State Manufacturing Export Pricing
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Transcript of State Manufacturing Export Pricing
LS170:X Case STUDY
July 14, 2014
SERVE MARKETShost government’s requirementsREMAIN Competitivetest foreign marketsactual or prospective demand
FOB FactoryFASFOB Port of originCFR Foreign PortCIF Foreign Portdelivered at frontier (DAF)
FOB Factory
Supplier COST
Supplier COST
FAS
Supplier COST
FOB PORT OF ORIGIN
Supplier COST
CFR foreign port
Supplier COST
CIR foreign port
Supplier COST
*Delivered at frontier
OPEN ACCOUNT€$
1. Establish a contract
EXPORTER IMPORTER
EXPORTER’s BANK
IMPORTER’s BANK
€$
EXPORTER IMPORTER
EXPORTER’s BANK
IMPORTER’s BANK
€$
2-3. DOCUMENTS+EXPORTS are DELIVERED
EXPORTER IMPORTER
EXPORTER’s BANK
IMPORTER’s BANK
€$ 4. IMPORTER PAYS through channels
4. EXPORTER RECEIVES PAYMENT
LETTER OF CREDITEXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
1. Establish a contract
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
2. Request for issuance
3. ISSUANCE
4. ADVICE of L/c ISSUANCE
5-6. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
EXPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
7. negotiates L/c and submits req’d original documents8. PAYS L/C Amount less charges
9. Orig documents delivered
IMPORTER
DOCkS
EXPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
10. reimburses exporters bank
IMPORTER
11. Pays Bank12. Documents are released
DOCkS
EXPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
10. reimburses exporters bank
IMPORTER
11. Pays Bank12. Documents are released
13. BUYER receives goods
DOCUMENTARY DRAFT sigHt Draft or time draft
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
1. Establish a contract
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
3-4. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
5. submits documents+draft
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
3-4. COPY OF DOCUMENTS+ EXPORTS are DELIVERED
5. submits documents+draft
6. SENDs Docs + Draft
7. Pays for the draft and charges
(sight); “accepts” (time)
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
DOCkS
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
9. BUYER receives goods
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
9. BUYER receives goods
10. REmits payment (if sight)
11. CREDITS ACCOUNT OF SELLER
EXPORTER IMPORTER
NOMINATED BANK
ISSUING BANK BANK
€$
8. Documents are released
9. BUYER receives goods
10. REmits payment (if sight)
11. CREDITS ACCOUNT OF SELLER 12. Pays Bank
at maturity
13. REmits payment at maturity (if TIME)
14. CREDITS ACCOUNT OF SELLER, at maturity
State manufacturing: export pricing
HOW WOULD YOU CALCULATE
Deduct: Sales Expense Ad & Promotion Expense
21,500 x (.20)= 4,300 21,500 x (.10)= 2,150 6,450 21,500-6,450=15,050
PORT of entry price?
HOW WOULD YOU CALCULATEPORT of entry price?
Base Price 15,050.00 Containerization 200.00 Inland freight less handling 798.00 Forwarding and Documentation 90.00 Ocean freight 2,633.00 Commercial risk insurance 105.00 18,876.00
HOW SHOULD THEY BILL THE CLIENTLETTER OF CREDIT? TIME DRAFT?LETTER OF CREDIT? TIME DRAFT?
HOW SHOULD THEY BILL THE CLIENTLETTER OF CREDIT? TIME DRAFT?LETTER OF CREDIT? TIME DRAFT?
HOW SHOULD THEY BILL THE CLIENTLETTER OF CREDIT? TIME DRAFT?LETTER OF CREDIT? TIME DRAFT?
BECAUSE OF high percentage in defaulting on loans, the company should still insist on a letter of credit.