Types of International Business

Types of International Business

On the basis of sale and purchase of goods and services, international trade can be divided into three kinds. They are export trade, import trade and entrepot trade. It has been exhibited in the chart drawn below

These trades are briefly stated hereunder

A) Export Trade

When the firm of country sells goods and services to a firm of another country it is called export trade. Export trade indicates selling of goods and services from the home country to a foreign country. For Example; the sale of handicraft, leather products, electronic goods, herbal products, etc., by Indian company to other countries is known as export trade.

B) Import Trade

When the business firm of a country purchases goods from the firm of another country it is called import trade. Importing means purchase of foreign products and bringing them into one’s home country. For example when Indian enterprise purchases petroleum products, electrical goods, machinery, and medical equipments etc., from other countries, it is termed as Import Trade

C) Entrepot Trade

When the firm of country imports goods for the purpose of exporting the same goods to the firms of some other country with or without making any change in the goods meant for export it is known as entrepot trade

For example, If an Indian company imports crude oil from Iran and exports it as petroleum after refining it in India, to Nepal it is called Entrepot trade. In this context crude is converted into petrol and exporter as petrol to Nepal

Now you must be thinking why India comes between Iran and Nepal. Why does not Nepal directly import crude oil from Iran?. Let us explore what could be the possible reasons for this.

Necessity for Entrepot Trade

A country cannot import goods directly from the others because of the following reasons.

a.        The country may not have any accessible trade routes connecting the importing country

b.        The goods imported may require further processing or finishing before exporting, and these facilities may be lacking in the exporting or importing country

c.         There may not have any bilateral trade agreement between both the country

d.        Importer and exporter may not share good economic relation with each other

Features of Entrepot Trade

The following are the special features of Entrepot trade

a.        Import duty is not levied on such goods

b.        These goods are reprocessed and repacked for re- export

c.         Such goods are kept in the Bonded warehouse till they are re-exported.