Application Of Commission And Discount

In the contract price terms, sometimes it involves Commission (Commission) and Discount (Allowance).

The price stipulated in the price terms can be divided into price with commission or discount and net price excluding such factors (Net Price).

A price with commission is usually referred to as "inclusive price" in business.

I. Commission

(1) the meaning of commission

In international trade, some pactions are carried out through intermediate agents.

Because middlemen introduce business or buy on behalf of the seller, they need to receive a certain fee, which is called Commission.

Where the contract price terms clearly stipulate the percentage of commission is called "Ming servant".

If the percentage of the Commission is not marked, even the word "Commission" is not marked, the issue of the Commission shall be stipulated separately by the parties. The practice of secretly making a commission is called "dark Commission".

Commission is directly related to the price of goods. Whether the price includes the proportion of commission and commission will affect the price of goods.

Obviously, the wage rate is higher than the net price.

Proper use of commission will help mobilize the enthusiasm of middlemen and expand pactions.

(two) Regulations for Commission

When a commission is included in the price of a commodity, it should be explained in writing.

For example, "$200 per metric ton CIF San Francisco, including 2% Commission" (US $200 per M / T CIF San Francisco including 2%commission).

It can also be used in trade terms, with the commissions abbreviated, the English letter "C" and the percentage of the Commission.

For example, "$200 per metric ton CIFC2% San Francisco" (US $200 per M / T CIF San Francisco including 2%commission).

The Commission contained in commodity prices can be expressed in absolute numbers, not only in percentage terms.

For example, "a commision of $25 per metric ton."

If a middleman obtains a "double Commission" or a tax evasion from the buyer and seller, it sometimes requires no commission in the contract, and the other shall be paid in accordance with the agreement secretly reached between the two parties.

The stipulation of the Commission should be reasonable, and the ratio should be between 1% and 5%.

In international trade, the method of calculating Commission is different. Some are calculated according to the percentage agreed on the paction amount, and some are calculated according to the quantity of the commodity being traded, that is, according to the number of commissions per unit.

In China's import and export business, the calculation method is also inconsistent, according to the amount of paction and the number of pactions.

When calculating the paction amount, some take the total invoice amount as the base of the Commission, while others calculate the commission based on the total value of FOB.

If the paction is done according to CIFC and the Commission is calculated on the basis of FOB value, the freight and insurance premium should be deducted from the CIF price, and the FOB value should be calculated, and then the commission rate will be used on FOB, that is, the commission amount.

The formula for calculating Commission is as follows:

Commission per unit of goods = commission rate * commission rate

Net price = commission per unit of goods

The above formula can also be written as follows:

Net price = inclusive rate * (L commission rate)

If the net price is known, the formula for calculating the commission price should be:

Inclusive rate = net price / (1- commission rate)

Here, it is worth noting that, when negotiating a paction, our price is $10000, and the other party requests a commission of 3%. In this case, we change the report to include the commission price. According to the above formula, we should figure out that it should be 10309.3 dollars, so as to ensure that the amount is 10000 dollars.

Generally speaking, there are two ways of payment for commission: one is deducting commission from the price directly by the intermediate agent, the other is paying the intermediate agent separately according to the agreed time and commission ratio after the client has paid the money.

When paying commission, accidents such as false payment, leakage and heavy payment should be prevented.

According to general practice, in the case of exclusive agency, if a client makes a paction with other clients in the agreed area, even if he does not go through the exclusive agency, he must pay the Commission at the agreed rate.

Two, discount

(1) the meaning of discount

Discount means that the seller gives the buyer a percentage discount at the original price, that is, giving the price a reasonable discount.

There are many discounts in international trade. Apart from general discounts, there are also Quantity Discount for sale expansion, special discount (Special Discount) and year-end rebate (Turnover Bonus) for special purposes.

Where a discount rate is expressly defined in the price terms, it is called "clear deduction"; where the two parties have reached an agreement on the issue of discount, and the rate of discount in the price terms is not known, it is called "secret deduction".

Discount is directly related to the price of goods. Whether the discount rate or discount rate affects the price of goods, the higher the discount rate, the lower the price.

Discount, like Commission, is an inevitable outcome of market economy. Proper use of discount is conducive to mobilizing the enthusiasm of buyers and expanding sales. In international trade, it is a means to strengthen external competition.

(two) the method of discounting

In international trade, discount is usually expressed clearly in the contract price terms.

For example, "CIF London $200 per metric ton, discount 3%" (US $200 per Metric ton CIF London including 3%discount).

This example can also be said: "CIF London $200 per metric ton, minus 3% discount" (US $200 per metric ton CIF London Less 3%discount).

In addition, discount can also be expressed by absolute number.

For example, "6 dollars per metric ton discount".

In actual business, it also uses "CIFD" or "CIFR" to indicate that CIF price includes discounts.

The "D" and "R" here are the abbreviation for "Discount" and "Rebate".

In view of the unclear meaning of "D" or "R" filled in trade, it may lead to misunderstanding, so it is better not to use this abbreviation.

When the two parties take a secret action, they will not stipulate in the contract price.

The issue of discount is handled according to the agreement secretly reached between the two parties.

This practice is unfair competition.

A public officer or an employee of a company should be "embezzled" and should be a corrupt person.

(three) calculation and payment method of discount

Discount is usually calculated on the basis of paction volume or invoice value.

For example, CIF London has a discount of 2% per metric ton of US $2000, and the actual net income of the seller is US $1960 per metric ton.

The calculation methods are as follows:

Unit goods discount = original price (or with discounted price) * discount rate

Seller's actual net income = original price per unit of goods discount

Discount is usually deducted in advance when the buyer pays the payment.

Some discounts are not deducted from the price directly, and are paid separately to the buyers according to the agreement reached secretly. This practice is usually applied to the "secret button" or "rebate".