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1、Chapter ThreeExport Price1SEIB OF GDUFS3.1 Expression of export pricelFour components in a standard format of a price: A code of currency: USD, CAD,CNY, EUR, GBPA number indicating the price unitA unit for measuring quantity: kg, gr, m/t, yd, setA certain trade term: FOB, CFR, CIFlExamples:USD225.30
2、/piece CIF New YorkFOB Guangzhou EUR12.80/set2SEIB OF GDUFS3.2 Pricing considerationslCost Cost of productionlDirect cost: material costs, labour costs, allocation of fixed costs, packing costs, etc.lAdministrative costs: overheadCost of saleslMarketing costs: advertising, sales trip expenses, commi
3、ssions intermediary services Cost of deliverylWarehousing and transporting charge, insurance premium, taxes and tariffs, customs duties 3SEIB OF GDUFS3.2 Pricing considerationslAnticipated profit marginin an absolute numberin a percentage profit marginlCapability of target marketReferring to the con
4、sumption power, income level, supply and demand relationshipThe higher the capital income of the target market, the higher the pricelPayment termsThe lower the financing charges, the higher the risk of paymentlOther factors to be considered foreign exchange rates international market price for simil
5、ar productspolicies and regulations in a particular market area4SEIB OF GDUFS3.3 Calculation of priceTable 3.1 Costing Worksheet5SEIB OF GDUFS3.3 Calculation of price6SEIB OF GDUFS3.3.1 FOB Price Table 3.2 FOB Costing WorksheetlFOB in freight currency FOB in freight currency = (Total Cost + Profit)/
6、Exchange RatelFOB in local currency 7SEIB OF GDUFS3.3.2 CFR PricelIf FOB price is available CFR = FOB + Ocean FreightlOcean freightProvided by shipping linesQuoted as packaged priceOthers like “additionals” and “surcharges”8SEIB OF GDUFS3.3.3 CIF PricelIf FOB price is available CIF = FOB + Ocean Fre
7、ight + Insurance PremiumlIf CFR price is availableCIF = CFR + Insurance Premium lCalculation of Insurance Premium (I)Based on contract value/invoice value +A markup (normally 10%) to cover incidental costsFormula: I = CIF x (1+10%) x Premium Rate (R)lThereforeCIF = CFR + CIF x (1+10%) x Premium Rate
8、 (R) or CIF = CFR / (1 110% x R)9SEIB OF GDUFSConversion of FOB, CFR & CIF PriceslConversion of FOB to other pricesCFR = FOB + FCIF = (FOB + F) / 1 (1+markup) x RlConversion of CFR to other pricesFOB = CFR FCIF = CFR / 1 (1+markup) x RlConversion of CIF to other pricesFOB = CIF x 1 (1+markup) x R FC
9、FR = CIF x 1 (1+markup) x R10SEIB OF GDUFS3.3.4 Price including commissionlNet price = basic costs + profitlCommissionAn incentive payment made to the middlepersons for their intermediary servicesExpressed in a fixed figure or in a percentage ExampleslCFR London GBP100 per doz, including 2% commissi
10、on lUSD200 per M/T CIFC2% London lCIFC3 Hamburg USD100/setlCAD150 per M/T FOB Toronto, including CAD8 per M/T commission11SEIB OF GDUFS3.3.4 Price including commissionlTwo ways of calculating commissionbased on invoice/contract value lC = contract value x C ratebased on FOB or FCA: lUnder such terms
11、 as CFR, CIF, C is calculated before F and I are deductedlFormula:C = price including C (FOB/FCA) x C rateNet price = price including C (FOB/FCA) C = price including C x (1- C rate)Price including C (FOB/FCA) = net price / (1-C rate)12SEIB OF GDUFS3.3.5 Price with discountlDiscounta certain percent
12、of price reduction, a special favor given by the exporter to the importer lReasons for discounting:To increase market competitivenessTo get rid of stocked goodsAs a motivator for B to introduce goods into new marketsAs a compensation for settling disputes or previous orders 13SEIB OF GDUFS3.3.5 Pric
13、e with discountlDiscount expressed in % or fixed numberUSD200 per M/T CIF New York less 3% discountCIFD3 New York GBP200 per M/TEUR200 per unit CIF London including 1% discountlCalculationBased on the contract valueDiscount = contract price x discount rateActual price = contract price discount = con
14、tract price x ( 1- discount rate ) 14SEIB OF GDUFSConversion of PriceNote: markup: percentage 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)x
15、R+ Freight + Insurance+ Ocean FreightCIF1-C%/D%CIFC%/D% price15SEIB OF GDUFS3.4 Understanding the price Export revenue (FOB) Export cost (FOB)Export revenue (FOB)Export Profit Margin 出口盈亏率=X 100%lExport profit margina ratio for measuring profitability of an export transactionStanding for how much pr
16、ofit can be generated for every unit of currency in salesFormula as follows:Note:lFigures calculated in exporters local currencylExport revenue and cost excluding overseas transport charges and insurance costlThe higher the Export Profit Margin, the more profitable the transaction is. 16SEIB OF GDUF
17、S3.4 Understanding the price Export cost in Local CurrencyExport Revenue in Foreign CurrencyECFFE =lExport 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 currencyFormula
18、 as follows:Note: lThe less the ECFFE is, the more profit the exporter can make lSee Example on Page 6517SEIB OF GDUFSWording of Prices in ContractlHKD 100 per doz EXW GUANGZHOU (5 Beijing Road)lCAD 200 per gr FCA Toronto (Airport)lEUR 150 per pr FOB ShanghailJPY 600 per lb FAS TokyolAUD 120 per pc
19、CFR SydneylCHF 300 per set Carriage Paid To 5 Maple Rd. Geneva(sea/air shipment: from Guangzhou to Dubai by sea, then by air to Geneva)lUSD 250 per set Delivered at Sino-Mongolian Frontier (Erlian)lEUR 350 per M/T DES GuangzhoulGBP 500 per unit DEQ London18SEIB OF GDUFS3.5 Communication of PricelSta
20、ges involvedInquiry/Invitation to offerOffer/QuotationCounter-offerAcceptance19SEIB OF GDUFS3.5.1 InquirylDefinition: A potential client asks for information from the counterpart to his intention in buying or selling of a certain commodity.lCan be initiated by both importers and exporterslCan be mad
21、e from one to one or severallExpressing an intention of transaction onlylNo obligation to progress the transaction (inquirer) & no obligation to answer (inquired party)20SEIB OF GDUFS3.5.2 Offer/QuotationlDefinition: a sufficiently definite proposal addressed to one or more specific persons for conc
22、luding a contract, necessarily indicating the intention of the offeror to be bound in case of acceptance. lDeterminants of an offerOne addressed to one or more specific personsSufficiently definite: indicating the goods, expressly or implicitly fixing or making provision for determining quantity and
23、 priceIndicating the intention of the offeror to be bound in case of acceptance21SEIB OF GDUFS3.5.2 Offer/QuotationlWhen it reaches the offeree, it becomes effective lValidity periodBy a fixed date for acceptanceBy a period of time for acceptancelWithdrawal of an offerBefore or at the same time of t
24、he offer reaching the offeree22SEIB OF GDUFS3.5.2 Offer/QuotationlRevocation of an offerBefore offeree dispatches acceptanceException: lWhen it is irrevocable: eg. having fixed time for acceptancelWhen offeree relies on it and has acted.lTermination of an offerLegally revoked by offerorNot accepted
25、by offeree within validity/reasonable periodRejected or counter-offered by offereeOther uncontrollable events23SEIB OF GDUFS3.5.3 Counter-offerlDefinition: a reply to an offer which contains additions, limitations of other modifications.lA refusal or rejection to the original offer original offer te
26、rminates automaticallylCounter-offer can be made for several times before the final acceptance.lPossible aspects of modifications :Price, paymentQuality, quantity of goodsPlace & time of deliveryExtent of one partys liability to the otherSettlement of dispute24SEIB OF GDUFS3.5.4 Acceptance lAn accep
27、tance is an unconditional statement made formally by or an action conducted by the offeree indicating assent to an offer or counter-offer.lAcceptance to be made within the validity period or reasonable timelSilence or inactivity does not in itself amount to acceptance. lEffective at the moment it re
28、aches the offeror within the fixed/reasonable time lA contract is concluded at the moment when an acceptance of an offer becomes effective. 25SEIB OF GDUFSExample: 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
29、 2/7your fax dated 30th: client is interested. But discussion takes time and we need offer to be valid for 10 days. Any possibility 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 airm
30、ail 2KG samples and consider further increase of quantity and decrease of price.E 10/7 your fax dated 9th: samples have been sent. We offer you a special price of 1900. Please reply promptly.26SEIB OF GDUFSI 14/7your fax dated 10th: please further defer the firm offer of 300M/T USD1900 since the sam
31、ples 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 extend 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
32、 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.Example: Price Communication27SEIB OF GDUFSI 25/7your fax dated 24th: difficult to accept your apology. Your fax dated 17th agreed to extend the validity peri
33、od 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 acceptance.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 dur
34、ing 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 fax already accepted your firm offer of 300M/T. Shipment during Aug/Sep is agreed. Otherwise we will claim compensation of USD232950 (2650-1900) X
35、300. Example: Price Communication28SEIB OF GDUFSE 2/8Your fax dated 30th: our fax dated 17th only agreed to defer the offer until 25/7, but with no indication that 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
36、 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 friendly opinion. Thanks.I 4/8your fax dated 2nd: we cannot agree with your suggestion. According to your requirement on 22nd we accepted
37、 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 Beijing. Example: Price Communication29SEIB OF GDUFSE 12/8 Your fax dated 4th: considering our friendship, we decide to sell to yo
38、u 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 Communication30SEIB OF GDUFS
