Common knowledge sharing in foreign trade, a must-have for beginners

1、 Characteristics of foreign trade

1. Cross border: Foreign trade activities involve the circulation of goods and services between different countries (regions), which is the most essential difference from domestic trade.

2. Complexity and risk: Foreign trade activities involve multiple links, such as market research, contract negotiation, logistics transportation, payment settlement, etc., and are influenced by various factors such as laws and regulations, trade policies, exchange rate fluctuations, etc. of different countries, thus possessing high complexity and risk.

3. Promoting economic development: Foreign trade activities can promote economic exchanges and cooperation between countries (regions), and drive the prosperity and development of the global economy.

2、 The main difference between foreign trade and domestic trade

1. Different trading partners: The main trading partners for domestic trade are enterprises and individuals within the same country (region); The trading partners of foreign trade are enterprises and individuals from different countries (regions).

2. Different advantages: Domestic trade has no language, cultural, legal or other barriers in the transaction process, and can avoid the impact of exchange rate fluctuations; Foreign trade, on the other hand, allows enterprises to access a broader market, expand their business scope, and obtain more profits.

3. Different processes: The process of domestic trade is relatively simple, from product production to sales, all completed in the same country (region); Foreign trade requires a series of complex processes such as customs declaration, transportation of goods, and customs clearance.

3、 Main processes of foreign trade

The complete process of foreign trade transactions includes the following steps:

1. Inquiry: Customers send inquiries to suppliers, inquiring about product information, prices, delivery times, etc. Suppliers need to provide detailed responses and provide customers with as much support as possible.

2. Quotation and Negotiation: Suppliers provide quotations based on customer requirements and their own costs, and negotiate and communicate with customers to ensure their own interests while meeting customer needs.

3. Contract signing: After both parties reach an agreement, a contract needs to be signed to specify specific details such as products, prices, quantities, delivery dates, etc.

4. Production and Quality Inspection: Suppliers produce according to contract requirements and conduct quality inspections to ensure that products meet customer requirements.

5. Packaging and Shipping: The supplier shall package the products appropriately and select suitable transportation methods for shipment to ensure the safety and timely arrival of the products.

6. Payment and settlement: Customers make payments according to contract requirements, suppliers settle after receiving payment, and summarize and evaluate the trade process.

4、 Common terms in foreign trade

In foreign trade activities, commonly used professional terms include:

FOB (Free On Board): FOB is a pricing term for exported goods, which includes the price, cost, and loading cost of the goods up to the port of shipment.

CIF (Cost, Insurance and Freight): The price term for transportation, insurance and freight, which is borne by the seller.

L/C (Letter of Credit): A letter of credit issued by a bank as a security deposit to ensure that the seller delivers the goods truthfully and is guaranteed to pay the purchase price in accordance with the contract.

Practical Application Cases of Terminology

For example, under FOB terms, the risks and expenses borne by the seller are transferred to the buyer after the goods are loaded onto the ship. If the outer packaging of the goods ruptures due to loose hooks after loading, the loss shall be borne by the buyer, as according to FOB terms, the seller is only responsible for safely loading the goods onto the ship.