When importing goods, importers can have difficulties with methods of payment, insurance and with trade restrictions such as tariffs.

Mark scheme

Marking points from the official mark scheme (May/June 2019). The mark or mark type is shown in brackets.

1. [1] Letter of credit / documentary credit (1) guarantee of payment via bank (1)
2. [1] Electronic/wire/online transfer (1) speedy transfer of funds (1)
3. [1] Bill of exchange (1) unconditional order from the person owed the money (1)
4. [1] Bank draft (1) cheque drawn on bank not individual/firm (1)
5. [1] International money order (1) payment for a pre-specified amount of money (1)
6. [1] Credit card (1) buy goods now but defer payment to card company until later (1)
7. [1] Debit card (1) pay for goods with money from current account (1)
8. [1] E.g. if goods are lost at sea (1) the importer cannot insure for more than the goods are worth, otherwise the importer will make a profit.
9. [1] E.g. a fire in a (bonded) warehouse (1) the importer cannot claim for more than the warehouse is worth (1)
10. [1] E.g. if an aircraft is insured with more than one company (1) each insurance company will share the amount of loss (1)
11. [1] E.g. if a truck is written-off in an accident (1) the truck becomes the property of the insurance company (1)
12. [1] E.g. if goods are stolen at the airport (1) the importer will receive compensation (1)
13. [1] E.g. if an importer insures goods with two companies (1) each insurance company will share the compensation (1)
14. [1] Tariffs act as a tax on imported goods, causing the price of imported goods to rise, leading to a fall in demand as consumers buy cheaper domestic goods instead – it they are available.
15. [1] Tariffs have a favourable effect on the balance of payments of the importing country – they reduce imports and increase the export surplus so can improve a deficit in the balance of payments, putting a country in a stronger financial position.
16. [1] Tariffs protect domestic industry from foreign competition so an infant industry can grow into an economically strong industry which can fully compete in the world market. This helps the country's economy to grow as more jobs/wealth will be created.
17. [1] Tariffs provide revenue to the government which can be spent on e.g. infrastructure, education or healthcare to improve a country's economy and standard of living.
18. [1] If tariffs were abolished, trade would be easier and cheaper for importers and consumers and there would be greater access to a wider choice of goods, as well as all the benefits of international trade.
19. [X] Evaluation: Putting tariffs on products protects against foreign competition, but it does not increase international trade / globalisation / market size / people's standard of living so it will depend on what the country/government most wants to achieve. Some countries without resources are unable to produce goods and services so have to depend entirely on expensive imports, so they will have a harder time with high prices even for necessities.