Customs and Practices Relating To International Trade And Its Impacts
Written by Vaishnavi Bandhakavi
Abstract:
Today’s global economy is more dependent on goods and services offered by various countries and treaties. With advanced technologies, a business entity can know which products and services are available in which part of the world. To regulate world trade the General Agreement on Trade and Tariff (GATT) came into force with 23 founding members and has been the backbone of international trade law it contains provisions related to unfair trade practices[1], dumping and subsidies. In 1994, the World Trade Organization WTO was established in place of GATT which deals with trade policy issues such as removing trade barriers, reducing tariffs and unfair trade practices. International Trade law has nowadays become an important part of academic works
In Simple words, International Trade law can be understood as appropriate rules and customs used for doing international trade between two or more countries
Introduction:
We live in an age of globalization where different nations across the world trade goods and services, International Trade is important because countries rely on other countries for the import of goods and services that can’t be found domestically, and if a country specializes in the export of goods, it may have to dependent on imports certain raw materials required for manufacture of finished goods.
As global trade has grown, countries have become more reliant on the export and maintaining good relations. They also rely on raw materials from different countries for the manufacture of finished goods and their subsequent export.
International Trade has seen various challenges over the past few years, especially during the coronavirus pandemic, the war in Ukraine, Political tensions between China and the USA, and Brexit.
Why does international trade occur between countries?
No country can manufacture all the goods required by them because of various reasons like lack of technology, lack of resources, cost of manufacture, lack of skilled labour, lack of capital to establish an industry and climatic conditions leading to dependence on other countries for certain goods.
Customer requirements and countries’ resources do not match. Hence, there tends to be interdependence on other countries for goods and services.[2]
Technological advancement of different countries varies. Some countries are better placed to manufacture goods/services of a particular kind than other countries.
Raw material availability. For example; for the manufacture of lithium ion batteries, the critical raw materials are lithium, graphite, cobalt, and manganese. Lithium is available only in a few countries like Australia, China and Chile. Cobalt is available in Congo and Indonesia. So EV battery manufacturers have to depend on these countries for the critical raw materials for the manufactures of lithium-ion batteries.
Skilled Workforce and entrepreneurial skills differ in different countries.
It also leads to the establishment of trade agreements and trade Policies and encourages the harmonious relationship between nations that rely on one another for better standards of living of the population. One Country may be more proactive than the other country in the sense that it can produce any goods using fewer inputs, such as capital and labour.
International Trade Involves a wide range of customs and practices that vary from one country to another, involving legal regulations and business standards. Key customs and practices related to international Trade:
- Trade Agreements: Many countries enter into a trade agreement with each other to facilitate and regulate trade. These agreements include Tariff reductions and other provisions to encourage cross-border trade.
- Inco-Terms: The International Commercial Terms (The Incoterms) are a standardized set of terms used to define the responsibility and liabilities between shippers/sellers and buyers in international trade. They specify who is responsible for paying for, and the management of shipping to delivering of goods
- Documentation: Accurate and complete verification of documents is necessary in International Trade, this includes (a bill of lading: A bill of lading specifies the name and address of the shipper, the name and address of the consignee, the quantity of the product, the destination of the goods, the method of transportation and the date of the shipment), invoices, packing list, checking of goods and certificate of origin and various other documents necessary for customs clearance
- Customs duty: In India, cross-border trade involves dealing with customs. Customs plays a crucial role in international trade. Customs duty is an indirect tax imposed on the products imported into the country and on the products exported from India. The main purpose behind it is controlling the flow of banned commodities, as it is an essential part of national tax revenue. Levying tax is one of the major tasks of customs authorities.
In India, customs duty is defined under the Act of Customs, 1962. It permits the Indian Government to charge duty on imports and exports prohibits imports and exports of banned commodities as well, and imposes penalties. Each and every matter of customs duty falls under CBEC (Central Board of Excise and Customs).[3] This department conveys policies that are committed to collecting customs, duties, and smuggling prevention.
Various custom duties:
- Basic Customs Duty: It is Valid on all imported commodities/ products that fall under the ambit of section 12 of the Customs Act, 1962. This kind of duties imposed the charges arranged in the first schedule to the customs tariff Act, 1975.
- Additional Customs duty: Another custom duty imposed on all imported products under section 3 of the Customs Tariff Act, 1975. This one is completely equal to the central excise duty levied on the same products produced in India.
- Anti-dumping duty: This duty is imposed when any product is being imported to a country at a lower market price than in their home country. Anti-dumping duties are the taxes imposed on imported goods in order to compensate for the differences between their export price and the normal value. ( A mass export of goods and services to other countries)
- Safeguard Duty: It is charged whenever the Indian government feels a sudden upsurge in exports that can damage the domestic field.
The Impact of customs on international trade:
Customs procedure not only ensures the safety of the country in legal trade but also ensures human, plant, and environmental health. At the same time, it contributes to the national economy by collecting taxes on trade. Most importantly, customs procedures are the most important practice that prevents illegal trade, therefore, it play a major role in combatting smuggling. For all these reasons, customs procedures are critical to international trade activities[4].
- Dispute Resolution: International Trade disputes can arise for various reasons and WTO is the most prominent body for the settlements of disputes relating to international trade. Disputes can resolved through negotiations, mediation and arbitration or through legal proceedings, depending on the terms of their contract and international conventions.
- Payment Methods: Different payment methods are used in international trade, including letters of credit, open accounts and cash in advance.
- Tariffs: Tariffs are the taxes imposed on imports
CONCLUSION:
Global Trade is shrinking: increasing protectionism
A frequent economic policy response of a country that finds itself in an economic downturn is the introduction of protectionist measures: in order to prevent a decline in production and employment at home, governments often protect domestic businesses by means of tariffs or other trade restrictions. This reduces exports, thereby weakening global trade.
REFERENCE;
https://www.lexology.com/library/detail.aspx?g=9e0038c8-3af6-422d-9ce0-860e8ef72cbd
International Trade Law, Justia,
https://www.justia.com/international-law/international-trade-law/
Reem Heakal, International Global Trade, Investopedia, ( March 20, 2023)
https://www.investopedia.com/insights/what-is-international-trade/
chandni wadhwani, Important Aspects Of International Trade, (05 Sep, 2022)
https://www.geeksforgeeks.org/important-aspects-of-international-trade/
[1] Vasundhara Rastogi, India: Import And Export Procedures In India, Mondaq , (18 September 2019)
[2] Singh & Associates, International trade law,Lexology,( February 28 2013)
https://www.lexology.com/library/detail.aspx?g=9e0038c8-3af6-422d-9ce0-860e8ef72cbd
[3] Bank Bazaar, Customs Duty {https://www.bankbazaar.com/tax/custom-duty.html, }
[4] Mr. Gilles Montagnat-Rentier, The Multifaceted Role of Customs and Its Importance for the Economy and Society, IMF e-Library , https://www.elibrary.imf.org/display/book/9798400200120/CH001.xml
