Trade restrictions.

One way a country can control its economy is by imposing import restrictions (or controls). If an industry is just starting up ( when it is called an infant industry) the government may help it because it makes the country richer and provides employment. The government can help an infant industry by subsidizing it or by imposing import restrictions . To subsidize an industry means to give it grants or loans. Import controls can protect it from competition by stopping or limiting the infant of the goods the impose industry produces. The government might also impose taxes on imported goods. These taxes are called duty or tariffs.

Import controls may only be selective or temporary. If they only apply to certain goods or certain countries, they are selective. If they only apply for a limited time, they are temporary. Traders may require a licence to import goods. A licence is a certificate which gives permission to do something. Traders may also be limited to a quota of goods. A quota is a maximum number.

Trade restrictions are enforced by the Customs and Excise department. Importers have to fill out a customs declaration form which declares the value of the goods so that the customs men can calculate the tariffs/taxes they must pay. To make the job of the customs department easier, the invoice for the goods is sometimes certified as accurate by the consulate of the importing country before the goods leave the exporting country. The invoice is then called a consular invoice. The consular invoice is sometimes also used as a certificate of origin (although this may be a separate document).

The certificate of origin is a certificate which shows where the goods come from originally (this is necessary if they have travelled through another country). It can be important to show the origin of goods when the importing and exporting countries have special trade agreements, because traders may pay less duty. A government often makes trade agreements with its trading partnerts (countries with which it trades regularly). Under trade agreements certain goods from certain countries may be exempt from (they do not have to pay) some of the tariffs, or they may be allowed bigger quotas.

Methods of payment.

The two principal methods of payment for exported goods are by Bill of Exchange and by letter of credit. The Bill of Exchange is an order in writing requesting someone (the buyer) to pay a specified sum of money at a specified date. If the bill must be paid immediately, it is known as a Sight Bill. The drawer (the exporter) draws up the Bill of Exchange naming the person who must pay the bill. This person (the buyer) is known 8s the drawee. The drawee (the exporter) then gives the Bill of Exchange to the bank. When the bank presents the bill to the drawee (the buyer) he must either pay it immediately (if it is a Sight Bill) or accept it by writing "Accepted" on it. By accepting a bill, a person agrees to pay the bill at a specified date (usually in three months). When the drawee pay s or accept the bill the bank gives him the documents which allow him to collect the goods from the quay when they arrive. Receiving the documents when the Sight Bill is paid is called 'Documents against Payment'. Receiving the documents when a bill is accepted is called Documents against Acceptance'.

The main document in exporting is the Bill of Lading, which is the title deed to the goods. The title deed is the document/deed which proves ownership of the goods. When a Bill of Exchange has been accepted by the drawee it becomes negotiable. This means that it can be transferred to another person, to pay a debt for example. On the other hand, if the exporter does not want to wait for payment of an accepted Bill of Exchange he can discount (seil) it at a Discount House.

Discounting Bills of Exchange is a way of lending and borrowing money. A Bill of Lading is also negotiable so goods can be sold by selling the Bill of Lading before the goods actually arrive in the importing country.

A letter of credit is a letter written by the buyer’s bank to the exporter's hank authorizing payment of a specified sum of money to as specified person (the exporter). The importer has to apply to bis bank to open a letter of credit. The exporter is paid when he presents the export documents to his bank.