Export and import are terms you’re probably familiar with. Export and import refer to international trade or trade between countries. Within a country, export and import activities play a very important role and are, of course, closely linked to economic activity.
Simply put, selling goods or services to other countries is called exporting. Meanwhile, purchasing products or goods from other countries is called importing.
So, what are the definitions, objectives, and examples of export and import activities? Read the full explanation below.
Definition of Export
Export is the activity of sending goods out of the customs territory. The customs territory is the territory of the Republic of Indonesia, consisting of land, water, and air, as well as all areas designated within the Exclusive Economic Zone (EEZ). Simply put, export is the activity of selling goods or services to foreign countries. A person or institution that exports is called an exporter.
What Is an Exporter?
An exporter is a legal entity or an individual who engages in export activities. Large-scale export activities naturally require the involvement of customs authorities to regulate cross-border trade.
Export activities typically occur when a country is capable of producing goods or services in large quantities and domestic demand has been met.
This results in a surplus of these goods, which can then be shipped abroad for sale. When a country engages in export activities, it receives revenue in the form of foreign currency. The more frequently a country exports, the greater the profits it earns from exchange rate differences.
Types of Exports
There are two types of exports in Indonesia: oil and gas exports and non-oil and gas exports.
Oil and gas products include crude oil and natural gas. Meanwhile, non-oil and gas exports encompass agricultural, plantation, forestry, and livestock products, as well as handicrafts, manufactured goods, and mineral products from the mining industry. Indonesia’s export commodities include rubber, palm oil, natural gas, coal, and timber for the apparel and textile industries.
The following are several factors that influence export activities:
- Conditions in foreign markets
- Exporters’ experience in capturing foreign markets
- The business climate created by the government
- Terms of international agreements
Each export item has its own specific requirements depending on the type of product. Not all individuals or communities can engage in export activities. This is because export activities require several procedures that must be followed.
Export activities can create new effective demand, which forces domestic market goods to seek innovation to increase productivity. Export activities can also contribute to economic growth and the expansion of foreign markets for certain goods.
Types of Export Activities
There are two types of export activities: regular exports and exports without a letter of credit. The difference between the two lies in the use of a letter of credit as a payment instrument.
Regular export activities involve selling goods overseas in accordance with all applicable regulations. These exports are typically conducted using a letter of credit.
Meanwhile, exports without a letter of credit may be conducted if the Department of Commerce has issued a special permit.
Export activities pursue the following objectives:
- Price control for products
Exporting countries have the opportunity to utilize excess production capacity. Thus, a country is considered capable of controlling the prices of export goods originating from its territory. This is because domestic products will have lower prices when they are produced easily and in abundance. For a country to control prices in the market, it must export to other countries that need those products. - Increasing foreign currency reserves / foreign exchange earnings
The value of a country’s wealth held in the form of foreign currency is referred to as foreign exchange reserves. Export activities help open new opportunities abroad. These opportunities will help expand the domestic market, investment, and foreign exchange reserves within the country. - Increasing Employment Opportunities
Export activities indirectly create new jobs. Thus, export and import activities also help reduce the unemployment rate. Furthermore, growth in domestic exports creates jobs, which in turn reduces poverty.
Definition of Imports
Import refers to the activity of bringing goods into a customs territory. The import of goods or services from abroad or from another customs territory is intended for distribution within the country or in a free trade zone.
Services received from abroad, such as insurance, transportation, and foreign labor, are also considered imports. As a general rule, imported goods are those that cannot be produced domestically.
What Is an Importer?
A person or entity that imports goods is called an importer. Goods are imported for profit. The profit arises because the price of imported goods may be lower than the price of similar domestically produced goods or services.
Examples of Import Activities
A simple example: Indonesia, which does not produce wheat, must import wheat from other countries to meet its domestic wheat needs.
Customs procedures are also necessary to oversee the process when imported goods are shipped on a large scale. Simply put, the government imposes tariffs on each product for every importer.
The types of goods imported include consumer goods or finished goods, capital goods, raw materials, and auxiliary materials.
Reasons for Importing
The following are several reasons why a country engages in import activities:
The importing country may be able to produce these goods, but the costs involved would be higher, resulting in higher prices for the goods sold. The importing country may already be able to produce these goods domestically, but production is insufficient to meet domestic demand. Importing countries cannot produce these goods due to a lack of raw materials, skills, etc.
Importing can have both advantages and disadvantages, particularly for domestic producers, as they cannot compete with imported products in terms of either price or quality.
Imports also deplete a country’s foreign exchange reserves, which can lead to a trade deficit.
Benefits of Importing
The following are some benefits of imports:
- Gain access to more modern technology through imported goods
- A country can focus on the production of specific goods or services.
- Combat inflation because imported goods are cheaper
- Obtain goods or services that cannot be produced domestically
- Securing a supply of raw materials for domestic industries
To date, no country has been truly self-sufficient without needing goods or services from other countries. This means that importing is an inevitable part of international trade.
It is important to note that not all products or goods can be classified as imports. The Department of Customs and Excise has established regulations that permit and prohibit the importation of goods. Prohibited imports, such as those containing pornographic material, illegal drugs, animals, and firearms, are also banned.
Purpose of Imports
The purpose of import activities is, of course, to meet domestic needs. Import activities also serve as a form of communication or cooperation between countries.
In addition to meeting domestic needs, import activities are carried out to improve the balance of payments and reduce foreign exchange outflows to other countries. Import activities also help enhance a country’s capacity.
Import activities are also useful for obtaining raw materials and modern technology. This means that import activities indirectly support a country’s stability.
The following are some of the purposes of import activities:
- Perform household chores
- Strengthen the balance of payments
- Reduce foreign exchange outflows
Examples of Export and Import Regulations
In international trade, there are several policies governing the export and import of goods. Below are examples of export and import policies:
1. Dumping in trade
A dumping policy is one in which a product is exported and sold abroad at a lower price to dominate the market. Dumping can be interpreted as a discriminatory pricing policy, which can destroy foreign markets where the product is sold at a lower price.
The goal of a dumping policy is to expand foreign markets and eliminate competition. This method is often used by companies to generate large profits.
Dumping policies are implemented to prevent domestic purchase prices from falling. There are several types of dumping policies, namely:
- Sporadic Dumping
Sporadic dumping is short-term dumping. The goal of sporadic dumping is to prevent a buildup of goods in the domestic market due to overproduction. - Persistent Dumping
Persistent dumping is a practice carried out continuously and on an ongoing basis. This is done due to market differences between the importing and exporting countries, also known as international price discrimination. - Predatory Dumping
Predatory dumping aims to cripple competitors. Thus, when a competitor’s prices fall, the dumping entity will raise its own prices as it sees fit.
2. Tariffs
Tariffs are taxes imposed on goods brought into a country. All goods imported into a country or region are subject to tariffs based on the value of those goods.
3. Free Trade Policy
Free trade policies are agreements between two countries that do not regulate the buying and selling of goods. Thus, trade between these countries ensures the unimpeded flow of goods into and out of the region.
4. Import Restrictions or Import Quotas
Import restrictions are imposed when there is an increase in domestic production. An import quota is a direct limit on the quantity of goods that can be imported. This measure is used to prevent domestic products from being overwhelmed by foreign goods, thereby allowing local businesses to compete fairly. Additionally, import restrictions are implemented through the establishment of tariff barriers and quotas, which help improve the balance of payments.
5. Export Subsidies
Export subsidies are government policies designed to encourage the export of goods and reduce sales of goods in the domestic market. Export subsidies involve the government providing funds to companies to increase the volume of exports and imports.
The domestic market itself utilizes direct payments, low-interest loans, export tax rebates, or publicly funded advertising in other countries. This concludes the comprehensive explanation of the definitions of exports and imports, their objectives, and examples of export and import policies.