International Business–II ncert solution class 11 Business Studies

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Chapter 12: International Business–II

NCERT Solutions for Class 11th Business Studies Chapter 12 – International Business–II

Multiple Choice Questions

Question 1. Which of the following documents are not required for obtaining an export license?

(a) lEC number
(b) Letter of credit
(c) Registration cum membership certificate
(d) Bank account number

Answer (b) Bank account, IEC, registration with export promotion council and registration with ECGC are required for obtaining export license.

Question 2. Which of the following documents is not required in connection with an import transaction?

(a) Bill of lading
(b) Shipping bill
(c) Certificate of origin
(d) Shipment advice

Answer (b) Shipping bill is the main document on the basis of which the customs office gives the permission for export.

Question 3. Which of the following do not form part of duty drawback scheme?

(a) Refund of excise duties
(b) Refund of customs duties
(c) Refund of export duties
(d) Refund of income dock charges at the port of shipment.

Answer (d) Major duty draw-backs include refund of excise duties paid on goods meant for exports, refund of customs duties paid on raw materials and machines imported for export production.

Question 4. Which one of the following is not a document related to fulfil the customs formalities

(a) Shipping bill
(b) Export licence
(c) Letter of insurance
(d) Proforma invoice

Answer (b) Export Contract or Export Order, Shipping Bill, Letter of Credit, Commercial Invoice, Certificate of Origin, Certificate of Inspection, Marine Insurance Policy are needed for customs formalities.

Question 5. Which one of the following is not a part of export documents?

(a) Commercial invoice
(b) Certificate of origin
(c) Bill of entry
(d) Mate’s receipt

Answer (c) The importer fills ‘bill of entry’ form for the assessment of customs import duty.

Question 6. A receipt issued by the commanding officer of the ship when the cargo is loaded on the ship is known as

(a) shipping receipt
(b) mate receipt
(c) cargo receipt
(d) charter receipt

Answer (b) A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth, date of shipment. description of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc.

Question 7. Which of the following document is prepared by the exporter and includes details of the cargo in terms of the shippers name, the number of packages, the shipping bill, port of destination, name of the vehicle carrying the cargo?

(a) Shipping bill
(b) Packaging list
(c) Mate’s receipt
(d) Bill of exchange

Answer (a) The shipping bill is the main document on the basis of which customs office grants permission for the export. The shipping bill contains particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged, country of final destination, exporter’s name and address, etc.

Question 8. The document containing the guarantee of a bank to honour drafts drawn on it by an exporter is

(a) letter of hypothecation
(b) letter of credit
(c) bill of lading
(d) bill of exchange

Answer (b) A letter of credit is a guarantee issued by the importer’s bank that it will honour up to a certain amount the payment of export bills to the bank of the exporter.

Question 9. Which of the following does not belong to the World Bank Group?

(a) IBRD
(b) IDA
(c) MIGA
(d) IMf

Answer (d) IMF does not belong to the World Bank Group.

Question 10. TRIP is one of the WTO agreements that deal with

(a) trade in agriculture
(b) trade in services
(c) trade related investment measures
(d) None of the above

Answer (d) TRIP is related to trade of intellectual property rights.

Short Answer Type Questions

Question 1. Discuss the formalities involved in getting an export licence.

Answer Important formalities in getting an export licence are as follows

(i) Opening a bank account in any bank authorised by the Reserve Bank of India (RBI) and getting an account number.
(ii) Obtaining Import Export Code (IEC) number from the Directorate General Foreign Trade (DGFT) or Regional Import Export Licensing Authority.
(iii) Registering with appropriate export promotion council.
(iv) Registering with Export Credit and Guarantee Corporation (ECGC) in order to safeguard against risks of non payments.

Question 2. Why is it necessary to get registered with an export promotion council?

Answer It is necessary for the exporter to become a member of the appropriate export promotion council and obtain a Registration Cum Membership Certificate (RCMC) for availing benefits available to export firms from the Government like duty exemptions. These councils also provide incentives to the exporters.

Question 3. What is IEC number?

Answer Import Export Code (IEC) number is given to an export firm by Director General for Foreign Trade (DGFT) which the firm needs to be filled in various export! import documents. For obtaining the IEC number, a firm has to apply to the DGFT with documents such as exporter/importer profile, bank receipt for requisite fee, certificate from the banker on the prescribed form, two copies of photographs attested by the banker, details of the non-resident interest and declaration about the applicant’s non association with caution listed firms.

Question 4. What is pre-shipment finance?

Answer Pre – Shipment finance is the finance that the exporter needs before shipment of the order for procuring raw materials and other components, processing and packing of goods and transportation of goods to the port of. shipment or we can say pre- shipment finance is the finance which is required to undertake export production.

Question 5. Why is it necessary for an export firm to go in for pre-shipment inspection?

Answer An export firm has to go in for pre-shipment inspection as required by the Government of India to ensure that only good quality products are exported from the country. The government has passed Export Quality Control and Inspection Act, 1963 for this purpose of compulsory inspection of certain products by a competent agency as deSignated by the government. If the product to be exported comes under such a category, the exporter needs to contact the Export Inspection Agency (EIA) or the other designated agency for obtaining Inspection certificate.

The pre-Shipment inspection report is required to be submitted along with other export documents at the time of exports Such an inspection is not compulsory in case the goods are being exported by star trading houses, trading houses, export houses, industrial units setup in Export Processing Zones/Special Economic Zones (EPZs/SEZs) and 100% Export Oriented Units (EOUs).

Question 6. Discuss the procedure related to excise clearance of goods.

Answer The exporter has to apply to the concerned Excise Commissioner in the region with an Invoice because according to the Central Excise Tariff Act, excise duty is payable on the materials used in manufacturing goods. If the Excise Commissioner is satisfied, he may issue the excise clearance.

But in many cases the government exempts payment of excise duty or later on refunds it If the goods so manufactured are meant for exports This is done to provide an incentive to the exporters to export more and also to make the export products more competitive In the world markets

Question 7. Explain briefly the process of customs clearance of export goods.

Answer The goods must be cleared from the customs before these can be loaded on the ship. For obtaining customs clearance, the exporter prepares the shipping b II which contains particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged country of “nal destination, exporter’s name and address, etc Five copies of the shipPing bill along with the following documents are then submitted to the Customs Appraiser at the Customs House for clearance:

(i) Export Contract or Export Order
(ii) Letter of Credit
(iii) Commercial invoice
(iv) Certificate of Origin
(v) Certificate of Inspection, where necessary
(vi) Manne Insurance Policy

After submission of these documents the superintendent of the concerned port trust is approached for carting order and after obtaining it, the Cargo is physically moved Into the port area and stored in shed

Question 8. What is bill of lading? How does it differ from bill of entry?

Answer Bill of lading is issued by the shipping company after the receipt of freight, it serves as an evidence that the shipping company has accepted the goods for carrying to the designated destination. in case the goods are being sent by air. this document IS referred to as airway bill

On the other hand “Bill of entry” IS filled by the Importer for assessment of customs import duty. One appraiser examines the document carefully and gives the examination order The importer procures the said document prepared by the appraiser and pays the duty. if any. After payment of the import duty, the bill of entry has to be presented to the dock superintendent The examiner gives his report on the bill of entry which is then presented to the port authority which issues the release order after receiVing necessary charges

Question 9. What is Shipping Bill?

Answer Shipping bill is the main document on the basis of which the customs office gives the permission for export. Shipping bill contains particulars of the goods being exported. the name of the vessel. the port at which goods are to be discharged, country of final destination, exporter’s name and address, etc. Exporter prepares the shipping bill for obtaining customs clearance. Thus, we can say shipping bill is the bill which is prepared by exporter and required for the customs clearance.

Question 10. Explain the meaning of Mate’s receipt.

Answer A mate receipt is a receipt issued by the commanding officer of the ship when the cargo is loaded on board, and contains the information about the name of the vessel, berth, date of shipment. descripton of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, etc. The port superintendent. on receipt of port dues, hand over the mate’s receipt to the C&F agent.

Question 11. What is a letter of credit? Why does an exporter need this document?

Answer A letter of credit is a guarantee issued by the importer’s bank that it will honour up to a certain amount of export bills to the bank of the exporter. Letter of credit is the most appropriate and secure method of payment adopted to settle international transactions.

The exporter needs this letter to insure against the non payment of dues by the importer in the foreign country as there IS always a risk In the collection of payment from the importers. Thus, in order to protect the exporter from financial loss “Letter of credit” is needed.

Question 12. Discuss the process involved in securing payment for exports.

Answer The process involved in securing payment for exports includes the following steps

(i) After the shipment of goods, the exporter informs the importer about the shipment of goods.
(ii) The exporter sends the documents like certified copy of invoice, bill of lading, packing list, etc. needed by the importer to claim the title of goods on their arrival at his/her country and getting them customs cleared.

These documents are sent through exporter’s banker with the instruction that these may be delivered to the importer after acceptance of the bill of exchange.

(iii) On receiving the bill of exchange, the Importer releases the payment in case of sight draft or accepts the usance draft for making payment on maturity of the bill of exchange.
(iv) The exporter’s bank receives the payment through the importer’s bank and is credited to the exporter’s account.
(v) The exporter can get immediate payment from his/ her bank on the submission of documents by Signing a letter of indemnity.
(vi) After receiving the payment for exports, the exporter needs to get a bank certificate of payment which states that the necessary documents relating to the particular export consignment have been presented to the importer for payment and the payment has been received in acoordance with the exchange control regulations.

Question 13. Differentiate between the following

(i) Sight and usance drafts
(ii) Bin of lading and airway bill
(iii) Pre-shipment and post-shipment finance

Answer

(i) Sight and Usance Drafts In the case of sight draft. the drawer instructs the bank to hand over the relevant documents to the importer against payment. But in the case of usance draft, the drawer instructs the bank to hand over the relevant documents to the importer against acceptance of the bill of exchange.

(ii) Bill of Lading and Airway Bill Bill of lading is a document prepared and signed by the master of the ship acknowledging the receipt of goods on board. It contains terms and conditions on which the goods are to be taken to the port of destination.

On the other hand. Airway Bill is a document wherein an airline/shipping company gives its official receipt of the goods on board its aircraft and at the same time gives an undertaking to carry them to the port of destination.

(iii) Pre-shipment and Post-shipment Finance Pre-shipment finance is provided to an exporter for financing the purchase. processing, manufacturing or packaging of goods for export purpose while the post-shipment finance is provided to the exporter from the date of extending the credit after the shipment of goods to the export country.

Question 14. Explain the meaning of the following documents used in connection with import transactions

(i) Trade enquiry
(ii) Import licence
(iii) Shipment of advice
(iv) Import general manifest
(v) Bill of entry

Answer

(i) Trade Enquiry A trade enquiry is a written request by an importing firm to the exporter for supply of information regarding the price and various terms and conditions on which the latter is ready to exports goods.

(ii) Import Licence Licence which permits the Import of goods that cannot be imported freely is called an import licence. The importer needs to consult the Export Import (EXIM) policy in force to know whether the goods that he or she wants to import are subject to Import licensinq In case goods can be imported only against the licence. the importer needs to procure an Import licence.

(iii) Shipment of Advice Shipment advice contains Information about the shipment of goods. The information provided in the shipment advice includes details such as invoice number. bill of lading/airways bill number and date. name of the vessel with date. the port of export. description of goods and quantity, and the date of sailing of vessel The overseas supplier dispatches the shipment advice to the Importer after loading the goods on the vessel

(iv) Import General Manifest Import general manifest is a document that contains the details of the imported goods. It is a document on the basis of which unloading of cargo takes place. It is provided by the person in charge of the carrier (ship or airway) to the officer in charge at the dock

(v) Bill of Entry Bill of entry IS a form filled by the Importer for assessment of customs import duty. One appraiser examines the document carefully and gives the examination order. The Importer procures the said document prepared by the appraiser and pays the duty, if any. After payment of the Import duty, the bill of entry has to be presented to the dock superintendent The examiner gives his report on the bill of entry which IS then presented to the port authority which Issues the release order after receiving necessary charges.

Question 15. List out major affiliated bodies of the World Bank.

Answer Major affiliated bodies of the World Bank are

(i) International Bank for Reconstruction and Development (IBRD)
(ii) International Fmancra’ Corporation (IFC)
(Iii) International Development ASSOCiation(IDA)
(iv) Multilateral Investment Guarantee Agency (MIGA)
(v) International Centre for Settlement of Investment Disputes (ICSID)

Question 16. Write short notes on the following

(i) UNCTAD
(ii) MIGA
(iii) World Bank
(iv) ITPO
(v) IMF

Answer

(i) UNCTAD The United Nations Conference on Trade and Development (UNCTAD) was established in 1964 as a permanent intergovernmental body It is the principal organ of the United Nations

General Assembly dealing with trade, investment, and development issues.

The organisation’s goals are to “maximize the trade, investment and development opportunities of and developing countries and assist them in their efforts to integrate into the world economy on an equitable basis”. UNCTAD was created to address the concerns of developing countries over the international market, multinational corporations, and the disparity between developed nations and developing nations.

The primary objective of the UNCTAD is to formulate policies relating to all aspects of development including trade, aid, transport, finance and technology The conference ordinarily meets once in four years. UNCTAD has 194 member States and has its permanent secretariat in Geneva.

One of the principal achievements of UNCTAD has been to conceive and Implement the Generalised System of Preferences (GSP). Under the GSP Scheme, manufactured goods exports and some agricultural goods from the developing countries enter duty-free or at reduced rates in the developed countries. This was done in order to promote exports of manufactured goods from developing countries.

(ii) MIGA The Multinational Investment Guarantee Agency (MIGA) was established in April, 1988 to supplement the functions of the World Bank and IFC with the following objectives

(a) To encourage flow of direct foreign investment into the less developed member countries.
(b) To provide Insurance cover to investors against political risks.
(c) To provide guarantee against non-commercial risks (like currency transfer risk, war and civil disturbances and breach of contract),
(d) To insure new Investments, expansion of existing investments, privatisation and financial restructuring.
(e) To provide promotional and advisory services.
(f) To establish credibility.

(iii) World Bank The International Bank for Reconstruction and Development (IBRD), commonly known as World Bank, emerged from the Bretton Woods Conference. The main objectives of World Bank were to aid the task of reconstruction of the war-affected economies of Europe and assist in the development of the underdeveloped nations of the world. At present, the World Bank is a group of five international organisations responsible for providing finance to different countries. Its headquarters is situated at
Washington DC.

World Bank is entrusted with the task of economic growth and widening the scope of international trade. During its initial years of Inception, it placed more emphasis on developing infrastructure facilities like energy. transportation and others but the results were not found to be very satisfactory due to poor administrative structure, lack of institutional framework and non-availability of skilled labour in under developed countries.

World Bank also extends assistance to different countries for raising cash crops so that they incomes rise and they may export the same for earning foreign exchange. The bank has also been providing resources for education. sanitation, health care and small scale enterprises.

The World Bank is no longer confined to simply providing financial assistance for infrastructure development, agriculture. industry, health and sanitation. It is also involved in areas like removal of rural poverty through raising productivity, increasing Income of the rural poor. providing technical support. and initiating research and cooperative ventures.

(iv) ITPO Indian Trade Promotion Organisation (ITPO) was setup on tst January, 1992 under the Companies Act. 1956 by the Ministry of Commerce, Government of India. Its headquarter is at New Delhi. ITPO was formed by merging the two erstwhile agencies viz .. Trade Development Authority and Trade Fair Authority of India.

ITPO is a service organisation and maintains regular and close interaction with trade, industry and government. It serves the industry by organising trade fairs and exhibitions within the co.mtry as well as abroad, It helps export firms in participating in international trade fairs and exhibitions, developing exports of new items and providing support and updated commercial business Information

ITPO has five regional offices at Mumbai. Bengaluru, Kolkata, Kanpur and Chennai and four international offices at Germany. Japan, UAE and USA

(v) IMF International Monetary Fund (IMF) came into existence In 1945 and has its headquarters located In Washington DC. In 2005. it had 191 countries as its members. The major idea underlying the setting up of the IMF is to evolve an orderly international monetary system to facilitate the system of international payments and adjustments in exchange rates among national currencies.

Some of the important functions of IMF include

(i) Acting as a short-term credit institution.
(ii) Providing machinery for the orderly adjustment of exchange rates.
(iii) Acting as a reservoir of the currencies of all the member countries, from which a borrower nation can borrow the currency of other nations.
(iv) Acting as a lending institution of foreign currency and current transaction.
(v) Determining the value of a country’s currency and altering it, if needed, so as to bring about an orderly adjustment of exchange rates of member countries.
(vi) Providing machinery for international consultations.

Long Answer Type Questions

Question 1. Rekha Garments has received an order to export 2000 men’s trousers to Swift Imports limited located in Australia. Discuss the procedure that Rekha Garments would need to go through for executing the export order.

Answer Steps involved in executing the export order are as follows

(i) Assessing Creditworthiness of Swift Imports Limited and Securing a Guarantee for Payments After receiving the receipt of indent, Rekha Garments should make necessary enquiry about the creditworthiness of Swift Imports Limited. in order to assess the risks of non payment by the importer.

(ii) Obtaining Export Licence After assuring about payments, the exporting firm Rekha Garments would initiate the steps relating to compliance of export regulations which demand that the export firm must have an export licence before it proceeds wIth exports.

(iii) Obtaining Pre-Shipment Finance Rekha Garments would then approach its banker for obtaining pre-shipment finance to undertake export production, for procuring raw materials and other components. processing and packing of goods and transportation of goods to the port of shipment.

(iv) Production or Procurement of Goods Rekha garments would proceed to get the goods ready as per the specifications of the importer. Either the firm would itself produce the goods or else buy them from the market.

(v) Pre-shipment Inspection If the product to be exported comes under the category of compulsory inspection. Rekha Garments needs to contact the Export Inspection Agency (EIA) or the other designated agency for obtaining inspection certificate.

(vi) Excise Clearance Rekha Garments would then have to apply to the concerned Excise Commissioner in the region with an invoice. If the

Excise Commissioner is satisfied, he would issue the excise clearance. Rekha Garments may get the refund of excise duty known as duty drawback as it is exporting the goods.

(vii) Obtaining Certificate of Origin Some importing countries provide tariff concessions or other exemptions to the goods coming from a particular country. If such benefits are available, the importer may ask the exporter to send a certificate of origin.

(viii) Reservation of Shipping Space The exporting firm applies to the shipping company for provision of shipping space. It has to specify the types of goods to be exported, probable date of shipment and the port of destination On acceptance of application for shipping, the shipping company issues a shipping order.

(ix) Packing and Forwarding The goods are then properly packed and marked with necessary details such as name and address of the importer, gross and net weight, port of shipment and destination, country of origin, etc. Rekha Garments would then have to make necessary arrangement for transportation of goods to the port.

(x) Insurance of Goods The exporter would then get the goods insured with an insurance company to protect against the risks of loss or damage of the goods due to the perils of the sea during the transit.

(xi) Customs Clearance The goods must be cleared from the customs before these can be loaded on the ship.

For obtaining customs clearance, Rekha Garments would have to prepare the shipping bill. Five copies of the shipping bill along with the other required documents would then be submitted to the Customs Appraiser at the customs house.

(xii) Obtaining Mates Receipt The goods are then loaded on board the ship for which the mate Or the captain of the ship issues mate’s receipt to the port superintendent.

(xiii) Payment of Freight and Issuance of Bill of Lading After the receipt of freight, the shipping company would issue a bill of lading which serves as an evidence that the shipping company has accepted the goods for carrying to the designated destination.

(xiv) Preparation of Invoice After sending the goods, an invoice of the despatched goods would be prepared. The invoice states the quantity of goods sent and the amount to be paid by the importer and would be presented to Swift Imports limited for payme

Question 2. Your firm is planning to import textile machinery from Canada. Describe the procedure involved in importing.

Answer Following is the procedure involved in importing textile machinery from Canada

(i) Trade Enquiry The importing firm approaches the textile machinery export firms in Canada with the help of trade enquiry they collecting information about their export prices and terms of exports. After receiving a trade enquiry, the exporter will prepare a quotation called proforma invoice and send it to our firm.

(ii) Procurement of Import Licence We will consult the Export Import (EXIM) policy in force to know whether the textile machinery imports are subject to import licensing. In case It can be imported only against the licence, we will procure an import licence.

(iii) Obtaining Foreign Exchange As payment for imports will be made in Canadian dollars, our firm will have to make an application to a
bank authorised by RBI to issue foreign exchange.

(iv) Placing Order or Indent After obtaining the import licence, our firm will place an import order or indent with the exporter for supply of the specified products containing information about the price, quantity, grade and quality of machinery and the instructions relating to packing, shipping, ports of shipment and destination, delivery schedule, insurance and mode of payment.

(v) Obtaining Letter of Credit If the payment terms agreed between us and the overseas supplier then our firm should obtain the letter of credit from its bank and forward it to the overseas supplier.

(vi) Arranging for Finance Our firm would make arrangements in advance to pay to the exporter on arrival of goods at the port.

(vii) Receipt of Shipment Advice After loading the ordered textile machinery on the vessel, the overseas supplier will dispatch the shipment advice to our firm which contains information about the shipment of goods.

(viii) Retirement of Import Documents After shipping the machinery, the overseas supplier will prepare a set of necessary documents including bill of exchange, commercial invoice, bill of lading/airway bill, packing list, certificate of origin, marine insurance policy, etc. and will hand it over to his or her banker for their onward transmission and negotiation to our firm.

The acceptance of bill of exchange for the purpose of getting delivery of the documents is known as retirement of import documents after which the bank handover the import documents to the importer.

(ix) Arrival of Goods Goods will be shipped by the overseas supplier as per the contract. The officer in charge at the dock will provide the document called import general manifest on the basis of which unloading of cargo will take place.

(x) Customs Clearance and Release of Goods Textile machinery imported into India will have to pass through customs clearance. Firstly, our firm will have to obtain a delivery order, pay dock dues and obtain port trust dues receipt and then fill in a form ‘bill of entry’ for assessment of customs import duty. After payment of the import duty, the bill of entry has to be presented to the dock superintendent. The examiner will give his report on the bill of entry and we will present the bill of entry to the port authority who will issue the release order after receiving necessary charges.

Question 3. Discuss the principal documents used in exporting.

Answer Following are the principal documents used in exporting

(i) Documents Related to Goods

(a) Export Invoice Export invoice is a sellers’ bill for merchandise and contains information about goods such as quantity, total value, number of packages, marks on packing, port of destination, name of ship, bill of lading number, terms of delivery and payments, etc.

(b) Packing List A packing list is a statement of the number of cases or packs and the details of the goods contained in these packs. It gives details of the nature of goods, which are being exported and the form in which these are being sent.

(c) Certificate of Origin This is a certificate which specifies the country in which the goods are being produced which entitles the importer to claim tariff concessions or other exemptions on goods originating from certain pre-specified countries.

(d) Certificate of Inspection For ensuring quality, the government has made it compulsory for certain products to be inspected by some authorised agency like Export Inspection Council of India (EICI) which issues the certificate that the consignment has been inspected as required under the Export (Quality Control and Inspection) Act, 1963, and satisfies the conditions relating to quality control and inspection as applicable to it, and is export worthy.

(ii) Documents Related to Shipment

(a) Mate’s Receipt The mate’s receipt indicates the name of the vessel. berth, date of shipment, description of packages, marks and numbers, condition of the cargo at the time of receipt on board the ship, eto. and is given by the commanding officer of the ship to the exporter after the cargo is loaded on the ship.

(b) Shipping Bill The shipping bill contains particulars of the goods being exported, the name of the vessel, the port at which goods are to be discharged, country of final destination, exporter’s name and address, etc. It is the main document on the basis of which customs office grants permission for the export.

(c) Bill of Lading/Airway Bill Bill of lading is issued by the shipping company after receipt of the freight, which serves as an evidence that the shipping company has accepted the goods for carrying to the designated destination. In the case the goods are being sent by air, this document is referred to as airway bill

(d) Marine Insurance Policy It is a certificate of insurance contract whereby the insurance company agrees in consideration of a payment called premium to indemnify the insured against loss Incurred by the latter in respect of goods exposed to penis of the sea,

(iii) Documents Related to Payment

(a) letter of Credit A letter of credit is a guarantee Issued by the importer’s bank that it will honour up to a certain amount the payment of export bills to the bank of the exporter letter of credit is the most appropriate and secure method of payment adopted to settle international transactions.

(b) Bill of Exchange Bill of exchange is a written Instrument drawn by exporter on the importer asking the tatter to pay a certain amount to a certain person or the bearer of the bill of exchange. The documents giving title to the export consignment are passed on to the Importer only when the Importer accepts the order contained in the bill of exchange.

(c) Bank Certificate of Payment Bank certificate of payment is a certificate that the necessary documents relating to the particular export consignment has been presented to the Importer for payment and the payment has been received in accordance with the exchange control regulations.

Question 4 List and explain various incentives and schemes that the government has evolved for promoting the country’s export.

Answer Major export promotion measures are as follows

(i) Duty Drawback Scheme eXCise and customs duties paid on export goods are refunded to exporters on production of proof of exports of these goods to the concerned authorities.

(ii) Export Manufacturing Under Bond Scheme This facility entitles firms to produce goods without payment of excise and other duties if the firms give an undertaking (i.e., bond) that they are manufacturing goods for export purposes and Will export such products on then production

(iii) Exemption from Payment of Sales Taxes and Income Tax Goods Meant for Export Purposes are not Subject to Sales Tax Exemption from income tax is available only to 100% Export Oriented Units (100% EOUs) and units set up in Export Processing Zones (EPZs)/Special Economic Zones (SEZs) for select years.

(iv) Advance Licence Scheme It Is a scheme under which an exporter IS allowed to duty free supply of domestic as well as imported inputs required for the manufacture of export goods,

(v) Export Promotion Capital Goods Scheme (EPCGS) The main objective of this scheme is to encourage the import of capital goods for export production. This scheme allows export firms to import capital goods at very low rates of customs duties subject to actual user condition and fulfilment of specified export obligations,

(vi) Scheme of Recognising Export Firms as Export House, Trading House and Superstar Trading House The government grants the status of export house, trading House, star trading house to select export firms based on achieving a prescribed average export of performance in past select years and assistance is given to them in marketing their products globally,

(vii) Export of Services In order to boost the export of services, various categories of service houses have been recognised on the basis of the export performance of the service providers,

(viii) Export Finance Finance is made available at concessional rates of interest to the exporters. Pre-shipment finance is provided to an exporter for financing the purchase, processing, manufacturing or packaging of goods for export purpose. Post-shipment finance is provided to the exporter from the date of extending the credit after the shipment of goods to the export country.

(ix) Export Processing Zones (EPZs) Export processing zones are industrial estates usually situated near seaports or airports with an objective to provide an internationally competitive duty free environment for export production at low cost. EPZs are now converted to Special Economic Zones (SEZs) which are free from all rules and regulations governing imports and exports units except relating to labour and banking,

(x) 100% Export Oriented Units (100 per cent EOUs) The 100%.

Export oriented units scheme was introduced in early 1981 adopting the same production regime as EPZs but a wider option in location, EOUs were established with a view to generating additional production capacity for exports by providing an appropriate policy framework, flexibility of operations and incentives,

Question 5. Identify various organisations that have been set up in the country by the government for promoting country’s foreign trade.

Answer Various organisations that have been set up in the country by the government for promoting country’s foreign trade are as follows

(i) Department of Commerce Department of Commerce in the Ministry of Commerce, Government of India is the apex body responsible for formulating policies in the sphere of foreign trade, increasing commercial relations with other countries. state trading. export promotional measures and the development. and regulation of certain export oriented industries and commodities.

(ii) Export Promotion Councils (EPCs) Export Promotion Councils are non profit organisations registered under the Companies Act or the Societies Registration Act, as the case may be. Their basic objective is to promote and develop the country’s exports of particular products falling under their jurisdiction.

(iii) Commodity Boards Commodity Boards are the boards which have been specially established by the Government of India for the development of production of traditional commodities and their exports and supplement the EPCs. At present there are seven commodity boards in india: Coffee Board, Rubber Board, Tobacco Board, Spice Board, Central Silk Board, Tea Board, and Coir Board.

(iv) Export Inspection Council (EIC) Export Inspection Council of India was setup by the Government of India under Section 3 of the Export Quality Control and inspection Act 1963. The council aims at sound development of export trade through quality control and pre-shipment inspection.

(v) Indian Trade Promotion Organisation (ITPO) Indian Trade Promotion Organisation was setup on 1et January 1992. ITPO is a service organisation which serves the industry by organising trade fairs and exhibitions within the country and abroad and helps export firms in participating in international trade fairs and in developing exports of new items.

(vi) Indian Institute of Foreign Trade (IIFT) Indian Institute of Foreign Trade is an institution that was setup in 1963 by the Government of India as an autonomous body. It has recently been recognised as Deemed University. It provides training in international trade, conduct researches in areas of international business. and analysing and disseminating data relating to international trade and investments.

(vii) Indian Institute of Packaging (IIP) The Indian Institute of Packaging was set up as a national institute jointly by the Ministry of Commerce, Government of India, and the Indian Packaging Industry and allied interests in 1966. It is a training-cum-research institute pertaining to packaging and testing and caters to both domestic and export markets. It also undertakes technical consultancy. testing services on packaging developments, training and educational programmes. promotional award contests. information services and other allied activities.

(viii) State Trading Organisations The State Trading Organisation (STC) was set-up in May 1956 With the main objective of to stimulate trade, primarily export trade among different trading partners of the world. Later the government set up many more organisations such as Metals and Minerals Trading Corporation (MMTC). and Handloom and Handicrafts Export Corporation (HHEC).

Question 6. What is World Bank? Discuss its various objectives and role of its affiliated agencies.

Answer The World Bank was established in 1944, the International Bank for Reconstruction and Development (IBRD). is the common name of World Bank. which was formed as a result of the Bretton Woods Conference.

The main objectives behind setting up this international organisation were to aid the task of reconstruction of the war-affected economies of Europe and assist in the development of the underdeveloped nations of the world. Till late 1950s, the World Bank remained preoccupied with the task of restoring war-torn nations in Europe after which it turned its attention to the development of underdeveloped nations.

Various objectives and roles of its affiliated agencies are given below International Development Association (IDA) The main objectives of IDA are

(i) It provides finance on easy terms.
(ii) It provides help in poverty alleviation.
(iii) It provides help in economic development programmes.
(iv) Extend macro economic management services.

The Multinational Investment Guarantee Agency (MIGA) Major objectives of MIGA are

(i) To encourage flow of direct foreign investment into the less developed member countries.
(ii) To provide insurance cover to investors against political risks.
(iii) To provide guarantee against non-commercial risks (like dangers involved in currency transfer. war and civil disturbances and breach of contract).
(iv) To insure new investments, expansion of existing investments, privatisation and financial restructuring.
(v) To provide promotional and advisory services.
(vi) To establish credibility.

We can conclude that the World Bank is no longer confined to simply providing financial assistance for infrastructure development. agriculture, industry, health and sanitation and is involved in areas like removal of rural poverty through raising productivity, providing technical support, and Initiating research and cooperative ventures.

Question 7. What is IMF? Discuss its various objectives and functions.

Answer International Monetary Fund (IMF) came into existence in 1945 with an aim to evolve an orderly international monetary system, i.e., facilitating system of international payments and adjustments in exchange rates among national currencies. Its headquarters is located in Washington DC. In 2005, it had 191 countries as its members.

Major Objectives of IMF

(i) To promote international monetary cooperation through a permanent institution.
(ii) To facilitate expansion of balanced growth of international trade and to contribute thereby to the promotion and maintenance of high levels of employment and real income.
(iii) To promote exchange stability with a view to maintain orderly exchange arrangements among member countries
(iv) To assist in the establishment of a multilateral system of payments in respect of current transactions between members.

Functions of IMF

Question 8. Write a detailed note on features, structure, objectives and functioning of WTO.

Answer GAD was transformed into World Trade Organisation (WTO) with effect from 1st January 1995. The headquarters of WTO are situated at Geneva, Switzerland.

Features of WTO

(i) WTO is a permanent organisation created by an international treaty ratified by the governments and legislatures of member states.
(ii) It governs trade not only in goods, but also in services and intellectual property rights.
(iii) It is a member driven rule-based organisation in the sense that all the decisions are taken by the member governments on the basis of a general consensus.
(iv) It is the principal international body concerned with solving trade problems between countries and providing a forum for multilateral trade negotiations.
(v) It has a global status similar to that of the IMF and the World Bank. (vi) As on 11th December 2005, there were 149 members in WTO.

Structure of WTO

(i) WTO comprises of The Ministerial Conference, which is composed of international trade ministers from aU member countries and is responsible for setting the strategic direction of the organization and making all final decisions on agreements under its wings. The Ministerial Conference meets atleast once every two years.
(ii) The General Council is composed of senior representatives of all members responsible for overseeing the day-to-day business and management of the WTO.
(iii) The Trade Policy Review Body is also composed of all the WTO members. It periodically reviews the trade policies and practices of all member states.
(iv) The Dispute Settlement Body is also composed of all the WTO members and oversees the implementation and effectiveness of the dispute resolution process for all WTO agreements.
(v) The Councils on Trade in Goods and Trade in Services operate under the mandate 01 the General Council and are members. They provide a mechanism to oversee composed the details of all of the general and specific agreements on trade in goods and services.
(vi) The Secretariat and Director General undertakes the administrative functions of running all aspects of the organization. The Secretariat has no legal decision-making powers but provides vital services, and often advice. to those who do. The Secretariat is headed by the Director General, who is elected by the members
(vii) The Committee on Trade and Development and Committee on Trade and Environment have specific mandates to focus on these relationships, which are especially relevant to how the WTO deals with sustainable development issues.

Major Objectives of WTO

(i) To ensure reduction of tariffs and other trade barriers imposed by different countries.
(ii) To engage in such activities which improve the standards of living, create employment, increase income and effective demand and facilitate higher production and trade.
(iii) To facilitate the optimal use of the world’s resources for sustainable development.
(iv) To promote an integrated, more viable and durable trading system.

Functions of WTO

(i) Promoting an environment that is encouraging to its member countries to come forward to WTO in mitigating their grievances.
(ii) Laying down a commonly accepted code of conduct with a view to reducing trade barriers including tariffs and eliminating discriminations in international trade relations.
(iii) Acting as a dispute settlement body.
(iv) Ensuring that all the rules and regulations prescribed in the Act are duly followed by the member countries for the settlement of their disputes.
(v) Holding consultations with IMF and IBRD and its affiliated agencies so as to bring better understanding and cooperation in global economic policy making.
(vi) Supervising on a regular basis the operations of the revised Agreements and Ministerial declarations relating to goods, services and Trade Related Intellectual Property Rights (TRIPS).

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NCERT Solutions for Class 11th Business Studies Chapter 12 – International Business–II

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