Getting to Know Export Import: Definition, Purpose, Benefits and Commodities

Definition of Export and Import – Sinaumed’s must have heard or learned about export and import, right? In a country, export and import activities have an important role and are closely related to economic activities. Then export and import activities become international trade activities carried out between countries.

In simple terms, an activity of selling goods or services abroad is called export. While the activity of buying a product or goods from abroad is called import. Export and import activities are commonly carried out by Indonesia as a developing country.

In order for Sinaumed’s to be able to recall the meaning of export and import, this article will fully explain the meaning, purpose, benefits, and commodities of export and import activities in Indonesia. Check out this article to the end, OK?

Definition of Export and Import

Definition of Export

An activity of removing goods from the customs area is called export. What is the customs area? In simple terms, the customs area is an area belonging to the Republic of Indonesia which consists of water, land and air areas within the Exclusive Economic Zone (EEZ).

The trade system by removing goods from within the country to abroad by fulfilling the applicable provisions can also be referred to as export activities. As one of the economic sectors, export activities play an important role through the expansion of markets in several countries.

It can be concluded that export is an activity or activity of releasing products and goods from within the country to abroad by following standard regulations and applicable provisions. Export activities are generally carried out by a country that is capable of producing goods in large quantities and this amount has been fulfilled domestically.

Why so? If the country is able to meet domestic needs, then it can send goods to countries that are unable to produce them. Then in export activities have a term called exporters.

What is meant by exporter? In general, exporters are activities of legal entities or individuals who carry out export activities. Export activities carried out on a large scale will involve Customs and Excise as a traffic controller for a country.

Each item to be exported has its own conditions depending on the type of goods. Not all individuals or communities are able to carry out export activities because there are several procedures that must be followed.

When compared with import activities, export activities are much easier to carry out. Because import activities have many regulations that must be obeyed, especially in terms of taxes. In export activities, there are only a few products that are subject to export taxes, namely exports of rattan, wood, and crude palm oil.

Export activities are able to create new effective demands that make goods in the domestic market seek innovation to increase productivity. Then export activities can increase economic growth and expand overseas markets for certain goods.

There are two ways that can be done in export activities, namely ordinary exports and exports without L/C. What is the difference between the two? The difference between the two lies in the use of letters of credit as a means of payment.

Ordinary export activities will carry out sales abroad with all the applicable conditions. Then the usual export activities are addressed to buyers using L/C. Meanwhile, export activities without L/C can be carried out if the trade department has issued a special permit.

Export Purpose and Benefits

1. Controlling Product Prices

A country that carries out export activities is able to take advantage of over capacity in a product. That way, the country is considered capable of controlling the price of export products that occur in the country.

Why? Because these domestic products will have cheaper prices when they can be produced easily and in abundance. In order for the country to be able to control prices in the market, it carries out export activities to other countries that need these products more.

2. Growing Domestic Industry

An activity or trading activity in the international scope that is carried out to provide stimulation to requests from within the country is called export. Export activities can also be interpreted as trading activities involving international markets.

A country’s export activities will give birth to other, much larger industries. Increased export demand for a product will have a direct impact on industrial development in a country.

That way, export activities will produce a more conducive business climate. Then the country will accustom itself to compete with intense competition in international trade.

3. Increase the State’s Foreign Exchange

The value of wealth owned by a country in the form of foreign currency is called foreign exchange. For the economic development of a country, export activities or activities will have a positive impact.

The existence of export activities is useful for opening new market opportunities abroad. This opportunity will grow the expansion of the domestic market, investment and foreign exchange in a country.

4. Increase employment opportunities

Export activities will indirectly create new jobs. That way, export activities also help reduce the unemployment rate. In addition, export growth in Indonesia will create jobs that will reduce the poverty rate.

Indonesian Export Commodities

Indonesia as a developing country has the five largest export commodities, namely textile products, rubber, palm oil, cocoa, and forest products.

1. Textile Products

Indonesian people often import textile products from abroad. However, Indonesian original textile products are no less good than other countries.

Indonesia has a relatively large number of textile industries and has succeeded in increasing domestic foreign exchange. Therefore, Indonesian original textile products are ranked in the top 5 export commodities.

2. Rubber

Don’t be surprised if rubber is used as the main commodity in export activities in Indonesia. Why? Because Indonesia itself is the second largest rubber producing country in the world, you know, Sinaumed’s. Indonesian rubber products are consistently sent to several developed countries, namely China, America and Japan.

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3. Oil Palm

Palm oil is a product that is often used as raw material for cooking oil, butter, soap, and some beauty products. Most of the palm oil will be exported in the form of palm oil and palm kernel oil. Indonesian palm oil products are sent to several countries, such as Pakistan, India and China.

4. Cocoa

Sinaumed’s shouldn’t be surprised if cocoa becomes an export activity commodity in Indonesia. It should be noted that Indonesia itself is the third largest cocoa bean producing country in the world. Exported cocoa beans will later be processed into chocolate or other foods.

Cocoa beans which are divided into several qualities will later be selected before being exported. Cocoa bean products that have met the Indonesian National Standard or SNI will be sent abroad.

5. Forest Products

Indonesia as a tropical country has good and abundant wood industry development prospects. Paper and wood pulp are some of the forest products sent abroad.

 

Definition of Import

What is meant by import activities? An activity or activity of marketing goods products from the customs area or buying a product of goods from another country to meet domestic basic needs is called import. Trade that is carried out by entering goods from abroad into the Indonesian customs area and complying with the provisions of laws and regulations is called an import transaction.

Activities to enter goods from one country into the customs territory of another country can also be interpreted as import activities. Import activities involving two countries are represented by the interests between the two countries.

As a simple example, Indonesia, which does not have wheat products, must import wheat products from other countries in order to meet domestic wheat needs.

The process of assistance by customs is needed when the activity of sending imported goods is carried out on a large scale. In simple terms, the government will apply a tax rate on each product to each importer.

These tax rates make imported goods products have relatively high prices because there is a tax burden that must be paid by consumers. When compared with local products, imported goods tend to be more expensive.

Please note, not all products or goods are allowed to enter as imported goods. The Directorate of Customs and Excise has established regulations that allow and prohibit the entry of imported goods. Imported goods that contain elements of pornography, illegal drugs, animals and firearms are prohibited from entering.

Purpose and Benefits of Import

Meeting domestic needs is the main objective of import activities. Export and import activities themselves are a form of communication or cooperation in each country.

In addition to meeting domestic needs, the purpose of carrying out import activities is to increase the balance of payments and reduce the outflow of foreign exchange to other countries. Then import activities are useful for increasing the potential of a country.

Import activities are useful for obtaining goods and services that cannot be produced by a country due to geographical factors and so on. In addition, import activities are beneficial for obtaining raw materials and modern technology. Indirectly, import activities will support the country’s stability.

Based on the description above, it can be concluded that there are three points for the purpose of import activities.

  • Meet domestic needs
  • Strengthening the balance of payments position.
  • Reducing the release of foreign exchange abroad.

 

Export and Import Commodities                                            

A product of goods and services that is able to meet the needs of buyers is referred to as a commodity. The type of commodity to be exported to a country certainly has its own advantages. Then Sinaumed’s needs to know three factors that can influence the superiority of a commodity, namely natural factors, technology, and production costs.

1. Natural Factors

One of the factors that can influence the superiority of a commodity is the geographical conditions of a country. For example, Indonesia as a country with a tropical climate has geographical conditions that allow rubber trees to thrive.

2. Technology Factors

In the process of making a commodity, the use of technology has a major effect on the quality of the product itself. So, it can be concluded that the technological advances used will affect the superiority of a commodity product.

3. Production Cost Factors

In addition to natural and technological factors, the superiority of a commodity is also influenced by production costs. The price of an item is influenced by production costs. Lower production costs will make the price of an item cheaper.

Prohibited goods in Import Export

In Regulation of the Minister of Trade Number 18 of 2021 concerning Export Prohibited Goods and Import Prohibited Goods, which include:

  1. Goods prohibited from export in the forestry sector
  2. Goods prohibited for export in the agricultural sector
  3. Goods prohibited from exporting subsidized fertilizers
  4. Mining export prohibited goods
  5. Goods prohibited from export of cultural heritage
  6. Goods prohibited from export of metal scrap and scrap.

Export-import activities are not immediately carried out. We have a few things to look at. As well as goods that are prohibited in export-import activities. Goods that are prohibited from export must meet the following criteria:

  1. Related to the protection of animals, health, fish, plants, human safety and the environment.
  2. Related to national security, national interests, public interests, including social, cultural, and public morals.
  3. Natural plants and wildlife.

Furthermore, goods that are prohibited from importing are as follows:

  1. It is prohibited to import certain types of sugar
  2. Prohibited import of rice with certain types
  3. Prohibited import of substances that deplete the ozone layer
  4. Prohibited imports in the form of used bags, used sacks and used clothes
  5. Prohibited import of goods based on cooling systems
  6. It is prohibited to import in the form of hazardous and toxic waste or B3 waste. Non-hazardous and toxic waste or non-B3 waste.
  7. Import of hand tools is prohibited
  8. Imports of medical devices containing mercury are prohibited

If you are interested in import and export and transactions, Sinaumed’s can read and get the book which is available at www.sinaumedia.com .

Export and Import Procedures

In exporting an item there are several steps that must be done. Following are the basics in the export procedure, as follows:

1. Sales contract letter or Sales Contract Process

For the first, make an agreement letter in the form of a document between the exporter and the importer. The document contains terms of payment, price, quality, quantity, method of transportation or delivery, insurance and so on.

2. Issuance of Importer Payment Guarantee Letters to Exporters or Letter of Credit (L/C) Opening Process

Following is the next process after the sale and purchase agreement, namely:

  • The importer asks the foreign exchange bank to open  a letter of credit . Guarantee letter for the money to be paid to the prospective exporter according to the agreement stated in  the sales contract .
  • Foreign exchange banks will open  letters of credit in their network of banks in the exporting country. This bank is called an advising bank .
  • The Advising Bank checks the validity of  the letter of credit from the prospective importer’s foreign exchange bank. After that the Advising Bank sends a Letter of Credit as collateral for the exported goods.
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3. Issuance of Shipping or Delivery Documents or Cargo Shipment Process

After the exporter receives the letter of credit from the Advising Bank, the prospective exporter will do the following:

  • Prospective exporters order vessels at import-export shipping companies.
  • Then the prospective exporter is required to make a Goods Export Declaration (PEB) at the Customs Office at the port. In addition, prospective exporters must pay export taxes and additional export taxes at  the advising bank or the bank that we use for export and import services according to what is in  the sales contract .
  • Furthermore, the shipping company loads the goods and submits several proof of shipment documents. The evidence is submitted by the exporter to  the advising bank to forward it to the foreign exchange bank where the importer is located.
  • Importers receive shipping documents if they have made payments to foreign exchange banks. Documents are important for importers because they are a condition for picking up goods. To collect goods, the importer must show proof of payment to the shipping agent for the imported goods.

4. Disbursement of Shipping Documents or Claims on Goods that have been paid by Importers or Shipping Documents Negotiations Process

Is taking money that has been paid by the importer to the bank. Here’s how:

  • After receiving the documents from the shipment, the exporter prepares other documents required by the letter of credit, such as invoices, packing lists, country of origin certificates, packing lists, and others. After it is complete, it is submitted to the Advising Bank to obtain the appropriate payment in the Letter of Credits.
  • The Advising Bank checks the completeness of documents and the accuracy of shipping documents to issue payment money.
  • Complete shipping documents will be sent to the foreign exchange bank in the importing country to receive payment for the exporter
  • The foreign exchange bank checks the completeness of the documents received. Then the foreign exchange bank pays off the payment to the advising bank in Jakarta.
  • After that, the foreign exchange bank submits the document to the importer which will be used to collect the imported goods.

Furthermore, if you want to import an item, then the following are the import procedures that you can do:

  1. If you want to send imported goods from abroad to Indonesia, use a ship or plane.
  2. Request complete original import documents from overseas suppliers to be sent immediately to Indonesia.
  3. Make payment of Import Duty and Import Tax according to the type of goods imported.
  4. Payments can be made through banks that have collaborated with the government in paying import taxes.
  5. Notification to Customs and Excise by using the Goods Import Notification (PIB) document, as well as the complementary import documents.
  6. After that Customs will assign a green, yellow, red, or priority line to your import process.
  7. If your import is approved, Customs will issue an SPPB or Approval Letter for the Release of Goods.
  8. If the SPPB is issued, legally the imported goods have been permitted or legally to enter Indonesian territory.
  9. Then transport imported goods from the customs area (TPS or airport) to your place. Transportation of goods usually uses land transportation such as trucks, buses, cars.

For further knowledge regarding export and import, Sinaumed’s can read and obtain his book which is available at www.sinaumedia.com . As #FriendsWithoutLimits, we always try to provide the best and latest information for you.

Example of Export and Import Policy

In international trade there are several policies in the export and import of goods. The following are examples of export and import policies, as follows:

1. Dumping Politics

Dumping politics is goods or services abroad and setting prices lower than domestic prices. The purpose of this Dumping Politics is to increase overseas markets and kill competition. This method is often done by companies to get a lot of profit.

Dumping politics occurs so that domestic purchase prices do not decrease. There are several types of dumping politics, as follows:

  • Sporadic Dumping
    That is dumping done in the short term. The purpose of sporadic dumping is to prevent goods from piling up in the domestic market due to excess production of goods.
  • Persistent Dumping
    That is a practice that is carried out continuously and permanently, due to market differences between importing and exporting countries or also called international price discrimination.
  • Predatory Dumping
    That aims to immobilize its rivals. When competitors fall, the dumping actors will raise the price of their products as desired.

2. Free trade policy

It is an agreement between the two countries that does not make any regulations regarding the activity of buying and selling goods. So trade between countries allows the flow of commodities to enter and leave the region without any obstacles.

3. Tariffs

Tariffs are taxes imposed on objects or goods that will enter the territory of a country. All goods entering a country or region will be subject to tariffs or taxes according to the value of the goods.

4. Import Restrictions or Import Quotas

Import restrictions are made when a country experiences an increase in its production process. Import quota is a direct limit on the amount of goods imported. This method is carried out so that domestic products are not eroded by the presence of foreign products, so that local traders can compete in a healthy manner.

Besides that, the way to limit the entry of goods is by installing tariff and quota barriers which are useful for improving the balance of a payment.

5. Export subsidies

Export subsidies are government policies to encourage exports of goods and reduce sales of goods in the domestic market. Export subsidies are grants of funds from the government to companies in order to increase the amount of goods exported.

The domestic market uses direct payments, low-interest loans, exporters’ tax wishes, or advertising in other countries with government funding.

To add insight regarding exports and imports, Sinaumed’s can read and obtain his book which is available at www.sinaumedia.com . As #FriendsWithoutLimits, we always try to provide the best and latest information for you.

Author: Yufi Cantika Sukma Divine

 

  1. Getting to Know Export Import: Definition, Purpose, Benefits, and Commodities 
  2. International trade
  3. Negative Impacts of International Trade 
  4. International Trade Theories
  5. Positive Impact of International Trade
  • Type of Sole Proprietorship
  • Type of Group Business
  • Definition of Goods Market
  • Definition of Request and Offer
  • Definition of Money
  • Definition of Inflation
  • Definition of Banks
  • Economic Principles
  • Definition of Scarcity
  • Definition of Macroeconomics
  • Microeconomics
  • Economic Recession
  • Economic growth
  • Economic Globalization
  • People’s Economy
  • Economic agents
  • Economic Problems in Indonesia
  • Economics
  • Types of Economic Systems
  • Types of Business Entities

Well, Sinaumed’s, that’s an explanation of the meaning of export and import . Hopefully this article is useful for Sinaumed’s who are studying international trade.