State Manufacturing Export Pricing
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Transcript of State Manufacturing Export Pricing
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LS170:X Case STUDY
July 14, 2014
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SERVE MARKETShost government’s requirementsREMAIN Competitivetest foreign marketsactual or prospective demand
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FOB FactoryFASFOB Port of originCFR Foreign PortCIF Foreign Portdelivered at frontier (DAF)
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FOB Factory
Supplier COST
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Supplier COST
FAS
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Supplier COST
FOB PORT OF ORIGIN
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Supplier COST
CFR foreign port
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Supplier COST
CIR foreign port
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Supplier COST
*Delivered at frontier
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OPEN ACCOUNT€$
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1. Establish a contract
EXPORTER IMPORTER
EXPORTER’s BANK
IMPORTER’s BANK
€$
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EXPORTER IMPORTER
EXPORTER’s BANK
IMPORTER’s BANK
€$
2-3. DOCUMENTS+EXPORTS are DELIVERED
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EXPORTER IMPORTER
EXPORTER’s BANK
IMPORTER’s BANK
€$ 4. IMPORTER PAYS through channels
4. EXPORTER RECEIVES PAYMENT
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LETTER OF CREDITEXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
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1. Establish a contract
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
2. Request for issuance
3. ISSUANCE
4. ADVICE of L/c ISSUANCE
5-6. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
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EXPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
7. negotiates L/c and submits req’d original documents8. PAYS L/C Amount less charges
9. Orig documents delivered
IMPORTER
DOCkS
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EXPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
10. reimburses exporters bank
IMPORTER
11. Pays Bank12. Documents are released
DOCkS
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EXPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
10. reimburses exporters bank
IMPORTER
11. Pays Bank12. Documents are released
13. BUYER receives goods
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DOCUMENTARY DRAFT sigHt Draft or time draft
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
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1. Establish a contract
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
3-4. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
5. submits documents+draft
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
3-4. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
5. submits documents+draft
6. SENDs Docs + Draft
7. Pays for the draft and charges
(sight); “accepts” (time)
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
DOCkS
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
9. BUYER receives goods
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
9. BUYER receives goods
10. REmits payment (if sight)
11. CREDITS ACCOUNT OF SELLER
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EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
9. BUYER receives goods
10. REmits payment (if sight)
11. CREDITS ACCOUNT OF SELLER 12. Pays Bank
at maturity
13. REmits payment at maturity (if TIME)
14. CREDITS ACCOUNT OF SELLER, at maturity
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State manufacturing: export pricing
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HOW WOULD YOU CALCULATE
Deduct: Sales Expense Ad & Promotion Expense
21,500 x (.20)= 4,300 21,500 x (.10)= 2,150 6,450 21,500-6,450=15,050
PORT of entry price?
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HOW WOULD YOU CALCULATEPORT of entry price?
Base Price 15,050.00 Containerization 200.00 Inland freight less handling 798.00 Forwarding and Documentation 90.00 Ocean freight 2,633.00 Commercial risk insurance 105.00 18,876.00
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HOW SHOULD THEY BILL THE CLIENTLETTER OF CREDIT? TIME DRAFT?LETTER OF CREDIT? TIME DRAFT?
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HOW SHOULD THEY BILL THE CLIENTLETTER OF CREDIT? TIME DRAFT?LETTER OF CREDIT? TIME DRAFT?
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HOW SHOULD THEY BILL THE CLIENTLETTER OF CREDIT? TIME DRAFT?LETTER OF CREDIT? TIME DRAFT?
BECAUSE OF high percentage in defaulting on loans, the company should still insist on a letter of credit.