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Price of Export |
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| Fixing the Export Price |
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 The fixing of the export price must be preceded by a detailed study of the market conditions, in order to make viable the continuance of the exporter’s efforts, without losses to the company. It is a fundamental element for competitive conditions of the product to be exported.
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| Price determination. |
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The determination of the price is influenced by two forces that act in opposite directions. On the one hand, the cost of production and the goal of maximum profit tend to elevate the price; on the other hand, the competitive pressures in the international market induce a price reduction. In the middle term, the price chosen will determine the viability of the export activity. |
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The strategy of commercializing the product also affects the formation of the price. On being placed in a new market, a little known product should have, in principle, a price inferior to that practiced by the competitors, in the hypotheses that it has the same level of quality. However, an already recognized product can be commercialized with a superior price because of its acceptance in the market. As happens in the internal market, it will be necessary also in the foreign market to accompany the changes in the costs of production and the alterations in the level of demand. It must be noted also, that in principle, export prices are not subject to verification by any entity in Brazil. The competition imposed by the international market is the main factor of control in the price of export and of the quality of the product.
In the process of fixing the price for export one must first know and make use of all the fiscal and financial benefits applicable to export, in order to obtain the biggest external competition. Knowledge of the internal cost structure of the company is also of utmost importance for the fixing of the price for export.
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| Factors that influence the export price |
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- Potential Competitors
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- Production Costs
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- Financial Schemes for export
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- Tribute Treatment applicable to export
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- Export expenses
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Prices practiced by competitors of third party countries
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- Consumer behavior
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- New technology
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| Methodology |
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 Methodology for fixing the export price based on the price of the product on the internal market. |
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The export price is within an ample variation in which the maximum price is dictated by the market while the minimum price is established by the variable cost. It is most usual for the company to calculate the price differential for internal and external sales. The following presents a structure of price establishment for export that takes as a starting point the price practiced in the internal market.
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Deductions |
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 IPI (14% of the market price without IPI)
ICMS (18% of the market price without IPI)
COFINS (3% of the market price without IPI)
PIS (0,65% of the market price without IPI)
Profit on the internal market (10% of the market price without IPI)
Packing for the internal market
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Suggestion for the effects of the calculation:
Exclude the elements that normally compose the price of the product in the internal market, but are not present in the export price (Examples ICMS, IPI, PIS, etc); and
Include the expenses that are not part of the internal market but will be part of the export price in FOB mode. Examples: expenses with packing for export, expenses with transport of the product to the loading location, agent’s commission abroad, etc.
In order to supply a routine that can be adapted to the peculiarities of each company, the following example shows the price of export, based on the internal market price:
Internal market price without IPI
(For effecting the calculation of the deductions)
Internal market price (including IPI of 14%) |
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Total deductions |
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First Subtotal (Difference between the price with IPI R$ 5.700,00 and the total deductions R$ 2.322,50) |
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Inclusions |
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Packing for Export
Freight and insurance to the load location |
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Total inclusions |
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Second subtotal (Sum of the first subtotal R$ 3.377,50 with the total of inclusions R$ 155,00)
Intended profit margin (10% calculated on the FOB price)
FOB Price (R$ 3.532,50 plus R$ 392,5)
Assuming a hypothetical exchange rate of US$ 1,00 = R$ 1,90,
The FOB price is |
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The final part of the calculation to arrive at the amount of R$ 3.925,00,
takes into consideration the percentage of 10% corresponding to the exporter’s intended profit margin which can be developed by the use of the simple rule of three.
Thus, if the amount of R$ 3.532,50 corresponds to 90 percent of the final price, R$ 3.925,00 will be the final price of export including the stipulated 10 percent, that is, R$ 392,50:
R$ 3.532,50 90%
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In the example above one can also consider as deductible elements from the internal price, sales commissions non-incident in export, expenses with distribution of the product on the internal market , financial expenses specific to the internal market and other components of the internal price that are not part of export.
On the other hand one can add values corresponding to commission of agents abroad, consular expenses, if necessary, and other expenses that the company may incur in the export operation.
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Fonte: Departamento
de Promoção Comercial (DPR) do Ministério
das Relações Exteriores |
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EXPORT
