Foreign trade people need to master the calculation formula, very practical!

Foreign trade people need to master the calculation formula, very practical!


For many foreign trade whites, how to calculate L/C fees, FOB fees, CFR fees, is often a headache, come and learn!


01 Letter of credit costs


Case 1

A customer operates an Egyptian letter of credit, the delivery amount is USD62998.50, while the actual amount received is USD62769.50. The difference of USD229.00 corresponds to which fees?

Expert interpretation.

From the message, there is a clear breakdown of the fees, totalling USD229.00, as follows

SWIFT CHAEGES USD50.00 (telegraphic charges)

REIMB.CHARGES USD75.00 (reimbursement fee)

ADMINISTRATION FEES USD35.00 (processing fee)

PAYMENT COMM. USD69.00 (Payment Fee)


Case 2

A customer received a letter of credit from a bank in Singapore for USD200785.80 with a forward period of 60 days, and found that the foreign exchange was far different after receiving it.


Expert interpretation.

From the message received, it can be seen that the documents produce discrepancies and the issuing bank provides discounting services, the breakdown is as follows.

DISC USD100 (Discrepancy Charge)

USANCE COMM USD501.96 (forward commission fee)

HANDLINGCOMM USD313.48 (commission fee)

TELEX USD90 (telegraphic fee)

CILE USD250 (no conversion fee)

The fees vary depending on the type of letter of credit and whether or not a letter of credit confirmation is added, whether or not a transfer occurs, etc. Generally speaking, the fees are not consistent from country to country and from bank to bank.

02 CIF Marine Insurance Premiums


Textbook formula.

CFR = FOB + freight

CIF = (FOB + freight) / [1 - insurance rate * (1 + insurance mark-up rate)

CIF=CFR/[1-Insurance Rate*(1+Insurance Plus Rate)

The formula for calculating the premium can be derived as follows

Premium = CIF * insurance mark-up rate * insurance premium rate


If the CFR is known, then the formula to derive the premium is

Premium = CIF * insurance mark-up rate * insurance premium rate

=CFR/[1 - premium rate*(1+insurance mark-up rate)]*insurance mark-up rate*insurance premium rate


If the FOB is known, then the derived premium formula is

Premium = CFR/[1 - insurance premium rate * (1 + insurance mark-up rate)] * insurance mark-up rate * insurance premium rate

= (FOB + freight) / [1 - insurance premium rate * (1 + insurance mark-up rate)] * insurance mark-up rate * insurance premium rate

In practice, it is not that complicated and the actual formula for calculating the premium is quite simple, which is

Premium = invoice value * 1.1 * insurance premium rate

The 1.1 in the formula is a 110% mark-up in accordance with international practice. The premium rate is the insurance company's quote.


Many foreign trade people understand the cost of their own products, but also find freight forwarders to know the freight costs, the freight costs are apportioned to each product, the CIF price is very simple.


The common quotation formula is.

CIF price = CFR price * 1.003


03 FOB settlement

I. FOB price calculation for goods with export tax rebate.

For factories

FOB = {{1-[tax rebate rate / (1 + VAT rate)]} * RMB tax inclusive price} / spot buy price

Explanation of the formula:

FOB = (RMB tax inclusive price - tax rebate income) / exchange rate

Where.

Refund income = RMB tax inclusive price * [Refund rate / (1 + VAT rate)]

Then.

FOB = {RMB tax inclusive price - {RMB tax inclusive price * [rebate rate/(1 + VAT rate)]}}/exchange rate

FOB = {{1-[tax rebate rate/(1+VAT rate)]}*RMB tax inclusive price}/exchange rate

For foreign trade companies

FOB = {{{1-[tax rebate rate/(1+VAT rate)]}*RMB tax-inclusive purchase price} + profit}/current foreign exchange purchase price

Or.

FOB = {{1-[tax rebate rate/(1+VAT rate)]}*RMB tax inclusive purchase price}/[spot purchase price*(1 - profit rate)

Note: The unit price and total price of the RMB tax-inclusive purchase price, profit and related expenses should be unified.


II. FOB price calculation for commodities with export duties.

FOB dollar price = [FOB yuan price × (1 + tariff rate)] / dollar spot buying price

Formula analysis:

Export tariffs = export duty-paid price × tariff rate

Where.

Export duty-paid price = FOB / (1 + tariff rate)

Duty-paid prices are calculated to the dollar, rounded to the nearest dollar.

Therefore: Export tariff amount = FOB/(1+tariff rate) x tariff rate

Tariffs are calculated up to the cent and rounded up to the nearest cent; the starting point is RMB 10, with exemptions below RMB 10.

Domestic costs include.

1. processing and finishing costs.

2. packaging costs.

3. custodial costs (storage/rental, fire insurance, etc.).

4. domestic transportation costs (warehouse to dock).

5. documentation costs (including commercial inspection fees, notary fees, consular visa fees, certificate of origin fees, licensing fees, custody fees, etc.)

6. shipping costs (loading, lifting and barging fees, etc.)

7. bank charges (discount interest, fees, etc.)

8. anticipated wear and tear (depletion, shortage, leakage, breakage, spoilage, etc.)

9. postal and electrical charges (costs of telegrams, telephone, telecopier, fax, e-mail, etc.).


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