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A brief introduction to the price composition of the three trade terms

A brief introduction to the price composition of the three trade terms

2020-05-08

The price composition of FOB, CFR and CIF is only applicable to sea or inland waterway transportation.In the price composition, it usually includes three aspects: purchase cost, expense and net profit.The accounting of expenses is the most complex, including domestic and foreign expenses. 

Domestic expenses are:

1.Processing and finishing expenses; 

2.Packing charge; 

3.Storage expenses (including warehouse rent, fire insurance, etc.); 

4.Domestic transportation expenses (warehouse to wharf); 

5.Certificate fees (including commodity inspection fees, notary fees, consular visa fees, certificate of origin fees, permit fees, customs declaration fees, etc.); 

6.Loading fee (loading, hoisting fee and barge fee, etc.); 

7.Bank charges (discount interest, service charge, etc.); 

8.Expected loss (loss, short loss, loss, damage, deterioration, etc.); 

9.Postage (charges for telegram, telex, mail, etc.). 

Overseas expenses mainly include:

1.Foreign freight (sea freight from port of loading to port of destination); 

2.Foreign insurance premium (insurance on carriage of goods by sea); 

3.If there is a middleman, there is also a commission paid to the middleman. 

The calculation formula is as follows:

FOB price = purchase cost price domestic expense net profit

CFR price = input cost price domestic cost foreign freight net profit CIF price = input cost domestic cost foreign freight foreign insurance premium net profitIn the price composition, it usually includes three aspects: purchase cost, expense and net profit. 

Domestic expenses are:

1.Processing and finishing expenses; 

2.Packing charge; 

3.Storage expenses (including warehouse rent, fire insurance, etc.); 

4.Domestic transportation expenses (warehouse to wharf); 

5.LCL (if the goods cannot be made into a whole container); 

6.Certificate fees (including commodity inspection fees, notary fees, consular visa fees, certificate of origin fees, permit fees, customs declaration fees, etc.); 

7.Bank charges (discount interest, service charge, etc.); 

8.Expected loss (loss, short loss, loss, damage, deterioration, etc.); 

9.Postage (charges for telegram, telex, mail, etc.). 

Overseas expenses mainly include:

1.Outward freight (transportation expenses from the inland place of shipment of the exporting country to the foreign destination); 

2.Foreign insurance; 

3.If there is a middleman, there is also a commission paid to the middleman. 

The calculation formula is as follows:

FCA price = purchase cost price domestic expense net profit

CPT price = purchase cost price domestic cost foreign freight net profit

CIP price = purchase cost domestic cost foreign freight foreign insurance net profit


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