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Difficulty: MediumForeign Trade Types and Balance of Payments

A commercial enterprise in Ghana imports raw timber from Liberia, stores it temporarily in a free port warehouse without paying local customs duties, and subsequently exports the timber to a furniture manufacturer in the United Kingdom. Which type of international trade is being conducted by the Ghanaian firm?

  1. A
    Bilateral trade
  2. Entrepôt tradeAnswer
  3. C
    Counter-trade
  4. D
    Multilateral trade

Answer

Entrepôt trade
Entrepôt trade (also known as re-export trade) occurs when a country imports goods from one foreign nation with the intent to export them to another foreign nation, often using free trade zones or bonded warehouses to defer or avoid local customs duties.

Step-by-Step Solution

1
Analyze the trade scenario described in the question stem
Goods are imported from one nation (Liberia) into a intermediate nation (Ghana) and subsequently exported to a third nation (United Kingdom) without undergoing local processing or customs duty payment.
Identifying the key operations (importing followed by re-exportation without duty/transformation) defines the specific category of foreign trade.
2
Match the trade operations with standard foreign trade definitions
The practice of importing merchandise into a duty-free port or warehouse for the sole purpose of re-exporting it to another destination is classified as entrepôt trade (re-export trade).
Entrepôt trade acts as a distribution hub for international goods moving between primary producers and ultimate buyers.

Key Concept

Entrepôt Trade / Re-export Trade
Estimated Time:1m 0s
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Topics

Foreign Trade Types and Balance of Payments

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