In international commercial operations, that is, the imports and exports of products, factors, elements, institutions and other entities intervene that make up the gear of the operation of international trade.
Since the search for markets begins, through negotiation and ending with the delivery of the merchandise, the factors and elements are many and whether each of these elements should be known.
The importance that international trade has had, has and will have, requires that we become more involved in learning about this important economic area that has become a pillar of the countries' economies.
To better understand the operation of international commercial operations and merchandise, we can classify the factors involved in 6 major elements, which constitute the complete operation.
We could classify those 6 elements in:
1. Theoretical aspects
2. Technical aspects
3. Administrative
aspects 4. Market
aspects 5. Legal
aspects 6. Financial aspects
Each of these elements are different from each other but are related to each other, so that a malfunction of one will influence a malfunction in another.
We will briefly explain each of the 6 elements mentioned above.
Theoretical aspects
In this aspect, we can include the theories of international trade, which are scientific syntheses that try to explain the operation of international trade in a scenario, we can say, ideal. There are 6 main theories of international trade:
The absolute advantage: It argues that countries have different capacities to produce goods efficiently. Due to these differences, a country must specialize in producing and exporting goods in which it is efficient, and importing those in which another country is efficient in its production.
The comparative advantage: According to this theory, it is convenient for a country to specialize in the goods it produces more efficiently and to buy from other countries what it produces less efficiently, even if this means buying goods from other countries that it could produce. more efficiently.
Hecksher Ohlin model: This business model establishes that the commercial advantages are due to a factor endowment, different in each country. Thus, nations are endowed with various factors and this diversity of factors explains the differences in the costs of producing a good; the more a factor abounds, the cheaper it is to produce a good.
Michel Porter's Diamond: The model aims to go beyond the explanations given by the theory of comparative advantage and the HO model. Porter's model tries to explain that these commercial advantages that some countries have over others go beyond productivity and factor endowments. The model explains that competitiveness factors are also involved that make one country more efficient than another.
Product life cycle: This theory states that in commercial schemes, the place where new products are introduced influences.
New theory of international trade: The new theory of trade states that thanks to trade, a nation specializes in those goods in which it achieves an economy of scale, thus lowering its production costs. At the same time, it purchases or imports those goods in which it does not achieve an economy of scale.
Another of the most important theoretical factors is international trade policy, which are the actions that governments undertake to promote their foreign trade.
We can divide trade policies into two:
Tariff policy: Conformed by taxes on foreign trade.
Non-tariff policy: Made up of the set of measures established by governments to control the flow of goods between countries, either to protect the production plant and national economies, or to preserve the goods of each country.
The next theoretical factor is the world economic structure, which is important to know the trade trends of the countries. The structure can be divided into two parts: economic systems and levels of economic integration.
There are basically two economic systems: the capitalist system, which emphasizes free enterprise and capital as the generation of wealth. On the other hand, socialism, which emphasizes collective ownership of the means of production, that is, there is no private property.
As for the levels of integration, it is a term used to describe the different aspects by which the economies of the countries become more homogeneous, that is, they tend to have a common economic policy.
The last theoretical element is international trade organizations. They are institutions that regulate, promote and supervise the correct functioning of international trade.
There are three organizations that directly influence international trade: The World Trade Organization, The International Chamber of Commerce and the World Customs Organization. There are other organizations that arise from regional trade agreements, such as ASEAN, EFTA, among others.
Technical aspects
In this aspect, there are all the operational elements that make up international trade. Basically, there are 5 major technical areas, within which documents, procedures, logistical factors, among others, intervene.
The 5 great areas are:
Tariff Classification: Foreign trade operations generate customs taxes called tariffs through tariff classification. All merchandise likely to be marketed are identified by an internationally accepted numerical code. This code is what is known as a tariff fraction.
Customs Operation: They are the set of acts, procedures and payments that must be fulfilled at customs. When the goods enter or leave the countries, these and those who carry out these activities must comply with a series of procedures established in the law of each country so that these operations are carried out in an orderly, legal and above all, controlled manner. Among these customs procedures, the clearance of goods stands out, which can be an import clearance, as well as an export clearance. Customs is the main institution in charge of enforcing these procedures.
Logistics: They are the set of actions aimed at optimizing the correct flow of goods, from their production to their consumption. In this part, the most important elements are transportation, packaging and packaging, the proper handling of merchandise, in addition to an adequate flow of information that allows these activities to be carried out efficiently and optimally. One of the most important logistics concepts to know in the study of international trade is the International Trade Terms (INCOTTERMS). These are a set of rights and obligations that the parties to a business transaction have to fulfill. Knowing this set of rules helps a lot in understanding international trade.
International Transportation: Set of means and documents necessary for the proper transportation of goods. It is one of the most important elements of international trade logistics. In this part, it is about knowing the most suitable means of transport for certain types of merchandise, the correct packaging and the transport documents that are used depending on each means of transport, in addition to the characteristics of each transport document.
Customs Valuation: We already mentioned that international commercial operations generate tariffs. These tariffs are determined through the tariff fraction of the merchandise, from a taxable base. The customs valuation are the set of criteria used to determine the tax base, and therefore the customs tariffs.
Administrative aspects
In this part, aspects not so much technical, but rather administrative are analyzed.
This chapter can be divided into two parts. The first, the formation of the export price, which is one of the pillars when carrying out an international trade operation. The second, the forms of international payment.
Regarding the formation of the export price, the price of the goods is perhaps the most important element of commercial transactions, since both the exporter / seller seeks a price at which they obtain a good profit, and the importer / buyer seeks a not very high price, accessible to your interests.
There are two schemes to form the export price; the costing scheme and the pricing scheme. The first part of a base, to which are added costs and the desired utility, which must be reasonable. The second scheme starts from a sale price, at which the costs incurred are discounted until only the profit allowed by the market is left.
It is worth mentioning that for a company or person who has little or no experience in international trade, the most recommended export price formation scheme is the costing scheme.
Speaking of international forms of payment, there are 5 forms of payment in international trade.
• Check.
• Bank Draft.
• Pay order.
• International bank collection.
• Letter of credit.
They are all different in terms of safety and performance. Of all of them, the safest, and therefore the most used is the letter of credit. The letter of credit, also called documentary credit, is the most used form of payment in international trade, since it is the one that provides greater security and confidence both to the buyer (importer) that they will receive the agreed merchandise in time, form and place agreed, as to the selling (exporting) party that will receive the payment of the merchandise in the agreed time and manner.
Market aspects
It can be said that many marketing concepts are the origin of commercial operations. The search for new markets, the entry strategies, the distribution of these, intervene in what we call export marketing.
In order to successfully carry out an export operation, the market to which the operation will focus must be previously known.
Focusing on international trade, there are two fundamental concepts: market research and ways to enter international markets.
A market study is the set of actions aimed at obtaining information about a market that is planned to enter. It is important to obtain information on the market to which you intend to export because it is not the same to carry out a commercial operation in the local market as in a foreign market. Therefore, the market study must be thorough enough to provide adequate information to determine the most appropriate and least risky form of entry in economic terms.
The forms of entry to international markets are the set of actions that will be carried out to penetrate the foreign market, based of course on the results of the market research previously carried out.
Legal aspects
One of the most important aspects of international trade is the legal aspect. The legal aspect is made up of the set of regulations to which international trade operations are subject, providing them with a framework of legality.
We can divide this aspect into two main parts: international systems and local systems.
International laws are made up of Free Trade Agreements and trade and economic complementation agreements that countries enter into to boost and improve their foreign trade.
Local laws, on the other hand, regulate commercial operations within the limits of a country, therefore, its scope is strictly local.
Local laws can be divided into:
• Operational Laws: They regulate the entry and exit of goods to a certain territory, establishing a legal framework to be complied with in terms of customs, transport, and measurement. etc.
• Administrative Laws: They regulate aspects such as facilities and trade promotion, in addition to establishing foreign trade policies in that country.
• Fiscal Laws: They regulate the collection of taxes on foreign trade.
• Decrees: Decrees are administrative acts usually promoted by the executive branch, that is, the president in republican countries or its equivalent in any other form of government, and which generally has limited regulatory content for a certain period or situations..
• Agreements: An agreement is a decision made jointly by two or more people, by a board, assembly or court. This is also called a pact, treaty or resolution of organizations, institutions, public or private companies.
• Rules and criteria: A set of norms that regulate, clarify and instruct in the handling of the provisions established both in international treaties and agreements and in local regulations.
Another legal aspect that is part of this element is international commercial contracts. International contracts are an agreement of wills between two parties that agree the delivery of merchandise and the payment of the same in a determined time and conditions.
There are several types of commercial contracts, the most important and the most used in international trade, the merchandise sales contract. INCOTERMS play a very important role in the conclusion of a merchandise sales contract, since they are obligations and rights that are predetermined and accepted by an international commercial organization, thus facilitating their conclusion and, above all, their compliance.
Financial aspects
The financial aspect of international trade is essential. The financial and economic factors to which international trade operations are subject must be known.
The financial factors that directly influence international business transactions are:
Exchange rate and currencies: One of the fundamental elements in international trade, due to the importance it has in transactions. The exchange rate The exchange rate is the number of units that must be delivered from one currency to obtain another.
The exchange rate is fundamental because it directly affects the commercial competitiveness of a country. A rise in the exchange rate benefits imports because it makes them cheaper, while a fall in the exchange rate benefits exports, since they have more local value since they receive payment in US dollars.
Financial instruments: Also called financial derivatives, they are a set of contracts that have two functions: protection of economic variables and speculation.
There are four different types of financial derivatives:
1. Forward contracts: Contract that negotiates the delivery of an underlying (merchandise) and the payment of the same between two parties at a future date, at a price established in the contract. These contracts are over-the-counter, that is, they are not regulated by any financial institution.
2. Futures: They are similar to the previous ones, with the difference that these are regulated by financial institutions.
3. Options: They are contracts that establish the right but not the obligation to buy or sell an underlying through the payment of a premium that provides that right.
4. Swaps: They are a contract that establishes an exchange of cash flows between two companies to face unforeseen economic situations.
Principle of parity of purchasing power: It can be said that it is one of the fundamental pillars that make trade between countries exist. This principle tries to explain the benefits of foreign trade through the differentials in the prices of goods in different countries. The most important concepts in this principle are the cost of production, transaction costs (insurance, transportation, taxes, etc.).
In itself, the principle of parity of purchasing power is an indicator that allows identifying the purchasing capacity of certain products in a given country.
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