CASO USO DE INCOTERMS

Introduction to Coterms and Methodology

Overview of the Topic

• Adolfo Carreño introduces the topic of Coterms, focusing on their application in international trade through a practical case study.

Case Study: Van's International Sales

• The example involves a Peruvian company, Van, which has received an order from an international client in France named La Cos for polo shirts.

• The seller at Van must utilize Incoterms (Coterms) to provide accurate quotations to the buyer.

Methodology for Quoting Prices

Steps for Accurate Quotations

• The seller needs a structured methodology to ensure that all costs are covered in the selling price, including product costs and logistics associated with Coterms.

• A total of six different quotations will be analyzed out of eleven possible Coterms to understand various scenarios better.

Base Calculation for Pricing

• The base for pricing includes:

• Cost of the product (raw materials, labor, direct/indirect production expenses).

• A predetermined profit margin added to this cost.

Adding Costs Based on Requested Incoterm

Incremental Cost Addition

• Additional costs are added based on the requested Incoterm:

• For instance, if quoting under XW terms, preparation and packaging costs are included in the base price.

Example Calculation

• If the base cost plus profit is $1,000 and preparation costs are $100, then the selling price under XW would be $1,100.

Adjusting Prices for Different Incoterms

Transitioning Between Terms

• When switching from XW to FOB terms:

• The previous price ($1,100) is adjusted by adding handling fees required under FOB conditions.

• This may include transport to temporary storage and export customs operations totaling an additional $500. Thus leading to a new selling price of $1,600 under FOB terms.

Understanding Logistics Costs

• Logistics costs vary depending on whether they are local origin expenses or international transport fees.

• For example:

• Under FOB terms: Seller covers local origin expenses but not international transport.

• Under SIF terms: Both local origin expenses and international freight/insurance must be included in pricing calculations.

Conclusion on Pricing Methodology

Summary of Key Points

• The methodology emphasizes starting with a solid base cost and incrementally adding relevant logistical expenses according to selected Incoterms.

• Understanding how each term affects pricing is crucial for effective international sales strategies as it directly impacts profitability and competitiveness in global markets.

Understanding Product Costing and Logistics in International Trade

Overview of Product Costing

• The base cost includes the product cost plus desired profit, ensuring coverage of all expenses before adding logistics costs.

• The buyer typically requests a specific Incoterm, which influences the final pricing structure.

Case Study: Vanlay's Order from La COS

• Vanlay, a Peruvian company, received an order for 10,000 polos from La COS in France, to be shipped on the vessel Atlantis arriving at Callao on July 15.

• The shipment will take 16 days to reach Bordeaux, emphasizing the importance of understanding shipping timelines in international trade.

Shipping Details and Costs

• The polos will be packed into two 40-foot containers; this detail is crucial as it affects freight costs significantly.

• A starting price of $0.50 per unit is proposed to cover product costs and expected profit but does not include all logistical expenses.

Breakdown of Additional Costs

• To accurately quote prices, sellers must understand both product costs and additional logistics expenses that arise during international transactions. This includes preparation costs estimated at $0.30 per polo for packaging materials like boxes and tape.

• Other logistical steps include transporting goods to a temporary deposit for export processing with associated fees such as $600 per container for freight and $500 for export documentation fees.

Detailed Logistics Process

• After preparing the cargo, it moves through various stages: from temporary storage to export processing and finally loading onto the ship at port—each stage incurs specific operational costs that need consideration when quoting prices based on Incoterms used by clients.

International Freight Considerations

• The freight cost from Callao to Bordeaux is set at $1,000 per container; this figure is essential when calculating total shipping expenses under different Incoterms like SIF or CFR.

• Insurance costs are also highlighted as an important factor; they amount to 0.5% of the CFR value plus policy issuance fees which should be factored into overall pricing strategies for international sales transactions.

Importation Costs in Destination Country

• Upon arrival in France, import duties are calculated at 11% of the total value along with handling charges estimated at $500 per container until delivery to La COS’s warehouse—these figures illustrate how destination country regulations impact overall pricing strategies in international trade scenarios.

Methodology for Quoting Prices Based on Incoterms

• It’s critical to identify included versus excluded costs based on negotiated Incoterms; this understanding aids in providing accurate quotes across various terms (e.g., XW, FCA, FOP). Six out of eleven common Incoterms are utilized here to ensure comprehensive coverage during discussions about pricing methodologies within international trade contexts.

Understanding Export Pricing and Incoterms

Initial Setup for Export Quotation

• The discussion begins with the necessity to prepare 11 quotations, indicating that understanding the first few will help in grasping the methodology.

• Transition to using an Excel sheet (specifically Apple Numbers) to solve export pricing questions step by step.

Key Data Points for Calculation

• The company is exporting 10,000 polo shirts using two containers on the Nave Atlantis, with a base price of $2.5 per shirt and a currency exchange rate of 3.5 soles per dollar.

Quotation in Terms of XW

• For an XW quotation requested by COS, the base price of $2.5 per polo is used along with preparation costs.

• Preparation costs include packaging materials estimated at $0.3 per polo, leading to a total selling price of $28,000 for 10,000 polos.

Quotation in Terms of FCA

• When COS requests an FCA quotation at a temporary deposit location (Contras), it requires additional calculations including internal freight and customs agent fees.

• The internal freight cost from Deman to Contras is specified as 600 soles per container; customs fees are quoted at $500.

Finalizing FCA Quotation

• After adding these costs to the previous value export calculation, the final FCA quotation totals $28,843 for delivery at Contras.

Quotation in Terms of FOP

• For an FOP quotation, all costs incurred up until loading onto the ship must be included; this includes loading charges and operational expenses.

• The resulting FOP total comes to $30,483 for two containers delivered at Callao port.

Calculating CFR Quotations

• To calculate CFR pricing, one must add freight costs to the previously established FOP value; this process continues into further details about shipping logistics.

CFR, SIF, and DDP in International Trade

Understanding CFR (Cost and Freight)

• The CFR is defined as the Free on Board (FOB) cost plus freight charges. In this case, the total value of the merchandise is calculated to be $32,000 after adding $2,000 for freight costs.

• A sales quote is presented to the buyer at a price of $32,4823 for delivery at the port of Bordeaux.

Calculating SIF (Cost, Insurance, and Freight)

• To determine the SIF value, insurance must be added to the CFR. The formula states that SIF equals CFR plus insurance or equivalently FOB plus freight and insurance.

• The insurance cost is calculated as 0.5% of the CFR value ($162), with an additional $20 for policy issuance fees. Thus, total insurance expenses amount to $182.

• Consequently, the final SIF value stands at $32,665 when including both freight and insurance paid upon arrival at Bordeaux.

Determining DDP (Delivered Duty Paid)

• For DDP calculations, it’s essential to consider all costs until delivery at the customer’s warehouse. Starting from SIF ($32,000), import duties are assessed at 11%, totaling approximately $3,593.

• Additional destination expenses include handling fees in France ($500 per container). With two containers involved, this adds another $1,000 to overall costs.

• Therefore, the total DDP value reaches approximately $37,258 when combining all relevant charges before final delivery to the customer's warehouse.

Key Considerations in International Trade Logistics

• International trade operations incur various logistical expenses categorized into three main groups: local origin costs; international freight and insurance; and local destination logistics. Each stage—origin, transit, and destination—carries its own associated costs that need careful management for successful transactions.