Page 48 - Account 10

or international trade. In international trade, the payment is made in foreign currencies.
The parties involved in this trade are known as importer and exporter. The party buying
the goods is known as the importer and that, selling the goods is known as the exporter.
This trade is also of three types, viz. import trade, export trade and entrepot trade.

Key Point The process of buying and selling of goods between the parties of different
countries is known as foreign trade.

a. Types of Foreign Trade

i. Import Trade
Import trade refers to the purchase of goods from any of the foreign countries. The
traders should agree the terms and conditions of foreign trade and rules and regulations
of both of the countries regarding foreign trade.
ii. Export Trade
This trade refers to the sales of goods to foreign countries. A number of procedures
and formalities are to be fulfilled by the parties even after agreeing the terms and
conditions of foreign trade. It is one of the major sources of earning foreign currency.

iii. Entrepot Trade
When the goods are imported from one country and exported the same to another country,
it is known as enterpot trade. This trade helps to establish the trade relationship among
the countries by the way of exchange of goods. When a Nepalese merchant imports goods
from China and exports the same to India or Pakistan, it is entrepot trade.
b. Procedures of Foreign Trade
Since foreign trade consists of import and export trade, all the formal procedures
of these trades are considered as the procedures of foreign trade. Person who wants
to import any goods from abroad has to obtain can import license. An importer has to
secure foreign exchange after obtaining import license. This can be done through Nepal
Rastra Bank or other banks. The common procedures or documents of foreign trade are
discussed below.

i. Inquiry Letter
The probable importers come to know about the manufacturers/suppliers of
the goods in the foreign countries through advertisement and publicity of business
information. Then they write letters to the exporter by asking the detail descriptions of the
goods. As such, an inquiry letter is that which is written by an importer to the exporter of
a foreign country by asking about the description of the goods, their prices and discount,
mode and timing of delivery, credit terms, means of payment, etc. It is the beginning
documentary relation between the trade parties of the different countries.

ii. Reply to the Inquiry
When the exporters receive the inquiry letters from the foreign customers, they
should give the reply according to their inquiries. Sometimes the exporters should also

48 Aakar’s Office Practice and Accountancy - 10 Trade 49