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1、Chapter Three,Export Price,SEIB OF GDUFS,2,3.1 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 Examples: U
2、SD225.30/piece CIF New York FOB Guangzhou EUR12.80/set,SEIB OF GDUFS,3,3.2 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 ex
3、penses, commissions intermediary services Cost of delivery Warehousing and transporting charge, insurance premium, taxes and tariffs, customs duties,SEIB OF GDUFS,4,3.2 Pricing considerations,Anticipated profit margin in an absolute number in a percentage profit margin Capability of target market Re
4、ferring to 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 ma
5、rket price for similar products policies and regulations in a particular market area,SEIB OF GDUFS,5,3.3 Calculation of price,Table 3.1 Costing Worksheet,SEIB OF GDUFS,6,3.3 Calculation of price,SEIB OF GDUFS,7,3.3.1 FOB Price,Table 3.2 FOB Costing Worksheet,FOB in freight currency FOB in freight cu
6、rrency = (Total Cost + Profit)/Exchange Rate,FOB in local currency,SEIB OF GDUFS,8,3.3.2 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 GDUFS,9,3.3.3 CIF Price,If FOB p
7、rice is available CIF = FOB + Ocean Freight + 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) Therefo
8、re CIF = CFR + CIF x (1+10%) x Premium Rate (R) or CIF = CFR / (1 110% x R),SEIB OF GDUFS,10,Conversion 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
9、 CIF to other prices FOB = CIF x 1 (1+markup) x R F CFR = CIF x 1 (1+markup) x R,SEIB OF GDUFS,11,3.3.4 Price 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
10、 Examples CFR London GBP100 per doz, including 2% commission USD200 per M/T CIFC2% London CIFC3 Hamburg USD100/set CAD150 per M/T FOB Toronto, including CAD8 per M/T commission,SEIB OF GDUFS,12,3.3.4 Price including commission,Two ways of calculating commission based on invoice/contract value C = co
11、ntract 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: 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
12、OF GDUFS,13,3.3.5 Price with discount,Discount a certain percent of price reduction, a special favor given by the exporter to the importer Reasons 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 compensatio
13、n for settling disputes or previous orders,SEIB OF GDUFS,14,3.3.5 Price with discount,Discount expressed in % or fixed number USD200 per M/T CIF New York less 3% discount CIFD3 New York GBP200 per M/T EUR200 per unit CIF London including 1% discountCalculation Based on the contract value Discount =
14、contract price x discount rate Actual price = contract price discount= contract price x ( 1- discount rate ),SEIB OF GDUFS,15,Conversion of Price,SEIB OF GDUFS,16,3.4 Understanding the price,Export profit margin a ratio for measuring profitability of an export transaction Standing for how much profi
15、t can be generated for every unit of currency in sales Formula as follows:,Note: Figures calculated in exporters local currency Export revenue and cost excluding overseas transport charges and insurance cost The higher the Export Profit Margin, the more profitable the transaction is.,SEIB OF GDUFS,1
16、7,3.4 Understanding the price,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: The less the ECFFE is, the more profit the export
17、er can make See Example on Page 65,SEIB OF GDUFS,18,Wording 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 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 London,
