Merchanting trade, more popularly known as
'intermediary trade', is a common trading model yet
becoming increasingly difficult for government agencies to digest
and accept as a genuine business. Recent times have seen several
huge business houses shut down their merchanting trade verticals
owing to regulatory, tax, and legal pressures. This article
attempts to analyze the different facets of merchanting trade, and
the instrumentalities involved viz., bills of lading and letters of
credit.
I. What is Merchanting Trade?
Merchanting trade is a trade which involves purchase of goods by
an Indian company from a person located in another country (say,
Country A) and sale of the very same goods to a purchaser located
in another country (say, Country B), without the goods physically
entering India. In merchanting trade, the goods move directly from
Country A to Country B.
