Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

Table of Contents

S. No. Topic Pg. No.

1 Introduction 1

2 Trade Society at IIFT Delhi 1

3 Overview of Trade Curriculum 2

4 Basic Concepts 3

5 The Shipping Process 4

6 What are HS Codes 4

7 What are INCOTERMS 5

8 Documentation 6

9 Payment Terms: CODLA 7

10 Some Important Resources 8

*Note: Please click on the topic links to directly go to the topic page

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Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

1. INTRODUCTION
The Indian Institute of Foreign Trade (IIFT) was set up in 1963 by the Government of India as an
autonomous organization to help professionalize the country's foreign trade management and increase
exports by developing human resources, analyzing and disseminating data and conducting research. The
Institute visualizes its future role as: The primary provider of training and research-based consultancy in the
areas of international business, both for the corporate sector, Government and the students’ community.
An institution with proven capability to continuously upgrade its knowledge base with a view to servicing
the requirements of the Government, trade and industry.

2. TRADE SOCIETY, IIFT DELHI

Trade Society at IIFT comprises of BLASH (Buy Low And Sell High), the International Trade Club and IBC(International
Business cell) which works extensively to bring together people who wish to make a career in Trade and provides a
platform to them to interact and learn dimensions of international trade beyond the regular classroom learning, helping
in broadening their horizons.

BLASH CLUB

An acronym for Buy Low and Sell High, BLASH the International Trade Club at IIFT is one of the oldest student driven
clubs in the college and has the track record of attracting the highest membership in all the student batches till date.
The club organizes all the activities which help the students at IIFT comprehend the essence of trading activities and at
the same time, instils deep knowledge with regards to the current trends and basics about the world of international
trade
The important activities of the club are: -
▪ Trade winds: – Magazine which summarizes all latest happenings in world of international trade from across the
world.
▪ Club Meetings – platform to students to share the knowledge they have among each other.
▪ Workshops – Eminent speakers speak on topics related to trade and international business.
▪ International Trade Conclave – Held in Singapore/Dubai to discuss global issues
▪ Competitions – competitions like the coveted Commodity Analysis Challenge.
▪ Live Projects – from government organizations, corporates and associations

INTERNATIONAL BUSINESS CELL (IBC)

The International Business Cell (IBC) provides its members with international business opportunities by exposing
students to speakers, experiences, tools, and information from the international business world. It is integral part of
Trade society working along with BLASH.It’s mission is to contribute to India’s external sector by spreading awareness
about trade with various countries and act as a single-stop knowledge resource centre on for both students as well as
corporates.

Mission
It’s mission is to contribute to India’s external sector by spreading awareness about trade with various countries and act
as a single-stop knowledge resource centre on for both students as well as corporates.
Objectives of the cell
Conduct sector-specific research & provide consulting services for corporates already present overseas & increase
engagement between students & delegates from embassies.
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Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

3.OVERVIEW OF TRADE CURRICULUM – SUBJECTS, LIVE PROJECTS, WORKSHOP

IIFT has pioneered and known for its excellence in Trade domain which offers course curriculum that
enables one to build a career in Trade.

Below is the list of subjects offered in various Trimesters:

SUBJECTS

Trimester 3
▪ International Trade Operations & Documentation
▪ Trade Analytics

Trimester 4
▪ India, and WTO
▪ International Business Strategy
▪ International Trade Logistics

Electives
▪ International Trade Operations & Logistics
▪ Agri-Commodity Trading (ACT)
▪ Management of Shipping Services
▪ Green Strategy for Global Operations and Logistics
▪ Sectoral Strategies for International Business (Seminar Course)
▪ Managing Global Compliance in Exports
▪ Customs & Excise Management

WORKSHOPS

Many trade related workshops are conducted in which are both offline and online. There are certifications for
Derivative Trading by MCX, Export Management by Niryaat Bandhu which comes under the Ministry of Commerce.

LIVE PROJECTS

There are some Live projects offered by institutes like Apeda under well-known faculty of IIFT like Dr. Rakesh Mohan
Joshi, Ms. Tammana Chaturvedi which add value to the curriculum. Taking these projects which are directly under the
OECD and WTO will give an edge over the other institutes and also direct Industry exposure.

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Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

4. BASIC CONCEPTS

Hello!
We will be discussing some concepts and terminologies that are useful to have a
basic knowledge of trade and set a foundation for the future interaction in trade
subjects during the course of your MBA journey at IIFT. You are expected to not to
bound yourself to the content shared but also go through the link shared along
with each topic to have a better grasp of the topics. Happy learning !!

WHAT IS FOREIGN TRADE ?

Foreign Trade is the system by which countries exchange goods and services. Countries
trade with each other to obtain things that are better quality, less expensive or simply
different from goods and services produced at home. In words of Prof. J.L. Hanson said,
“An exchange of various specialized commodities and services rendered among the
corresponding countries is known as foreign trade.”
https://www.iedunote.com/foreign-trade

WHY DO WE NEED TRADE ?

Trade increases competition and lowers world prices, which provides benefits to
consumers by raising the purchasing power of their own income, and leads a rise in
consumer surplus. Trade also breaks down domestic monopolies, which face competition
from more efficient foreign firms. The quality of goods and services is likely to increases as
competition encourages innovation, design and the application of new technologies. Trade
will also encourage the transfer of technology between countries.
https://www.economicsonline.co.uk/Global_economics/Why_do_countries_trade.html
Assumptions :
David Ricardo’s Formula for Comparative Advantage • Two countries
• Producing two products
• Using same mode of production
It states that If a country can produce a product
cheaper than the trading country, it can export
that product & import the one produced cheaper
by the trading country.
David Ricardo

https://www.economicsonline.co.uk/Global_economics/Comparative_advantage.html

TYPES OF CARRIAGES
▪ Pre-carriage - Inland transportation on the seller’s
side i.e. from the place where the shipment starts to
the departure point on the seller’s side.
▪ Main carriage - Transportation from the point of
departure on the seller’s side to the arrival point on
the buyer’s side.
Pre-carriage Main-carriage On-carriage ▪ On-carriage - Transportation from the arrival point on
the buyer’s side to his premise.
https://www.shippingandfreightresource.com/pre-carriage-carriage-and-on-carriage-explained/

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Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

THE SHIPPING PROCESS

▪ Export haulage – the transfer of goods from its original source to the freight forwarder’s warehouse.
▪ Export customs clearance – the goods receive clearance to leave its country of origin.
▪ Origin handling – the unloading, inspection and validation of the cargo against its booking documents.
▪ Import customs clearance – the customs paperwork for your cargo will be checked by the authorities.
▪ Destination handling – the handling of cargo once it reaches the destination office, including transfer to the
import warehouse.
▪ Import haulage – the transfer of cargo from the import warehouse to its final destination.
https://transporteca.co.uk/shipping-process

WHAT ARE HS (HARMONIZED SYSTEM) CODES ?

HS Codes or Harmonized System of codes are an international nomenclature
for the classification of goods. They were introduced in 1988 by the World
Customs Organisation (WCO).
HS Codes help standardize how products are identified globally and are updated
every five years with the latest amendment made in 2017. They also prescribe
rules to classify goods based on type and packaging. It serves the purpose of
facilitating smooth customs clearance, monitoring import and export of goods
across borders and statistical analysis.
http://www.wcoomd.org/en/topics/nomenclature/overview/what-is-the-harmonized-system.aspx

6-digit identification 5000 commodity

21 sections 99 chapters
code groups

The Indian Trade Classification (Harmonized System)

(ITC) (HS) code has 8 digits (the first 6 digits are
common as per WCO with an additional 2 digits for
added specificity).
http://www.dgft.org/itc_hs_code.html Page|4
Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

WHAT ARE INCOTERMS ?

Incoterms are a set of guidelines issued by the International Chamber of
Commerce (ICC), that define the responsibilities of buyers and sellers for the
delivery of goods under sales contracts for international trade.
They were first given in 1936 and are frequently revised. Most recent version is
the INCOTERMS 2020.
It is important to note that these are only guidelines and are legally binding only if
they are introduced into the contracts.
There are 11 incoterms, 7 of which are omni-modal and 4 are marine restricted
There are four groups: E, F, C and D. These groups are determined by the delivery location and who is responsible for
covering the cost of each part of the journey. In Groups E and F – the named place is in the seller’s country but in
Groups C and D, the named place is in the buyer’s country. The named place is the point up to which all costs are
borne by the seller.

TYPES OF INCOTERMS

OMNI MODAL INCOTERMS MARINE RESTRICTED INCOTERMS

▪ EXW (Ex Works) ▪ FAS ( Free Alongside Ship)
▪ FCA ( Free Carrier) ▪ FOB ( Free on Board)
▪ CPT (Carriage Paid to) ▪ CFR ( Cost & Freight)
▪ CIP ( Carriage & Insurance Paid to) ▪ CIF (Cost, Insurance & Freight)
▪ DAP ( Delivered at place)
▪ DPU ( Delivered at place unloaded)
▪ DDP ( Delivered Duty paid) https://incodocs.com/blog/incoterms-2020-explained-the-complete-guide/
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Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

DOCUMENTATION AND PAYMENT TERMS

Nothing in the world of international trade is possible without documentation,

either physical binders or online forms, documents forms the core of different
terms of trade, which vary from the proof of shipment to the insurance terms. Let
us delve into these and look at the different aspects of documentation in brief.

BILL OF LADING

The bill of lading acts as a contract between the carrier of goods and the shipper (usually
exporter) of goods. It is a compulsory document as carries details of the type, quantity and
destination of the goods being carried. It acts as a document of title, i.e., the legal ownership
of the goods being carried goes to the holder of the original bill of lading or a named
consignee. Just like the receipt issued after purchasing goods from a store, the B/L acts as a
receipt of goods shipped. Since it is legally binding, it serves as an evidence of contract.
https://www.americanexpress.com/us/foreign-exchange/articles/bills-of-lading/

BILL OF EXCHANGE

BoE (also known as Draft), is a written order primarily used in international trade, which binds
one party to pay a fixed sum of money to another party on demand (sight BoE) or at a
predetermined date (Time BoE). Post drafting, the Bill of Exchange is presented to the
accepting party, and without their acceptance, the bill has no validity. It becomes legally
binding, but only after acceptance by the drawee. It is analogous to the cheque/demand
drafts that we use on regular basis to either be credited or debited with currency.

https://www.investopedia.com/terms/b/billofexchange.asp

CERTIFICATE OF ORIGIN

In the present day and age where customers are more conscious about “where” they get goods
for their diurnal consumption rather than “what”, the origin of goods and commodities
becomes very important. These certificates help the customs understand the nature of goods,
and decide upon the applicable tariffs, concessions or schemes/benefits applicable to them. In
most countries, the exporter (seller) of the goods is expected to sign the CO, get the signature
notarized and the document subsequently signed by a Chamber of Commerce(CoC).
https://iccwbo.org/resources-for-business/certificates-of-origin/

INSURANCE POLICY DOC.

The insurance policy document is a principal commercial document issued by the insurance
company to the party that undertakes the insurance, which is pre-decided in the terms of
contract or in the INCOTERMS used. It details the coverage amount, terms and condition of
coverage, and acts as evidence of the insurance of the goods or consignment in question.
The stakeholders in this policy include the exporter, the importer, insurance company and
banks involved in various stages of documentation and payment term finalization.

paisabazaar.com/commercial-insurance/trade-credit-insurance/ Page|6
Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

PAYMENT TERMS: CODLA

So we have just covered documentation requirements for carrying out
international trade activities. Do check out the links given after each topic to delve
deeper into the interesting world of documentation. Now we come to payment
terms, are you ready ? Lets go then !!
There are 5 main types of payment terms: Consignment, Open Account,
Documentary Collection, Letter of Credit and Advance Payments

CONSIGNMENT OPEN ACCOUNT

Here the exporter The payment is
(seller) of goods received as
receives the payment soon as the
after the goods have importer
been resold by the receives the
importing party shipped goods
(buyer) in the at his named
importer’s country. place.

DOCUMENTARY COLLECTION LETTER OF CREDIT

Here, a financial institution or a bank is enlisted to collect This is a financial, legally binding document which
the payment from the buyer (importer) against the guarantees payment to the exporter irrespective of
instruction of the seller (exporter), upon which the bank the buyer’s payment fulfilment, provided the terms of
furnishes the shipping documents to the buyer. In this the LC are upheld by the seller. This LC is issued by a
mode, the bank does not have any obligation to pay the bank and are governed by a set of guidelines known
seller and only follows the seller’s instructions. as the UCP600, by the ICC.

ADVANCE PAYMENT
Advance payment method involves payment for the consignment by the buyer to the seller before the transfer of
ownership of goods to the buyer, which can be a point as defined by the agreed upon INCOTERM. It is also referred
to as Cash in Advance, and is the least preferable for the buyer, since advance payments cause unfavourable cash
flows. This method is usually considered when the importing party is a subsidiary/parent of the seller.
Consignment Payment will be made after goods being sold in importing country

Open account Delivery first before payment (Without any bank guarantee)

Collection
Delivery first before payment (through bank)

Letter of Credit
A guarantee for payment by Bank

Advance payment
Pay first before delivery

Exporter’s Risk Page|7

Indian Institute of Foreign Trade Pre-Read Material – Trade Prep Comm, IIFT

4. SOME IMPORTANT RESOURCES

1) ITC trade maps: ITC trade maps is an application for commodity analysis of how various countries export
and import various commodities. This can be a useful tool to improve one’s understanding of international
trade.

https://www.trademap.org/Index.aspx

2) INCOTERMS: INCOTERMS are international commercial terms. The application of INCOTERMS is to

understand the actual responsibility of the buyer and seller and the split of cost between the buyer and seller. This
is very important for interviews (especially trade and International sales and marketing roles)

https://iccwbo.org/resources-for-business/incoterms-rules/incoterms-2020/

3) The Atlas of Economic complexity

The Atlas of Economic complexity is related to the relations of various countries and how are they related and how
are they different from each other because of various trade restrictions. It can be useful to know and even
showcase knowledge in interviews.

http://atlas.cid.harvard.edu/

4) Trade Logistics
A useful handbook about trade logistics and its fundamentals (Refer the first few chapters to ace trade interviews).
This is the easiest and the fundamental E-book on trade logistics.

http://apps.who.int/medicinedocs/documents/s20211en/s20211en.pdf

5) World Trade Organization

Refer Trade topics and be up to date with important news and events. It can be useful for group discussions and
implications of which can be useful to further strengthen knowledge of trade.

http://apps.who.int/medicinedocs/documents/s20211en/s20211en.pdf

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