Import vs Export is a common topic for discussion. But what are they? Why do they matter? How do they differ? Let’s discuss it all, one at a time.
The branch of business that deals with the selling, distribution, or exchange of goods and services for a monetary price are known as trade. It also ensures the end customer receives the delivery of goods. The phrases “imports” and “exports” are commonly used in trading. Here’s how import vs export differs from each other.
Import vs Export
The major distinction between import and export is that import refers to a nation purchasing products or services from another nation. On the other hand, export refers to a nation offering its products and services to another nation.
Exports and Imports are like the two wheels of a GDP bicycle required to run the economy of any country. Mind you, no country in the world is self-sufficient. It requires help from other nations to run its economy and in turn provide help with products and services where they are at a surplus level. Let us take a deep dive and understand the difference between import and export.
What is Import?
Import refers to the acquisition of products and services manufactured in other nations by citizens, local companies, or government agencies. Any products or services purchased from another nation will be classified as imported, regardless of whether they are transported, delivered through the mail, or carried in the individual’s baggage. Simply put, products manufactured in another nation and sold in the home country are termed as “imported.”
Importing services or goods into a nation involves bringing them in for use or to be sold in the domestic sector, or to be exported abroad. Every economy strives to limit the number of commodities as low as possible. Many times, a nation imports just those items that it cannot create domestically or at the same minimal cost that it pays to buy commodities from other nations. A nation likes to import commodities whose supplies are either not available in the country or are not capable of being produced by native countries.
A country frequently imports raw resources or products that are not readily accessible in the region but are needed to generate other goods or services. Many economies, for example, import crude oil since they cannot generate it on their land due to the lack of natural resources. As a result, they rely on nations with natural resources to supply fuel. The items that are less costly to import are defined by tariff rates and free trade agreements. Import is critical for a nation’s economy because it makes available commodities that are limited, non-existent, or too exorbitant to create in the home nation.
Nations import products only when there’s a disparity in the prices. That means it happens only when the global market offers more affordable prices than the domestic market. Many small firms import stuff that would be too exorbitant to manufacture in the home nation and sell them in the local market. As a result, there are primarily two sorts of imports, consumer products imports and industrial goods imports.
Let’s take a look at the procedure followed while importing goods and services.
- Trade Enquiry
The import program commences with a trade query to determine how many nations and businesses export the desired goods. It’s mandatory for the importing firm to gather all necessary information from trade journals, trade associations, and other resources. After gathering the required data, the importing company contacts the exporting firms to inquire about their pricing and delivery terms.
- Acquiring import license
Some commodities require an import permit, and some don’t. As a result, the buyer must be familiar with the current export-import policy to determine whether the items requested by the importer require an entry permit or not. If it is required, the importer must take all of the measures required to secure it.
- Procuring foreign exchange
Since the exporter is based in a foreign nation, the importer must get foreign exchange. The exporter will expect payment for the items in the currency of the nation in which he or she dwells.
- Placing order
The buyer makes a purchase requisition with the exporter for the items to be delivered. The import order specifies the pricing, grade, volume, color, quality, and other characteristics of the items to be delivered.
- Letter of credit
After the importer and exporter have agreed on payment conditions, the importing firm must get a letter of credit from its banking institution. This verifies the reliability of the obligation’s fulfillment.
- Arrangements of Funds
The purchasing funds need to be arranged before the arrival of the importing goods in the dockyard or port of destination.
- Shipment advice receipt
The receipt, which is sent by the exporter, contains all the details of the shipment, such as invoice number, description of goods, exporting port, and more.
- Retiring the import documents
After the shipment is dispatched, the exporter creates certain important documents and transfers them to the banker as specified in the contract.
- Arrival and customs clearance
Once the goods reach the destination, they are required to obtain clearance from customs officials after completing all the legal formalities.
Advantages of Import
Knowing the advantages of import is vital for understanding import vs export.
- Importing goods and services can help in raising the profit margins.
- Importers can have cheaper products due to low labor costs and taxes in the foreign market.
- Some nations provide help to the importer for developing trade relations with nations, thus, benefiting the Importing nation to establish friendly relations.
- It can help in stabilizing the economy of a nation.
Disadvantages of Import
- Importing products has the potential to erode home markets and national financial systems, particularly when there is a trade imbalance, which occurs when imports exceed exports.
- Problems can also occur due to the adoption of societal norms, which leads to a clash in domestic values.
- The local industry is crippled as a result of low-wage imports from nations where domestic companies are unable to compete because they are unable to cut their pricing of goods due to high labor costs and worker union agreements.
What is Export?
Exporting products and services produced in one’s nation to citizens of another country is referred to as exporting. The products and services can be of any classification. But if they are produced inside one nation and sold to a foreign nation, they are classified as export. Organizations export products and services to other nations to obtain financial advantages that would not be possible in the home market.
At times, the demand for a given commodity, goods, or services in an international market surges. It’s then that commodity or service is exported. The products are also exported, reflecting the comparative advantage of a nation. The items whose natural resources are accessible in a country provide it with a competitive edge.
A country prioritizes strengthening its exports. There are several advantages to exporting, such as more employment opportunities in a nation, higher salaries and a higher quality of living for country citizens. Exporting items to an international market allows manufacturing enterprises to develop and evolve.
Export is one of the most important aspects of a country’s economy since selling products and services in a foreign market boosts its GDP. In countries with less restrictive trade regulations, exporting is fairly prevalent.
One of the effective strategies to grow a business is to boost exports. Businesses strive to increase worldwide market share via exporting.
The procedure followed by the nations while exporting their products is as follows:
- Enquiring and authorizing quotation receipts
The potential buyer of the goods sends a request for bids to multiple exporting businesses, detailing the cost, volume, quality, and terms of service. In exchange, the exporters give a proforma invoice outlining the products.
- Receipt of order
When the buyer accepts the exporter’s prices, quantities, and terms and conditions, he or she makes an indent, which is an order for the products to be dispatched.
- Obtaining license
The exporter must follow particular legal procedures as the items are subject to certain customs rules, which require the exporter to procure an export license before proceeding.
- Pre Shipment inspection
The commodities must be inspected by the appropriate government authority in order to guarantee that only high-quality products are exported from the territory.
- Packaging and Clearance
After completing all legal processes and applying for shipping space, the ordered items are packaged. All relevant information, such as total net quantity, importer’s address and phone number, place of origin, and so on is recorded. Thereafter, the exporting company takes all the required measures to get the products onboard to be shipped after clearance from customs officials.
- Mates receipt and freight payment
The Clearing and Forwarding agency capitulates the mate’s receipt provided by the ship’s captain to the freight company deciding the freight. After obtaining it, the firm provides a bill of lading. This serves as documentation that the delivery company has received the goods and is ready to transport them to their final destination.
- Securing the Payment
Finally, the exporter informs the importer of the item’s shipment. Following that, upon arrival and clearance of customs, the importer requires specific papers, such as a bill of lading, invoices, insurance policy, certificate of origin, and other documents to claim the ownership of the goods. The exporting business sends these papers to the importing business along with the banker, instructing them to deliver them only once the bill of exchange has been accepted.
Advantages of Export
- Exporting products needs less investment than other means of international commerce and expansion, such as FDI.
- Exporting determines a nation’s ability to manufacture and produce goods for itself as well as for other nations.
- It provides job opportunities with the rise in demand for a firm’s products outside its nation.
- It helps in balancing the trade deficit with other nations.
- It helps in the rise of the standard of living of the exporting nations’ citizens.
Disadvantages of Export
- Exporting goods is difficult for small firms whose products are in demand. They are unable to serve the foreign market due to limited resources.
- The interaction between employees and the demand for resources is a big roadblock to exporting goods.
- A lack of knowledge of different languages, differences in culture, exchange regulations, and trade regulations have a negative impact on exporting the goods.
Export vs Import: Key Points you Should Know
By now you know a bit about what are exports and imports. Let’s dig deeper into Import vs Export.
- Import, as the name implies, is the process of bringing items from another nation into one’s own country to resell them on the home market. Conversely, export is all about transporting commodities from the home nation to any other for sale.
- The main goal of importing commodities from another nation is to meet the demand for a certain item that is not available or in low supply in the home country. The primary purpose for exporting products to another nation, on the other hand, is to expand worldwide presence or market reach.
- Imports at a large amount reflect strong domestic consumption, indicating that the economy is expanding. In contrast, an increased level of export indicates a trade surplus, which is beneficial to the overall economic growth.
Import vs Export: Head to Head Comparison
We have summarised the import and export difference in table form.
|1.||It is the process of a country purchasing products and services from another nation and then reselling them on its own home markets.||It is the act of a nation selling products or services to another nation.|
|2.||Its main objective is to fulfill the demands of the required products and services in its own territory.||Its main objective is to raise the market share and be in trade surplus.|
|3.||A high level of imports can be detrimental to the economy of a nation.||A high level of export can have a positive impact on a nation’s economy.|
|4.||If the import levels are higher than the export levels, a nation has a trade deficit.||If the export levels are higher than the import levels, a nation has a trade surplus.|
|5.||A nation spends its economy on importing.||A nation gains its economy by exporting|
To summarise the Import vs Export, importing products is better for the economy than exporting. Import opportunities are limited if the local currency is weak. Plus, knowing custom relations, the constitution, cultural norms, operational procedures, freight costs, and legal documentation are all critical to serving import and export. However, trade agreements, and mutual understanding, import, and export play a key role in global commerce.
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