To calculate your export price, start from your production cost, add your margin, then add the export costs you take on under your Incoterm (packing, freight, insurance, paperwork). Next, check import duties and taxes in the destination market and the distributor's and retailer's margins, and make sure the final shelf price is still competitive. This calculation is called a cost build-up, or "escandallo" in Spanish.
What is an export cost build-up?
It is a spreadsheet that breaks down, line by line, how you get from what it costs to make a product to what the end customer pays in another country. It does two jobs: it tells you whether exporting is profitable, and it lets you set a different price for each market.
It does not have to be higher than your home price. According to the ICEX guide on export pricing, the ceiling is what the customer is willing to pay, so you need to know your competitors in each country.
Which costs should it include?
- Production cost: raw materials, packaging, labour and overheads.
- Commercial margin: what you need for the sale to be worthwhile. Cost plus margin gives your net price at origin.
- Export adaptations: reinforced packing, labelling in another language, certificates or samples.
- Freight and insurance: up to the point set by the Incoterm. Ask your freight forwarder for a quote.
- Duties and taxes at destination: they depend on your product's tariff code and the country.
- Finance and payment: bank charges, credit insurance or interest if you offer payment terms.
- Exchange rate: if you sell in another currency, build in a cushion or review the price often.
How does the Incoterm affect the price?
Incoterms allocate tasks, costs and risks between seller and buyer. There are eleven rules, and they set neither the price nor the currency: you agree those in the contract. What they do is decide which items go into your quote. Under EXW you quote only the goods at your factory; under CIF or DAP you include freight, and sometimes insurance, so those costs become part of your price.
That is why you should choose the Incoterm before settling the price, and build the cost sheet on the same term you will quote. You will find more detail in the ICC Incoterms rules page.
How do you calculate the price step by step?
- Work out your full unit cost at origin.
- Apply your margin to get the EXW (ex-works) price.
- Add export packing, freight and insurance according to the chosen Incoterm.
- Find the tariff code and check duties and taxes at destination.
- Add or subtract the distributor's and retailer's margins to see the final shelf price.
- Compare it with local competitors and adjust.
For duties and entry conditions you can use the European Commission's Access2Markets, which gathers information for exporters.
What does a numeric example look like?
An illustrative, generic example, with made-up figures just to show the mechanics, in euros per unit:
- Production cost: 10.00
- 20% margin on cost: EXW price of 12.00
- Export packing: +0.30
- Freight and insurance to destination: +0.70, total 13.00
- Hypothetical 4% duty on that value: +0.52, total 13.52
- The distributor takes a 25% margin on its selling price: 13.52 / 0.75 = 18.03
- The retailer takes 40% on its selling price: 18.03 / 0.60 = 30.05, before VAT
Your product leaves the factory at 12.00 and reaches the shelf at around 30.00. If competitors sell at 24.00, you will have to cut costs, change the Incoterm or adjust margins. Without a cost build-up you would find out after the order has shipped.
What are the most common mistakes?
- Taking the home price and adding freight without thinking about the destination market.
- Forgetting the distributor's margin, which can decide whether they take you on. More on this channel in the guide to finding international distributors.
- Quoting without fixing the Incoterm, or with a different one from your cost sheet.
- Leaving no room to negotiate: price is usually settled last, after delivery times, commissions and discounts.
- Not reviewing the calculation when freight, exchange rates or duties change. Always state how long your quote is valid.
How Vycte helps you
With 30 years of experience in international trade, Vycte works as an outsourced export department: we help you build the cost sheet for each market, advise on Incoterms and payment terms, and define pricing strategy with your distributors. Transport and customs formalities are handled by your freight forwarder. If you want to review your numbers, get in touch.
Frequently asked questions
Can I sell cheaper abroad than at home? Yes. Each market needs its own price, which depends on local competition and what the customer will pay, not necessarily on your home price.
Should I include VAT in the export price? It depends on the transaction and destination. Check the specific tax treatment with your tax adviser; we do not provide tax advice.
How often should I review the cost build-up? Whenever freight, currency, duties or production costs change, and at least once a year. State a validity period in your quotes.
