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(共51张PPT)
CHAPTER 12 QUALITY, QUANTITY, PACKING AND PRICING
Quality
Quantity
Packing
Pricing
§1 Quality
Name of commodity?
Using a proper name for the traded good is significant in that it helps to avoid confusion, reduce customs duties or save freight.
Currently businessmen usually nominate traded goods with names complying with the Harmonized Commodity Description and Coding System (HS) of tariff nomenclature.
HS is an internationally standardized system of names and numbers for classifying traded products. It is developed and maintained by the World Customs Organization (WCO) (formerly the Customs Co-operation Council)
2. Methods of expressing quality of commodity
Sale as seen
Sale by sample
Sale by description
① Sale by specifications
② Sale by grade
③ Sale by standard
④ Sale by brand and trade mark
⑤ Sale by name of origin
⑥ Sale by descriptions and illustrations
Sale as seen
A sale is made on the basis that the buyer has inspected the goods and is buying them as a result of this inspection.
This method is of special necessity for particular goods such as ornaments, jewels, paintings, artworks, etc.
In many cases, the buyer may be advised to arrange for inspection of the goods before or at the time they are handed over by the seller for carriage.
(2) Sale by sample
Garments, light industry products, and agricultural native products are generally sold by samples.
① Counter sample: a reproduced product for buyer’s confirmation
② Sealed sample: This sealed sample is for checking the quality of the delivered goods in the future.?
③ Reference sample: When sale is made by description, either the seller or the buyer may send a sample to the other party to let it know more clearly about the products. This sample is often marked “for reference only”. It is not the basis for delivery.?
(3) Sale by description
① Sale by specifications
Specifications refer to indices relating to chemical composition, contents, length, and size of a product.
Simple and accurate.
For example,
Printed Shirting “Jumping Fish”
Yarn counts 30×36
No. of threads/inch 72×69
Width (inch) 35/36″
② Sale by grade
Products can be divided into different grades based on different specifications.
e.g. Fresh Hen Eggs, shell light brown and clean, even in size
Grade AA: 60-65gm per egg
Grade A: 55-60gm per egg
Grade B: 50-55gm per egg
Grade C: 45-50gm per egg
③ Sale by standard
A standard is an established norm or requirement.
It is usually a formal document that establishes uniform
engineering or technical criteria, methods, processes and
practices.
International standards like ISO standard, national
standards like BS in Britain, ANSI in the USA and JIS in
Japan.
When sale is made by standard, it is important to mark the
publication year of the standard.
For example. Rifampicin B.P.1993.
(Note: B.P.: British Pharmacopoeia)
④ Sale by brand and trade mark
Brand is the name, term, symbol, or design or a combination of
these to identify a product.
Trade mark is a legal term. It includes all those words, symbols, or marks that are legally registered for use by a single company, printed on the commodity or its packing.
Example:
The Buick car is branded under the brand name "Buick".
When "Buick" is printed in a certain kind of script,
however, it becomes a trade mark.
⑤ Sale by name of origin
Some products are well known by the place of origin, they would be more welcomed whenever their places of origin are mentioned.
Thus, the place of origin may signify the quality of a product.
In concluding a sales contract, traders like to mention the places of origin of these products to indicate their qualities.
⑥ Sale by descriptions and illustrations
Machinery, instruments, equipments, etc. have complex structure.
Sale by descriptions and illustrations is applicable.
In the contract, the clause of quality contains not only the name of commodity, the brand but also the instructions to illustrate the structure and functions of the product.
Clauses like “quality and technical data to be strictly in conformity with the description submitted by the seller” are to be stipulated.?
3. Quality clause in the contract
Description or sample used separately or together to describe
quality, depending on the product features.
Flexible clauses
(1) “The quality of the goods shipped to be about equal to the sample” may
be stipulated.
(2) Flexible quality range for some primary products
① Range:
e.g. Printed Shirting “Jumping Fish”
Yarn counts 30x36
No. of threads/inc 72x69
Width (inch) 35/36’’
② Allowing more or less
Example:
Duck feather: down content 18%, allowing
1% more or less?
③ Max. & min.
Example,
Fish Meal Protein 55% Min.?
Fat 9% Max.?
Moisture 11% Max.?
Salt 4% Max.?
Sand 4% Max.?
(3) Quality tolerance
It is not uncommon that some industrial products such as instruments, mechanical products have some tolerances — permissible variation in quality.
When the quality difference is within the flexible range, the price of the product may not be adjusted.
However, if the difference greatly influences the quality, the price is normally increased or reduced accordingly. For example, soybean, if the oil content of the goods shipped is 1% higher, the price will be accordingly increased by 2%.
§2 Quantity?
1. The system of weights and measures
A set of units which can be used to specify anything which
can be measured.
Metric system
An international decimalised system of measurement, first adopted by France in 1791.
Fundamental units: kilogram (kg.), meter (m.), square meter (sq. m.) and litre (l.).
Some other derived units are metric ton (M/T), kilometer (km.) and so on.
This system is widely used by European continent and many other countries.?
(2) International system of units
Since the 1960s, the international system of units has been the internationally recognised standard metric system.
The International System is called the SI, using the first two initials of its French name Système International d'Unités.
This system is published by international standard metrical organization, and is based on the metric system.
Fundamental units include kilogram, meter, second, etc.
SI is the official system of measurement for most nations including China.
(3) British system (also called British imperial units)
Mostly used in the British Commonwealth and the former British Empire but in most Commonwealth countries they have been largely supplanted by the metric system.
The units are still used for some applications in the United Kingdom but have been mostly replaced by the metric system in commercial, scientific, and industrial applications.
(4) American system
Most commonly used system of measurement in the United States.
A number of differences between the imperial and US system:
Imperial system: a long ton (L/T) of 2240 pounds (lb.) The American system: a short ton of 2000 pounds (lb.).
Six U.S. gallons are a little
less than five Imperial gallons.
1 Metric Ton = 1000 kilograms
1 Short Ton = 907 kilograms
1 Long ton = 1010 kilograms
2. Quantity units
Two categories of units which are used to show the quantity of commodity in international trade.
Metrical units, including weight, length, area, volume and capacity;
Numbers including some customary units such as dozen, gross (罗), great gross, ream (令), and some packing units like barrel (桶) (for petroleum, oil), bale (包) (for cotton), etc.?
3. Methods for calculating weight
(1) Net weight. The weight of the product itself. Weight is calculated by net weight unless otherwise stated in the contract. ?
(2) Gross weight plus the weight of package. For some less valued products, gross weight may be used in the contract, called “gross for net”.
Methods of calculating tare: ① Real tare: the actual weight of each package; ② Average tare: the average weight of packages; ③ Customary tare: the weight of package known to all; ④ Computed tare: the weight of package agreed upon by the buyer and the seller.? ?
(3) Conditioned weight (公量)
A weight applicable for weighing products with unstable
moisture contents such as wool, cotton, raw silk, etc.
In order to determine the moisture contents accurately,
the universal conditioned weight is used.
Theoretically conditioned weight equals dry weight plus
standard moisture content. The formula
(4) Theoretical weight
This is a calculated weight based on nominal dimensions (规格) of a product. Some products are of uniform sizes and/or dimensions and the weight of each unit is almost the same.
Thus the total weight of a shipment can be obtained by multiplying the total units of the shipment by the weight of each unit.
Steel plate
4. Quantity clause in the contract?
The importance of quantity clause (CISG)
Goods are
over-delivered
The buyer can accept (pay at
the contract rate) or reject all
or part of the excess part
Goods are
under-delivered
The seller must
replenish
within delivery time
without causing
unreasonable
losses to the buyer
The buyer reserves the
right of claiming damages
(2) More or less clause
A clause which allows the quantity delivered be a certain percentage more or less than contracted quantity.
For example, 2000 M/T, 5% more or less at seller's option.
However, if the quantity is related with transportation, “at carrier's option” may be stipulated, or “at buyer's option” when the ship is arranged by the buyer.?
Settlement for the more or less part is usually based on the contract price. Sometimes it may be on the market price.
§3 Packing
Selling packing: also called small, inner or immediate packing. It is mainly used to protect products, make the products convenient to use, and to promote sales. Inner packing should be in conformity with the laws and regulations of the purchase countries.
Transport packing: also known as big or outer packing. Its main functions are to protect goods, and facilitate storage as well as shipment.
Types of transport packing
?
Unit packing:
Bale: paper, wool, cotton, and carpets, etc.;
Bag: cement, fertilizer, flour, chemicals, etc.;
Barrel/Drum: liquid or greasy cargoes;
Box/Case: equipments and car accessories;
Glass container: dangerous liquid cargoes such as acid;
Carton: consumer-type of products.
Crate/Skeleton case
(2) Unionization (or combined) packing
A kind of packing whereby individual packages are put together and placed into a larger container.
The combined packing has such advantages as to protect goods effectively, improve efficiency of handling, and save packing costs as well as freight.
2. Marks on transport packing?
Shipping mark
Facilitates the identification and count of the goods in the process of loading and unloading, shipping and storing.
The Standard Shipping Mark includes four elements.
① Initials or Abbreviated Name ABC
② Reference Number 1234
③ Destination BOMBAY
④ Package Number 1/25
(2) Indicative mark?
A caution mark reminding people of carefulness in handling or carrying goods. It is composed of graphs and words, such as KEEP DRY, USE NO HOOK, THIS WAY UP, HANDLE WITH CARE.
(3) Warning mark?
Also called hazardous mark and is used to
indicate explosive, poisonous, inflammable
goods. It is also composed of graphs or
pictures and words.?
EXPLOSIVE
INFLAMMABLE
POISONOUS
(4) Weight and volume mark
(5) Country of origin mark?
N.W.:11.3 KG?
G.W.:16.4 KG?
MEAS.:45.5×52×55.5 cm
3. Neutral packing
A special type of packing where there is no country of origin on it.
Neutral packing with designated brand: the neutral packing where the brand (or trademark) designated by the buyer is marked out on it.
Neutral packing without designated brand: the neutral packing without designated brand or trademark.
In recent years it has been restricted by some countries. Exporters should be cautious in adopting it. ?
4. Bar codes?
Universal Product Code (U.P.C.) system in the U.S.A. and Canada
The International Article Numbering (EAN) system in over 90 other countries
Number Mfg Product Check
System Code Code Digit
The number system consists of two digits (sometimes three digits) which identify the country (or economic region) numbering authority which assigned the manufacturer code.
In 1988, China established the Chinese Article Code Center which is now known as GS1 China.
GS1 China is at present in charge of organizing, coordinating and administrating article numbering and Auto-ID work throughout China.
GS1 China joined GS1 as a Member Organization on behalf of China in April 1991.
China’s GS1 country codes are 690-695.
5. Packing clause in the contract
(1) Contents: packing material and the way of packing. Example,
Packing: in cartons containing 30 doz. Do not use terms like
“seaworthy packing” or “customary packing”.
(2) Packing marks: It is not common to stipulate packing marks in
the contract. If, however, the buyer designates the packing
marks, it is necessary to stipulate the details of the shipping
mark in the contract.?
(3) Packing charges: usually included in price. But if the buyer
calls for special packing, then it is necessary to ascertain who
shall bear the additional charges. The time and methods of
payment should also be stated.
§4 Pricing?
1. Points to be considered in pricing?
(1) International market level.?
(2) The policies and regulations that apply to a particular market
area.?
(3) Exporter's specific purposes or the importer's requirements.?
(4) The change of supply and demand relationship and the trend
of rising and falling of the market prices.?
(5) Adequate profit margin over actual costs.?
(6) Quality and quantity of the products contracted, transportation
costs, place and terms of delivery etc.
(7) Method of payment of the goods and the possible fluctuations
of foreign exchange rates.
2. Choice of currency for accounting and payment
Currency for accounting is the currency used for price calculation.
Currency for payment is the currency for settlement.
Exporter: choose hard currency (currency that is reliable and stable and more in demand) .
Importer: choose soft currency (whose value may depreciate rapidly or that is difficult to convert into other currencies. )
Measures to offset foreign exchange exposures:
(1) Try to reduce the import price or raise the export price
Importer: The currency used is likely to float upward, you should try to press the exporter to reduce the price.
Exporter: The currency is likely to float downward, you should try to raise the price.
Usually such measure is used within a short period, because it is rather difficult to forecast the tendency of foreign exchange for a long period.
Stipulate exchange proviso clause
Define in the contract the equivalent contractual amount in another hard currency according to
the rate between the two currencies on the date
of concluding the contract.
On the date of payment, the amount of the hard
currency shall be converted into the soft currency
according to the rate on that date.
Example
JPY 10
million
JPY1= CHF0.0124
Exchange rate on the
date of concluding contract
CHF 124,000
CHF 124,000
JPY1= CHF0.011
Exchange rate on the
date of payment
JPY11.272727
million
(The buyer shall pay JPY 1,272,727 more)
3. Commission and discount?
Commission
The fee charged by a broker or agent for his/her service in facilitating a transaction.
It may be indicated in the price. Example:
USD 1 000 per M/T CFR Seattle including 2% commission.
USD 1 000 per M/T CFRC2% Seattle.
USD 1 000 per M/T CFRC2 Seattle.
The commission included in the price is known as plain commission.
Commission which is not included in the price is called secret commission.
The original price quoted by the exporter is USD20 per piece CIFC2% New York, now the exporter is requested by the importer to make a new quotation on CIFC5. By how much will the exporter’s net income be reduced if the new quotation remains the same as the original one And how much should the exporter quote if its original net income is the same as before ?
(2) Discount
Discount is a certain percentage of price reduction and a special favor given by the exporter to the importer.
It is usually used as a means of promoting and expanding sales.
There are different types of discount such as “quantity discount”, “cash discount”, and “special discount” for some special purposes.
Discount can also be specified in the price clause, such as “US$ 200 per metric ton CIF London less 3% discount”.
4. Cost accounting in export
Cost of earning foreign exchange in export
Total export cost: purchasing cost or production cost and domestic charges (storage, management, taxes, and so on).
Net foreign exchange income (USD) : FOB price.
Suppose the total cost for per unit of commodity A is as follows: purchasing cost RMB7270, processing charges RMB900, circulation charges RMB700, other costs RMB30, and the export price is USD1300 per unit CIF New York, in which USD128 of freight and USD72 of insurance premium are included.
(2) Profit or loss ratio in export: This index is the ratio of profit or loss (which is the net export income in RMB minus total export cost) to the total export cost. The net export income in RMB is the net foreign exchange income in US dollar multiplied by the buying rate of Renminbi to USD. Positive result and negative result stand for profit ratio in export and loss ratio in export respectively.?
5. Price clause in the contract
Constitution of price clause:
Unit price and total amount.
Unit price: ① currency unit; ② unit price figure;
③ measurement unit; ④ trade term.
?
US$ 500 per barrel FOB Dalian
① ② ③ ④
Are the following export quotations correct
1. $3.50 per yard CIFC Hong Kong
2. 500 per carton CFR net Great Britain
3. US$1000 per ton FOB London
4. J 1,000,000 per doz. FOB net less 1% discount
5. HK$2000 CIF Shanghai including 2% commission
(2) Ways of price stipulation?
① Fixed price: The common way of price stipulation is to define a fixed price mutually agreed. The fixed price is so clear and definite as to facilitate accounting.?
② Flexible price: Because of the uncertainty of the market situation, price may be flexibly stipulated as “price to be agreed on the date of ×××” or only part of the price is fixed.?
P: the final price P0: the initial price
M: the average price or price index of relevant material at the time of
calculating the final price
M0: the average price or price index of relevant material at the time of
signing the contract
W: the average wage or wage index at the time of calculating the
final price
W0: the average wage or wage index at the time of signing the
contract
A、B、C: the share of management expenses and profits, share of
material prices and the share of wages in the price
respectively.
Company A imported an equipment, the initial contract price of which was US$8 million(P0), the share of material price, wages and management expenses & profits was 60%(B), 20%(C), 20%(A) respectively. Both the importer and the exporter agreed to define the final price by making adjustment to the original price. Suppose at the time of signing the contract, the indexes of material price and wage were 100 (M0,W0), at the time of delivery, they were 115 (M) and 110 (W) respectively. Calculate the final price.

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