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Methods of quoting and payment
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(Last updated: 30 Nov 2007)
The key items that an exporter should include in an export quote are: the product, quantity, packaging, quality, price and pricing method, payment terms, shipping details, documentation required, and any other special conditions of sale.
In calculating a price for a product, an exporter must consider the following:
- The trade terms or incoterms of a deal. These Incoterms determine who will pay for what in the transaction, and at what point the insurance risk changes from the seller to buyer. The particular incoterm (eg. FOB, CFR, CIF, etc) will determine the responsibilities of the buyer and seller, and assist to determine the price of the product.
- The costs that the exporter must pay to provide all goods and services.
- The payment terms to determine how you will be paid for a sale. The major types of payment terms are prepayment, open account, documentary collection, and letter of credit (L/C).
Quotations for major exports to China should either by in Australian dollars, US dollars, or Pound Sterling, FOB Australian port. The trend for smaller contracts has been to operate on a C&F or CIF basis. Chinese standard contracts cover each of the standard types of Incoterms.
The most secure method of payment with China is a letter of credit confirmed by an Australian bank. L/Cs should be opened 15-20 days prior to shipment. Payment methods that are becoming more common include bid bonds, advance payment bonds and letters of guarantee.
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