Setting Price

Compute Exporter’s Selling Price Nelson, p. 31 Ex. 2-5 Manufacturer’s (Factory) Cost + Your Commission + Freight forwarder fee + Freight to port + Consular invoice (?) + Export packing/labeling + Foreign distributor/agent fee + Marine Insurance + Transportation Exporter’s Selling Price

Compute Your Selling Price (1 of 2) Nelson, p. 31 Ex Manufacturer’s (Factory) Cost –Obtain from Exercise 8 + Your Commission –Typical commissions between 7% to 20% of manufacturer’s cost; typically the higher the price of the good, the lower the commission. –Assume 15% of manufacturer’s cost + Freight forwarder fee –Most forwarders charge a basic fee for their services and then add on other charges for expenses, e.g. faxes, telephone, documentation preparation –Assume $300 + Freight to port –Based on weight ___ and measure___ –Assume $500 + Consular invoice –Document required by some countries which allows clearance of shipment into that country –Assume $0

Compute Your Selling Price (2 of 2) Nelson, p. 31 Ex Export packing/labeling –Assume $300 + Foreign distributor/agent fee –Typical commissions between 5 % and 20% –Assume 5% of manufacturer’s cost + Marine Insurance –Generally sold warehouse to warehouse (i.e. from sender’s factory to receiver’s platform –Based on value of the shipment charges (freight handling, etc.) plus 10% –E.g. Ocean cargo insurance costs about $.50 to $1.50 per $100 of invoice value –Assume $0. + Transportation to named destination –Select ocean ___air __ truck__ –Based on weight___ and measure____ –Assume $2,000 + TRC Terminal receiving charges or wharfage –Steamship line charges to load goods on board vessel –Assume $50 = Exporter’s Selling Price or Landed Cost (CIF)

For Most Common Incoterms TermDefinitionRiskCostInclude on Quotation EXW Ex Works Buyer arranges for pick up of goods at the seller’s location. Seller is responsible for packing, labeling, and preparing the goods for shipment on a specified date or time Buyer assumes all risk Buyer pays all transportation costs N/A FAS Free Alongside Ship (over water only) Buyer arranges for the ocean transport. Seller is responsible for packing labeling, preparing the goods for shipment, and delivering the goods to the dock. Seller: until the goods reach the dock. Buyer: from dock to destination Buyer: all ocean transport costs. Seller is responsible for costs associated with transporting the goods to the dock. Costs of transporting goods to the dock.

For Most Common Incoterms TermDefinitionRiskCostInclude on Quotation FOB* Free On Board FOB should also never be used unless you specify what and where such as "FOB ocean vessel at New York City Seller arranges for ocean transport of the goods, preparing the goods for shipment, and loading the goods onto the vessel. The goods ship ocean freight collect. Buyer: Once the items are on board Seller: Wharfage (charges to load the goods onto the ship) and freight forwarder fees. Costs, until on board CIF Cost, Insurance, and Freight Seller has the same responsibilities as when shipping FOB with addition of a marine insurance policy and shipping costs Seller:; until the shipment reaches the overseas dock. Seller insurance and freight forwarder fees. Insurance, freight and cost of goods

Manufacturer’s (Factory) Cost Assume $5000 Manufacture’s Shipping Costs to Exporter’s Works (Pomona) Assume $500 Your CommissionAssume 15% of manufacturer’s cost Freight forwarder fee Assume $300 Freight to port (Long Beach)Assume $200 Export packing/labelingAssume $300 Foreign distributor/agent feeAssume 5% of manufacturer’s cost Transportation to named destinationAssume $2,000 Marine InsuranceAssume $2,000 TRC Terminal receiving charges or wharfage Assume $50 Sample Exercise - Calculate Selling Price