In international trade, there are two types of pricing methods: fixed price and non-fixed price.
(1) Fixed price
Fixed price means that the price is determined when the contract is signed, and no matter what happens afterwards, the payment for goods shall be settled at the determined price. This fixed pricing method is conducive to settlement, but if the market fluctuates, one party will suffer losses. If the fluctuation is severe, it may sometimes affect the smooth performance of the contract.
(2) Non-fixed pricing
Some commodities have a long delivery period. If a fixed price is adopted, both parties will bear a greater price risk. In order to reduce risks and prevent breach of contract, the following non-fixed pricing methods can be adopted.
① Non-fixed price, but specified pricing method
For commodities with frequent price changes and large fluctuations, the contract may not specify a fixed price, but a pricing method. For example, “based on the three-month closing price of the commodity at xx exchange, calculated according to the average price of the shipment month plus xx pounds.”
② Provisional price
To avoid price risk, when negotiating forward transactions of certain goods with large market price changes, the buyer and seller can first stipulate a provisional price in the contract, and then the two parties will agree on the final price according to the market price at that time after a certain period of time before the delivery date. This practice is uncertain and is limited to customers with close relationships and reliable credit.
③ Sliding price
Internationally, for transactions of complete sets of equipment, large machinery, large transportation vehicles and other goods, it takes a long time from the signing of the contract to the completion of the contract. During this period, the changes in raw materials, wages, etc. may be large, which will cause the production cost and price of the goods to change greatly. For the sake of fairness, the sliding price method is often used. This method refers to first stipulating a basic price (Basic Price) in the contract, and at the same time stipulating the method of adjusting the basic price in the contract. For example: “The above basic price will be adjusted according to the wage index and price index of x month in 200x announced by xxx (institution) according to the following adjustment formula.”
In addition to the above four pricing methods, sometimes the method of partially fixed pricing and partially non-fixed pricing is also used. This means that in the case of large-scale transactions with installment delivery, in order to avoid the risk of price changes in the long-term delivery part, the buyer and seller adopt the method of fixing the price of the near-term delivery part and temporarily non-fixing the price of the long-term delivery part.