1. SEEMA RAMDAS KOTIAN ROLL NO :- DPGD/OC13/0214 SPECIALIZATION:- BANKING INVESTMENT AND INSURANCE.       WELINGKAR INSTITUTE OF MANAGEMENT DEVELOPMENT AND RESEARCH.  

2. INTRODUCTION  
The foreign trade of a country refers to its imports and exports of merchandise from and to other countries under contracts of sales. No country in the world produces all the commodities it requires. On the contrary, a country may produce more of those commodities in the production of which it has a greater or comparative advantage, and may not produce or may produce smaller quantities of those in the production of which it has a greater or comparative disadvantages. The commodities which a country produces at an advantage it exports, while those in producing which it has greater disadvantage it imports. This happens under what in economic terms is called the law of comparative cost or Advantage. Further the price at which goods are traded between two countries depends on the extend and sufficiency of demands for the goods to be imported and exported; this is expressed in economic terms as the law of Reciprocal Demands

3. What is Foreign Trade
Trade is exchange of goods and services between a purchaser and a seller.
If the purchaser and the seller are the residents in the same country and purchases and sells goods and or services then such business is called as Inland Trade.
When the residents of two or more different countries do the transactions of sales and purchase of goods or services, such trade is said to be foreign trade and transactions are known as Foreign Trade Transactions.

4. Import Export 2 Types of Foreign Trade
Import:- If the seller is aboard and the buyer is in the home country, trade is known as import trade.
Export:- when the seller is in the home country and the purchaser is aboard the trade is known as export.

5. Balance of payment
The balance of payment is more comprehensive than balance of trade. Balance of payment includes balance of trade and other invisible items of foreign trade.
Capital Account Sec, 2(e)
The capital account transactions includes private long and short-term assets, banking transactions and official loans, amortisation, IMF and reserves and monetary gold contingent liabilities.

6. Current Account Sec , 2(J)
Foreign trade, services, short-term banking and credit facilities.
Payments as interest on Loans and net income from investments.
Remittance for living expenses of parents, spouse and children residing aboard.
And expenses for foreign travel, education and medical care of parents, spouse, and children.

7. Factors of Balance of Trade
External Factors:-
The sudden rise in price of essential commodities of imports likes edible oil, sugar, machinery, drugs and medical equipments etc.
Migration from countries where Indians are target for violence. This affects the inward remittances.
Position of world-wide inflation or recession in the developed countries like U.S.A Germany, Japan, France, England etc, with whom regular foreign trade is carried out.

8. Internal Factors:-
Domestic shortage of agricultural and industrial products.
Low industrial and agricultural production due to high production cost.
Absence of hi-technology.

9. Documents used in Foreign Trade
Commercial Invoice
Bills of Lading/ Airway Bill
Marine Insurance Policy and Certificate
Bills of Exchange
Consular Invoice
Customs Invoice
Certificate of Origin
Inspection Certificate
Packing List.

10. Documents are used to record a written evidence of having carried out a transaction in both local and international trade. This section deals with the documents used in international trade where is a fairly large number of documents required to satisfy the two basic requirements VIZ, Regulatory and Operational.