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Chapter One Introduction to International Business 1 1.1 Concepts of Business and International Business 1 1.1.1 What Is Business? 1 1.1.2 What Is International Business? 1 1.2 The Need for International Business 2 1.3 Two Related Economic Theories 3 1.3.1 Absolute Advantage 3 1.3.2 Comparative Advantage 3 1.4 International Business Activities 4 1.4.1 Main Types of International Business Activities 4 1.4.2 Common Forms of International Business Activities 5 1.5 International Business Management 9 1.5.1 International Marketing Management 9 1.5.2 International Financial Management 9 1.5.3 International Human Resource Management 11 1.6 Economic Integration 13 1.6.1 Regional Economic Integration 14 1.6.2 Renowned Regional Economic Integration 15 Exercises 19 Chapter Two Introduction to International Trade 21 2.1 International Trade 21 2.1.1 What Is International Trade? 21 2.1.2 International Trade and Domestic Trade 21 2.1.3 Reasons for International Trade 22 2.1.4 Classification of International Trade 24 2.2 Trade Barrier 25 2.2.1 What is Trade Barrier? 25 2.2.2 Types of Trade Barriers 26 2.2.3 International Business Risks 32 2.3 Business Preparation 32 2.3.1 Market Research 32 2.3.2 Credit Inquiry 33 2.3.3 Making Contacts 33 2.4 Business Negotiation 34 2.4.1 What is Negotiation? 34 2.4.2 General Procedures in Business Negotiation 34 Exercises 39 Chapter Three Trade Terms 41 3.1 Definition and Functions of International ?Trade Terms 41 3.2 International Rules and Practices on Trade ?Terms 42 3.2.1 Warsaw-Oxford Rules 1932 42 3.2.2 Revised American Foreign Trade Definition 1941 42 3.2.3 Incoterms 2010 Rules 43 3.2.4 Main Features of the Incoterms 2020 Rules 45 3.2.5 Changes to the Incoterms 2010 Rules in the Incoterms 2020 Rules 46 3.2.6 Seven Commonly Used Trade Terms to Any Mode of Transportation 46 3.2.7 Four Commonly Used Trade Terms to Sea and Inland Waterway Transportation 49 Exercises 51 Chapter Four Packing and Transportation 53 4.1 Packing 53 4.1.1 Packing Problem in Law 53 4.1.2 Types of Packing 54 4.1.3 Marking 56 4.2 Transportation 57 4.2.1 Modes of Transportation 58 4.2.2 Choice of Modes and Intermodal Transportation 60 Exercises 62 Chapter Five Inspection and Insurance 65 5.1 Inspection 65 5.1.1 Pre-shipment Inspection 65 5.1.2 Post-shipment Inspection 67 5.1.3 Pre-shipment Inspection vs. Post-shipment Inspection 68 5.1.4 The Pre-shipment Inspection Industry 69 5.1.5 Choice of the Inspector 70 5.1.6 The Basic Mechanics of PSI 71 5.1.7 Inspection Documents 73 5.2 Insurance 74 5.2.1 Definition 74 5.2.2 Basic Characteristics of Insurance 74 5.2.3 Insurable Risks 75 5.2.4 Marine Insurance 76 Exercises 81 Chapter Six Instruments of Payment 83 6.1 Negotiable Instruments 83 6.1.1 What Are Negotiable Instruments? 83 6.1.2 Characteristics of Negotiable Instruments 83 6.1.3 Parties to Negotiable Instruments 84 6.2 Bills of Exchange 85 6.2.1 What Are Bills of Exchange? 85 6.2.2 Essentials and Non-essentials of Valid Bills of Exchange 86 6.2.3 Types of Bills of Exchange 89 6.2.4 Procedure of Using Bills of Exchange 90 6.3 Checks 94 6.3.1 What are Checks? 94 6.3.2 Essential Requirements 95 6.3.3 Crossing a Check 95 6.4 Promissory Notes 97 6.4.1 What Are Promissory Notes? 97 6.4.2 Essentials of Valid Promissory Notes 97 6.4.3 Types of Promissory Notes 98 6.4.4 Comparison Between Bills, Promissory Notes and Checks 98 Exercises 99 Chapter Seven Modes of Payment 101 7.1 Remittance 101 7.1.1 What is Remittance? 101 7.1.2 Basic Parties to Remittance 101 7.1.3 Types of Remittance 102 7.1.4 Application of Remittance 104 7.2 Collection 104 7.2.1 What Is Collection? 104 7.2.2 Basic Parties to Collection 105 7.2.3 Types of Collection 106 7.3 Letters of Credit 108 7.3.1 What Is Letter of Credit? 108 7.3.2 Characteristics of Letter of Credit 108 7.3.3 Parties in Letter of Credit 109 7.3.4 Essential Contents of Letter of Credit 110 7.3.5 Procedure of Documentary Credit 111 7.3.6 Discrepancies in Letter of Credit 114 7.3.7 Types of Letter of Credit 115 Exercises 116 Chapter Eight Commercial Documents in International Trade 118 8.1 Introduction 118 8.2 Commercial Invoice 119 8.2.1 Definition 119 8.2.2 Contents of Commercial Invoice 120 8.3 Pro Forma Invoice 122 8.4 Marine Bill of Lading 123 8.4.1 Definition 123 8.4.2 Functions of a Bill of Lading 124 8.4.3 Parties of a Bill of Lading 124 8.4.4 Contents of a Bill of Lading 125 8.4.5 Types of Bill of Lading 127 8.5 Other Transport Documents 130 8.5.1 Sea Waybill 130 8.5.2 Air Waybill 130 8.5.3 Road Waybill or CMR Consignment Note 132 8.5.4 Railway Bill or Cargo Receipt 133 8.5.5 Courier Receipt or Post Receipt 133 8.6 Insurance Documents 133 8.6.1 Definition 134 8.6.2 Types of Loss 134 8.6.3 Types of Coverage/Risk 135 8.6.4 Types of Insurance Documents 135 Exercises 136 Chapter Nine Business Letters 139 9.1 Parts of a Business Letter 139 9.2 Formats of Business Letters 144 9.2.1 Three Commonly Used Formats 144 9.2.2 Envelope Writing 148 9.3 Eight Principles of Business Writing 148 9.4 Practical Business Letters 153 9.4.1 Enquiries and Replies 153 9.4.2 Offers and Counter-offers 155 9.4.3 Placing and Acknowledging Orders 157 9.4.4 Complaints and Claims 159 Exercises 160 Chapter Ten Claims and Arbitration 163 10.1 Claims 163 10.1.1 Introduction 163 10.1.2 Breach of Contract 164 10.1.3 Discrepancy and Claim Clause 165 10.1.4 Legal Aspects of Marketing Claims 166 10.1.5 Resolution of Trade Claims 167 10.1.6 International Litigation 168 10.2 Arbitration 168 10.2.1 Definition of Arbitration 168 10.2.2 Advantages and Disadvantages of Arbitration 171 10.2.3 Foundations of International Commercial Arbitration 173 10.2.4 Institution Arbitration and Ad Hoc Arbitration 174 10.2.5 Arbitration Institutions 175 10.2.6 The Place of Arbitration 176 10.2.7 Other Methods of Dispute Resolution 178 Exercises 180 References 183