Pricing Price Clause

Cost Accounting Conversions among prices on CIF, CFR and FOB basis Examples.Examples

Practice Assignment: 某出口公司按 FOB Ningbo 每公吨 900 美元 报出某商品价格，国外客户要求改报 CIF Hamburg, 则应报价多少？（设每公吨运 费为 100 美元，按发票金额加 2 成投保平 安险和受潮受热险，保险费率合计为 1.5% ，报价保留小数点后两位数） (USD )

Methods of Pricing 1. A fixed price is given in the contract. No price adjustment shall be allowed after conclusion of this contract. 2. A provisional price is given. e.g. Unit price: HK$5000 per bale (400 KGS) CIF Hong Kong Remarks: The above is a provisional price, which shall be determined through negotiation between the Buyer and the Seller 15 days before the shipment. 3. A price adjustment clause is given.A price adjustment clause

Payment Currency Payment currency is an important part of a sales contract. Usually there is quite a long time between the conclusion of a sales contract and the settlement of the payment. During this time, the payment currency may depreciate or appreciate in the international financial market, sometimes to quite a great degree. So the exporter need consider the exchange risks while determining what currency is to be used for the payment of the consignment. Usually the payment currency is the evaluation currency, but in many cases, the payment currency is some other currency.

Ways to Prevent Exchange Risks In international trade, the payment currency should first of all be convertible. To prevent exchange risks, the exporter can adopt several ways in determining the evaluation currency and the payment currency. (1) In export business, the exporter generally tries to have hard currency as the evaluation and the payment currency while in import, the importer generally tries to use soft currency. Hard currency is the one that tends to appreciate while soft currency is the one that tends to depreciate.

(2) If soft currency is used in export or hard currency is used in import, we should try to raise the price for the exports or reduce the price in import so as to offset the possible depreciation or appreciation of the currency used. (3) To use both soft currency and hard currency. That is, the payment is to be made partially in soft currency and partially in hard currency. (4) To have an exchange clause （外汇保值条款） in a sales contract.an exchange clause

Commission Commission is what is paid to the agent or middleman or broker for negotiating the sale. It is based on a percentage of the selling price and paid by the seller to the agent or broker after he has received the payment of the goods. In quoting the prices of the goods, the seller may state that his quoted price contains a certain percentage of commission like this: US$1,000 per metric ton CIF Bangkok including 2% commission. (Or: US$1,000 per metric ton CIFC2% Bangkok)

Discount Discount is a favor granted to the buyer by the seller for various purposes, e.g. quantity purchase, regular purchase, early payment, cash payment, etc. This is used by the seller and is thus stated in the quotation of the price: US$1,000 per metric ton CIF New York less/including 5% discount. This means that the buyer is only expected to pay US$950 per metric ton.

Net Price If the price does not contain any commission or discount, it is a net price. This is either stated or not stated in the quotation of the price. If stated, the price quotation will be: US$1,000 per metric ton CIF net New York. Notes: In calculating the commission and discount, it is usually based on the invoice value of the goods. But under CIF, the invoice price contains freight and insurance, the freight and insurance does not go to the benefit of the seller. So the commission and discount are often based on FOB price of the goods.

The Price Clause of a Contract The Price Clause of a Contract comprises the unit price, total amount and remarks about commission and some necessary price adjustments. Unit price often consists of the employed currency, unit price, unit of measurement and trade terms.

Notes - As regards the employed currency, it is not advisable to use only $, which might cause unexpected trouble. - Unit price must be the same as negotiated. - About unit of measurement, in quotation, sales contract, invoice and other documents, the same unit of measurement should be used. - Also, attention should be paid to the use of different systems of measurement units. - Trade term should not be ignored as it is an integral part of unit price.