A company exports a batch of containerized goods, with a quotation of $35 per box Qingdao. The customer requests to change the CIF London price. It is known that the sea freight for this batch of goods to London 

is $5 per box,  insured for 110% of the CIF amount against all risks at a rate of 0.8%. What is the CIF price that should be quoted?

          In international trade, both importers and exporters need to handle import and export licenses, customs declaration, loading and unloading ,transportation, tax payment and insurance, and various expenses are incurred. Price clauses in contract of international trade usually refer to unit price and total value.Unit price in international trade should contain four necessary parts:the price itself,the currency used in trade,the measuring unit,and the trade term.Unit price also contains commission or discount rate if necessary. For example, USD 1000 per metric ton CIF New York.

     Net price refers to the price of goods without commission or discount.

1. Conversion of FOB price into other prices

    The FOB price shall include the following expenses:

Purchase cost (ex-factory price=factory production cost+tax+profit)

Goods packaging fee

Goods storage fee (including fire insurance fee and goods loss)

Processing and arrangement fees

Transportation fee and loading and unloading handling fee

Domestic commodity inspection fee

Export duties and various taxes

Handling fees for obtaining relevant export certificates and handling consignment, customs declaration and foreign exchange settlement

All kinds of miscellaneous fees (business communication fees, port fees and wharf fees)

(1) FOB price converted into other prices

CFR price=FOB price+freight

CIF price=(FOB price+freight)/(1-insurance premium × premium rate)

=CFR price/(1-premium × premium rate)

Example 1

A company quoted $330 per carton FOB Tianjin Xingang, and then the foreign businessman asked to quote CIF London price. Assume that the freight is $40 per carton and the premium rate is 0.6%, and try to calculate the CIF London price we should quote

CIF=(FOB+F)/[1- (1+mark up rate) × premium rate]

=(330+40)/[1- (1+10%) × 0.6%]

=372. 46 (US $)

We should quote $372. 46

(2) Conversion of CFR Prices into Other Prices

FOB price=CFR price-freight

CIF price=CFR price/(1-insurance premium × premium rate)

Example 2

The CFR unit price for the export of our commodity to a country is $110. If the customer requests to change the CIF price, what price shall I quote on the premise of not affecting our foreign exchange income? (Insured at 110% of invoice value, premium rate is 0.5%)

CIF price=CFR price/(1-insurance premium × premium rate)

=110/(1-110% × 0.5%)

=$110.608

(3) CIF price converted into other prices

FOB price=CIF price × (1-Insurance premium × Insurance premium rate) - Freight

CFR Price=CIF Price Insurance Premium

=CIF price × (1-insurance premium × premium rate)