Import is an international trade practice involving purchasing goods and services from a foreign country. It is an important determinant of a country’s trade balance. The lower its value, the more favorable the trade balance in an economy.
An importer is a person, business, or nation that brings in goods or services from another country. An exporter is a person, business, or nation that sends goods or services to another nation primarily for sale. The import export business makes it easy for nations to receive goods and services that they cannot produce or access due to geographical factors or other constraints.
Table of contents
- Import is an international trade practice that involves purchasing goods and services from a foreign country. A simple example includes car imports to the USA, and the major exporters of cars to the US are China, Mexico, Japan, Canada, and Germany.
- Its benefits include the introduction of new, diverse, and good quality products, promoting healthy competition, and reducing costs due to purchasing affordable products or components from a foreign country.
- Tax is levied on imported products to save the domestic market producers from aggressive competition from foreign participants.
- The opposite is the exports. Exporting happens when products are made domestically and provided to customers in other nations.
An import is bringing in items from another country for commercial purposes. These goods can be received by individuals, businesses, or the government and used to process other products or resell to end users. It is not a simple process because there are various prerequisites. For instance, an import export license is one of the requirements for anyone planning to launch a business focussing on purchasing from abroad.
Each country is endowed with unique resources. At the same time, a country’s ability to develop and strengthen its whole economy with its domestic resources may be limited. For example, certain countries are abundant in minerals, precious metals, and fossil fuels but lack other resources vital for development, like human resources. In addition, certain items, components of products, or resources are far less expensive than manufacturing or procuring them domestically. Hence, countries consider purchasing from foreign nations to reduce the overall cost.
Countries generally make purchases from foreign countries throughout the trade process. Since this activity is legitimate, it is important to process via custom authority. US Customs and Border Protection supervises the import of products into the United States, determining which products are permitted to enter the US market and which are not. The functioning of this law enforcement and the country’s primary border control organization stops people from entering the country fraudulently. In addition, it stops them from bringing dangerous or illegal items into the country. Examples of products that are forbidden from entering the nation include hazardous toys, illegal chemicals, such as Rohypnol and absinthe, etc.
Import duty is a tax levied on items imported from other countries. Duties are calculated based on various factors, including the price, location, and type of commodities. They serve as a source of revenue for the government and protect domestic producers from fierce foreign competition.
An import tariff has a protective role by safeguarding domestic suppliers from foreign competitors since it raises the price of imported items by charging taxes. When an import tax is imposed to shield domestic suppliers from foreign competition, it is referred to as a protective tariff. An import duty’s market effects extend beyond its immediate effects as its ripple effects spread to other sectors of the economy. Furthermore, there are other forms of trade restrictions. A sort of trade restriction known as import quotas places a numerical cap on the amount of a good that may be brought into a nation during a specific period.
A free trade agreement between countries can lower import and export restrictions. Under a free trade policy, there are little to no government tariffs, quotas, subsidies, or prohibitions that prevent the exchange of products and services across international borders. For example, three North American nations, the United States, Canada, and Mexico, joined together to form a trade bloc in North America through the North American Free Trade Agreement (NAFTA).
NAFTA aims to remove all tariff and non-tariff trade and investment barriers between the US, Canada, and Mexico. By signing the agreement, the three countries have committed to lower trade barriers and expand the range of investment options available to small- and medium-sized businesses (SMEs) in the US, Canada, and Mexico.
Import vs Export
Let’s look into some of the significant differences:
|It is the process of buying goods and services from international markets.
|It is the process of selling goods and services in international markets.
|The fundamental goal of purchasing from a foreign country is to meet the demand for products and services unavailable in a country.
|The fundamental goal of exporting is to generate revenue by selling goods in the foreign market.
|The country experiences a trade deficit if imports are more than exports.
|The country experiences a trade surplus if exports are more than imports.
Importing and exporting help the nation’s economies grow and expand. Countries use data on exports and imports to evaluate whether they are in a surplus or deficit. When a country’s exports exceed its imports, it has a trade surplus. It implies a net influx of currency from international markets. A trade surplus usually suggests that the economy is doing well. When a country’s imports exceed its exports, it has a trade deficit. It signifies a net outflow of domestic cash to overseas markets.
Frequently Asked Questions (FAQs)
GDP = C + I + G + (X – M)
In the above formula, C is the consumption, I is the investment, G is the government spending, X is the export, and M denotes the import.
The exports provide revenue for the nation, enhancing the exporting country’s GDP. At the same time, when importing, the money spent leaves the economy, indirectly contributing to reducing the importing country’s GDP. Therefore, net export is negative when the total export value is less than the total import.
A country is said to have a trade surplus and a positive trade balance if exports exceed imports. Conversely, when imports outweigh exports, a nation or region is considered to have a trade deficit and a negative trade balance.
There are various benefits. Firstly, it helps introduce new, diverse, or high-quality products to the market. In addition, certain products attract a high production cost when produced domestically, making buying from a foreign country an affordable option. As a result, it contributes to cost reduction. Furthermore, it also improves international relations.
This has been a guide to Import and its meaning. We explain its tax implications and comparison with export. You may also find some useful articles here: