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Your export price is not what the consumer pays: costs, taxes and margins are added between the two. Learn to calculate it from the shelf backward and to decide whether your product sets the price or takes it from the market.
Goal: Work the FOB price back from the shelf price and explain what your price includes under each Incoterm.
The export price moves between two limits. At the bottom is your cost plus a minimum margin: below that point you lose money. At the top is the value the customer perceives and what the competition charges. There are three approaches to set it: cost-based (cost plus margin), competition-based (you compare with market prices) and value-based (you charge for the benefit the customer perceives). Normally you combine them.
Your price is not what the consumer pays. Between your factory and the shelf, freight, insurance, tariffs, destination taxes and the margins of the importer, the distributor and the retailer are added. That sum is called price escalation. If you do not calculate it, your product reaches the shelf too expensive. That is why it pays to do the math backward: start from the shelf price, remove each layer and arrive at your departure price.
What your price includes is defined by the Incoterms® rule, the International Chamber of Commerce rule that divides costs and risks between seller and buyer. A FOB price does not include international freight; a CIF price does include freight and insurance. Always state the rule and the place in your quote. It is covered in module 4 and in the Incoterms® calculator. Currency and payment term also count: if you quote in dollars and your costs are in soles, the exchange rate moves your margin, and giving credit has a financial cost. This is covered in the Finance, costs and payment methods course.
Not all products are priced the same way. Those with an international reference price, such as metals and conventional coffee, have a price set by the world market. You are a price taker and you compete on costs, quality and delivery conditions. Differentiated products, by brand, origin or certification, give you more freedom to charge for value. Some certifications even set a price floor, as happens with Fairtrade coffee.
You also decide how to enter. With penetration pricing you enter low to win customers, but it is hard to raise the price afterward. With skimming you enter high and sell to those who value the product most. Beware of the extremes: selling abroad below the price in your own market, or below cost, can be considered dumping. The importing country can investigate and apply anti-dumping duties under WTO rules. Know your costs before you lower the price.
| Approach | How it is calculated | When it works | Risk |
|---|---|---|---|
| Cost-based | Total cost plus margin | First quote and price floor | Ignores what the customer pays |
| Competition-based | You compare with rivals' prices at destination | Products similar to others | Price war |
| Value-based | You charge for the benefit the customer perceives | Brand, origin or certification | Requires proving that value |
| International reference | World market price plus or minus a differential | Metals and conventional coffee | You do not control the price |
Result: At US$ 6.42 on the shelf the company earns US$ 0.50 per bag; to match the competition's US$ 5.35 it would lose US$ 0.06. It must justify its price with value (origin, organic certification) or lower its costs, not enter a price war.
20/07/2015
Guatemala requested consultations on 12/04/2013 against the price band system under which Peru charged an additional duty on certain imported agricultural products. The Panel circulated its report on 27/11/2014, the Appellate Body issued its own on 20/07/2015 and the DSB adopted it on 31/07/2015. The conclusion was that the additional duty operated as a variable levy, inconsistent with the Agreement on Agriculture. Peru reported in March 2016 that it had revised the system. It matters because a country's price mechanisms change what your product costs there.
Besides the tariff, check whether your market applies variable duties, quotas or surcharges that change your price delivered at destination.
Source: OMC – DS457 Peru — Additional Duty on Imports of Certain Agricultural Products
30/07/2026
On 30/07/2026 Fairtrade International announced new minimum prices for coffee, following a decision by its Standards Committee on 15/07/2026. For contracts signed from 01/12/2026, the FOB minimum will be US$ 2.00 per pound for washed arabica and US$ 1.95 for natural arabica. An organic differential of US$ 0.40 per pound and a Fairtrade premium of US$ 0.20 per pound are added. It matters because it shows an agreed price floor for a product whose price is usually set by the world market.
If you sell with a certification, check whether it sets a minimum price and use it as the floor of your quote.
Source: Fairtrade International – Price announcement for Fairtrade Coffee, 30 July 2026
28/04/2026
On 28/04/2026 the World Bank published the April 2026 edition of its Commodity Markets Outlook. The report notes record prices for several key metals and sharp increases in energy and fertilizers; the next update is scheduled for October 2026. It matters because metals are a central part of Peruvian exports and their price is set by the world market, not by the exporter: it can rise or fall without your costs changing.
In products with an international reference price, start from the day's quote and focus your effort on controlling costs.
Source: Banco Mundial – Commodity Markets Outlook (edición de abril de 2026)
Practise with the calculators, the COMEX Simulator and the review questions on the main page.
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