The price of foreign trade goods has a unique pricing method. As mentioned above, most foreign trade transactions are conducted through ocean transportation. Therefore, in order to facilitate the pricing of both buyers and sellers, the seaport terminal is usually used as the place of delivery of goods and the price is calculated based on this, such as “delivery at Shanghai Port, China” or “delivery at Rotterdam Port, Netherlands”. Of course, if both parties agree, inland locations can also be used as the place of delivery and the price is calculated based on this. Therefore, when quoting, the place of delivery of goods must be stated.
The price is of course very different for delivery at different locations. This is because the goods are transported from the factory to the hands of foreign customers, and due to the many intermediate links, the costs are also correspondingly messy and numerous. In addition to the payment for goods, there are also freight charges, customs declaration (abbreviated as customs declaration) fees, commodity inspection fees, terminal loading and unloading fees, etc., and these fees are different when trading with different countries. Considering that international trade middlemen are likely to purchase from country A, transport to the port of country B, and then sell to country C, this is even more troublesome and it is difficult to calculate the price using ordinary trade methods.
Specifically, from the time your product leaves the factory to the time it is delivered to a foreign seaport terminal or a certain location designated by a foreign customer through ocean shipping in containers, you may incur the following types of expenses or all of them:
1. The ex-factory price of the product.
2. The cost of declaring the product for inspection by the Import and Export Commodity Inspection and Quarantine Bureau and issuing a quality certificate, i.e., the commodity inspection fee.
3. The cost of declaring the product for export to the Chinese Customs, i.e., the export customs clearance fee.
4. The cost of renting a container to load the product and transport it to a Chinese seaport terminal, as well as various miscellaneous expenses incurred at the Chinese terminal (this will be described in detail in the ocean freight section of the fifth day tutorial of this book).
The above are the procedures and expenses before the goods are transported to a Chinese seaport terminal for export.
5. The freight for transporting the product to a foreign seaport terminal by an ocean-going cargo ship, i.e., the ocean freight.
6. The insurance premium for applying for international cargo transportation insurance.
The above are the procedures and expenses for transporting the product to a foreign seaport terminal.
7. Miscellaneous fees charged when unloading containers at foreign terminals and other terminals.
8. Fees for declaring imports to foreign customs, that is, import declaration fees, and sometimes import tariffs need to be paid.
9. Fees for transporting goods from foreign seaport terminals to the customer’s designated location.
The above are the procedures and fees before the goods are delivered to the customer.
In addition, because the payment for goods needs to go through the bank, the bank will also charge a certain handling fee.
Analyzing the above cost structure, it is not difficult to find that the seaport terminal can be used as the reference point for dividing the costs. Another advantage of doing so is to distinguish responsibilities. For example, if the Chinese terminal is used as the reference point, we will bear the responsibility up to point 4, responsible for transporting the goods to the Chinese terminal in good condition and conducting commodity inspection and customs declaration. The customer will be responsible for other matters. If the goods are damaged during ocean transportation, the customer will seek compensation from the shipping company and insurance company. If the foreign terminal is used as the reference point, we will bear the responsibility up to point 6, responsible for delivering the goods to the foreign terminal in good condition.
The vast majority of foreign trade stops here, and only a few require us to do point 9. After all, as locals, customers are familiar with local conditions, and it is more convenient and cost-effective to do points 7 to 9 than for us. However, with the development of international trade, foreign trade has penetrated into every corner of the world. Some foreign buyers who are not familiar with foreign trade or have difficulty in doing it for some reason hope to save some trouble and receive the goods directly at their “own doorstep”, so they require us to do the whole package more often than before. However, the mainstream still stops at point 4 or 6.