1、Chapter ThreeChapter ThreeExport PriceExport PriceSEIB OF GDUFS23.1 Expression of export price Four components in a standard format of a price:A code of currency:USD,CAD,CNY,EUR,GBP A number indicating the price unit A unit for measuring quantity:kg,gr,m/t,yd,set A certain trade term:FOB,CFR,CIF Exa
2、mples:USD225.30/piece CIF New York FOB Guangzhou EUR12.80/setSEIB OF GDUFS33.2 Pricing considerations Cost Cost of production Direct cost:material costs,labour costs,allocation of fixed costs,packing costs,etc.Administrative costs:overhead Cost of sales Marketing costs:advertising,sales trip expense
3、s,commissions intermediary services Cost of delivery Warehousing and transporting charge,insurance premium,taxes and tariffs,customs duties SEIB OF GDUFS43.2 Pricing considerations Anticipated profit margin in an absolute number in a percentage profit margin Capability of target market Referring to
4、the consumption power,income level,supply and demand relationship The higher the capital income of the target market,the higher the price Payment terms The lower the financing charges,the higher the risk of payment Other factors to be considered foreign exchange rates international market price for
5、similar products policies and regulations in a particular market areaSEIB OF GDUFS53.3 Calculation of priceTable 3.1 Costing WorksheetSEIB OF GDUFS63.3 Calculation of priceSEIB OF GDUFS73.3.1 FOB Price Table 3.2 FOB Costing Worksheet FOB in freight currency FOB in freight currency=(Total Cost+Profit
6、)/Exchange Ratel FOB in local currency SEIB OF GDUFS83.3.2 CFR Price If FOB price is available CFR=FOB+Ocean Freight Ocean freight Provided by shipping lines Quoted as packaged price Others like“additionals”and“surcharges”SEIB OF GDUFS93.3.3 CIF Price If FOB price is available CIF=FOB+Ocean Freight+
7、Insurance Premium If CFR price is available CIF=CFR+Insurance Premium Calculation of Insurance Premium(I)Based on contract value/invoice value+A markup(normally 10%)to cover incidental costs Formula:I=CIF x(1+10%)x Premium Rate(R)Therefore CIF=CFR+CIF x(1+10%)x Premium Rate(R)or CIF=CFR/(1 110%x R)S
8、EIB OF GDUFS10Conversion of FOB,CFR&CIF Prices Conversion of FOB to other prices CFR=FOB+F CIF=(FOB+F)/1 (1+markup)x R Conversion of CFR to other prices FOB=CFR F CIF=CFR/1 (1+markup)x R Conversion of CIF to other prices FOB=CIF x 1 (1+markup)x R F CFR=CIF x 1 (1+markup)x RSEIB OF GDUFS113.3.4 Price
9、 including commission Net price=basic costs+profit Commission An incentive payment made to the middlepersons for their intermediary services Expressed in a fixed figure or in a percentage Examples CFR London GBP100 per doz,including 2%commission USD200 per M/T CIFC2%London CIFC3 Hamburg USD100/set C
10、AD150 per M/T FOB Toronto,including CAD8 per M/T commissionSEIB OF GDUFS123.3.4 Price including commission Two ways of calculating commission based on invoice/contract value C=contract value x C rate based on FOB or FCA:Under such terms as CFR,CIF,C is calculated before F and I are deducted Formula:
11、C=price including C(FOB/FCA)x C rate Net price=price including C(FOB/FCA)C =price including C x(1-C rate)Price including C(FOB/FCA)=net price/(1-C rate)SEIB OF GDUFS133.3.5 Price with discount Discount a certain percent of price reduction,a special favor given by the exporter to the importer Reasons
12、 for discounting:To increase market competitiveness To get rid of stocked goods As a motivator for B to introduce goods into new markets As a compensation for settling disputes or previous orders SEIB OF GDUFS143.3.5 Price with discount Discount expressed in%or fixed number USD200 per M/T CIF New Yo
13、rk less 3%discount CIFD3 New York GBP200 per M/T EUR200 per unit CIF London including 1%discount Calculation Based on the contract value Discount=contract price x discount rate Actual price=contract price discount =contract price x(1-discount rate)SEIB OF GDUFS15Conversion of PriceNote:markup:percen
14、tage of the contract valueR:Insurance premium rateFactory priceFac price+All other costsExpected profitExchange rate FOB priceFOBC%/D%priceCFR priceCFRC%/D%priceCIF priceFOB1-C%/D%CFR1-C%/D%CFR1-(1+markup)xR+Freight+Insurance+Ocean FreightCIF1-C%/D%CIFC%/D%priceSEIB OF GDUFS163.4 Understanding the p
15、rice Export revenue(FOB)Export cost(FOB)Export revenue(FOB)Export Profit Margin 出口盈亏率=X 100%l Export profit margin a ratio for measuring profitability of an export transaction Standing for how much profit can be generated for every unit of currency in sales Formula as follows:Note:l Figures calculat
16、ed in exporters local currencyl Export revenue and cost excluding overseas transport charges and insurance costl The higher the Export Profit Margin,the more profitable the transaction is.SEIB OF GDUFS173.4 Understanding the price Export cost in Local CurrencyExport Revenue in Foreign CurrencyECFFE=
17、l Export cost for foreign exchange(ECFFE)Interpreting profitability with currency factor Sanding for how many units of local currency the exporter should pay to make one unit of foreign currency Formula as follows:Note:l The less the ECFFE is,the more profit the exporter can make l See Example on Pa
18、ge 65SEIB OF GDUFS18Wording of Prices in Contract HKD 100 per doz EXW GUANGZHOU(5 Beijing Road)CAD 200 per gr FCA Toronto(Airport)EUR 150 per pr FOB Shanghai JPY 600 per lb FAS Tokyo AUD 120 per pc CFR Sydney CHF 300 per set Carriage Paid To 5 Maple Rd.Geneva(sea/air shipment:from Guangzhou to Dubai
19、 by sea,then by air to Geneva)USD 250 per set Delivered at Sino-Mongolian Frontier(Erlian)EUR 350 per M/T DES Guangzhou GBP 500 per unit DEQ LondonSEIB OF GDUFS193.5 Communication of Price Stages involved Inquiry/Invitation to offer Offer/Quotation Counter-offer AcceptanceSEIB OF GDUFS203.5.1 Inquir
20、y Definition:A potential client asks for information from the counterpart to his intention in buying or selling of a certain commodity.Can be initiated by both importers and exporters Can be made from one to one or several Expressing an intention of transaction only No obligation to progress the tra
21、nsaction(inquirer)&no obligation to answer(inquired party)SEIB OF GDUFS213.5.2 Offer/Quotation Definition:a sufficiently definite proposal addressed to one or more specific persons for concluding a contract,necessarily indicating the intention of the offeror to be bound in case of acceptance.Determi
22、nants of an offer One addressed to one or more specific persons Sufficiently definite:indicating the goods,expressly or implicitly fixing or making provision for determining quantity and price Indicating the intention of the offeror to be bound in case of acceptanceSEIB OF GDUFS223.5.2 Offer/Quotati
23、on When it reaches the offeree,it becomes effective Validity period By a fixed date for acceptance By a period of time for acceptance Withdrawal of an offer Before or at the same time of the offer reaching the offereeSEIB OF GDUFS233.5.2 Offer/Quotation Revocation of an offer Before offeree dispatch
24、es acceptance Exception:When it is irrevocable:eg.having fixed time for acceptance When offeree relies on it and has acted.Termination of an offer Legally revoked by offeror Not accepted by offeree within validity/reasonable period Rejected or counter-offered by offeree Other uncontrollable eventsSE
25、IB OF GDUFS243.5.3 Counter-offer Definition:a reply to an offer which contains additions,limitations of other modifications.A refusal or rejection to the original offer original offer terminates automatically Counter-offer can be made for several times before the final acceptance.Possible aspects of
26、 modifications:Price,payment Quality,quantity of goods Place&time of delivery Extent of one partys liability to the other Settlement of disputeSEIB OF GDUFS253.5.4 Acceptance An acceptance is an unconditional statement made formally by or an action conducted by the offeree indicating assent to an of
27、fer or counter-offer.Acceptance to be made within the validity period or reasonable time Silence or inactivity does not in itself amount to acceptance.Effective at the moment it reaches the offeror within the fixed/reasonable time A contract is concluded at the moment when an acceptance of an offer
28、becomes effective.SEIB OF GDUFS26Example:Price CommunicationE 30/6 Your fax dated 29th:we offer until 4/7 here 200M/T CIF USD1950,immediate shipment and payment by sight L/C.I 2/7your fax dated 30th:client is interested.But discussion takes time and we need offer to be valid for 10 days.Any possibil
29、ity to increase quantity and to decrease price?E 3/7Your fax dated 2nd:quantity can be increased to 300M/T,offer valid until 15/7 hereI 9/7your fax dated 3rd:please airmail 2KG samples and consider further increase of quantity and decrease of price.E 10/7 your fax dated 9th:samples have been sent.We
30、 offer you a special price of 1900.Please reply promptly.SEIB OF GDUFS27I 14/7your fax dated 10th:please further defer the firm offer of 300M/T USD1900 since the samples are not received yet.Decision will be available one week after the receipt of samples.E 17/7 Your fax dated 14th:we agree to exten
31、d the validity period to 25/7.I 22/7your fax dated 17th:we accept your offer of 300M/T CIF 1900.Please arrange immediate shipment,payment by L/C.Certificate of Origin and seaworthy packing should be provided.E 24/7 your fax dated 22nd:market changed.Goods had been sold before we received your fax.Ex
32、ample:Price CommunicationSEIB OF GDUFS28I 25/7your fax dated 24th:difficult to accept your apology.Your fax dated 17th agreed to extend the validity period to 25th.Your withdrawal of firm offer goes against practice.If you want to adjust your price we can negotiate with client with no guarantee of a
33、cceptance.E 29/7 Your fax dated 25th:we are sorry but the 300M/T have been sold already.The best we can do now is to provide 200M/T2650,shipment during Aug/Sep,subject to your reply here by 31st.I 30/7your fax dated 29th:we cannot accept your new offer and reserve our right of arbitration.Our 22nd f
34、ax already accepted your firm offer of 300M/T.Shipment during Aug/Sep is agreed.Otherwise we will claim compensation of USD232950(2650-1900)X 300.Example:Price CommunicationSEIB OF GDUFS29E 2/8Your fax dated 30th:our fax dated 17th only agreed to defer the offer until 25/7,but with no indication tha
35、t it was a firm offer.Our old customers all know that orders should be subject to our confirmation.To be friendly we offered you another 200M/T 2650,however,to our surprise you were considering arbitration.In this case we are willing to offer you 200M/T by an appropriate price.Please give your frien
36、dly opinion.Thanks.I 4/8your fax dated 2nd:we cannot agree with your suggestion.According to your requirement on 22nd we accepted your offer.The order must be executed under the condition that 300M/T1900.To be friendly we accept shipment during Aug/Sep.Otherwise we will carry out arbitration in Beij
37、ing.Example:Price CommunicationSEIB OF GDUFS30E 12/8 Your fax dated 4th:considering our friendship,we decide to sell to you 200M/T in Sep and 100 M/T in Oct,without providing C.O.,packing as each 75KGs in a single-layered gunny-bag and irrevocable L/C for payment.Please find details in our dispatched letter.I 13/8 your fax dated 12th:we agree 200M/T in Sep and 100 in Oct.L/C will be opened immediately.We will try to compensate for your troubles this time by future orders.Example:Price Communication
