Pricing in International Markets BMI3C

Discussion Ever bought something from the US? Ever bought something from the US? Physically gone across border Physically gone across border By mail By mail Why did you buy it in the States rather than Canada? Why did you buy it in the States rather than Canada? Any difficulties/unexpected costs? Any difficulties/unexpected costs? Any warranty problems? Any warranty problems?

Currency Values Exchange Rates can fluctuate Exchange Rates can fluctuate Hard currency vs. soft currency Hard currency vs. soft currency If country A’s currency falls relative to country B’s, goods imported from B into A will be more expensive If country A’s currency falls relative to country B’s, goods imported from B into A will be more expensive Can have serious impacts on cost Can have serious impacts on cost On a $500,000 shipment, a currency fluctuation of 1 cent would cost $5,000 On a $500,000 shipment, a currency fluctuation of 1 cent would cost $5,000

Tariffs/Duties Taxes on imported goods Taxes on imported goods Protectionist policy Protectionist policy Can have a significant impact Can have a significant impact During the softwood lumber dispute the U.S. imposed duties of 27% on Canadian lumber During the softwood lumber dispute the U.S. imposed duties of 27% on Canadian lumber Ex: Ex: French Jam has tariff of 8.5% French Jam has tariff of 8.5% If cost to buyer is $2.25, the duty will bring the landed cost to $2.44 If cost to buyer is $2.25, the duty will bring the landed cost to $2.44

Tariffs/Duties A Free Trade agreement between nations means that the countries have agreed not to charge tariffs on each other’s goods A Free Trade agreement between nations means that the countries have agreed not to charge tariffs on each other’s goods Doesn’t always work (see softwood lumber) Doesn’t always work (see softwood lumber) Countries have different tariff rates (MFN, preferential rates, general tariffs) depending on deals worked out with each other Countries have different tariff rates (MFN, preferential rates, general tariffs) depending on deals worked out with each other

Transportation Transportation Transportation Charges depend on: Charges depend on: Agent, shipping company/freight forwarder Agent, shipping company/freight forwarder Shipment method Shipment method Weight Weight Volume Volume Distance to final destination Distance to final destination Containerization Containerization Way to reduce costs Way to reduce costs

Extra Charges Hidden Costs Hidden Costs Cost to fix mistakes Cost to fix mistakes Travel, legal arrangements Travel, legal arrangements Insurance Insurance Translations Translations Labelling Labelling Local Taxes/charges Local Taxes/charges Bribes? Bribes?