Export Import and Documentation Procedures

EXPORT, IMPORT DOCUMENTATION AND PROCEDURES Polytechnic Series

Chapter One: EXPORT AND IMPORT ENVIRONMENT

Chapter one, in which we look at:

 the importance of the export and import industry.
 definitions of export and import and the misconception.
 the industries contribution to the export and import industry and the factors before the

companies enter this business.
 the challenges faced in export and import business.

1.0.INTRODUCTION

International trade has been playing an importance and significant role which it is quickly
becoming one of the hottest industries around the world, but it isn’t a new industry by any
means. Trade across the nations and across the globe has been hot since prehistoric man,
but it is becoming increasingly profitable as people start understanding how beneficial
trade can be on an international level.

Importing and exporting activities have been an integral part of our lives for a very
long time. There are big businesses not only in the Malaysia, but all over the world as well.
The importance roles played by the importing and exporting activities to the nations as
follow:

 Increase country’s income
Growth of an economy is directly related to the export and import activities. It may
help one of the countries to increase their income and profitability through by
import, export and excise duty, tax charges (sales and services), penalty, surcharge,
levy and compound. However, if the exports increase at a faster pace as compared
with imports, there has no any reason to stop an economy from being a developed
one. Therefore, the instability in exports can adversely influence the process of
economic development.

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 Increase living standard of people in a country
As statement above that we discuss before, export and import activities can develop
the economics of nations. To a large extent, most developed economies have been
highly successful in increasing economic output. Therefore, the impressive
increased in national output can be improved citizen’s standard living directly. The
economics of growth has increased the happiness of the citizens; it has brought out
many benefits which are
i. Increased consumption

Consumers can benefit from consuming more goods and services. An
assumption of economics is that consumption is related to utility, so in
theory, with higher consumption levels, there is greater prosperity.

ii. Improved public service

Increasing of tax revenues, government can spend more on important public
services such as health and education. Improved health care will improve
quality of life through treating diseases and increasing life expectancy.
Increased educational standards can give the population a greater diversity
of skills and literacy. This enables greater opportunity and freedom.
Education is seen as an important determinant of welfare and happiness.

iii. Reduced unemployment and poverty

Economic Growth of the country can attract the local and foreign investor
doing the investment by opening their business. Therefore, it can reduce
unemployment by creating more jobs to the citizen. This is significant
because unemployment is a major source of social problems like crime and
alienation.

iv. Improved benefit of employee 2|Page

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Countries may benefit by employment opportunities for its citizens,
housing, schools, and management development programs. Earlier, in
addition to transferring technology and building a $720 million computer
chip factory, Motorola Inc. built 2200 apartments and two schools for its
employees – and provided a fast-track management training program for
local Chinese (The Economist, 1996a, p.48)

 Increase the foreign exchange
“An export tax thus offers the potential to contribute to foreign exchange earnings
by exploiting the country’s international monopoly power, to raise government
revenue and to reduce the price faced by consumer,” (Warr, 903: 2001). According
to Warr, Thailand is a good example. Thailand is one of the countries which it was
a major exporter to the agriculture’s products such as rice. During the economic
crisis of year 1997, Thailand diminishes its currency. The government started to
search new sources of revenue and was concerned that the devaluation would
provoke large consumer price increases for rice. Warr suggested that if an export
tax had been imposed, it could have potentially contributed to the foreign exchange
reserves (Warr, 903: 2001).

 Movement in technology
There is great interest throughout the world in technology transfer which can be
viewed as the sending of new products, processes, and production inputs from one
country to another. Eastern European countries have been acquiring technology
from the West, and at the same time have been supplying technology there. The
developing countries of the world are constantly seeking technology from
developed countries. For instance, China with allure of its potential huge market
and its highly purchases of industrial equipment, is being particular aggressive
seeking technology transfer. (Source: International Marketing and Export Management, A.,

Gerald and D., Edwin, 2008)

2.0. DEFINITION OF EXPORT AND IMPORT 3|Page

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With the introduction of globalization and increase in trade relations between nations, there
has been an increase in import and export of goods between countries. Globalization
is referring to the increasing unification of the world's economic order through reduction
of such barriers to international trade as tariffs, export fees, and import quotas. Its goal is
to increase material wealth, goods, and services through an international division of labor
by efficiencies catalyzed by international relations, specialization and competition.

Moreover, it describes the process by which regional economies, societies, and
cultures have become integrating through communication, transportation, and trade. It
serves as a great way to expand their businesses and open new markets with an eye for
opportunities. It allows the people obtaining the market share into global economy.
Besides, the globalization also serves as a catalyst for faster growth and brand building.

The export can be defined as a procedure to take or cause to be taken out of
Malaysia by land, sea or air to place in a vessel, conveyance or aircraft for the purpose of
such goods being taken out of Malaysia. An export is any specialized products, commodity
or technology, shipped from one country to another country, typically for use in its
domestic market. For instance, Malaysia exports natural gas, petroleum products, durians,
palm oil and, etc. to others country.

Meanwhile, the definition of import is a procedure for any goods or services
brought into a country from another country in a fair and acceptable fashion, typically for
use in trade. Imported goods or services introduce domestic consumers to newer things by
foreign producers. Most of companies usually import goods and services to fulfill the
requirement of the domestic market at a cheaper price and provide goods that are superior
compared to manufacturing goods in local market. The importer can be dividing in three
types, which are:

 there are those who import and sell products to the rest of the world,
 there are those who import from foreign sources at low prices and they sell to the

domestic market only, and
 there are those who import and sell the products to foreign and also the domestic

market.

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3.0. CONSIDERATION FACTOR BEFORE ENTERING EXPORT BUSINESS

We cannot deny that the exporting and importing business really can lead the organization
increase the sales and profits, enhances a company's prestige, offers job opportunities, and
provides a valuable way for business owners to level seasonal fluctuations. However, one
thing gets tricky: what factors must consider or develop before we are going to enter global.

Before we start an export business, the organization should evaluate their
company’s “export readiness”. Further planning for export should be done only, if they
realize that their company’s assets are good enough for export. There are several factors
should be considered such as:

i. location of exported and imported country
ii. transportation & telecommunication facilities
iii. background of trade partner
iv. law and regulation of country
v. potential of market

3.1. Why People Exporting?
There are many good reasons for exporting.
 The primary reason for export is to earn foreign exchange. The foreign exchange
not only brings profit for the exporter but also improves the economic condition
of the country.
 Secondly, companies that export their goods are believed to be more reliable than
their counterpart domestic companies assuming that exporting company has
survive the test in meeting international standards.
 Thirdly, free exchange of ideas and cultural knowledge opens up immense
business and trade opportunities for a company.
 Fourthly, as one starts visiting customers to sell one’s goods, he has an opportunity
to start exploring for newer customers, state-of-the-art machines and vendors in
foreign lands.
 Fifthly, by exporting goods, an exporter also becomes safe from offset lack of
demand for seasonal products.

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 Lastly, international trade keeps an exporter more competitive and less vulnerable
to the market as the exporter may have a business boom in one sector while
simultaneously witnessing a bust in a different sector.

3.2. Why People Importing?
There are several reasons that the people doing the importation:
 the people can get new products from foreign country which it was not able getting
at domestic market.
 to fulfill the extra requirement or demand from domestic market.
 to gain the competitive advantages whereby it can benefit to the consumers in
terms of quality and price (they can get a good quality product in lower price).
 the policy created by government by signing the agreement with others country.
For example: barter trade.

4.0. POTENTIAL BENEFITS FROM EXPORT ACTIVITY
Ideally, export activities occur on the principle that it shows in benefit to all participants
and injury to none (other than perhaps competitions), regardless of whether we are
considering to nations or individual firms. For the individual business concern this usually
means that profits are realized, either directly in the case of the seller (exporter) or
indirectly for the buyer (importer).
Furthermore, the benefit of international trade to a country is determined by its
impact on consumption and production. However, no country is entirely self-sufficient in
terms of its ability satisfying effectively and economically the whole range of the ever-
changing desires of its people. It is because consumption is the last economic activity and
production is but the meaning of last, the most basic of all contributions of international
trade is that to the welfare of local consumers. The activation of trade relationships among
countries have created a new job opportunities and increased purchasing power of citizen
for both domestic and foreign products and services. (Source: International Marketing and Export

Management, A., Gerald and D., Edwin, 2008)

4.1. The Effect of Exports.

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Consumers have a stake in the exports of domestic firms to the level that high
volume creates economies in the production process which is then passed on.
Selling in a foreign country helps to gain economy in production at home, which
means lower prices to consumers of domestic products. Meanwhile, the individual
firms will lower the prices to consumers so that it can gain the competitive
advantages both at home and foreign market, and helps to diversify the risk inherent
in conducting business.

Besides, the country conditions also have an influence on, and influence by
the exports. During an economic crisis, export basically play a role to hold steady,
sometimes even increase, thereby softening the effect of crisis. For example, Japan
since 2004 based in part on the upsurge of orders from China and it was helping the
Japan improve the weak economics. Figure 1.0 as above has been shown the
advantages and disadvantages of exporting business activities. (Source: International

Marketing and Export Management, A., Gerald and D., Edwin, 2008)

4.2. The Effect of Imports
As we know, the natures of potential benefits of importing consumer goods are
clear - namely, lower price, an increase in supply and variety of goods from which
consumers can choose, and being able to access the results of technological
developments and advancements. Importing certain industrial products (raw
material or capital equipment) bring about lower domestic costs of production than
would be possible if the consumer goods manufacturer bought only from local
suppliers.
Then, importing many industrial goods, particularly certain raw materials
such as copper, enables the production of goods that depend almost exclusively,
and in some case entirely, no non-domestic sources of supply. The reason for this
situation is might be that country not capable of supplying domestic buyers with all
their requirements from domestic resources. Again consumers can get a greater
quantity and variety of goods made available to them in the marketplace by paying
a lower price. A major benefit of importing to a nation and to individual companies

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is the acquisition of technology and adds to whatever innovations are developed
locally. According to the Sachs (2000), this can happen in three ways, which are:
i. countries can import directly technology in the form of capital and consumers’

goods (cell phone, machine tools for use in the industrial production),
ii. countries can license technologies from those who developed them,
iii. countries can attract foreign direct investment (FDI) which the multinational

company can create production facilities within its border, for instance, Intel’s
plants in Ireland and Malaysia.

Meanwhile, importing also will bring unfavorable effect to the importing
country. In order to pay the imports, there must be a capital outflow. It is not only
does this have a negative effect upon the country’s balance of payments, but also
there would be a reduction in amount of foreign exchange available for other’s
needs. Moreover, the import activities can increase the competition to the local
market. The labors could be affected if this competition led to lost sales, profits and
redundancy in employment. (Source: International Marketing and Export Management, A.,

Gerald and D., Edwin, 2008)

4.3. The advantage and disadvantage of trade business.
4.3.1. The advantages of trade business.
International trade brings a number of valuable benefits to a country,
including:
i. To get a country’s comparative advantage.
The international trade encourages a country to specialize in
producing only those goods and services which it can produce more
effectively and efficiently, and at the lowest cost.
ii. Producing a narrow range of goods and services for the domestic
and export market.
The country itself can produce in at higher volumes, which provides
further cost benefits in terms of economies of scale.
iii. Trade increases competition and lowers world prices.

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It benefits the consumers by raising the purchasing power of their
own income, and leads a rise in consumer surplus.
iv. Trade also breaks down domestic monopolies.
To gain the advantage by facing positive competition from more
efficient firms from other countries.
v. Providing a good quality of goods and services.
The quality is likely to increases as competition encourages
innovation, design and the application of new technologies. Trade
will also encourage the transfer of technology between countries.
vi. To increase the employment.
Trade means that more will be employed in the relevant sector and,
through the multiplier process; more jobs will be created across the
whole economy.

4.3.2. The disadvantages of trade business.
Despite the benefits, trade can also bring some disadvantages, including:
i. Trade can lead to over-specialisation.
The workers would possibly face the risk of losing their jobs when
world demand fall or when goods for domestic consumption can be
produced more cheaply abroad. Jobs lost through such changes
cause severe structural unemployment.
ii. Some industries do not get a chance to grow.
The reason is they face competition from more established foreign
firms, especially the new infant industries which may find it difficult
to establish themselves.

iii. The dilemma of local producers.
The local producer who may supply a unique product tailored to
meet the needs of the domestic market, may suffer because cheaper
imports may destroy their market. Over time, the diversity of output
in an economy may diminish as local producers leave the market.

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Figure 2.0 Contribution of the export and import industry to the country

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EXPORT, IMPORT DOCUMENTATION AND PROCEDURES Polytechnic Series
Top 10 Major Export Products, 2019

Top 10 Major Import Products, 2019

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TRADE PERFORMANCE: APRIL 2020 AND JANUARY - APRIL 2020

Malaysia's Trade Impacted by COVID-19 Pandemic
In April 2020, Malaysia’s trade amounted to RM133.34 billion, a decrease of 16.4% compared to

April 2019, due to COVID-19 pandemic which caused major disruptions to global supply chain.

Lower trade was recorded particularly with Singapore, Thailand, India, the United States (US),

Japan, Viet Nam and Saudi Arabia.

Exports was valued at RM64.92 billion, contracted by 23.8% while imports decreased by 8% to

RM68.42 billion. Trade balance recorded a deficit of RM3.5 billion in April 2020, after 269

consecutive months of surplus on account of a higher contraction in exports compared to imports.

Compared to March 2020, trade and exports slipped by 9.9% and 19%, respectively while imports

increased by 0.9%.
Malaysia’s trade during the first four months of 2020 dropped by 3.5% to RM573.75 billion

compared to the corresponding period of 2019. Lower trade was recorded with Thailand,

Singapore, Hong Kong, Germany, India and Viet Nam. Meanwhile, higher trade was registered

with the Republic of Korea (ROK), Indonesia and the US. Exports during the period registered a

decrease of 5.5% to RM303.61 billion and imports declined marginally by 1.2% to RM270.14

billion. Trade surplus was valued at RM33.47 billion, declined by 29.9% compared to the same

period of 2019.

Commenting on the April trade performance, Senior Minister and Minister of International Trade

& Industry YB Dato' Seri Mohamed Azmin Ali said that the declines in both exports and imports

are expected given that most countries around the world were under some form of lockdown to

contain the spread of COVID-19. This has caused major disruptions to the manufacturing activities

and movement of goods globally. Nevertheless, exports of some products such as iron and steel,

rubber gloves and refined palm oil recorded increases.

"Malaysia's exports are expected to improve in the coming months as the government allowed

more industries to resume operations and at full operating capacity since 4 May 2020. Similarly,

companies in other countries are also ramping up their business operations. This will boost trade

activities between Malaysia and other countries", he added.

Source: MATRADE

REFERENCE

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Albaum G., Strandshow J., & Duerr E., (2008), Chapter one: International Marketing and
Exporting. International Marketing And Export Management (Six Edition). Ashford
Colour Press Ltd, Gosport, Hampshire.

Delaney L., (2004), 20 factors to consider before going global. Retrieved on 19 November 2011
from http://www.entrepreneur.com/article/75138.

DOSM, (2019), Malaysia external trade indices October 2019. Retrieved on 4 December 2019
from
https://www.dosm.gov.my/v1/index.php?r=column/cthemeByCat&cat=140&bul_id=SE
V0NTJjcEJhc2hvaWIydW9LNzhPdz09&menu_id=azJjRWpYL0VBYU90TVhpclByWj
dMQT09

MATRADE, (2020), Trade performance: April 2020 and January - April 2020. Retrieved on 18
June 2020 from http://www.matrade.gov.my/en/malaysian-exporters/services-for-
exporters/trade-market-information/trade-statistics/181-malaysian-exporters/trade-
performance-2020/5101-trade-performance-april-2020-and-january-april-2020

MATRADE, (2020), Top 10 export products in 2019. Retrieved on 18 June 2020 from
http://www.matrade.gov.my/en/malaysian-exporters/services-for-exporters/trade-market-
information/trade-statistics/28-malaysian-exporters/trade-statistics/4544-top-10-major-
export-products-2019

MATRADE, (2020), Top 10 import products in 2019. Retrieved on 18 June 2020 from
http://www.matrade.gov.my/en/malaysian-exporters/services-for-exporters/trade-market-
information/trade-statistics/28-malaysian-exporters/trade-statistics/4545-top-10-major-
import-products-2019

n.n. (2011), Starting export introduction. Retrieved on 19 November 2011 from
http://www.eximguru.com/exim/Guides/How-To-
Export/Ch_1_Starting_Export_Introduction.aspx

n.n. (2020), Why do countries trade? Retrieved on 18 June 2020 from
https://www.economicsonline.co.uk/Global_economics/Why_do_countries_trade.html

World top exports, (2019), Malaysia’s top trading partners. Retrieved on 8 June 2017 from
http://www.worldstopexports.com/malaysias-top-import-partners/

LEARNING ACTIVITY: MIND MAPPING 19 | P a g e

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Now you are finished your lesson of chapter 1: EXPORT AND IMPORT ENVIROMENT, draw
a mind mapping to review about this chapter.

HOW TO DRAW A BASIC MIND MAP:
Step 1. Write the title of the subject that you are exploring in the center of a page and draw a circle
around it.
Step 2. Draw lines out from this circle as you think of subheadings of the topic or important facts
or tasks that relate to your subject. Label these lines with your subheadings.
Step 3. Dive deeper into the subject to uncover the next level of information (related sub-topics,
tasks or facts, for example). Then, link these to the relevant subheadings.
Step 4. Repeat the process for the next level of facts, tasks and ideas. Draw lines out from the
appropriate headings and label them.

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MIND MAPPING:

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