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What is Foreign Trade and How It Works

2 Mins read

If more than once you have heard the term foreign trade in a conversation, but you are not entirely sure you understand what the concept refers to, in this article, we will explain the most basic things you should know about what foreign trade is and how it works.

But before starting with this post we would like to invite you to see our online foreign trade courses, there you will know in depth all the import and export topics:

What is Foreign Trade?

Foreign trade represents the exchange between one country and another, in terms of goods and services. So that the nations involved can meet their external and internal market needs.

Definition of Foreign Trade

Foreign trade is the exchange of goods or services existing between two or more nations with the purpose that each one can satisfy their internal and external market needs.

It is regulated by international standards, treaties, agreements, and conventions between countries to simplify their processes and seeks to cover internal demand that cannot be met by national production.

Although foreign trade is something that we are all part of and that affects our day to day lives, it is not exactly one of the most common topics in a casual conversation, so you may have many doubts about it.

If this happens to you, don’t worry, here are some of the most frequent questions about this topic:

1. What is the difference between foreign trade and international trade?

International trade incorporates global transactions of products. An example of this is the price of oil, which is subject to a change in its price due to international trade. So oil is affected by world economic and commercial events.

While foreign trade is a specific country or a commercial bloc that establishes commercial exchange relations with the rest of the world. 

2. What is the EPCG Scheme?

Under the EPCG Scheme (Export Promotion Capital Goods Scheme), an exporter can import the capital goods or the machinery required for the processing of manufacturing and production of the finished product that will be exported. You will be liable for zero custom duty. This has been introduced for the production of high-quality products and services that matches international standards.

3. What is Advance Authorisation Scheme?

AAS or Advance Authorization scheme enables you to import the raw materials required to process the finished product that the producer or manufacturer is producing for the export function. These raw materials are the inputs in the processing of the final product. 

4. What is RoDTEP Scheme?

RoDTEP stands for Remission of Duties or Taxes on Export Products this is a scheme to promote the Indian manufacturers producing the cost-competitive and be ready to compete in the global market. This RoDTEP scheme is fully compliant to WTO. Under this scheme, all the taxes are reimbursed including duties and levies under state/Central and local level.