Commerce · Ch 22 — Types of Trade
Internal Trade and External Trade — A Comparison
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Internal Trade and External Trade — A Comparison
Having examined both halves of the classification of trade in detail — internal trade with its wholesale and retail branches, and external trade with its export, import, and entrepot branches — it is useful to step back and compare internal trade and external trade directly, on the same bases, to fix firmly in mind why the two are treated as fundamentally different categories rather than mere variations of the same activity.
The table below sets out the principal points of difference.
| Basis of Distinction | Internal Trade | External Trade |
|---|---|---|
| Geographical scope | Confined to within one country's boundaries | Carried on between two or more countries |
| Currency used | Domestic currency of that one country | Foreign currency or an internationally accepted currency |
| Regulatory/customs formalities | Minimal; governed by the country's own domestic trade laws only | Extensive; governed by customs law, export/import licensing (such as an Importer-Exporter Code), and international trade agreements |
| Distance and mode of transport | Usually shorter distances; road, rail, or local transport commonly suffice | Often much longer distances; typically requires sea or air freight |
| Risk involved | Comparatively lower; largely limited to ordinary business/credit risk | Comparatively higher; includes currency-exchange-rate risk, transit risk over long distances, and political/policy risk between countries |
| Documentation required | Minimal — an invoice and, at most, a delivery challan | Extensive — includes documents such as export/import invoices, shipping bills, bills of lading or airway bills, certificates of origin, and letters of credit |
| Sub-types | Wholesale trade and retail trade | Export trade, import trade, and entrepot (re-export) trade |
Definition 1Importer-Exporter Code (IEC)
A registration/identification number required by businesses in India that wish to engage in import or export trade, issued by the compet …