When buyers and sellers negotiate a deal, the most important thing they care about is the transaction price.
When importers purchase goods from abroad, they usually ask for prices from multiple suppliers, make necessary counter-offers to different quotations, and then compare and analyze the quotations to determine the final supplier. The purpose of importers’ price comparison is to minimize import costs, save foreign exchange expenditures, and improve corporate economic benefits.
Before the import contract is signed, the cost estimate is based on the price negotiated by both parties; after the contract is signed, the price listed in the price clause of the contract shall prevail.
Quotation of imported goods under the common trade terms transaction method:
FOB import goods quotation = FOB import contract price (excluding freight and insurance)
CFR import goods quotation = CFR import contract price (including ocean freight, excluding insurance)
CIF import goods quotation = CIF import contract price (including ocean freight and insurance)
Tips
How to choose import trade terms
The commonly used import trade terms are CFR or CIF. Because the use of FOB has problems such as importer dispatching ships for transshipment, if there are cycle differences that cause delays in shipping schedules, delayed supply of goods or overdue delivery, unnecessary costs will be incurred. It is usually more convenient for overseas suppliers to charter ships and book cargo spaces by themselves. However, at the beginning of cooperation, it is best not to let the exporter arrange transportation directly for convenience. It is best for the importer to let the exporter quote three prices of FOB, CFR and CIF, and at the same time ask the transportation company and insurance company for ocean freight and insurance, compare the two, and decide based on cost, convenience and ability to bear risks.
In import business, especially when importing bulk goods, foreign trade companies strive to use the FOB term. The purpose is to prevent the exporter from colluding with the carrier by taking advantage of the designated carrier to commit fraud.
In actual business, everything should be based on reality, comprehensive consideration, and flexible selection of appropriate trade terms.