What are the different types of quotations that an exporter can offer to importers? This is otherwise called Terms of Sales.
What is Terms of Sale?
Terms of sales refer to the conditions and basis of trade transactions. The basic terms of sales are decided in advance between the buyers and the sellers as a part of sales contract. In export trade, the pricing decision is very important which should be clearly settled between the parties of the sales contract.
Different types of quotations in International Trade
The most important types of prices that are often quoted in the international trade are as follows:
1. Loco Price: This is the price of the goods are available at the godown of the seller. In the course of shipment, whatever be the expenses, all will have to be borne by the importer.
2. On the Spot Price: This term is used for the price of goods that will be charged for ready delivery of the goods.
3. At Station Price: When the seller takes up himself the responsibility of sending goods to the railway station of his city, it is called At Station Price. But, the loading expenses and railway freight, etc., are to be paid by the buyer.
4. Free on Rail: When the responsibility of sending the goods to the railway station and of loading is taken by the seller, it is called F.O.R. price. Freight is to be paid by the buyer.
5. Free Along Ship (F.A.S) Price: This price includes expenses upto the despatch of goods to the sea port. This F.A.S. price includes cost of goods, packing, marking, dock charges and the commission of forwarding agent.
6. Free on Board (F.O.B) Price: When the seller takes upon himself the responsibility of sending the goods to the sea port and also of loading, it is called F.O.B. price.
7. Cost and Freight (C&F) Price: This price includes apart from the above expenses, the freight of the ship also. Insurance premium is not included in this price.
8. Cost, Insurance and Freight (C.I.F) Price: This price includes all the expenses upto the shipment of the goods from the port of shipper; the importer has to receive all the delivery of the goods in his country.
9. Ex- Ship Price: This price includes besides the cost of goods the expenses of reaching the goods up to the port of the buyer’s country. In other words, marine insurance and other expenses connected with shipment have to be borne by the seller.
10. Franco Price: Franco means free from all expenses. Under this price, all the possible expenses in transit are to be borne by the seller and the seller has to supply goods at the factory of the buyer. Therefore, the expenses in the country of the buyer will have to be borne by the seller of the goods.
In foreign trade, generally, such prices are not quoted, because the seller does not have an idea about the local expenses in the country of the importer.
Commonly used Quotations in International Trade
In the export trade, all the above terms are not frequently used. The most common types of terms of sales that are used are F.O.B., C&F, and C.I.F. These terms should be property settled between the buyers and the sellers. Otherwise, a lapse on the part of the buyer or seller in settling the price may cause a good deal of losses, because the expenses in the shipment of goods are often higher than that of cost of the goods.