Ch.2 Quality

1、 CHAPTER 2 QUALITY, QUANTITY, PACKING AND PRICINGn Qualityn Quantityn Packingn Pricing1 Quality1.Name of commoditynUsing a proper name for the traded good is significant in that it helps to avoid confusion, reduce customs duties or save freight. nCurrently businessmen usually nominate traded goods w

2、ith names complying with the Harmonized Commodity Description and Coding System (HS) of tariff nomenclature. nHS 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 Custom

3、s Co-operation Council)2. Methods of expressing quality of commodity(1)Sale as seen (2)Sale by sample (3)Sale by description Sale by specifications Sale by grade Sale by standard Sale by brand and trade mark Sale by name of origin Sale by descriptions and illustrations (1) Sale as seen nA sale is ma

4、de on the basis that the buyer has inspected the goods and is buying them as a result of this inspection.nThis method is of special necessity for particular goods such as ornaments, jewels, paintings, artworks, etc. nIn many cases, the buyer may be advised to arrange for inspection of the goods befo

5、re 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. Counter sample: a reproduced product for buyers confirmation Sealed sample: This sealed sample is for checking the

6、quality of the delivered goods in the future. 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)

7、 Sale by description 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 3036 No. of threads/inch 7269 Width (inch) 35/36 Sale by grade Products

8、 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 Sale by standard n A standard is an established norm or require

9、ment. n It is usually a formal document that establishes uniform engineering or technical criteria, methods, processes and practices. n International standards like ISO standard, national standards like BS in Britain, ANSI in the USA and JIS in Japan. n When sale is made by standard, it is important

10、 to mark the publication year of the standard. n For example. Rifampicin B.P.1993. (Note: B.P.: British Pharmacopoeia) Sale by brand and trade mark n Brand is the name, term, symbol, or design or a combination of these to identify a product. n Trade mark is a legal term. It includes all those words,

11、 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. Sale by name of origin n Some product

12、s are well known by the place of origin, they would be more welcomed whenever their places of origin are mentioned. n Thus, the place of origin may signify the quality of a product. n In concluding a sales contract, traders like to mention the places of origin of these products to indicate their qua

13、lities. Sale by descriptions and illustrations n Machinery, instruments, equipments, etc. have complex structure. n Sale by descriptions and illustrations is applicable. n In the contract, the clause of quality contains not only the name of commodity, the brand but also the instructions to illustrat

14、e the structure and functions of the product. n 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

15、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 Range: e.g. Printed Shirting “Jumping Fish” Yarn counts 30 x36 No. of threads/inc 72x69 Width (inch) 35/36 Allowing

16、more or less Example: Duck feather: down content 18%, allowing 1% more or less Max. & min. Example, Fish Meal Protein 55% Min. Fat 9% Max. Moisture 11% Max. Salt 4% Max. Sand 4% Max.(3) Quality tolerancen It is not uncommon that some industrial products such as instruments, mechanical products h

17、ave some tolerances permissible variation in quality. n When the quality difference is within the flexible range, the price of the product may not be adjusted. n However, if the difference greatly influences the quality, the price is normally increased or reduced accordingly. For example, soybean, i

18、f the oil content of the goods shipped is 1% higher, the price will be accordingly increased by 2%. 2 Quantity1. The system of weights and measures A set of units which can be used to specify anything which can be measured.(1) Metric systemnAn international decimalised system of measurement, first a

19、dopted by France in 1791. nFundamental units: kilogram (kg.), meter (m.), square meter (sq. m.) and litre (l.). nSome other derived units are metric ton (M/T), kilometer (km.) and so on. nThis system is widely used by European continent and many other countries.(2) International system of unitsn Sin

20、ce the 1960s, the international system of units has been the internationally recognised standard metric system. n The International System is called the SI, using the first two initials of its French name Systme International dUnits. n This system is published by international standard metrical orga

21、nization, and is based on the metric system. n Fundamental units include kilogram, meter, second, etc. n SI is the official system of measurement for most nations including China. (3) British system (also called British imperial units) n Mostly used in the British Commonwealth and the former British

22、 Empire but in most Commonwealth countries they have been largely supplanted by the metric system. n 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 n M

23、ost commonly used system of measurement in the United States. n A number of differences between the imperial and US system:n Imperial system: a long ton (L/T) of 2240 pounds (lb.) The American system: a short ton of 2000 pounds (lb.). n Six U.S. gallons are a little less than five Imperial gallons.1

24、 Metric Ton = 1000 kilograms1 Short Ton = 907 kilograms1 Long ton = 1010 kilograms2. Quantity units n Two categories of units which are used to show the quantity of commodity in international trade. n Metrical units, including weight, length, area, volume and capacity; n Numbers including some custo

25、mary units such as dozen, gross (羅羅), great gross, ream (令令), and some packing units like barrel (桶桶) (for petroleum, oil), bale (包包) (for cotton), etc.3. Methods for calculating weight n (1) Net weight. The weight of the product itself. Weight is calculated by net weight unless otherwise stated in

26、the contract. n (2) Gross weight. Net weight plus the weight of package. For some less valued products, gross weight may be used in the contract, called “gross for net”. n Methods of calculating tare: Real tare: the actual weight of each package; Average tare: the average weight of packages; Customa

27、ry tare: the weight of package known to all; Computed tare: the weight of package agreed upon by the buyer and the seller. (3) Conditioned weight (公量公量) n A weight applicable for weighing products with unstable moisture contents such as wool, cotton, raw silk, etc. n In order to determine the moistu

28、re contents accurately, the universal conditioned weight is used. n Theoretically conditioned weight equals dry weight plus standard moisture content. The formula ) +1() tan+1( = Conregainmoistureactualregainmoisturedardsweightactualweightditioned(4) Theoretical weightn This is a calculated weight b

29、ased on nominal dimensions (規(guī)格規(guī)格) of a product. Some products are of uniform sizes and/or dimensions and the weight of each unit is almost the same. n 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 plate4. Quantity

30、 clause in the contract(1) The importance of quantity clause (CISG)Goods areover-deliveredThe buyer can accept (pay at the contract rate) or reject all or part of the excess partGoods are under-deliveredThe seller must replenishwithin delivery timewithout causing unreasonablelosses to the buyerThe b

31、uyer reserves the right of claiming damages(2) More or less clause n A clause which allows the quantity delivered be a certain percentage more or less than contracted quantity. n For example, 2000 M/T, 5% more or less at sellers option. n However, if the quantity is related with transportation, “at

32、carriers option” may be stipulated, or “at buyers option” when the ship is arranged by the buyer.n Settlement for the more or less part is usually based on the contract price. Sometimes it may be on the market price.3 Packing n Selling packing: also called small, inner or immediate packing. It is ma

33、inly 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. n Transport packing: also known as big or outer packing. Its main functions are to protect goods, and facilitate st

34、orage as well as shipment. 1.Types of transport packing(1) Unit packing: nBale: paper, wool, cotton, and carpets, etc.;nBag: cement, fertilizer, flour, chemicals, etc.;nBarrel/Drum: liquid or greasy cargoes;nBox/Case: equipments and car accessories;nGlass container: dangerous liquid cargoes such as

35、acid;nCarton: consumer-type of products.nCrate/Skeleton case(2) Unionization (or combined) packing n A kind of packing whereby individual packages are put together and placed into a larger container. n The combined packing has such advantages as to protect goods effectively, improve efficiency of ha

36、ndling, and save packing costs as well as freight.2. Marks on transport packing(1) 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. Initials or Abbreviated Name ABC Re

37、ference Number 1234 Destination BOMBAY 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 an

38、d 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 markN.W.:11.3 KGG.W.:16.4 KGMEAS.:45.55255.5 cm3. Neutral packing n A special type of packing where ther

39、e is no country of origin on it. n Neutral packing with designated brand: the neutral packing where the brand (or trademark) designated by the buyer is marked out on it. n Neutral packing without designated brand: the neutral packing without designated brand or trademark.n In recent years it has bee

40、n restricted by some countries. Exporters should be cautious in adopting it. 4. Bar codesn Universal Product Code (U.P.C.) system in the U.S.A. and Canada n The International Article Numbering (EAN) system in over 90 other countries Number Mfg Product CheckSystem Code Code Digitn The number system c

41、onsists of two digits (sometimes three digits) which identify the country (or economic region) numbering authority which assigned the manufacturer code. n In 1988, China established the Chinese Article Code Center which is now known as GS1 China. n GS1 China is at present in charge of organizing, co

42、ordinating and administrating article numbering and Auto-ID work throughout China. n GS1 China joined GS1 as a Member Organization on behalf of China in April 1991. n Chinas GS1 country codes are 690-695.5. Packing clause in the contract (1) Contents: packing material and the way of packing. Example

43、, 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 mar

44、k 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 Pricing1. Points to be considered in pricingn (1) Internati

45、onal market level.n (2) The policies and regulations that apply to a particular market area.n (3) Exporters specific purposes or the importers requirements.n (4) The change of supply and demand relationship and the trend of rising and falling of the market prices.n (5) Adequate profit margin over ac

46、tual costs.n (6) Quality and quantity of the products contracted, transportation costs, place and terms of delivery etc. n (7) Method of payment of the goods and the possible fluctuations of foreign exchange rates.2. Choice of currency for accounting and payment n Currency for accounting is the curr

47、ency used for price calculation.n Currency for payment is the currency for settlement. n Exporter: choose hard currency (currency that is reliable and stable and more in demand) .n Importer: choose soft currency (whose value may depreciate rapidly or that is difficult to convert into other currencie

48、s. ) Measures to offset foreign exchange exposures:(1) Try to reduce the import price or raise the export pricen Importer: The currency used is likely to float upward, you should try to press the exporter to reduce the price. n Exporter: The currency is likely to float downward, you should try to ra

49、ise the price. n 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. (1)Stipulate exchange proviso clausenDefine in the contract the equivalent contractual amount in another hard currency according to the

50、rate between the two currencies on the date of concluding the contract.n 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.ExampleJPY 10 millionJPY1= CHF0.0124Exchange rate on the date of concluding contractCHF 124,00

51、0CHF 124,000JPY1= CHF0.011Exchange rate on the date of paymentJPY11.272727million (The buyer shall pay JPY 1,272,727 more)3. Commission and discount(1)CommissionnThe fee charged by a broker or agent for his/her service in facilitating a transaction. nIt may be indicated in the price. Example: USD 1

52、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. nThe commission included in the price is known as plain commission. nCommission which is not included in the price is called secret commission. rate commissioninclusive-price inclusiveC

53、= commission-price inclusiveC = price Netrate commissionprice inclusiveC = Commission-rate commission-1price net= price inclusiveC- 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 muc

54、h will the exporters 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?6.20$= %5-16.19= rate commission -1price net=CIFC5:quotationNew (iii) piece. per US$19) - (US$19.6 US$0.6by re

55、duced be willincome netnew sexporter The US$19 = 5%20-20 = 5%CIFC5-CIFC5 = C-CIFC5 = income netnew The (ii) US$19.6 = 2%20-20 = 2%CIFC2-CIFC2 = C-CIFC2 = income net original The (i) US(2) Discount n Discount is a certain percentage of price reduction and a special favor given by the exporter to the

56、importer. n It is usually used as a means of promoting and expanding sales. n There are different types of discount such as “quantity discount”, “cash discount”, and “special discount” for some special purposes. n Discount can also be specified in the price clause, such as “US$ 200 per metric ton CI

57、F London less 3% discount”. 4. Cost accounting in export(1) 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. (USD) income exchange foreign Net(

58、RMB) cost export Total=export in exchange foreign earning of Cost 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 USD12

59、8 of freight and USD72 of insurance premium are included.8900 RMB =30+700+900+7270 = (RMB) cost Total USD1100 = 72 - 128- 1300 = income exchange foreign NetUSDRMB/09.8 =USD1100RMB8900=export in exchange foreign earning of Cost (2) Profit or loss ratio in export: This index is the ratio of profit or

60、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 i