22.09.

2023

EXPORT PRICE

Learning Outcomes

State the standard form of a price quoted in Int’l

trade
Identify the major factors in pricing decision
Calculate basic prices
Understand the function and calculation of
commission and discount
Explain the ratios used to interpret profitability
Define the four stages of price communication

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Contents

LO1: Introduction
LO2: Pricing in export markets
LO3: Understanding the Price
LO4: Communication of price

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Introduction LO1

Price is one the of the key variables in the any

international trade deal and should incorporate:
• The right quantity
• At the right level of quality
• At the right time
• At the right cost
 Export price should be
 high enough to make a reasonable profit, and
 low enough to be competitive in the market

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Pricing Objectives

• To achieve certain levels of market share, profits, or

returns on investment
• Other specific goal:
Compare prices with the competition
Eliminate the competition
Excess production capacity
Project a high quality image
Survive
 setting the right price for your company

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Pricing and Markup policy

High markup  few competitors and

differentiated products, market power  R & D
expenditures and the skills of the workforce
Ex: Medicines, computers, chemicals, communication
equipment

 Low markup  sectors of increased competitors

Ex: Textiles, food, electic machinery, motor vehicles

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Determinants of export prices

• Internal variables • External variables
Cost of production Supply and demand
Cost of market research Location and environment of
Business travel foreign market
Product modification Economic policies: Exchange
Packing rate, incentives,…
Freight forwarding Home country regulations
Level of product
differentiation

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Pricing in export markets LO2

Pricing methods

Full cost pricing

1. Cost-based
pricing Marginal cost
pricing
Demand based
2. Market-based pricing
pricing Competitive
pricing
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1. Cost based pricing

Based on cost of product + markup rate

Most basic approach, but no optimum method:
 May be too low  dumping, importers may earn a
huge margin
 May be too high  non competitive, parallel
market, rejection of offers

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Full cost (Cost plus) pricing

Adding A markup rate on full cost  start at EXW

Used during the initial stages of internationalization
Benefits:
Ensures fast recovery of investments
Useful for firms dependent on int’l market than domestic
market
Disadvantages:
Overlooks prevailing int’l market price-either
uncompetitive due to high price or low price

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Marginal cost pricing

The price does not cover the product’s total cost 

only the marginal (variable) cost of producing the
product to be sold in the export market  a lower
price in the export market than at home
Used:
Having unsued capacity
Gaining or penetrating int’l market share
 Notes:
Dumping

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2. Market based pricing

Flexible policy  allows the prices to be changed in

accordance with the changes in market conditions
Demand based pricing: export price is based on
what the market could bear
Competitive pricing: export price is based on
competitive pressures in the market

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Dumping

• Ranges of dumping
• Predatory dumping  intentional selling at a loss to
increase market share
• Unintentional dumping  occurs when market factors
cause the import’s selling price to fall below prices in the
exporter’s home market
• Remedies for dumping
• Antidumping duty  are levied on imported goods
sold at less than fair market value
• Countervailing duties  are imposed on imports which
are subsidized in the exporter’s home country

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Price including commission

Net price = basic cost + profit

Commission:
- An incentive payment made to the middlepersons for
their intermediary service
- Express in fixed figure or a percentage  CFRC5%
Example:
USD100/doz CFR NewYork port, including 2%
commission
USD 200/doz CFR2% NewYork port
USD 200/doz CFR2 NewYork port

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Price including commission

Calculation commission (C)

C= contract value x rate (%)
Or C = price incl C x C %
Price:
Net price = price incl. C x (1-%C)
Price incl. C = Net price/(1-%C)

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Price including commission

Ex 1: USD100.00/MT CFRC5%, C=?

C = USD 100 x 5% = USD 5
 CFR net?

Ex 2. USD 200.00/case FOB Cat Lai port,

Incoterms 2020, O/F= USD22/case  CFRC5% ?

Ex 3 USD 150/pc FOB Cat Lai port, Incoterms

2020, O/F= USD15/pc, R=1%  CIFC3% ?

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Price with discount

Discount:
- A special favor given by the seller to the buyer
- Express in fixed figure or a percentage  CFRD5%
Example:
USD100/doz CFR NewYork port less 2% discount
USD100/doz CFR NewYork port including 2%
discount
USD 200/doz CFRD2% NewYork port

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Price with discount

Calculation discount (D)

D= contract value x rate (%)
Price:
Actual price = Contract price – D
= Contract price/(1-D%)

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Export Costing Sheets

Useful tool which services as a check list to ensure

that no cost has be omitted
Your freight forwarder  transport rates, cost
of documentation, insurance, packing and
labelling costs etc…
(see page 59)

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Price-followers

A “top-down” calculation Deducting all the

elements to arrive at the price “Ex Works” 
enabling you to establish if you can meet your
competitors’ market-prices at cost-price level.
A “bottom-up” calculation  dividing the
supporting budgets over the total number of items
to be sold  to help you setting your final price in
the target market.

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Price-followers

The information you need for price calculations is:

1. Your export cost price per unit product
2. Your objectives for sakes and profits
3. The transportation costs from factory to port
4. The cost of long haul shipping to your target market
5. The costs of insurance, of documentation, of credit /
payment terms
6. The mark-ups of the distributive trade in your target
market
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7. The VAT or sales rate tax
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Top-down calculation example

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Bottom-up calculation example

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Understanding the Price LO3

• Export Cost for Foreign Exchange

• Import Cost for Foreign Exchange

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Export Cost for Foreign Exchange

(ECFFE)
Export cost for foreign exchange ratio (Re) is
calculated the total amount of home currency cost
(Ce) to an unit of foreign currency turn-over (Te) on
FOB basic.

Ce
Re =
Te
If Re < E/R  export?
If Re > E/R  export?
E/R: Commercial exchange rate
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Import Cost for Foreign Exchange (ICFFE)

Import cost for foreign exchange ratio (Ri) is

calculated the total amount of home currency turn-
over (Ti) to an unit of foreign currency expense (Ci)
on CIF basic.
Ti
Ri =
Ci

If Ri < E/R  import?

If Ri > E/R  import?
E/R: commercial exchange rate
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Communication of price LO4

Communication is one of the most important

aspects of any international trade transaction.
Most transmission of information/ communication
is done through the issuance of documentation
A contract is concluded when an acceptance of an
offer becomes effective.

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Price Negotiations

Be aware that price is only one part of a

comprehensive package  Avoid early price
concessions.
Carefully consider concessions  reduce price or
profitability  discounts, payment terms, product
features
Know conditions in importer’s market.
Focus negotiations first on substantive issues (quality
and delivery), then on price.

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Marketing materials
1 Seller 2 Buyer

Inquiry/ Request for quote (RFQ)

3 Offer

Price quote/ Pro-forma Invoice

Counter-
4
offer
Purchase Order
5 Acceptance
Confirmation
Contract
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Business Letter

Inquiry
Counter-offer
Offer

Order
Acceptance

Confirmation

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INQUIRY/ ENQUIRY

Buyer states simply and concisely what he wants

Not only price, but also other relevant issues such
as: sample, payment, shipment... 6 Articles
Buyer has no legal engagement
If supplier is whom buyer has not previously dealt
with
 Tell: How buyer has obtained the supplier
 Introduce: some details of buyer’s business

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How to write

1. Opening: Tell the supplier how / why you get to

know him or her
2. Message: Introduce yourself  Tell the supplier
what exactly you want him or her to send you
3. Ending: Express your wishes

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Know offeror?

3 sources

On the basis of
Recommendations Exhibitions, Trade Fairs
Advertisement
(1) (3)
(2)

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Example

Recommendations (1)
• Your name and your address have been recommended
(given) to us by VCCI.
• We were advised by… that you were supplying…/
that you could supply…..
• We were advised by … that you are looking for an agent in
Vietnam to represent you
• We are indebted for your address to the….(name
of organization)
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Example

Advertisements (2)
We have read (seen) your advertisement in + Issue
No. + of Name + of publication:
Ex: We have read (seen) your advertisement in this
month’s issue of The Economist

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Example

On the basis of Exhibitions, Trade Fairs (3)

We attended (visited), (paid a visit to)+Name
of the exhibition + held (organized by …. (in,
at)…….. and had good impression on/ and
were deeply impressed by your selection of
goods (range of products) displayed
(demonstrated/ shown) on your stand (booth).

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Message

Say who you are and what you are doing

• We are … based in…
• Our company is a subsidiary of… and we
specialize in …
• We are regular buyers of the commodity and….
• We are one of the major companies in textile and
garment industry.
• We are a big company specializing (dealing) in…

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CuuDuongThanCong.com https://fb.com/tailieudientucntt

Message

State what you wish the supplier to do

Could you please send us your latest catalogue and
current price list?
Could /Would /Will you please quote prices CIF?
We would be grateful (appreciate it) if you could
send us samples (provide us with samples).
Could you guarantee delivery within 2 weeks?
We are particularly interested in your terms of
payment.
We would appreciate a sample of each of the items
listed above
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Expressions: Explain what is required

• We are most interested in …. (increasing /

developing/ extending the sale of….)
• We wonder if you could help us/ advise us/ send
us/ let us have……
• What we have in mind is …. ( to develop this line
of items in Vietnam)
• What we need is …. (latest catalogue)
• We would like you to …..

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Ending

Hope for better future

• We look forward to / receiving your prompt/ early
reply
• We would appreciate your prompt / proper
attention to this
• We hope to hear from you shortly/ ASAP
• We hope that you will be able to make an offer

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Re: Softwood for Pulp and Paper

Dear Sirs,
Your name and address have been given to us by the Japan-
Vietnam Trade Association.
First of all we would like to take the opportunity of introducing
ourselves as one of the country's leading trading companies dealing
in all kinds of materials for industry such as woodchips, iron ore,
coal, scaps, etc...
At present we are extensively engaged in importing hardwoods and
now proposing to extend our business into the softwood area and
are investigating the possibility of importing from Vietnam.
We would therefore, be obliged if you will kindly let us have your
offer of the goods in question. Please quote your latest price, the
price is preferred to be quoted CFR HCMC port, and the most
favorable terms of payments.
We are looking forward ro receiving your reply.
Yours faithfully, Code: 706026 Chapter 3

Re: Softwood for Pulp and Paper

Dear Sirs,
Your name and address have been given to us by the Japan-
Vietnam Trade Association.
First of all we would like to take the opportunity of introducing
ourselves as one of the country's leading trading companies
dealing in all kinds of materials for industry such as woodchips,
iron ore, coal, scaps, etc...
At present we are extensively engaged in importing hardwoods
and now proposing to extend our business into the softwood area
and are investigating the possibility of importing from Vietnam.
We would therefore, be obliged if you will kindly let us have
your offer of the goods in question. Please quote your latest
price, the price is preferred to be quoted CFR HCMC port, and
the most favorable terms of payments.
We are looking forward ro receiving your reply.
Yours faithfully, 14
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OFFER

Supplier make in writing usually state:

 Description of goods
 Quality
 Quantity 6 mandatory
 Packing and marking articles
 Price
 Payment
 Shipment
Offer may be firm or w/o engagement:
 Passive vs Active offer
 Free vs Firm offer
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Free offer

• An offer w/o engagement  do not bind the seller

• Sent to one or more specific persons
• If the offeree accepts  need seller’s confirmation
having sold or not

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Offer without engagement for grinding

machine
Dear Sirs,
We wish to inform you that we have started producing a new model of
Grinding Machine DA75 in which we think you may be interested.
From the Catalogue enclosed you will see that the machine is of high
efficiency, performance and is comparatively easy to handle. Most of the
good points of the ealier types have been incorporated in the model. In
addition, it has many advantages as compared with the existing models.
We are pleased to offer you those machines at the price of USD 245 per
unit. The price is to be understood to be CIF Haiphong. We feel sure that
our offer will be of interest and assistance to you and we shall be glad to
send you further information should you require it.
This offer is made without engagement on your part. 15
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Yours faithfully,
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Firm offer

An offer with offeror’s engagement w/i a stated

period of time/ dead line.
Express/ imply these words: firm offer, for
acceptance within X days or similar qualifying
words
Once accepted, firm offer can not be withdrawn 
contract concluded

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Firm Offer for Drilling Rigs

Dear Sirs,
We thank you for your enquiry of 8th Sept. for our drilling rigs MdB 32.
We are pleased to make you an offer, subject to acceptance within 21
days for 10 machines at the price of USD 12 per unit CIF Saigon port
including packing.
Payment is to be made against a Bill of Lading, an invoice, and a Work's
Test Certificate, by an Irrevocable Letter of Credit to be opened in our
favour with the Commercial Bank, London, for the full value of the
goods intended for the shipment.
The machines can be despatched within 6 months from receipt of your
formal order. We enclose a list of firms whom we have been supplying
with our machines for the past few years for your reference.
Yours faithfully
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CISG/ Article 15

(1) An offer becomes effective when it reaches the

offeree.
(2) An offer, even if it is irrevocable, may be
withdrawn if the withdrawal reaches the offeree
before or at the same time as the offer.

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CISG/ Article 20

(1) A period of time for acceptance fixed by the offeror in a telegram or

a letter begins to run from the moment the telegram is handed in for
dispatch or from the date shown on the letter or, if no such date is show,
from the date shown on the envelope. A period of time for acceptance
fixed by the offeror by telephone, telex or other means of instantaneous
communication, begins to run from the moment that the offer reaches
the offeree.
(2) Official holidays or non-business days occurring during the period
for acceptance are included in calculating the period. However, if a
notice of acceptance cannot be delivered at the address of the offeror on
the last day of the period because that day falls on an official holiday or
a non-business day at the place of business of the offeror, the period is
extended until the first business day which follows.
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CISG/ Article 22

An acceptance may be withdrawn if the withdrawal

reaches the offeror before or at the same time as the
acceptance would have become effective.

CISG/ Article 23

A contract is concluded at the moment when an

acceptance of an offer becomes effective in
accordance with the provisions of this Convention.

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How to write?

1. Opening: Express thanks for the enquiry +

Express pleasure in offering
2. Message: Mention 6 terms and conditions at least
+ More terms and conditions (If any)
3. Ending: Express hope for orders and future
business

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Opening

Free offer:
- We thank you very much for your enquiry dated…
of…. asking for/for…and are happy/glad/pleased to
make you an offer on the following terms and
conditions
- We… and take great pleasure in making you an
offer.

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Opening

Firm offer:
We thank you … to make you an offer which is
valid until October 20xx… on the following terms
and conditions
….. and take pleasure in offering firm until
December 20xx…

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Opening

Useful expressions for a firm offer:

• We are pleased to make you an offer which is valid
until…
• We are pleased to offer firm until…..
• This offer remains open for acceptance within 15
days.
• This offer is firm for 20 days
• This offer is subject to acceptance within …
• This offer is valid until….

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Message

1. Names of goods/ Commodity:

Woolen sweaters
Washing machine TD 236
2. Quality and specifications:
•As per enclosed catalogue No. 234/DL
•Quantity: 1,000 pieces/ units
3. Price:
- Unit price is ….. including packing
- Total value/amount:

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Message

4. Packing: in customary export packing/in

seaworthy cases
5. Shipment: in one lot/ shipment in the middle of
December 20xx
6. Payment: in US dollar by an irrevocable letter of
credit at sight to be opened at/ through/ by the Bank
for Foreign Trade of Vietnam (Vietcombank) 15 days
prior to the /shipment, valid for 45 days to the
account of Lloyd’s Bank, London, in favour of the
seller for the total value of the goods to be shipped.

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Ending

Express hope for orders and future business

We assure that any of your orders will be given our
best attention.
We look forward to the opportunity of doing
business with you.
We look forward to the opportunity of being of
service to you
We look forward to your order soon/ your early
order.
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Dear Sirs,
We have received your inquiry dated 25th Sept. for which we thank you. We are pleased to
offer the items you are looking for on the terms and conditons as follows:
1. Commodity: Frozen Shrimps
2. Quality: as per sample sent to you and certificate of quality by Vinacontrol
3. Price: US$18000 MT CIF Kobe including packing
4. Quantity: 50 MT
5. packing: in export customary cartons of42 kgs net each
6. Shipment: in two shipments
Dec. 2002: 30 MT
Jan. 2003: 20 MT
7. Payment in USD by irrevocable LC to be opened through Kobe Commercial Bank,
Kobe, 15 days prior to the first shipment, valid for 90 days to the account of
Techcombank, Hanoi in our favour of total value of the goods to be shipped; partial
shipment is allowed and transhipment and re-export are not allowed.

You can see that the price of frozen shrimps in the world market is higher than that of the
goods we are offering. But because you have been our regular customer, we, therefore, are
maintaining old price/ price of the previous transactions.
We are looking forward to receiving your early order.
Yours faithfully
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Counter offer

Offer can not meet all satisfaction of the offeree 

he may amend and add some new terms and
requirements.
Counter-offer is the refusal of an offer  The
offer from one party will be of no effect after the
other party’s counter-offer  a new offer needed

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Acceptance

The absolutely necessary step for successful

business conclusion and contract.
The offeree absolutely accepts all points offered
by the other party within the validity time when
receiving the offer or counter offer.
It is an intention of agreement by the offeree to
place an order or sign a contract with the offeror.

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CISG/ Article 19
(1) A reply to an offer which purports to be an acceptance but
contains additions, limitations or other modifications is a
rejection of the offer and constitutes a counter-offer.
(2) However, a reply to an offer which purports to be an
acceptance but contains additional or different terms which do
not materially alter the terms of the offer constitutes an
acceptance, unless the offeror, without undue delay, objects
orally to the discrepancy or dispatches a notice to that effect.
If he does not so object, the terms of the contract are the terms
of the offer with the modifications contained in the
acceptance.
(3) Additional or different terms relating, among other things, to
the price, payment, quality and quantity of the goods, place
and time of delivery, extent of one party's liability to the other
or the settlement of disputes are considered to alter the terms
of the offer materially.
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CISG/ Article 18

(1) A statement made by or other conduct of the offeree

indicating assent to an offer is an acceptance. Silence or
inactivity does not in itself amount to acceptance.
(2) An acceptance of an offer becomes effective at the moment
the indication of assent reaches the offeror. An acceptance is not
effective if the indication of assent does not reach the offeror
within the time he has fixed or, if no time is fixed, within a
reasonable time, due account being taken of the circumstances
of the transaction, including the rapidity of the means of
communication employed by the offeror. An oral offer must be
accepted immediately unless the circumstances indicate
otherwise.

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Dear Sir,
We have received your letter of August 1, offering us 2,000
dozens of No. 208 ladies’ pajamas at USD26.00 per dozen. In
reply, we regret to inform you that our client has found your
price much too high. Information indicates that similar articles
have been sold there at approximately USD19.00 per dozen.
We don’t deny that your pajamas are slightly better in design,
but your price difference should in no case be as big as
USD7.00 per dozen. To step up the trade, we, on behalf of our
clients, counteroffer the following, subject to your reply here
on August 3, 2007: 2000 dozens of No.208 ladies’ pajamas at
USD22.00 per dozen CIFC 2% San Francisco, other terms
remaining the same as stated in your letter dated August1, 2007.
As the market is declining, we recommend your acceptance.
Yours sincerely,
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Order

Order is used to order goods in accordance with

the amount which is required by company
Cover letter  explain the contents of the order
There are two ways in making order:
1. Order without using official order form  an order
letter
2. Order by using official order form a purchase
order (P.O)

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An order letter

Made by only writing a letter with all details of

orders by directly enclosed it in that letter
The content must clear, brief and direct to the
purpose

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An official order form

Used in great companies

Cover letter
A purchase order (PO) usually consists of these
rows:
 No. (number)
 Description/ items
 Quantity
 Unit price
 Amount
 Delivery date
 Terms of payment
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Covering letter

1. Opening
Acknowledge receipt of the offer
Express pleasure in enclosing an order form
Ex: We thank you for your letter dated … and take
pleasure in enclosing herewith an order

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Covering letter

2. Message:
Ex:
• We would like to make clear the following points:
• We would like to draw your attention to the
following points:
• We would like to emphasize the following points:
3. Ending:
We look forward to your sales confirmation/order
confirmation soon

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INDONESIAN MODERN OFFICE EQUIPMENT LTD

Jln.Samudra Raya No. 35B
Bandung 23001

Your ref: MP/DC/ 21

Our ref : AM/ L/ 2B
27th November, 2021
Mr. William C Parker
Marketing Manager
International Corporation Ltd
Jln. Rafflesia no. 23 Jakarta
Dear Mr. William,
Subject: Purchase Order No.365 T.
Thank you for your letter of 15 November, enclosing your catalogue, price-list, and terms of
payment. We have studied your catalogue very carefully and are very pleased with the quality of
the typewriters
you offered.
We enclose our purchase order and shall pay by D/A at 30 days sight.

Yours Sincerely,

Alan P. Mardinata
Salles Manager
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INDONESIAN MODERN OFFICE EQUIPMENT LTD

Jln. Samudera Raya No. 35B
Bandung 23001
Purchase Order No.356T
To. International Corporation Ltd.
Jln. Rafflesia no.23 Jakarta Date: 26thNovember,2021

QTY Item Catalogue N0: Unit price $/ pc Total $

100 Silver reed 254 250.00 25,000.00

150 Canon 126 200.00 30,000.00
50 IBM 232 300,00 15,000.00

100 Remington 305 150.00 15,000.00

Total 85,000.00
Delivery date Required Payment:

10 December 2021 D/A at 30 days sight

Code: 706026 Chapter 3 Allan P. Martadinata

Confirmation

If the exchange of letters or faxes or telexes

eventually leads to the conclusion of business 
should confirm the deal
A Sale/Buy Confirmation  a document regarded
as a contract
A letter confirming an order or a sale should be
very simple as the relative Confirmation or
Contract or is almost always enclosed.

Code: 706026 Chapter 3

Sales Confirmation
Dear Sirs,
Thank you for your order No.86-AM007. Enclosed is our Sales
Confirmation No. 86-AM007CB in duplicate, of which one copy is
to be countersigned and returned for our file.
We wish to point out that the stipulations in the relevant credit
should strictly conform to the terms stated in our sales confirmation
thus avoiding subsequent amendments
We hope you can establish the covering L/C in April 2009. You
may rest assured that we shall make up your order upon receipt of
the credit and effect the shipment within the time you requested.
Thank you for your cooperation and we are looking forward to your
further orders.

Yours sincerely, 24
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Review and Application

Code: 706026 Chapter 3

Review Questions

1. High markup are common in industries with

relatively few competitors. Discuss and provide
examples
2. The large influx of shrimp imports into US from Asia
and Latin America depressed wholesale prices by
over 40% between 1997-2002. despite such lower
prices, shrimp entrées at some seafood restaurants in
the US rose by about 28% during the same period.
Discuss why prices are not aligned with costs?
3. What are the difference between marginal and cost
based pricing? Code: 706026 Chapter 3

Review Questions

4. When writing a letter of offer, in which case should

the seller write a firm offer letter? When should you
write a free offer?

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Case study
On March 1, 20xx, company B of Malaysia asked to buy company
S (Vietnam) 5,000 MTs of grade I coffee beans. The next day, S
sent an offer of USD 450.00/MT FOB Cat Lai Port, Incoterms 2020
payment by L/C A/S open 10 days after contract date and goods
will be delivered in May 20xx, this offer is valid for 20 days. On
March 21, 20xx, B sent a letter of acceptance of S's offer. On March
30, B opened an L/C A/S valid until May 30, requesting delivery in
the middle of May 20xx. On May 1, 20xx, S proposed to raise the
price to the market value at the time of May and delivery in June
20xx and S stated that if the price is not revised accordingly, it will
not deliver the goods because the contract has not been officially
signed. On June 1, 20xx, B sued S for not performing the contract.

Code: 706026 Chapter 3

Case study
Questions:
a. Is company S's statement on May 1 correct? Why?
b. Company B said that it had to compensate the third
company USD 50,000 for not delivering coffee on
time because company S did not deliver. Do you
think this claim is justified? Why?
c. In the situation of volatile coffee prices, what should
company S do to protect its interests?

Code: 706026 Chapter 3

Exe 1. ECFFE

Export price: Usd 800/ MT CFR Le Harve port,

Incoterms 2020
Ocean freight: Usd 30/ MT
Costs upto on board: Vnd11.500.000/ MT
ECFFE ?

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Exe. 2: ECFFE

Export item A at 1,500 USD/MT FOB Cat Lai

port, Incoterms 2020
Purchasing/packaging: 23.500.000 VND/ MT
Pre-carriage + loading on board: 4.000.000 VND/
MT
Export tax: 5%
Profit: 15%
Income tax: 25%
Interest rate (1.5%/ 3 tháng)

Code: 706026 Chapter 3

Exe. 3: ICFFE

Import item A at 1.600 USD/MT, domestic selling

price at 32.000.000 VND/MT.

• Import tax: 10%

• Income tax: 25%
• Profit: 15%
• Interest rate: 1.5%/ 3 months

Code: 706026 Chapter 3

Exe. 4: offer choice

Supposed you receive 03 offers asf:

Offer 1: Usd 750/ MT CIF HCMC port
Offer 2: Usd 719/ MT CFR HCMC port
Offer 3: Usd 715/ MT FOB Pusan port, Korea
 Choose the appropriate offer. Where as:
 O/F from Pusan port-HCMC port: Usd 30/ MT
 Insurance rate: R= 0.25%
 Other conditions and terms are the same

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Exe. 5: offer choice

Supposed you receive 02 inquiries from a Japanese
customer for X asf:
Proposal 1: FOB price at Usd35/MT, payment term:
80% pay for 1 month after shipment date, 10%- 8
months after shipment date, 10%-12 months after
shipment date.
Proposal 2: CIF price at Usd57/MT, payment term:
30%- 2 months after shipment date, 30%-6 months
after shipment date, 40%-10 month after shipment date
Known as:
Seafreight rate HCMC-TOKYO: 21 USD/MT
Insurance rate: 0.25%
SIBOR: 6%/ year Code: 706026 Chapter 3

Exe. 5: offer choice

Supposed you receive 02 offer from a foreign

customer for commodity X asf:
• Offer 1: unit price 1,000$/MT, 50% by T/T right
after shipment date, 20% -2 months after shipment
date, 30% - 5 months after shipment date
• Offer 2: unit price 1,000$/MT, 40% by T/T right
after shipment date, 10%- 2 months after shipment
date, 50% - 4 months after shipment date

Code: 706026 Chapter 3

CREDIT COEFFICIENT (k)

• With the same credit condition:

The average credit term (T) = Σxi .ti / Σxi
Or: T = Σpi .ti
Where as:
xi the amount for No.i
ti the time of payment for time i
pi the ratio of payment for time i
pt =p0 + p0 . T. r
k=p0/pt

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Exe. 6: price incl. comm.

ABC Co., Ltd offered to sell goods at "USD100 per

case CIF New York, Incoterms 2020". The importer
requested a revised quote for CFRC5%. The premium
rate for insurance was 1.05% and mark-up for
insurance was 10%. To get the same export revenue,
what would ABC's new offer be?

Code: 706026 Chapter 3

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