How to calculate a competitive export price

To calculate a competitive export price, build your price up to the point at which the target country records its imports, which for most countries is the border, with freight and insurance included (CIF). Then compare it, per kilogram or per unit, with the prices at which the product actually enters that country, looking at the whole range of prices, not just the average. If your price is below the price at which half of the imports come in, you can compete on price; if it is above almost all of them, the market is closed to you on price.

A common mistake is to compare a factory price with a market price that already includes delivery, or to compare a price per piece with a price per kilogram. The steps below keep the comparison like for like.

Step 1. Start from your full cost

Take your cost per unit at the factory gate and add every cost that exporting brings before the goods leave:

• export packaging, pallets, labels in the buyer's language;
• certificates, tests and permits the market requires;
• transport to the port or the border and export formalities;
• export duty, if your country charges one on this product;
• payment costs: bank fees, the cost of a letter of credit or of insurance against non-payment;
• commission to an agent, if you work through one;
• the minimum margin you are prepared to accept.

The result is your price with the goods ready to leave your country. Write each item down separately: when the price turns out to be too high, you will see which item to work on.

Step 2. Add freight and insurance up to the buyer's border

Two delivery terms are enough for this calculation:

• FOB (free on board): your price with the goods loaded on the ship in your port. The buyer pays the sea freight.
• CIF (cost, insurance and freight): your price with the goods delivered to the buyer's port, freight and insurance paid.

Most countries record the value of imports at their border including freight and insurance, which is close to CIF. Some, for example the United States, record imports without international freight. Find out how the country you sell to values imports and bring your price to the same point. If you compare your FOB price with the market's CIF prices, you will look cheaper than you are by the cost of freight.

In short: your delivered price (CIF) = (price from Step 1 + freight) × (1 + insurance rate). Cargo insurance usually costs a fraction of a percent of the value.

Step 3. Get a real freight rate

For expensive goods freight is a small part of the price. For cheap and heavy goods it can be larger than your margin. Ask a freight forwarder (a company that organises transport for you) for a rate for your real lot and route:

• a full container or a part of a shared one: per kilogram, a part load usually costs more;
• port to port, or door to door with transport inside both countries;
• light and bulky goods are charged by volume rather than weight.

Freight indices and benchmarks are useful for a first estimate, but they assume a full container on a main route. Use the forwarder's quote for the final price.

Step 4. Bring everything to the same unit

Import prices in shipment data are usually per kilogram of net weight, that is, the weight of the goods without packaging. If you sell by the piece, the bottle or the square metre, convert:

• a price per piece divided by the net weight of one piece gives a price per kilogram;
• gross weight includes packaging, and for small retail packs it can be noticeably higher than net weight, so a price per gross kilogram looks lower than it is;
• some goods are also recorded in pieces, litres or pairs; if the source shows these additional units, compare in them.

Step 5. Compare with real import prices

Now compare your delivered price with the prices at which the product actually enters the country. Look at four things:

1. The spread, not the average. An average hides the fact that one code often covers several quality grades. Find the price at which half of the imports come in, and the share of imports bought at your price or higher.
2. Prices by country of origin. Suppliers from different countries often sell at very different levels. Compare yourself with the suppliers whose product is closest to yours.
3. The same period and currency. Prices move; compare with recent months and convert currencies on the same dates.
4. The right code. If the 6-digit code mixes several products, use the national codes that match yours. How to find them is covered in How to find the HS code for a product.

How to read the result:

• your price is below the price at which half of the imports come in: you can compete on price;
• your price is above that, but part of the imports is bought at your price or higher: you can sell only in the more expensive segment, and you need a product and an offer for it;
• your price is above what almost all imports are bought at: practically nobody buys at this price there.

Step 6. Check the duty gap

The buyer pays import duty and VAT on top of the CIF price. When all suppliers pay the same rate, this does not change the comparison. It does change it when your competitors pay less:

• suppliers from countries with a trade agreement may pay a lower duty or none;
• inside a customs union such as the Eurasian Economic Union (EAEU), members do not pay import duty to each other;
• anti-dumping duties (extra duties on goods sold below their home-market price) can apply to goods from some countries only.

If competitors pay no duty and you pay 10%, your CIF price has to be about 9% lower than theirs for the buyer to pay the same after duty.

A second check: work back from the shelf

For consumer goods, check the price from the other end as well. Take the retail price in the target country and subtract VAT, the retailer's margin, the distributor's or importer's margin, local transport, import duty and customs costs. What is left is the CIF price the chain can pay you. If it is lower than your delivered price, the product will not reach the shelf at a competitive price, even if the import statistics look good.

Example of a build-up

The numbers here are invented, to show the arithmetic only. A producer has a cost of 2.00 US dollars per kilogram, including the margin it needs. Packing for export, transport to the port and export formalities add 0.05 dollars per kilogram; there is no export duty. A forwarder quotes 0.30 dollars per kilogram to the buyer's port, and insurance is 0.3% of the value.

Delivered price (CIF) = (2.00 + 0.05 + 0.30) × 1.003 ≈ 2.36 dollars per kilogram. This is the number to compare with the import prices of the target country, not the 2.00 the producer started with.

How Find new export markets does this

The Find new export markets section runs this comparison for every country it covers. You enter a 6-digit HS code and your cost in dollars per kilogram; freight and the country of origin are optional. The section adds export duty, freight and insurance and compares your delivered price (CIF) with the prices at which the product is imported into each country, also CIF and before import duty and VAT.

• If you enter your own freight rate, for example a forwarder's quote, it is used for every market in the search. If not, the section uses a freight benchmark for the route; where no rate is known for the route, the margin is estimated without real freight and has little effect on the score, so entering your rate makes the result more accurate.
• If you name your country of origin, inside the EAEU the section accounts for the duty gap: tags Duty-free within the EAEU and EAEU competitors pay no duty show when it applies.
• The tag Price above market means your delivered price is higher than what is paid for 98% of the market's imports by value. Premium segment only means it is higher than half of the shipments, but part of the imports is still bought at that price or higher.
• For each country you see the breakdown: cost, delivery and duties, market price.

The ranking and verdicts are open to everyone, and the score already takes your price into account. Exact volumes and prices open after you sign in on a paid plan. For one country, the prices per kilogram and their spread are in the market report in Analyze markets by product; there, too, prices open with a plan.

The section shows the price picture only for the 14 countries where Orion Markets has shipment data; the list is on the data coverage page.

Common mistakes

• Factory price against delivered price. Always bring your price to the point at which the market's prices are recorded.
• Gross against net weight. Packaging weight makes your price per kilogram look lower than it is.
• Average instead of spread. A market can pay well for the top grade and very little for the rest. Find where your product sits.
• Freight from a benchmark only. For heavy goods, a few cents per kilogram of difference in freight can decide whether the market pays off.
• Forgetting the duty gap. A competitor that pays no duty can sell at a higher CIF price than you and still be cheaper for the buyer.

To see how your price compares in each covered country, enter your code and cost on Find new export markets. How to choose among the countries is covered in How to choose a country for export.