Tips for mastering price terms

The price term is something unique to foreign trade. Because we can't hand over the money with the customer face-to-face, it always has to be transported over long distances, so there will be various miscellaneous charges. These costs are of course included in the calculation of the price. Depending on the place and method of delivery, the miscellaneous fees are naturally different, so we have some terms to indicate different delivery methods to measure the price.

International trade practices use port terminals as a place of delivery, so there are three main price terms:


1. Delivery at the terminal in China: The term is called FOB

For example, the agreement to deliver at the Shanghai port is called FOB SHANGHAI.

In this way, in addition to the value of the goods themselves, plus the freight you ship to the Shanghai terminal, and the customs export handling fee and the miscellaneous expenses incurred on the Shanghai terminal, is the total cost price.

The FOB price is a more basic price.

Simple formula: FOB = price + domestic transportation fee

2. Delivery at a foreign terminal: The term is called CNF

For example, the contract is delivered at the port of New York, USA, called CNF NEW YORK.

In this way, in addition to the FOB price, plus the transportation and transportation charges for goods shipped to New York, USA.

Simple formula: CNF = FOB + ocean freight

3. Deliver at the foreign terminal and at the same time buy insurance for the goods to avoid damage on the way: The term is called CIF

Similarly, the contract is to be called CIF NEW YORK at the New York port.

This method is based on the CNF price, plus a little premium. How much does the insurance cost need? It is determined by the insurance company and varies slightly depending on the type of goods and the place of delivery. Make a call to the insurance company and tell them the type, value and location of your goods, and they will tell you how much the insurance premium needs. There are also a few types of insurance, but usually all risks are used: what the insurance company is doing for you - at least in the book.

Insurance premiums are not expensive. Take the goods exported to the United States as an example. If you have all the risks, the goods with a price of 1,000 yuan will also be paid for 5 yuan. If you are safe, you can buy them if you bite your teeth.

Simple formula: CIF = FOB + ocean freight + insurance

Summary: The three main price terms are FOB, CNF, and CIF. The term should be followed by the name of the port. FOB is more basic, equal to the value of the goods plus domestic transportation and miscellaneous fees. The shipping cost added to the foreign country becomes CNF, and the insurance premium is CIF.

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