Understanding WTO agreements and its structure

WTO’s contribution to world trade is enormous. Countries like India and China must thank the organization to make it possible for these countries to become potentially strong economic force in global business. It is due to the process adopted by WTO which is resulting into the convergence of income levels around the world. In the past many countries has been directly or indirectly benefited from WTO to raise their income level. Perhaps the biggest gainer in recent future is likely to be India. However WTO has been criticized time and again in failing to enforce its sanctions on rich members like US. However one would not accuse WTO for such gaps if one understand how WTO works. The most important pillars of WTO process are its 6 part agreements structure. These agreements are negotiated multilateral agreements which result into rules which must be followed by each member and contribute to the functioning of WTO.

Click here to see a video to understand the nature and categories of these WTO agreements

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Significance of Understanding of International Trade Procedures and Documentation

While operating in international markets, a businessperson can not transact without the interventions of mainly four groups of intermediaries or regulators – 1) Governments of host and home country, 2) Banks in both the countries, 3) Transporting group – Different payers involved with the overall logistics of carrying the goods from home country to host country, 4) Misc Group – Different service providers which facilitate the transaction of the goods internationally. Due to the simple fact that the transacting parties are located in different countries with different set of laws and regulations as also differing business practices, it becomes too complicated for them to carry out their transactions without the active participation of different players belonging to these groups or categories of entities. While governments of exporting and importing countries have their own objectives and compulsions to intervene, other groups are motivated to intervene seeing opportunities of profit in international transactions. Banking groups thrive on providing their services for profits of their own, transporters carry out their role on daily basis to make profit from the movement of the goods. Miscellaneous group consists of service providers which thrive on peculiar situations arising from international transactions.

In all, the involvement of so many parties in international transactions create a set of challenges and opportunities. The understanding of International Trade Procedures and Documentation is vital to meet these challenges and exploit these opportunities to its maximum.

Class Assignment 1 for the ITPD course

Students must do this assignment to understand the practical ways of dealing with an export order.

Under this assignment each group of student has to complete following tasks

1. Identify a company exporting any of its products. Write a small write up on the company and their products for exports.

2. Identify aq particular order executed by the company

3. Find some details of the buyer like – country of destination, type of buyer (e.g. end user or reseller)

4. Find some details of contract conditions – Like payment terms, delivery terms, mode of shipment (by sea or by air), delivery time etc.

5. Find some details of L/C conditions (preferably a copy of the L/C)

6. Find out the name of issuing bank, advising bank, bank charges

7. Find out how much time was required for manufacturing the goods.

8. Find out what kind of packing was required

9. Find out whether there was a third party inspection required by the buyer? Which company did the inspection

10. List the documents prepared for  this shipment.

11. Attach a copy of each of the document used for this shipment.

12. Find out how long did it take to realize the payment for the order.

Write down each of the above information in word document and send the same to me giving names of the group members. (send by email). Attach all the documents you have gathered.

The above assignment carries 10 marks and will be given 5% weightage in overall marks. Each group must work on a seperate company and different order.

Alligned Document System of Export Documentation

In the last session of ITPD yesterday at I.T.S Mohan Nagar Campus, we discussed the importance and features of Aligned Documents System for export documentation. ADS is an international initiative to standardize the size and information of international trade documentation. Once ratified by majority of the countries the whole trade documentation world wide can be made electronic significantly improving the process of documents and reducing time for documentary formalities while ensuring compliance. Most importantly such EDI if introduced worldwide can significantly improve the monitoring of the international trade transaction reducing scope of frauds and misappropriation by unscrupulous traders.

The documentation was also discussed and important documents both commercial and regulatory were discussed. Important documents which were discussed in the class are – Invoice, Packing List, Transport Documents, Mate’s receipt, Inspection certificate, and Country of Origin certificate. It was argued that most of the information provided in the invoice is essential for the smooth flow of goods through shipping and regulatory channels. The invoice acts as the bill for the seller and identifies the description of the goods and rationale for the cost of the goods. On the other hand packing list identifies the goods in details with respect to nature of packing, size and weight of different packing units etc.

Transport documents acts as the document of title and can be negotiable instrument depending upon the type of the document. In most cases Ocean Bill of Lading is a negotiable document which can be sold to the bank for consideration. On the other hand Air way bill can not be made negotiable since by the time this document reaches the buyer through different banking channels the air shipment is already there on the destination port and may attract heavy demurrage charges for want of such transport document if it is necessary to have it in original. Therefore Air Way Bill is consignee named and a non negotiable copy can be used to claim the goods by the named consignee at the port of call.

While the country of origin of the goods is mentioned in the invoice it is important to have the certificate of origin among the major set of commercial documents, since such document is important of the customs at the port of call to levy right quantum of duties on the goods received in the host country before these are claimed by the buyer.

Sessions 5 and 6 of the ITPD course

Sessions 5 and 6 of the ITPD course saw one class quiz which was well taken by the students and most students could answer majority of the questions right. The sessions also started with the concept of Alligned Documentary System ratified by many countries aimed at making the international trade procedures and documentaion based on electronic data interface (EDI) compliance to reduce the delays in the logistics operations. The class also discussed the basic structure of an INVOICE and PACKING LIST. An exercise about of knotted carpet consignment having 320 carpets of 3 sizes and 3 colors helped understand the students about the compleities involved in making a packing list wihtout which a consignment can not be identified well.

Sessions 3 and 4 of ITPD

Amazingly the 3 and 4th sessions of ITPD were very interactive with students showing great interest in the benfits of through understanding of ITPD. It was pleasant to see that student did not find the understanding of the course too tough which is generally the case.

The significance of ITPD is coumponded by the fact that overall foreign trade of India is on the upswing. In order to ensure smooth foreign trade, having happy buyers, getting timely proceeds, a thorough understanding of the ITPD is must. Students gave strong feedback on their views regarding the significance of ITPD and linked the understanding to smooth customs clearance of goods, minimizing the trade risks.

It also emerged that n order to minimize the differnt types of trade risks, an understanding of different tools available to cover the risks is essential.

Sessions 1 and 2 of ITPD course

Sessions on ITPD course started off today with around 40 students anxiously trying to understand the concepts of International Trade Procedures and Documentation. The sessions were very interactive, students trying to bring in the issues related to procedural bypassing of certain companies like SPEAK ASIA which by having the formation of company n Singapore managed to bypass FEMA laws and fleece the investors in India. Such discussions highlighted the loopholes and vulnerability of the exiting company laws related to companies which have used these procedural cracks to launder money internationally.

However the main focus of the sessions revolved around the importance of understanding the international trade procedures and documentation which can probably ensure strong technical skills and knowledge of international trading which can be really helpful for the students to enter into an international business career. It was highlighted that a person well versed with the ITPD can prove to be an intelligent and prudent international marketer and negotiator capable to signing favorable business contracts with least ambiguity and by ensuring happiness of the buyers overseas.

It was also a focus of the discussions that there are number of areas and steps where strong understanding of ITPD is essential. These areas range from company formation to dealing with local and foreign governments as also dealing with an array of govt. agencies during the course of international trade transactions.

In order to understand the steps involved in exporting a real life situation was given to the students to discuss the course of action which is required. The situation was well understood by the students who came forth energetically to discuss the issues and challenges involved in exporting an off track product. Several interesting alternative for export models emerged from the discussions and debate among students. The true story situation related to export of ‘pan’ by a famous Pan Wala from Delhi after he floated his website and he started getting enquiries from rich NRIs living all over the world. The challenge involved related to packing of the products, logistics, dealing with the customs, airlines, food regulatory agencies, foreign laws, documentation, payment realization from the customers, risks management, inspection of the export consignments etc. Students gave valuable solutions and identified possible procedural obstacles. The situation was well debated and brought out practical insights into steps and reasons of procedures and documentation involved in international trade transactions.

Student seemed to be very responsive and ready to take off to higher level of understanding of the subject.