE #INAN$E
%AT - A
1. Define International Trade
According to Irving Kravis, International trade arises as a result of availability
and non availability factors.
2. Write the Benefits of International Trade.
The buying and selling of goods and services across national borders in knon as
International trade. International trade is the backbone of out !odern co!!ercial
orld.
". #tate the theories of International Trade
1. $o!%arative cost Theory 2. &%%orutnity $ost Theory ". 'ecksher &hlin
Theory (. Availability A%%roach
(. What is Availability A%%roach)
Availability A%%roach as %ro%osed by Kravis. The availability a%%roach
*ur%orts that a nation ould tend to i!%ort those co!!odities hich are not
readily available do!estically and e+%ort those to satisfy de!and.
,. What is Balance of Trade)
The B&T denotes the difference beteen the !erchandise e+%orts and
!erchandise i!%orts of a country.
-. What is .ffective Tariff)
$ordon defines the effective tariff as the %ercentage increase in value added %er unit on an
econo!ic activity hich is !ade %ossible by the tariff structure relative to the situation in the
absence of tariffs.
1
/. What is &%ti!u! Tariff)
&%ti!u! tariff is the rate of tariff beyond hich any further gain fro! an i!%rove!ent in the
ter!s of trade ill be !ore than offset by the related decline in volu!e.
0. Write about WT&.
World Trade organi1ations deal about the trade activities taken %lace a!ong
various nations.
2. Write briefly on .3I4 *olicy.
.3I4 *olicy discuss about the e+%ort i!%ort %olicies rules and regulations of the
country involved in it.
15. Define Balance of *ay!ent.
Balance of *ay!ent of a country has been defined as a syste!atic record of all
econo!ic transactions beteen the residents of the re%orting country and
residents of foreign countries.
11. 6ive the ty%es of transaction involved in B&*.
1. Autono!ous 2. $o!%ensatory transactions
12. What is .+change $ontrol)
When tariffs do not hel% in restoring the balance of %ay!ents e7uilibriu!,
countries very often resort to e+change control.
1". Define Tariff.
Tariffs in international trade refer to the duties or ta+es i!%osed on
internationally traded co!!odities hey they cross the national borders.
1(. What is Trade Barrier)
Trade Barriers are the obstacles for doing easy trade.
1,. Write the co!%onents of B&*.
1. $urrent account 2. $a%ital Account ". 8nilateral *ay!ents account
(.&fficial settle!ents account
1-. What is B&* .7uilibriu!)
The B&* of a country is said to be in e7uilibriu! hen the de!and for
foreign e+change is e+actly e7uivalent to the su%%ly of it.
2
1/. What is B&* Dise7uilibriu!)
The B&* is in dise7uilibriu! hen there is either a sur%lus or a deficit in the
balance of %ay!ents.
10. What is 9o!inal Tariff)
9o!inal tariff refers to the actual duty on an i!%orted ite!.
12. Write a brief note on :.4A.
:oreign .+change !anage!ent Act gives the clear cut idea of !anaging the
affairs of the foreign e+change
25. What is Bill of .+change)
Bill of e+change is a docu!ent given by the e+%orter to the i!%orter shoing the a!ount to be
%aid and the !ode of %ay!ent.
21. What is $onsular Invoice)
$onsular invoice is the co!!ercial invoice hich got certified by the consular.
22. #tate the ob;ective of .+i! Bank.
To give %ost shi%!ent and %reshi%!ent credit through co!!ercial banks.
2". What is .$6$)
.$6$ as set u% by the govern!ent of India to %rovide e+%ort credit insurance su%%ort to
Indian e+%orters.
2(. <ist the e+%ort %ro!otion !easures.
1. .+%ort %olicy !easures 2. financial incentives ". assistance for e+%ort %roduction and
!arketing
2,. What is Bill of <ading)
Bill of lading is issued by the shi%%ing co!%any as an acknoledge!ent of the goods received in
good condition.
2-. .+%lain $o!!ercial Invoice.
$o!!ercial invoice contains all the infor!ation about the goods to be shi%%ed.
2/. What is :oreign .+change.
Accg. to Dr. *aul .i1ing =:oreign e+change is the syste! or %rocess of converting one national
currency into another and of transferring !oney fro! one country to another.
20. What is :oreign .+change !arket)
:oreign e+change !arket is a !arket in hich foreign e+change transactions take %lace.
"
22. .+%lain Telegra%hic transfer.
A su! can be transferred fro! a bank in one country to a bank in another %art of the orld by
cable or tele+.
"5. What is 4ail Transfer)
Transfer of funds fro! a bank account in one center to an account in another centre ithin the
country by !ail.
"1. What is Arbitrage)
Arbitrage is the si!ultaneous buying and selling of foreign currencies ith the intention of
!aking %rofits fro! the different beteen the e+change rates %revailing at the sa!e ti!e in
different !arkets.
"2. What is .+change control)
$hecking of the outflo of ca%ital, !aintenance of the e+ternal value of the currency and so on.
"". .+%lain .+change *egging.
The %olicy of the govern!ent of fi+ing the e+change rate arbitrarily either belo or above the
nor!al !arket rate.
"(. What is standstill agree!ent)
The standstill seeks to give to the debtor country so!e ti!e to ad;ust its %osition by %reventing the
!ove!ent of ca%ital out of the country.
",. #tate 'edging.
'edging !eans the transaction undertaken s%ecifically to offset so!e e+%osure arising out of the
fir!>s usual o%erations.
"-. What is I:$)
I:$ e+tends credit to %rivate business enter%rises in the develo%ing countries.
"/. .+%lain 4I6A.
The !ultilateral invest!ent guarantee agency also an affiliate of the orld bank, as established to
encourage foreign direct invest!ent in develo%ing countries by %rotecting investors fro! non
co!!ercial risk.
"0. What is $onsign!ent #ale)
The e+%orter consigns the goods to his agent or re%resentative in the foreign !arkets ho
arranges for the sale of the goods and !akes %ay!ent to the e+%orter.
(
"2. What is Docu!ents against %ay!ent)
Docu!ents giving title to the goods ill be handed over to the buyer through the bank only on
%ay!ent.
(5. What is Docu!ents on Acce%tance)
The title to the goods are handed over to the buyer hen he acce%ts the bill of e+change by
signing it.
(1. .+%lain Docu!entary <etter of credit)
A letter of credit is a docu!ent containing the guarantee of a bank to honour drafts dran on it by
an e+%orter, under certain conditions and u% to certain a!ounts.
(2. hat is su%%liers credit)
$redit is e+tended to overseas buyer by either a financial institution or a consortiu! of financial
institutions.
(". What is <ine of $redit)
The fincancial institution in the su%%lier>s country !ayt e+tend a line of credit to a financial
institution in the buyer>s country hich in turn ill disburse the credit.
((. What is <etter of $redit)
A letter of credit is an undertaking by a bank to %ay or to arrange to %ay for s%ecified
!erchandise, %rovided that certain sti%ulated conditions are !et by the beneficiary.
(,. Who is a Beneficiary?
Beneficiary is the %arty in hose favour the credit is issued that is the beneficcary is the seller or
e+%orter.
(-. Which is the 9otifying Bank)
The 9otifying bank is the bank hich at the re7uest of the issuing bank notifies the beneficiary
that the credit has been o%ened in his favour.
(/. What is clean letter of credit)
A clean draft is a draft ithout any docu!ent attached to it.
(0. What is docu!entary letter of credit)
The draft !ust be acco!%anied by the docu!ents s%ecified in the letter of credity.
(2. What is Assignable credit)
The beneficiary !ay assign his rights to another beneficiary, either ithin a stated %eriod or
before the e+%iry of the credity.
,
,5. What is Acce%tance credit)
The bank !erely acce%ts the draft dran by the e+%orter.
,1. What is @evocable <etter of credit)
It !ay be revoked or cancelled at any ti!e ithout the consent of the beneficiary.
,2. What is $onfir!ed $redit)
If the letter of credit is confir!ed by a bank in the beneficiary>s country, it beco!es a confir!ed
credit.
,". What is @ed clause credit)
The red clause is an authority to the negotiating bank to !ake advances to the beneficiary for the
%ur%ose of %urchasing the relevant !erchandise.
,(. #tate Inco ter!s.
There are nu!ber of co!!on sale or trade ter!s used in international trade to e+%ress the sale
%rice and the corres%onding rights and res%onsibilities of the seller and buyer.
,,. What is :A#)
The buyer has to bear all costs and risks of loss of or da!age to the goods fro! that !o!ent.
,-. What is $I:)
$ost, insurance and freight !eans that the seller has the sa!e obligations as under $:@ %rocure
!arine insurance against the buyer>s risk of loss or da!age to the goods during the carriage.
,/. What is #D@)
#%ecial draing right is an international reseve asset created by the fund taking into account of the
global need to su%%le!ent e+isting reserves.
,0. What is 8sance Bill)
A bill is a usance bill if the draee is to !ake %ay!ent after a %eriod s%ecified say "5 days or -5
days in the bill has e+%ired.
,2. What is After sight bill)
The date is calculated fro! the date it is signed that is acce%ted by the draee.
-5. hat is Inland bill)
A bill hich is dran in India and !ade %ayable in or dran u%on any %erson resident in India is an
Inland bill.
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-1. What is :oreign bill)
Any bill hich does not fulfill the conditions of %ayable in India as ell as it should be dran in
India.
-2. hat is <egalised Invoice)
Instead of a s%ecific for!at of invoice the ordinary co!!ercial invoice is %resented to the
e!bassy or consulate for certification.
-". What is $ertified Invoice)
A co!!ercial invoice beco!es a certified invoice hen it contains certain cerification by the
e+%orter.
-(. What is *rofor!a Invoice)
A %rofor!a invoice contains all the %ariticulars in a co!!ercial invoice.
-,. What is certificate of origin)
A certificate of origin declares the %lace of actual !anufacture or groth of the goods.
--. What is *acking <ist)
The list ould contain the details of goods contained in individual %ackages.
-/. What is eighted note of certificate)
This gives the eight of individual ite!s shi%%ed. If the goods are shi%%ed in a bulk.
-0. What is Analysis $eritificate)
This !ay be issued in the case of che!icals, drugs etc.
-2. Why health certificate is issued)
Where live ani!als are e+%orted they !ay certify that the ani!als are of good health, if food
grains are e+%orted.
/5. What is $ourier @ecie%t)
If a credit for a docu!ent issued by a courier or e+%edited delivery service evidencing recei%t of the
goods for delivery.
/1. What is Aoyage *olicy)
A voyage %olicy covers the goods fro! the co!!ence!ent and till the co!%letion of a %articular
voyage.
/2. What is ti!e *olicy)
A ti!e %olicy covers the risk for a s%ecified %eriod !entioned in the %olicy.
/
/". What is Aalued *olicy)
In a valued %olicy the value of goods insured is agreed beteen the assured and the insurer.
/(. What is 8nvalued %olicy)
An unvalued %olicy is a %olicy hich does not s%ecify the value of the goods but sub;ect to the
li!it of the su! insured.
/,. What is #%ecific *olicy)
A %olicy issued against the s%ecific shi%!ent of goods is knon as s%ecific %olicy.
/-. What is &%en *olicy)
.+%orters having continuous shi%!ent !ay o%t for o%en %olicy.
//. What is 6@ B I for!)
6@ B I for! in res%ect of the shi%!ent and sub!it its co%ies at the %ort of shi%!ent and to the
authori1ed dealers in foreign e+change.
/0. What is 6@ B , for!)
When e+%orters have obtained %er!ission fro! @BI to retain the %roceeds of their e+%orts for
financing their i!%orts in India.
/2. What is ** for!)
.+%orts to all countries by %arcel%ost e+ce%t hen !ade on value %ayable on cash on delivery
basis should be declared on %% for!s.
05. What is .* for!)
#hi%!ents to Afghanistan and *akistan other than by %ost should be declared on .* for!s.
01. What is $&D for!)
.+%orts to all countries by %arcel or cash %ost under arrange!ents to reali1e the %roceeds
throught %ostal channels on value %ayable or cash on delivery.
02. What is .+%ort *ro!otion)
.+%ort %ro!otion is the task of %ersuading fir!s to e+%ort and the %rovision of services to
su%%ort e+%ort !arketing.
0". What is $ash co!%ensatory su%%ort)
The sche!e envisaged cash %ay!ent to e+%orters at a %redeter!ined %ercentage on :&B value of
e+%orts.
0
0(. What is Duty Draback Assistance)
The !ost idely ado%ted !ethod of relieving e+%ort goods of such duties is the sche!e of
draback.
0,. hat is Ta+ @elief)
In order to reduce the %rices of e+%ort goods, e+%orters are e+e!%ted fro! the %ay!ent of e+cise
duties and sales ta+.
0-. What is $ha!bers of $o!!erce)
$ha!bers of co!!erce are vouluntary association of business !en interested in %ro!oting and
develo%ing co!!ercial and industrial o%%ortunities.
0/. What is Trade Develo%!ent Authority)
It as set u% by the 6ovt. of India to identify and %ro!ote selective and intensive develo%!ent of
%roducts having long range groth %ros%ects.
00. What is trade :air Authority of India?
T:AI has been established as an autono!ous organi1ation under the co!%anies act 12,-, to give a
ne orientation to india>s e+%ort %ro!otion thorugh fairs and e+hibitions.
02. Discuss about :I.&.
It is an a%e+ body coBordianting the acitivities of various e+%ort %ro!otion organi1ation
including .+%ort %ro!otion $ouncils, co!!odity boards.
25. What is the role of %ackaging)
The !ain ob;ective is to i!%rove the %ackaging standards of Indian e+%orts for the %ur%ose of
e+%ort %ro!otion and also to create infrastructural facilities for the i!%rove!ent.
21. What is currency futures)
:utures contract !ay be defined as an agree!ent entered in to ith the s%ecified futures
e+change to buy or sell a standard a!ount of foreign currency at a s%ecified %rice.
22. What is :utures .+change)
A futures contract can be traded only on a recogni1ed futures e+changes.
2". What is an o%tion)
An o%tion confers on the buyer the eligibility to buy or sell a su! of foreign currency at a
%redeter!ined rate on a future date.
2
2(. Who is o%tion buyer)
&%tion buyer is the holder of the right under the contract either to buy or sell one s%ecific
currency against another s%ecific currency.
2,. Who is an o%tion seller)
Also knon as the riter of the o%tion one ho !akes the right available to the buyer.
2-. What is $all o%tion)
A contract under hich the o%tion buyer has the right to %urchase the s%ecified currency is the
call o%tion.
2/. What is a %ut o%tion)
A contract conferring the right to the buyer to sell the s%ecified currency is %ut o%tion.
20. What is over the counter o%tion)
They are tailor !ade to the re7uire!ents of the buyer ith regard to the !aturity, %rice and si1e of
the contract.
22. What is !oney !arket hedge)
The co!%any hich has an e+%osure in a foreign currency covers it by borroing or investing the
concerned currency in the !oney !arket.
155. What is hedging ith futures)
They !ay %rove to be a good tool for hedging here large e+%osure is involved and is e+%ected to
!ature near the due date of the futures contract.
%AT - B
1. .+%lain the basis of International Trade.
1. $o!%arative cost Theory 2. &%%orutnity $ost Theory ". 'ecksher &hlin
Theory (. Availability A%%roach
2. .+%lain the factors causing dise7uilibriu! in B&*.
1. .cono!ic :actor 2. *olitical factor ". #ocial factor
". 6ive a detailed descri%tion of foreign trade and econo!ic groth.
*ros%erity through e+%orts of !anufacturers 2. #ta%le .+%ort #trategy ". I!%ort substitution
strategy
(. .+%lain about .3I4 %olicy of India.
*olicy of .+%orts and I!%orts 2. @ules and regulations folloed regarding
e+%orts and i!%orts
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,. Discuss about the !easures used for correction in dise7uilibriu! of B&*.
1. Auto!atic corrections 2. Deliberate 4easures, trade !easures ,
4iscellaneous !easures
-. .+%lain in detail about the classification of trade Barriers.
Basis of origin and destination of goodsB .+%ort Duties, I!%ort Duties, Transit Duties,
Cuantification of the tariff B #%ecific Duties, AdBvalore! duties, $o!%ound duties ". A%%lication
beteen different countries B single colu!n tariff, Double colu!n tariff, tri%le colu!n tariff
/. Discuss in detail about Cuantitative @estrictions.
Ty%es of I!%ort Cuota B 1. Tariff Cuota 2. 8nilateral Cuota ". Bilateral
Cuota (. 4i+ing Cuota ,. I!%ort <icensing
0. .+%lain the current trend of foreign trade in India.
@ecent trends used in foreign trade. *ast data and statistics about
international trade.
2. .+%lain in detail about the classification of trade Barriers.
Basis of origin and destination of goodsB .+%ort Duties, I!%ort Duties,
Transit Duties, Cuantification of the tariff B #%ecific Duties, AdBvalore! duties, $o!%ound duties
". A%%lication beteen different countries B single colu!n tariff, Double colu!n tariff, tri%le
colu!n tariff
15. Discuss in detail about Cuantitative @estrictions.
Ty%es of I!%ort Cuota B 1. Tariff Cuota 2. 8nilateral Cuota ". Bilateral
Cuota (. 4i+ing Cuota ,. I!%ort <icensing
11. .+%lain the current trend of foreign trade in India.
@ecent trends used in foreign trade. *ast data and statistics about
international trade
12. .+%lain the different ty%es of Bill of <ading.
1. :ull set 2. $lean and claused ". &n board and received for shi%!ent (. #hi%%ed on Deck ,.
:reight %aid and freight collect -. &cean bill of lading /. #traight bill of lading 0. *ort to%ort 2.
#tale bill of lading 15. $harter %arty bill of lading 11. 'ouse bill of lading liner bill of lading,
short for! bill of lading, Third %arty bill of lading
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1". .+%lain the various docu!ents connected ith e+%ort business in detail.
$ertificate of origin, %acking list, eighted note, Cuality certificate, Analysis certificate, 'ealth
certificate, Black list certificate
1(. What are the functions of foreign e+change !arket)
#%ot e+changes, :orard .+changes, #a% &%erations, Arbitrage, .+change control, bilateral
and !ultilateral agree!ents.
1,. .+%lain in de%th the various e+%ort %ro!otion sche!es in India.
.+%ort %olicy !easures, financial incentives, assistance for e+%ort %roduction and !arketing,
organi1ation for e+%ort %ro!otion
1-. .+%lain the different !eans of %ay!ent in International trade.
Telegra%hic transfer, 4ail transfer, $he7ues and bank drafts, foreign bill of e+change,
Docu!entary or rei!burse!ent credit
1/. Briefly e+%lainD
EiF $ertificate of Analysis EiiF 4ulti!odal trans%ort docu!ents EiiiF $&D for!
EivF $ertificate of &rigin
Analysis certificateD This !ay be issued in the case of che!icals, drugs etc. shoing rhe results of
analysis !ade of their ingredients.
4ulti!odal trans%ortD 4ulti!odal trans%ort !eans carriage of goods by to or !ore !odes of
trans%ort
$&D :or!D .+%orts to all countries by %arcel %ost under arrange!ents to reali1e through cash on
delivery.
$ertificate of originD It shos the %lace of !anufacture or origin of the goods.
10. .+%lain Internal 'edging)
1. .+%osure 9etting 2. Deno!ination in <ocal currency ". :oreign currency accounts (. <eads
and lags.
12. What is I!%ort <icensing) Write the salient feature of license.
1. Issued in du%licate 2. *eriod of validity ". Actual user condition (. value descri%tion and
7uantity ,. .+%ort obligation
25. Write the various financing sche!es for ca%ital goods i!%ort)
1. Duty e+e!%tion sche!e 2. Duty re!ission sche!e ". Duty free re%lenish!ent certificate (.
Duty entitle!ent %ass book ,. .+%ort %ro!otion ca%ital goods sche!e.
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