Differences Between Home Trade And Foreign Trade Along With Their Complexities

Without trade, it is impossible for raw materials to reach the manufacturers either at home or abroad and for the finished goods to reach the final consumer because there will no one to arrange for their transfer. In simple words, home trade takes places within a country where as in foreign trade; goods are exported out of the country. Surely there are some complexities which a trader has to face in both the home trade and foreign trade.

Higher cost of transport and insurance owing to longer distances between markets

In home trade, goods are moved from one part of a country to another. Usually, it is not necessary to move the goods over large stretches of water, unless of course it is a nation made up many islands like Indonesia and Philippines. Sometimes, it may be necessary to use rivers. Thus, the usual mode is by road, rail, river or canals. Normally, the distance travelled is shorter than foreign trade. In foreign trade, goods travel a greater distance, sometimes overseas. This means higher transport as well as storage costs and insurance costs due to increased risks. The usual mode of transport for goods in foreign trade is by sea or air.

National Boundaries

Home trade takes place within a single political entity where there is uniformity in the banking, legal and fiscal systems. Foreign trade takes places when people from different political entities who do not share the same banking, legal and fiscal systems. Each nation would normally act in its own self-interest.

Custom duties, quotas and more complex documentation

When goods move across safe boundaries within a country, they are not subject to customs duties or quotas. However, they may be subject to excise duties. When goods are moved across national boundaries as in foreign trade, they are liable to custom duties, quota restrictions and exchange control restrictions. Details of the exports and imports would have to be declared in the customs declaration forms. They will then have to be verified by means of documents such as consular invoice, certificate of origin, bill of lading, etc. the goods will also have to be packed and marked in accordance with the customs requirements of the importing countries concerned. Finally the goods will have to be cleared by the customs and arrangements will have to be made to store them in bonded warehouses. As a whole, these are not such very serious complexities if one has decided to trade.

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