ĐẠI HỌC FPT CẦN THƠ

Chapter 7 c

Pricing in International
Trade
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 Nội dung bài học

•Determinants of Export Prices

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•Pricing in Export Markets

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•Terms of Sale
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 Export Competitiveness
v Price and nonprice factors:
- Reliability
- Delivery time
- Product reliability
- Product quality
- Design flexibility
- Support services
- Financial services

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 Export Pricing Objectives

vMarket share

vProfits

vTargeted level of return on investment

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 Pricing and Markup Policy
vHigh markups (few competitors,
differentiated products)

vLow markups (increased competition)

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 Determinants of Export Price
vInternal variables
- Cost of production
- Cost of market research
- Business travel
- Product modification
- Packing
- Consultants
- Freight forwarders
- Level of product differentiation
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 Determinants of Export Prices
vExternal variables
- Supply and demand
- Location and environment
of foreign market (host
country)
- Economic policies such as
exchange rates, price
controls, and tariffs
- Home country regulations

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 Approaches to Export Pricing
Cost-based pricing: Export price is based on full
cost and markup or full cost plus a desired
amount of return on investment.

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 Approaches to Export Pricing
Skimming versus penetration pricing:
Skimming Price -(Định giá Hớt váng)
-premium price for a product
-have few competitors or produce differentiated
products.
-for the high-income, price-inelastic segment of
the market.

Penetration pricing- (định giá thâm nhập) is

based on charging lower prices for exports to
increase market share
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 Approaches to Export Pricing
Marginal pricing: Export price is based on the
variable cost of producing the product; employed
by unused capacity or gain market share; lower
price in the export market than at home.
Demand-based pricing: Export price is based on
what the market could bear. A superior or unique
product can command a higher price.
Ex:Cartier watches and Levi’s jeans.
Competitive pricing: Export prices are based on
competitive pressures in the market, maintain
same price level, for small than dominant firms.

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Pricing objectives and strategy

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 Export price calculation
Illu str a t i v e E x a m p l e
A U S m a n u f a c t u re r e x p o r t s m e d i c a l e q u i p m e n t f r o m M ia m i, F l o r i d a t o a
d istr i b u t o r in B ra z il.
S e lli n g p r i c e : $ 3 0 , 0 0 0
T e r m s o f s a l e : E x - w o rk s , M ia m i, F l o r i d a
P a ym ent m ethod : O p en account
Table 7.1 Export price calculation
Itemized Cost US dollars
Ex-works price (Miami, Florida) 30,000
Freight to Port Manaus, Brazil 2500
Insurance 750
CIF price 33,250
Landing Charges
Import duty (25% of CIF) 8312.5
Marine tax (20% ocean freight) 500
Warehousing tax (0.65% of CIF) 216.13
Terminal handling charge ($350 per container) 350
Custom broker's union fee ($140.00) 140
Custom brokerage fee ($750) 750
Bank costs (2% ex works price) 600
Total landing charges 10868.63
Landed cost at port manaus (with out local taxes) 44,118.63
Cost to Brazilian distributor 44,118.63
Distributor mark-up (50%) 22,059.32
Cost to retailer 66,177.95
Retailer mark-up (60%) 39,706.77
Price to brazilian consumer before local taxes 105,884.72
Local taxes (manufactures tax and local state tax: $6500) 6,500.00
Price to brazilian consumer after taxes 112,384.72

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 Competitiveness
Achieving Competitiveness: Long term Vs short
term
Long-term: Free trade agreements, FDI,
licensing
Short-term: shorten
the channel or
export through an
overseas
representative;
product
differentiation
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Trade terms 2020

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 INCOTERMS® 2020

Vietnam Port Port Singapore

1 (EXW) 2 (FO B) 3 (CF R) 4 (DDP)

A= 500$ 700$ 1200$
+
1400$200- ShipmePntrofit = ?
Materials - Risk
- Customs
Labor 100 <= Profit < 300
Factors constituting product prices in foreign trade contracts ?

... - Production costs, Profit

Profit =
100$
- Shipment costs
- Risks
-Customs clearance

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 INCOTERMS® 2020
INCOTERMS
PRICE :
Unit Price : USD 420/ MT. EXW 789 vovanngan Str …
VN, Incoterms® 2020.
Total Amount : USD 2,940,000 + 1% .
Say : Two million nine hundred and forty thousand
United Sates Dollars only.

Unit Price : USD 450/ MT. FCA CatLai CY, HCM city,
Vietnam, Incoterms® 2020.

Unit Price : USD 550/MT. CIF Singapore port,

Singapore, Incoterms® 2020.

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 Incoterms ® 2020
THE ROLE OF INCOTERMS IN INTERNATIONAL TRADE

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 Incoterms ® 2020
THE ROLE OF INCOTERMS IN INTERNATIONAL TRADE

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 Incoterms ® 2020
THE ROLE OF INCOTERMS IN INTERNATIONAL TRADE

<9Pricing in International Trade>< Truong Thi Huyen Trang >

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 Incoterms ® 2020
THE ROLE OF INCOTERMS IN INTERNATIONAL TRADE

<0Pricing in International Trade>< Truong Thi Huyen Trang >

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Incoterms ® 2020

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 INCOTERMS® 2020

Group1: Rules for any mode

of transport

Group 2: Rules for sea and

Inland Waterway Transport

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INCOTERMS® 2020

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 Incoterms ® 2020
Group E: Departure term
- Ex-works: Buyer or agent must collect the
goods at the seller’s works or warehouse.

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 Incoterms ® 2020

Group F: Main Carriage Unpaid terms

FCA Free Carrier (…named place of delivery)

FAS Free Alongside Ship (…named port of

shipment)

FOB Free On Board (…named port of

shipment)

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 Incoterms ® 2020

Group C: Main Carriage paid terms

CFR Cost and Freight (…named port of
destination)
CIF Cost, Insurance and Freight (…named
port of destination)
CPT Carriage Paid To (…named place of
destination)
CIP Carriage and Insurance Paid To (…
named place of destination)
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 Incoterms ® 2020

Group D: Arrival terms

DAP Delivered at Place (… named place of
destination)
DDU Delivered Duty Unpaid (…named place
of destination)
DDP Delivered Duty paid (…named place of
destination)

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INCOTERMS® 2020

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INCOTERMS® 2020

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 Questions
What is the basic difference of the following rules:
ØFCA – CPT
ØFOB – CFR
ØCPT – CFR
ØDAP - DDP

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 Questions
1. What rules does the buyer have to clear for export?
2. What conditions does the seller have to clear for
export?
3. Under what rules does the seller pay the
international freight?
4. Under what rules does the buyer pay the
international freight?

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 INCOTERMS® 2020

• Obligations of the seller and the buyer

Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Obligations of the seller and the buyer

Who will bear the cost, to which location?
Where does the risk pass from seller to buyer?
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 INCOTERMS® 2020
EXW Seller’s Warehouse, Thuduc District, Hochiminh city, Vietnam,
Incoterms® 2020
Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Risk
Expenses
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<Pricing in International Trade>< Truong Thi Huyen Trang > 4
 INCOTERMS® 2020

FCA VICT CY, HCM city, Vietnam, Incoterms® 2020

Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Costs
Risks

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 INCOTERMS® 2020

+ Customs
Clearance

Case 1: delivery at warehouse: The seller must load the goods onto the
receiving means of transport and carry out export procedures

Case 2: delivery out of warehouse: The seller must bring the goods to the
agreed place and deliver them on a means of transport ready for unloading
and clearing for export
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 INCOTERMS® 2020

+Customs
Clearance

Case 1: delivery at warehouse: The seller must load the goods onto the
receiving means of transport and carry out export procedures

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 INCOTERMS® 2020

ICD Phước Cát Lái

Long Port

Case 2: delivery out of warehouse: The seller must bring the goods to the
agreed place and deliver them on a means of transport ready for unloading
and clearing for export
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CY: Container Yard CFS:

Container Freight Station 3
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 INCOTERMS® 2020

ICD : Inland Container Depot.

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INCOTERMS® 2020

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 INCOTERMS® 2020

Container Freight Station- CFS

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INCOTERMS® 2020

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 INCOTERMS® 2020
CPT Osaka CY, Japan, Incoterms® 2020
Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Risk
Expenses
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FCA Catlai CY, HCMC, Vietnam, Incoterms® 2020

Named Place

- HQNK

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 INCOTERMS® 2020
CIP Osaka CY, Japan, Incoterms® 2020
Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Insurance

Risk
Expenses
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 INCOTERMS® 2020
DAP Chuo-ku Osaka, Japan, Incoterms® 2020
Freight
Inland Inland

Customs Customs CHUO-KU

Seller's W POL POD Buyer's W

Risk

Expenses

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 - HQNK

DAP
DAP Buyer’s warehouse
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 INCOTERMS® 2020
DPU Osaka CY, Japan, Incoterms® 2020
Fre0
ight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Risk

Expenses

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 INCOTERMS® 2020
DDP Chuo-ku Osaka, Japan, Incoterms® 2020
Freight
Inland Inland

Customs Customs CHUO-KU

Seller's W POL POD Buyer's W

Risk

Expenses

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DDP
DDP Buyer’s warehouse
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 INCOTERMS® 2020
FAS VICT Port, HCM city, Vietnam, Incoterms® 2020
Freight
Inland Inland

Customs Customs

Seller's W Cầu cảng POD Buyer's W

Risk
Expenses
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51
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 INCOTERMS® 2020
FOB VICT Port, HCM city, Vietnam, Incoterms® 2020
Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

Risk
On boardExpenses
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 INCOTERMS® 2020

FCA
FOB
FAS

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 INCOTERMS® 2020
CFR Osaka port, Japan, Incoterms® 2020
Freight
Inland Inland

Customs Customs

Seller's W POL POD Buyer's W

On board Risk
Expenses
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56
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 INCOTERMS® 2020
CIF Osaka port, Japan, Incoterms® 2020
Freight
Inland Inland

Customs Customs

POL POD Buyer's W

Seller's W BẢO HIỂM

On board Risk
Expenses
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9/19/22 58

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 Questions
1. What commercial terms have the risk passing point coincident with
the transfer of costs from seller to buyer? What are the rules where
the risk and cost transfer points do not coincide?
2. Which of the rules in Incoterms® 2020 stipulate that the buyer must
buy insurance for the goods for the seller on the main transport leg?
3. Seller agrees to deliver 300 tons of coffee to buyer FOB port of
Montreal, Canada. The goods are transported and unloaded at the
port and kept at the customs shed for in- spection and payment of
duties. The buyer is notified of the arrival of the merchandise and its
location. Before the buyer picks up the goods, the customs shed
(including the merchandise in it) is destroyed by fire. The buyer claims
refund of the purchase price, stating that she did not receive the
goods. Is the seller responsible?
4. In reference to Q. 3, would the outcome be different if the contract
had been DAP port of Montreal?

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 Quiz

Select the appropriate term under Incoterms® 2020:

1. Star.Co (Japan) signs a contract to buy rice from Hope.Co
(Vietnam). The buyer is obliged to charter a vessel to carry
the goods and the seller is fully responsible when the goods
are delivered on board the vessel at the port of loading
(Vietnam). Delivery terms are:
a. FOB Osaka Port b. FOB Saigon Port
c. CIF CatLai Port d. CFR Busan Port

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 Quiz

Select the appropriate term under Incoterms® 2020:

2. Sun.Co (Vietnam) signed a contract to buy fertilizer from
Moon.Co (USA). The seller is obligated to charter the vessel,
purchase insurance for the goods and discharge all liability
when the goods are delivered on board the vessel at the port
of loading of Tampa (USA). Delivery terms are:
a. FOB Osaka Port b. CIF Tampa Port
c. CIF CatLai Port d. CFR Busan Port

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 Quiz

3. Under Incoterms® 2020, what conditions define a cost-

sharing intersection as a risk-sharing intersection?
a.EXW, FCA, FAS c. CPT, CIP, CFR
b.DAP, CPT, FOB d. DDP, FAS, CIF

4.Under Incoterms® 2020, what rules stipulate that the

buyer does not have to pay the main freight?
a.DAP, DDP, FCA c. CPT, DPU, CFR

b.CFR, FOB, FAS d. FCA, FAS, FOB

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 Quiz

5.Under Incoterms® 2020, what rules require the point of

delivery in the exporter's country?
a.FOB, FAS, EXW c. FOB, CIF

b.CIP, FCA , CPT d. All the answers above

6. According to Incoterms® 2020, which rule requires the
seller to bear the costs of unloading at the named place of
destination?

a.DPU c. DAP

b.CPT d. DDP

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 REVIEW QUESTIONS
1.High markups are common in industries with relatively few
competitors. Discuss and provide examples.
2.What is the difference between marginal and cost-based
pricing?
3.State the major differences between Incoterms 2010 and
Incoterms 2020.
4.What are the limitations of Incoterms? Compare and contrast
Incoterms with the Uniform Commercial Code.
5.In what cases would export-import managers prefer to use
Group C (shipment) terms?

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 EXERCISES
1.Câu 1: Hãy lựa chọn tập quán thương mại thích hợp khi biết nhà nhập khẩu ở TP.Hồ
Chí Minh, người bán ở thành phố Tokyo, Nhật Bản, nơi xuất hàng đi là cảng Osaka,
Nhật Bản.
2.____________ Hàng hóa là 20 xe hơi Toyota 4 chỗ ngồi. Người bán đề nghị sau khi
làm thủ tục xuất khẩu, sẽ thuê phương tiện vận tải, trả cước phí vận tải tới Việt Nam.
Nhưng rủi ro được chuyển sang cho người mua sau khi hàng giao cho người vận tải.
3.____________ Người mua không thống nhất mà đề nghị người bán sau khi làm thủ
tục xuất khẩu, giao hàng cho người vận tải là hết nghĩa vụ.
4.____________ Hàng hóa là 10.000 MTS thép xây dựng. Người bán đề nghị sau khi
làm thủ tục xuất khẩu, giao xếp xong hàng lên tàu là hết nghĩa vụ.
5.____________ Người mua hoàn toàn thống nhất điều kiện (3) nhưng đề nghị người
bán thuê phương tiện vận tải, trả cước phí vận tải và mua bảo hiểm cho hàng hóa.
6.____________ Hàng hóa là 05 thùng cá hồi, chuyên chở bằng đường hàng không.
Người bán sau khi làm thủ tục xuất khẩu, giao hàng cho người vận tải là hết nghĩa vụ.

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 EXERCISES
Câu 2: Nhà xuất khẩu ở TP.HCM, người mua hàng ở Hồng Kong, nơi đưa hàng đến là TP
Rotterdam, Hà Lan. Hãy lựa chọn điều kiện thương mại thích hợp cho các trường hợp:
1.____________ Hàng hóa là hồ tiêu 5.000 tấn, người bán sau khi làm thủ tục xuất khẩu,
thuê phương tiện vận tải, trả cước phí vận tải hàng hóa đến cảng đích. Địa điểm chuyển
rủi ro về hàng hóa được chuyển từ người bán sang người mua sau khi hàng giao và xếp
xong lên tàu ở nước xuất khẩu.
2.____________ Hai bên mua bán hoàn toàn chấp thuận các điều kiện đã nêu ở mục (1),
nhưng thay đổi địa điểm chuyển rủi ro: sau khi người bán giao hàng an toàn trên phương
tiện vận tải ở nước nhập khẩu.
3.____________ Hàng hóa là cá basa đông lạnh – 20 MT. Người bán sau khi làm thủ tục
xuất khẩu giao hàng cho người vận tải là hết nghĩa vụ. Người mua thực hiện các công việc
khác để đưa hàng đến nước nhập khẩu tại Rotterdam, Hà Lan.
4.____________ Hai bên mua bán chấp thuận hoàn toàn các điều kiện nêu ở mục (3)
nhưng đề nghị người bán thực hiện các công việc có liên quan đến vận tải và mua bảo
hiểm cho hàng hóa. Rủi ro về hàng hóa được chuyển từ người bán sang người mua sau
khi người bán giao hàng cho người vận tải tại nước xuất khẩu.

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 ĐẠI HỌC FPT CẦN THƠ

Chapter 7

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