Reasons for entrepot trade. (Business Studies)
The trade engaged in import of goods from a foreign country not for consumption but for re-exporting them to another country is called entrept trade. The goods so imported are kept in bonded warehouse and after due payment of duties are re-exported. The necessity of entrepot trade emerge when it is not possible to maintain direct trade relationship with the foreign country. The following reasons can be attributed for the growth of entrepot trade:
- Sometimes due to some political factors two countries are not willing to maintain direct trade relationship. In this case entrepot trade will be of immense help.
- There may be a sense of communication which gives rise to entrepot trade.
- Sometimes shipping difficulty arises due to prohibitive freight rates. In such a case, the problem can be solved by entrepot trade.
- When banking facilities are absent direct trade between two countries are affected.
- Direct trade fails when both the countries have developed the attitude of suspicion and confidence.