Introduction

Setting the right price for export commodities is crucial for ensuring profitability and competitiveness, especially for exporters in countries with volatile exchange rates. This guide explains how to create accurate pricing and prepare professional proforma invoices.

Key Pricing Components

1. Cost of Goods Sold (COGS)

Include all direct costs like raw materials, labor, and production expenses.

2. Shipping Costs

Calculate transportation, port fees, and customs clearance for both origin and destination.

3. Insurance Costs

Ensure goods are covered for damage or loss during transit.

4. Profit Margin

Add a reasonable margin to cover risks and ensure profitability.

Understanding CIF (Cost, Insurance, and Freight)

CIF is a pricing term under Incoterms that includes:

  • Cost: The price of the goods.
  • Insurance: Coverage for the goods during transit.
  • Freight: Transporting goods to the destination port.

The seller is responsible for arranging and paying for these components up to the destination port.

Preparing a Proforma Invoice

A proforma invoice serves as a preliminary bill. Include the following:

  • Exporter and buyer details.
  • Product description, quantity, and unit price.
  • Payment terms and currency.
  • Incoterm (e.g., CIF, FOB).
  • Shipping and insurance details.
  • Delivery date and destination port.

Ensure the proforma invoice is clear and complies with international standards.

Managing Exchange Rate Volatility

Exporters in countries with fluctuating currencies can:

  • Price in stable international currencies like USD or EUR.
  • Hedge against currency risks using financial tools.
  • Set short payment terms to minimize risk.

Understanding Payment Methods

Common international payment methods include:

  • Letter of Credit (LC): Secure and widely accepted.
  • Telegraphic Transfer (T/T): Fast and efficient.
  • Open Account: Suitable for trusted clients.

Negotiate with the buyer to determine whether payments will be made in the exporter’s or importer’s currency.

Best Practices for Building Trust

To gain buyer confidence:

  • Share detailed product specifications and certifications.
  • Provide high-quality images and samples.
  • Offer clear and transparent terms in your proforma invoice.