Module 1: Trade Foundations

How International Trade Works

Every container that arrives at Mombasa or Dar es Salaam, every lorry that crosses Busia or Namanga, is the end of a chain of decisions made by a buyer, a seller and the people they hire to move goods and money between them. If you want to import or export, even in small quantities, you need a clear picture of that chain. Once you can see all its links, you can estimate costs, avoid surprises at the border and talk confidently with suppliers, buyers, banks and agents.

The four flows in every trade

Any cross-border sale involves four things moving at the same time. Keeping them separate in your mind is the single most useful habit you can build.

• Goods: the physical product, packed, loaded, transported, unloaded, inspected and delivered.
• Documents: the commercial invoice, packing list, transport document, certificates and customs declarations that describe the goods and prove who owns them.
• Money: the payment from buyer to seller, plus payments to carriers, insurers, agents, ports and the government.
• Risk and responsibility: who pays for what, and who carries the loss if goods are damaged or delayed at each stage.

Problems almost always appear where these flows do not line up: goods arrive but the documents are wrong, documents are ready but payment has not been released, or nobody agreed who pays for unloading.

The main players

You will deal with more people than just your buyer or supplier. A typical import into East Africa involves:

• The exporter (seller) and the importer (buyer).
• A carrier: a shipping line, airline or trucking company.
• A freight forwarder, who books and coordinates transport.
• A clearing agent (customs broker), licensed to lodge customs declarations on your behalf.
• Banks that send, receive or guarantee payment.
• Government agencies: the customs authority (in Kenya, the Kenya Revenue Authority, KRA), standards bodies such as the Kenya Bureau of Standards (KEBS), and other regulators depending on the product, for example agencies dealing with food, drugs, plant health or communications equipment.
• Insurers who cover cargo while it travels.

The life of a typical shipment

Here is the usual sequence for an import, step by step:

1. You research the product and market, and find a supplier.
2. You agree a price, quantity, quality standard, delivery term (an Incoterm) and payment method, and confirm it in a contract or purchase order.
3. You check what permits, standards certificates and pre-shipment inspections the product needs in your country.
4. The supplier produces and packs the goods; inspections are carried out if required.
5. Goods are handed to the carrier, which issues a transport document such as a bill of lading.
6. Payment is made or released according to the agreed method.
7. Goods arrive; your clearing agent lodges the customs declaration, duties and taxes are paid, and any inspections are completed.
8. Goods are released and delivered to your store.

Exporting follows the same pattern from the other side: you prepare the goods and export documents, clear export customs in your country, and the buyer handles import clearance at destination unless you agreed otherwise.

Worked example: a Nairobi electronics shop

Wanjiru runs an accessories shop in Nairobi and wants to import 2,000 phone cases from a factory in Guangzhou. She agrees a price per piece, a delivery term where the supplier delivers the goods on board a ship in China, and payment of 30 percent deposit with the balance before shipping. She then hires a freight forwarder to arrange sea freight to Mombasa and a clearing agent to handle Kenyan customs. Before the goods ship, she asks her agent which standards requirements apply to the product, so that the right certificate travels with the cargo. When the ship arrives, her agent lodges the declaration through Kenya's electronic single window, she pays the duties and taxes assessed, the container is released and trucked to Nairobi.

Notice how each flow had its own step: goods (factory, ship, truck), documents (invoice, packing list, bill of lading, certificate), money (deposit, balance, freight, duties) and risk (passing to her when goods were on board in China).

Common mistakes to avoid

• Agreeing a price without agreeing a delivery term, so nobody knows who pays freight and insurance.
• Paying the full amount before checking that the supplier is genuine.
• Shipping before confirming which import permits and standards certificates are needed.
• Treating the customs clearance stage as an afterthought; it is often where delays and extra costs appear.
• Relying on figures from a friend or an old shipment. Duties, fees and rules change, so always confirm current requirements with KRA Customs and the relevant regulator.