Avoid pitfalls when export pricing.

• Author: CLAYTON, GRAHAM
• Position: Brief Article

It is the movement of goods from one country to another, and all that is required to facilitate their satisfactory conveyance, that differentiates export pricing from domestic pricing.

Simply put, there are more things involved and potentially more things that can go wrong, and these have to be taken into account when setting and quoting export prices.

The movement of good internationally can involve: special packing and labelling requirements, the production of numerous multi-copy documents, insuring the goods against a wide variety of perils and contingencies, the arrangement of domestic and international carriage, including handling and storage en route, as well as numerous other tasks including tracking, inspection and notification services.

The exporter can quote price in such a way as to make the buyer responsible for all such tasks, for specified tasks, or else for none of these tasks.

We are talking here about the convenience or service aspect of quoting export prices that can make a firm's goods more saleable to prospective foreign buyers. Some foreign buyers want no involvement in moving goods internationally, arranging insurance, dealing with customs, etc. They want a price that covers delivery of the goods to their doorstep with no hassles. Alternatively some foreign buyers want a price quote based on the export goods being picked up either at the Canadian exporter's place of business or at some specified point of delivery in Canada. They will handle everything else.

It should be recognized that there is a sort of self-insurance dimension to an exporter, or their contracted agents, handling the export packing, shipping, insurance and related matters. If things go wrong in moving the goods abroad due to errors made by the foreign buyer or their agents then the exporter may. experience delays in getting paid, or buyer refusals to accept or pay for shipments owing to losses, damages, financial penalties, etc., incurred with the shipment.

The issue of who is to be responsible for what, vis-a-vis moving the goods from the seller to the buyer, is something that has to be agreed upon by the exporter and the foreign buyer. The exporter then sets the selling price to cover the costs of whatever conveyance responsibilities they have committed to. This is where Incoterms come in.

Incoterms (international commercial terms) are a set of standardized export pricing terms developed by the ICC (International Chamber of Commerce) and endorsed by...