Difference Between Import and Export

Edited by Diffzy | Updated on: April 26, 2022

       

Difference Between Import and Export Difference Between Import and Export

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Introduction

To put it in simple words, import and export are two economic activities done at the international level. Import refers to any good or service brought in the domestic county from any outsider country and export is sending any good or service from the domestic country to any outside country.

Import is people who prefer to buy goods or services from other countries than from domestic dealers for any concerned reason. 

In export, Salers sell their products and services in the international market and sent them to other countries.

In both cases, imports and exports play a vital role in influencing a country’s economy on many levels.

In this article, we will have a look at how import differentiates itself from the export process.

Import vs. Export

The primary difference between imports and exports is that residents of the home nation purchase tangible or intangible items from the rest of the world, whereas domestic customers acquire tangible or intangible products from the rest of the world in the import. Because payment is made to overseas vendors, there is an outflow of domestic money in this circumstance.

When it comes to exports, people from all over the world buy physical and intangible goods from our nation.

In the case of exports, foreign citizens make payments in their own currency to us, resulting in a foreign currency influx

Difference Between Imports and Exports in Tabular Form

Table: Import vs. Export
Parameter
Imports
Exports
Currency flow
Domestic currency goes out as a payment to international sellers.
Foreign currency flows in a home country as international buyers pay domestic sellers.
Effect on the GDP
excessive import has a negative impact on GDP
more export leads to generate more GDP
Engaged person
Person who carries out import activities is known as an Importer.
A person who carries out export activities is known as an Exporter.
Purpose
To buy products and services from an outsider country rather than from domestic sellers.
to sell products and sellers to the outsider country than to domestic buyers
Representation
High imports represent greater domestic demand.
High exports represent an increase in foreign demand.
Benefits to the home country
Increase in imports allows for the outflow of funds.
An increase in export activity allows the inflow of foreign currency.

Legal documents required for import and export trades:

Following is the list of three documents required by the DGFT- Directorate General of Foreign Trade, to commence import or export trade. 

  • Bill of Lading/ Airway Bill   
  • Commercial Invoice cum Packing List
  • Shipping Bill/ Bill of Export (for export trade)
  • Bill of Entry (for import trade)

What is an Import trade?

In simple words, import means receiving goods and services from a foreign country in the international market. Importation is the purchase or transfer of goods or services from a nation or market other than one's own. 

Features of an import trade:

  • Imports are any direct purchases made by residents outside of a country's economic jurisdiction.
  • Imports take place especially when domestic dealers cannot fulfill buyers’ needs or a new product or a service is launched in the international market that is yet to be manufactured in the home country.
  • Better quality, better price, better service, and better after-service are a few parameters that may influence imports in the county.
  • Any goods entering the country are recorded as an import. However, this doesn't involve smuggled goods or illegal services.

Mandatory documents required by the world bank to commence Import trade are-

  • Bill of entry
  • Commercial invoice
  • Packing list
  • Bill of lading
  • Foreign exchange control form (form A1)
  • Terminal handling receipts
  • Certified engineer’s report
  • Cargo release order
  • Product manual
  • Inspection report

Types of Import trades:

Import can be classified into two categories as below:

  1. Industrial and consumer goods
  2. Intermediate goods and services

Import of Industrial and consumer goods

Industrial goods or capital goods are used to manufacture other final products that are ready to consume. This may include machinery, equipment, raw materials, etc. Import of these products could be for various reasons like quality assurance, unavailability of the raw material in the home country, cost-effectiveness, and so on.

Consumer goods are nothing but final goods that are directly consumed by the consumers. Imports of such goods could be a result of many factors such as unavailability of the local alternative, brand credibility, luxury product purchase, cost, and/ or a lesser cost.

Import of intermediate goods and services:

Intermediate goods and services are used in the production of the final product. Although they shouldn't be confused with capital goods. Capital goods are used to produce final products whereas intermediate goods are in the semi-finished state or to be used in the final product after modification.

This could be understood with an example.

Metal is a basic material used to make utensils. To manufacture a utensil, metal will be processed or sculpted. This metal is an intermediate product in this case. Capital goods, on the other hand, will be used to process the metal in order to turn it into a utensil, or the end product.

Importation of these items might occur for the same reasons as previously stated.

Importation procedure:

According to DGFT, there is a certain procedure that is supposed to be followed by all importers. The procedure is as below-

  1. Obtaining Import Export Code to perform any international trade activity is mandatory by DGFT. This code can be obtained by any regional DGFT facility. This code is required to accept or make any international payments, clear custom duties, and overall import trade.
  2. Following the rules of the Customs Act is crucial. Goods and services that are prohibited by this law cannot be imported under any circumstances. For example, Smuggled Items.
  3. Obtaining an import license is the next step. There are certain rules and regulations set by DGFT for specific categories of goods and services. Under this, an importer may obtain an alphanumeric 8 digit ITC-HS code that specifies the category of the goods and services.
  4. There are three documents required by the DGFT, as mentioned above. These documents contain complete information on the goods and services to be imported.
  5. Under the Customs Tariff Act, there are few rates and taxes to be paid for goods clearance. Moreover, IGST (Integrated Goods and Service Tax) is to be paid by the importer according to the category of the goods and services.

Advantages of Import

  1. Businesses may import raw materials from the outside country for a lesser price, or quality purposes. Using a quality input to make the final product assures the quality of the final product. 
  2. Such import courses also assist business owners in determining whether there is a genuine market need for a new product, allowing them to plan ahead of time for a successful marketing campaign.
  3. Another significant advantage of importing is the reduction in production costs. Many companies nowadays think that importing certain items, portions of products, and resources is far more cost-effective than creating them locally.

Disadvantages of Import

  1. Increased burden of foreign payments on the home country.
  2. Dependency on products and services in foreign countries increases. In case of occurrence of any obstacle in the supply, production in the home country may get affected.
  3. Importation process is lengthy, hence in the case of emergency supply needs, importation of the products isn't beneficial.
  4. Sometimes, the unavailability of certain raw materials in the domestic market may cause businesses to import from the outside country. In such cases, these materials could be expensive and may cut down the profit margin.
  5. The most considerable disadvantage of the importation is the outflow of domestic funds which impacts negatively on the country’s GDP.   

What is an Export Trade?

Exportation means selling domestically made goods and services to customers from a foreign country than selling in the local market to the domestic buyer. The person who carries out this trade is known as the exporter. Export trade has a positive impact on a country’s economy.

Features of exportation

  • Any direct sales made by sellers from the home nation outside of the country's economic jurisdiction are considered exports.
  • When a country prepares unique and remarkable products and services, it exports them. Foreign demand for such items may rise as a result of improved quality, lower prices, or the fact that the selling country is the sole manufacturer of the product.
  • Better quality, better price, better service, and better after-service are a few parameters that may influence export trades.
  • Any goods crossing the country’s border are recorded as an export. However, this doesn't involve smuggled goods or illegal services.

Mandatory documents required by the world bank to commence Import trade are-

  • Bill of entry
  • Commercial invoice
  • Packing list
  • Bill of lading
  • Foreign exchange control form (form A1)
  • Terminal handling receipts
  • Certified engineer’s report

Types of export trades:

There are various channels of export trades available. However, export activities can be broadly divided into three major categories as below:

  1. Indirect export
  2. Direct export
  3. Cooperative export

Indirect Export Trade:

In indirect exportation, Selling items through an intermediary, who then sells them straight to customers or importing wholesalers, is known as indirect exporting. The simplest approach to discovering an intermediary to assist you with indirect exporting is to seek one in your own nation.

Indirect export involves appointing third people to represent your firm and products abroad, such as agents or distributors

Direct Export Trade

Direct exporting is when a seller sells his goods directly to a client rather than through a third-party distributor. The seller is responsible to take care of every activity related to export such as market research, international distribution, shipment logistics, and invoicing.

Direct exportation cuts down costs of the commission of the exporting agent. This gives them the authority to take charge of the process at every step.

Cooperative Export Trade

Cooperatives are another kind of indirect merchant export. When a corporation with an established distribution channel for its own products agrees to export the goods of a non-competing foreign manufacturer, this is known as cooperative exporting.

Let us understand this better with an example. A US company that is engaged in the clothing business and has its own distribution channel contracts with a Canadian company that is in the business of perfumes (non-competitive to the US company), and helps with the marketing and selling of their products in the USA.

Export procedure:

  • An exporter needs to obtain the IEC- import-export code to commence export trade from the regional office of DGFT.
  • Checking the category of the goods to be exported is mandatory. Accordingly, exporters check whether they need the export license. If they do, then they apply to DGFT.
  • Registering with ICC - Indian Chamber of Commerce is also mandatory for every Indian exporter. ICC issues Non- Preferential certificates of Origin, stating that all goods being exported are originated in India.

Advantages of an export trade

  • Exporting goods and services outside of the country potentially increase the profit margins of businesses. Also, trading internationally grows the business on many levels.
  • In case of a falling of the domestic economy, businesses have other economies to rely on.
  • Increase in exports defines increased international demand. It also states that a country's industries and industrial facilities produce a lot of stuff.
  • Higher exportation rates bring many more employment opportunities. For higher demand, manufacturers also hire more staff for production which leads to more employment.

Disadvantages of an export trade

  • If businesses start getting good international market exposure, they may lose attention in the domestic market which will lead them to lose their in-house potential customers.
  • Entire exporting procedure is an added expenditure. New packaging strategies, traveling charges, warehouse costs, etc are added expenses that can put a financial strain on the companies.
  • Damage, loss or theft are a few risks experienced during transportation by exporters.
  • Obtaining information about some markets could be really difficult. Lack of market research might lead to losses.

These all risks can be overcome by following basic and planned strategies. 

Main Differences Between Import Trade and Export Trade in Points

  • When goods and services are purchased from the international seller than the domestic seller is known as an import. When goods are sold outside of the economic border of the country than in the domestic market, is known as export trade.
  • The person engaged in importation is known as an importer. The person who is engaged in exportation is known as an exporter.
  • In importation, the outflow of the domestic currency is experienced. Whereas in the exportation, the inflow of foreign currency can be seen. 
  • Excessive importation has a negative impact on the country’s economy. On the other hand, excessive exportation impacts positively on a country’s GDP.
  • Higher importation represents a lack of availability of goods and services Or lack of quality, higher costs, etc. higher exportation represents greater market presence internationally.
  • The aim of importing is to fulfill the domestic demand for goods and services that are not available within the country. The purpose of exporting is to generate more income by selling domestically originated products and services and creating more demand for them internationally.

Conclusion

Both importation and exportation are necessary for the country’s economy. Importation can satisfy the needs of domestically unavailable products. Whereas exportation plays an important role in building a global presence in the international market. However, excessive import trades can influence the economy negatively. Increased exportation is always beneficial for generating income and availing inflow of foreign currency.

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"Difference Between Import and Export." Diffzy.com, 2022. Tue. 24 May. 2022. <https://www.diffzy.com/article/difference-between-import-and-export-115>.



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