Unit 4 You Can Make Your Life a Bed of Roses

How to Determine the Price for Imports and Exports?         - Target on cost and profit - Target on rivals -Target on market

Ways of Quotation

•Seller –the highest price Buyer-the lowest price

•Seller- the lowest price Buyer-the highest price

•Take the first offer

•Specific offer

How to Determine the Price for Imports and Exports?

Fixed pricing ( 固定价格）Eg. USD 58.50 Per Dozen CIF LondonFlexible pricing ( 非固定价格）

Partial fixed price and partial unfixed price （部分固定、部分不固定价格）Floating pricing（规定滑动价格）Eg. Long term production such as large machinery.

Commission •Quotation with commission•Quotation with no commission• Commission= Quotation with commission X commission rate Net Price= Quotation with commission – commission

Eg. USD27.50 per piece CIFC5 New York

Discount

•Quantity Discount•Special Discount•Turnover Discount

Eg. USD 280.00 per M/T CIF Bombay less 3% Discount

International Payments

International payments are a financial activity conducted among different countries in which payments are effected or funds are transferred from one country to another in order to settle accounts, debts, chains, etc. emerged in the course of political, economic or cultural contacts among them.

Price Structure of Incoterms

•FOB= producing and buying cost + inland cost + net profit•CFR= producing and buying cost + inland cost + net profit + outland cost = FOB + outland costCIF = producing and buying cost + inland cost + net profit + outland cost + outland insurance = FOB + outland cost + outland insurance

Price Structure of Incoterms

•FCA= producing and buying cost + inland cost + net profit•CPT= producing and buying cost + inland cost + net profit + outland cost = FCA + outland costCIP = producing and buying cost + inland cost + net profit + outland cost + outland insurance = FCA + outland cost + outland insurance

Price Structure of Incoterms

•FOB= producing and buying cost + inland cost + net profit•CFR= producing and buying cost + inland cost + net profit + outland cost = FOB + outland costCIF = producing and buying cost + inland cost + net profit + outland cost + outland insurance = FOB + outland cost + outland insurance

Three basic methods of payment in foreign trade

Cash in advance__ in cases where the buyer is unknown or when the political and economic conditions in the buyer’s country make the payment uncertain.Payment against documents __ the shipping documents are exchanged with the bank representing the importer. That includes documentary Bills of Exchange and Documentary Letters of Credit.

Three basic methods of payment in foreign trade

Open account __ when there is complete trust between the seller and the buyer. The seller dispatch the goods, debits the purchaser’s account and sends his invoice. At some agreed period of time, the buyer sends a remittance to the seller to settle the outstanding balance on the account.

Three basic methods of payment in foreign trade

Payment against documents __ the shipping documents are exchanged with the bank representing the importer. That includes documentary Bills of Exchange and Documentary Letters of Credit.

Credit Instruments

A credit instrument is a written or printed paper by means of which funds are transferred from one person to another. Credit instruments most commonly used in international payments and settlements are bill of exchange( 汇 票 ), promissory notes （ 本 票 ） and cheques （ 支 票 ） . These three are also known as negotiable instruments. Credit instruments may also take such forms as traveler’s cheques( 旅行支票 ), certificates of deposit （可转让定期存单） , treasury bills （国库券） , treasury bonds( 国库债券 ), etc.

Functions of a negotiable instrument•As a means of payments__ Under non-cash settlements, negotiable instruments to be commonly used as a payment instrument are bills of exchange, promissory notes and cheques, among which bills of exchange are most widely used in international payments and settlements.•As a credit instrument•As a negotiable instrument__ it may be negotiated to another person either by mere delivery or by endorsement and delivery. All rights and property embodied therein can pass free from the transferor to the transferee, provided the latter takes the instrument in good faith and for value.

Parties to a negotiable instrument

Drawer 出票人 Drawee 付款人 Payee 收款人 Acceptor 承兑人 Endorser 背书人 Endorsee 被背书人 Acceptor for honour 参加承兑人 Guarantor 保证人 Holder 持票人 Holder for value 付对价持票人

Drawer 出 票 人 ___ is the person who draws a bill of exchange or a cheque upon the drawee for the payment of a certain amount of money.Drawee 付 款 人 __ is the person upon whom a bill of exchange or a cheque is drawn. (he is also known as the addressee of a draft.)Payee 收款人 __ is the person to whose order the drawee is to make payment or to whom the money is to be paid.Acceptor 承 兑 人 — If and when the drawee agrees and assents to the order in writing addressed to him on a bill of exchange by signing his name on its face, indicating that he will pay on due date, the drawee will become an acceptor.

Endorser 背书人 __ when a payee or a holder signs his name on the back of an instrument for the purpose of transferring it to another person, he is called an endorser.Endorsee 被 背 书 人 __ is the person to whom an instrument is endorsed. He is the holder of an instrument which has been transferred by an endorser.Acceptor for honour 参加承兑人 __ is the person who himself is not a party liable on a bill of exchange but with the consent of the holder may intervene and accept the bill supra protest( 拒 付 前 ), for the honour of any party liable thereon and for the honour of the person for whose account the bill is drawn.

Guarantor 保证人 __ is the person who guarantee the acceptance and the payment of a bill of exchange, though he is not a party liable thereon.Holder 持 票 人 __ is the possessor of an instrument, namely the payee, endorsee or bearer.Holder for value 付对价持票人— is the person who possesses an instrument for which value has been given by himself or by some other person.

•Bill of Exchange ( 汇票） __ or frequently referred to as a draft, is defined as “ an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at a fixed or determinable future time a sum certain in money to or to the order of a specified person or to the bearer.”Drawer, drawee, payee.

Classification of Bill of Exchange

•Banker’s Draft•Commercial Draft

•Clean Draft•Documentary Bill

•Sight Draft•Time Bill or Usance BillAt ---days after sightAt ---days after dateAt ---days after date of Bill of LadingFixed date

Usage of Draft

• “ Pay A Co. only”, “Pay ----Co. not negotiable” “Pay ---Co. or order”, “Pay to the order of ----Co”. “Pay Bearer”, “Pay Holder”• Acceptance•Endorsement ( 背书）•Discount （贴现）

•Promissory Note Banker’s --- Commercial --- •Check Cash---- Account ---- •RemittanceM/T, T/T, D/D

• Collection

Financial DocumentsCommercial Documents

1. Documents against Payment (D/P) 付款交单 D/P at sight D/P after sight2. Documents against Acceptance (D/A) 承兑交单