Occasionally, there are customers who ask us to “take care of everything”. Accordingly, more price terms such as DDP (Delivered Duty Paid, which means we are responsible for shipping the goods to the customer’s location and handling the import declaration and payment of import tariffs for the customer) have been generated. However, FOB, CNF, and CIF are still the most commonly used terms, and other terms are just deformations and extensions after adding additional costs.
It can be understood that the so-called FOB is the value of the goods plus the pre-export costs. Adding ocean freight becomes CNF, and adding insurance becomes CIF. CIF plus other procedures and corresponding fees becomes DDP and other extended terms. However, these extended terms are still rarely used in actual operations, so I will not go into details here.
In addition, there is a special term for foreign trade, Commission. Many international traders are open brokers, purchasing products for their customers and extracting commissions in an explicit or implicit manner. The commission that is clearly stated is called explicit commission. The practice is to display the commission ratio in the price with the abbreviation C plus a number, such as CNFNEWYORKC3USD9.00/CTN, which means US$9/box, delivered at the port of New York, excluding insurance, and the price includes a 3% commission. In this way, the middleman can charge the final buyer a 3% commission based on this price. If it is a hidden commission, it will not be shown in the price, but will be paid separately by the exporter according to the agreement after the transaction is completed.
In international trade, the US dollar (abbreviated as USD) is generally used as the settlement currency, and the price should naturally be in US dollars. So, how is a product with an ex-factory price of RMB 117 including tax converted into US dollar FOB and CIF prices? Obviously, calculate the total cost of export RMB under different price terms, and then convert it into US dollars according to the exchange rate (exchange rate) between RMB and US dollars, and add your expected profit, which is the US dollar price.