How to Calculate Export Pricing — FOB and CIF Costing Guide

Getting your export price wrong is the fastest way to either lose money or lose buyers. Price too high and your quote gets rejected in favour of a competitor from Vietnam or China. Price too low and you bleed cash on every shipment — sometimes without realising it until your bank statement arrives weeks later.

Export pricing is fundamentally different from domestic pricing. When you sell within India, your cost structure is simple — production cost, transport, GST, margin. When you sell internationally, you layer on freight, marine insurance, customs clearance, documentation charges, port handling, currency conversion, and a dozen other costs that domestic sellers never think about. Miss even one line item and your margin evaporates.

This guide walks you through the exact process of building an export price from the ground up — starting from your factory floor and ending at the buyer's port. We cover FOB and CIF calculations step by step, provide a sample costing sheet you can adapt for your products, and explain how government incentives like RoDTEP and duty drawback affect your net realisation.

Why Export Pricing Is Different from Domestic Pricing

When you sell domestically, your customer pays GST, handles their own local transport (usually), and deals in Indian Rupees. The pricing is straightforward.

Export pricing introduces several layers of complexity:

Additional cost layers. Between your factory gate and the buyer's warehouse, there are inland transport costs, customs broker charges, port handling fees, ocean or air freight, marine insurance, documentation costs, inspection fees, and bank charges. Each of these must be accounted for.

Currency risk. You quote in USD (or EUR, GBP, or the buyer's preferred currency), but your costs are in INR. Between the day you quote and the day you receive payment — often 60 to 120 days apart — the exchange rate can move 2-5%, which directly affects your margin.

Incoterms determine cost responsibility. The price you quote depends entirely on the Incoterms you agree on with the buyer. An FOB price means the buyer takes responsibility once goods are loaded on the vessel. A CIF price means you are also covering freight and insurance to the destination port. Each Incoterm shifts costs and risks differently.

Competitive benchmarking is international. Your buyer is not comparing your price to another supplier in Jaipur. They are comparing it to suppliers in China, Turkey, Bangladesh, and a dozen other countries. Your pricing must be globally competitive while still covering your actual costs.

FOB Pricing Calculation — Step by Step

FOB (Free On Board) is the most common Incoterm for Indian exports. When you quote FOB, your price includes everything up to and including loading the goods onto the vessel at the Indian port. The buyer handles ocean freight, insurance, and destination charges.

Here is how to build your FOB price from the ground up.

Component 1: Ex-Factory Cost

This is your base cost of producing or procuring the goods.

Cost Element	What It Covers
Raw materials	All inputs — materials, components, packaging materials
Direct labour	Wages for workers directly involved in production
Manufacturing overhead	Factory rent, electricity, equipment depreciation, maintenance
Packaging for export	Export-quality packaging (often stronger/different from domestic)
Quality testing	In-house QC costs, lab testing if required

Important: Export packaging is often more expensive than domestic packaging. International shipments face rougher handling, longer transit times, and stricter labelling requirements. Budget for this separately — do not just use your domestic packaging cost.

Component 2: Profit Margin

Add your target profit margin to the ex-factory cost. For Indian MSMEs, typical margins range from 10% to 25% depending on the product category, competition level, and order volume.

The formula: Ex-factory cost + Profit margin = Ex-works price

Do not set your margin in isolation. Research what competitors from other countries are quoting (your CHA or export promotion council can help with this). If your ex-factory cost plus a 20% margin puts you way above market rates, you need to either reduce costs or accept a lower margin to enter the market.

Component 3: Inland Transportation

This covers moving goods from your factory to the port of export.

Cost Element	Typical Range
Truck freight (factory to port)	Rs 15,000 – 80,000 per container (varies by distance)
Loading/unloading at factory	Rs 2,000 – 5,000
Container stuffing at factory or CFS	Rs 3,000 – 8,000
Empty container transport (if stuffing at factory)	Rs 5,000 – 15,000

If your factory is in Ludhiana and you are shipping from Nhava Sheva (Mumbai), your inland transport cost will be significantly higher than a factory in Bhiwandi. Factor in the actual route, not an estimate.

Component 4: CHA and Customs Charges

Your Customs House Agent (CHA) handles export documentation and customs clearance.

Cost Element	Typical Range
CHA service charges	Rs 3,000 – 8,000 per shipment
Customs examination charges (if examined)	Rs 2,000 – 5,000
Shipping bill processing	Included in CHA charges usually
EDI charges	Rs 200 – 500

Component 5: Port and Terminal Charges

Cost Element	Typical Range
Terminal handling charges (THC)	Rs 8,000 – 18,000 per container (varies by port)
Port charges	Rs 1,000 – 3,000
Container weighing (SOLAS VGM compliance)	Rs 500 – 1,500
Seal charges	Rs 200 – 500

Component 6: Documentation and Certification Costs

Document	Typical Cost
Certificate of Origin (CoO)	Rs 500 – 2,000
Phytosanitary certificate (for agri products)	Rs 1,000 – 3,000
Fumigation certificate	Rs 3,000 – 8,000 per container
Pre-shipment inspection (if required)	Rs 5,000 – 25,000
FSSAI / EIC / BIS testing (product-specific)	Rs 2,000 – 15,000
Marine insurance (if FOB, usually buyer's responsibility)	Not included in FOB

For a detailed breakdown of every document you need, see the export documentation guide.

Component 7: Bank and Finance Charges

Cost Element	Typical Range
Bank charges for document negotiation	0.1% – 0.25% of invoice value
LC advising charges (if payment by LC)	Rs 2,000 – 5,000
Foreign exchange conversion charges	0.1% – 0.5%
ECGC premium (export credit insurance)	0.5% – 1.5% of invoice value

The FOB Formula

FOB Price = Ex-factory cost + Profit margin + Inland transport + CHA charges + Port/terminal charges + Documentation costs + Bank charges + Miscellaneous (buffer 2-3%)

Always add a 2-3% buffer for unexpected costs — container detention at port, extra inspections, or documentation re-work. Without this buffer, every minor hiccup eats into your margin.

CIF Pricing Calculation

CIF (Cost, Insurance, and Freight) is the second most common Incoterm. When you quote CIF, you include everything in the FOB price plus ocean freight and marine insurance to the buyer's destination port.

CIF = FOB + Ocean Freight + Marine Insurance

Ocean freight varies significantly by destination, container type, season, and shipping line. You must get actual freight quotes from your shipping line or freight forwarder for the specific route.

Route Example	20ft Container	40ft Container
Nhava Sheva to Dubai	$400 – 800	$600 – 1,200
Nhava Sheva to Rotterdam	$800 – 1,800	$1,200 – 3,000
Chennai to New York	$1,200 – 2,500	$1,800 – 4,000

Note: Freight rates fluctuate significantly. These are indicative ranges — always get current quotes. Rates during peak season (September–December) can be 30-50% higher than off-season.

Marine insurance is typically calculated as a percentage of CIF value.

• Standard marine insurance: 0.5% – 2% of CIF value (depending on product type, route, and risk)
• Institute Cargo Clauses (A) — all risks cover: higher premium
• Institute Cargo Clauses (C) — basic cover: lower premium

The formula creates a circular reference (insurance is based on CIF, but CIF includes insurance). The standard industry calculation is:

CIF = (FOB + Freight) / (1 – Insurance rate)

For example, if FOB is $10,000, freight is $1,200, and insurance rate is 1%:

CIF = ($10,000 + $1,200) / (1 – 0.01) = $11,200 / 0.99 = $11,313.13

Sample Export Costing Sheet

Here is a filled-in example for a hypothetical product — a shipment of 500 cartons of handmade brass decorative items, weighing 8,000 kg, shipped FOB from Nhava Sheva to Dubai.

Cost Component	Amount (INR)	Notes
Raw materials (brass, finishing chemicals)	4,00,000	For 500 cartons
Direct labour	1,20,000
Manufacturing overhead	80,000	Factory rent, electricity, equipment
Export packaging	35,000	Double-wall corrugated cartons, bubble wrap
Quality testing	8,000	In-house QC
Ex-factory cost	6,43,000
Profit margin (15%)	96,450
Ex-works price	7,39,450
Inland transport (Moradabad to Nhava Sheva)	45,000	20ft container by road
CHA charges	5,500
Terminal handling and port charges	14,000
Documentation (CoO, inspection cert)	3,500
Bank charges (0.15% of invoice)	1,200
Miscellaneous buffer (2%)	16,200
Total FOB cost (INR)	8,24,850
FOB price in USD (at Rs 84/USD)	$9,820
FOB price per carton	$19.64

If quoting CIF Dubai, add ocean freight ($600 for a 20ft container) and marine insurance (0.8% of CIF value) to arrive at the CIF price.

Margin Calculation — Setting Your Profit

There is no universal "correct" margin for exports. It depends on your product category, the competitive landscape, and your strategic goals.

Typical MSME export margins by product type:

Product Category	Typical Margin Range
Agricultural commodities (rice, spices)	5% – 15%
Manufactured goods (textiles, garments)	10% – 20%
Handicrafts and artisanal products	15% – 30%
Engineering goods	10% – 20%
Chemicals and pharmaceuticals	12% – 25%

How to think about margin:

• For your first few orders, it is acceptable to work on thinner margins (8-12%) to establish the relationship. Repeat orders with the same buyer become more profitable as you eliminate learning-curve inefficiencies.
• Always calculate margin on total cost, not just ex-factory cost. Many exporters set a 20% margin on production cost but forget that shipping, documentation, and bank charges eat into that margin.
• Factor in government incentives (discussed below) — these effectively increase your net realisation, allowing you to offer more competitive prices while maintaining your actual margin.

Currency Considerations

Quoting Currency

Most international trade is quoted in USD. Some buyers in Europe prefer EUR, and UK buyers may request GBP. Quoting in the buyer's currency makes your offer more attractive to them but shifts the exchange rate risk entirely to you.

Best practice for Indian MSMEs: Quote in USD. It is universally accepted, and most Indian banks handle USD conversions efficiently with tight spreads.

Exchange Rate Risk

Between the time you quote a price and the time you receive payment, the INR/USD rate can move significantly.

Example: You quote $10,000 when the rate is Rs 84/USD (expecting Rs 8,40,000). By the time payment arrives 90 days later, the rate has moved to Rs 82/USD. You receive Rs 8,20,000 — a Rs 20,000 loss on that single order.

Basic hedging options:

Method	How It Works	Cost
Forward contract	Lock in exchange rate with your bank for a future date	Small premium (0.5-2%)
Option contract	Right (not obligation) to convert at a specific rate	Premium payment
Natural hedge	Match USD receivables with USD payables (e.g., imported inputs)	No direct cost
Price adjustment clause	Contract allows price revision if exchange rate moves beyond a threshold	No cost, but buyer must agree

For MSMEs doing their first few shipments, a simple forward contract with your AD bank is the most practical approach. As your volumes grow, explore other instruments.

Government Incentives That Affect Your Pricing

India offers several export incentive schemes that effectively reduce your cost of export. Factor these into your pricing to offer more competitive rates while maintaining your actual margin.

RoDTEP (Remission of Duties and Taxes on Exported Products)

RoDTEP reimburses embedded taxes and duties that are not refunded through other mechanisms (like GST input credit or duty drawback). Rates are notified per HS code and range from 0.3% to 4.3% of FOB value.

Check the applicable RoDTEP rate for your product using the HS Code Finder and the DGFT notification. This is essentially money back in your pocket after export.

Duty Drawback

If your exported goods use imported inputs on which you paid customs duty, you can claim a refund through the duty drawback scheme. Rates are either All Industry Rates (fixed by government) or Brand Rates (specific to your actual duty incidence).

IGST Refund / ITC Refund

Exports are zero-rated under GST. You either pay IGST on export and get it refunded, or export under LUT and claim Input Tax Credit refund. Either way, GST should not be a cost in your export pricing. Read the GST on exports guide for the full process.

How Incentives Affect Your Pricing

Here is a simplified example:

Item	Amount
Your FOB price	$10,000
RoDTEP benefit (say 1.5% of FOB)	+$150
Duty drawback (say 2% of FOB)	+$200
IGST/ITC refund on inputs	+$300 (estimated)
Your effective net realisation	$10,650

This means your actual margin is 6.5% higher than what your invoice shows. You can use this to either improve your profit or sharpen your pricing to win more orders. Smart exporters factor in incentives when quoting — not to reduce their invoice price, but to know their true bottom line.

Competitive Pricing Analysis

Knowing your cost is only half the equation. You also need to know what the market will bear.

How to benchmark your price:

1. Ask your buyer. Experienced importers will tell you their target price. This is the simplest starting point.
2. Check with your Export Promotion Council. EPCs like FIEO, AEPC, and Pharmexcil often have pricing benchmarks for common products.
3. Attend trade fairs. Exhibitions like the India International Trade Fair, Canton Fair, or Ambiente (Frankfurt) give you direct exposure to competitor pricing.
4. Use the XIMPEX Market Finder. Analyse which countries are buying your product and at what volumes. This helps you identify markets where Indian suppliers are already competitive versus markets dominated by lower-cost producers.
5. Study import data of your target country. Import databases show the unit price at which products are entering a market. This gives you a direct benchmark. Browse HS code pages for trade data on specific products.

Do not compete on price alone. Indian MSMEs often try to be the cheapest supplier in the market. This is a losing strategy. Compete on quality, reliability, customisation, and compliance instead. A buyer who only cares about the lowest price will switch suppliers the moment someone undercuts you by $0.50 per unit.

Common Export Pricing Mistakes

Forgetting hidden costs. The most common mistake. Exporters calculate ex-factory cost, add a margin, and forget about port charges, documentation, bank fees, and the 2-3% miscellaneous costs that add up. Always build a detailed cost sheet — not a rough estimate.

Not factoring exchange rate risk. If you quote today and ship 30 days later, and the buyer pays 60 days after that, you are exposed to 90 days of currency movement. A 2% adverse movement on a Rs 10 lakh order is Rs 20,000 gone from your profit.

Underpricing to win orders. First-time exporters often slash prices to get their first order. This sets a dangerous precedent — the buyer will expect the same price (or lower) for repeat orders. It is better to offer a small first-order discount (5%) than to quote an unsustainably low price.

Not including quality testing costs. Many export markets require third-party testing or certification. If the buyer specifies SGS inspection, or if your product needs lab testing for compliance, this cost must be in your pricing. An SGS inspection can cost Rs 15,000-50,000 per shipment.

Ignoring packaging costs. Export packaging is not the same as domestic packaging. A bag of spices shipped to a distributor in Kolkata can be packed in basic HDPE bags. The same spices shipped to a supermarket chain in Germany need food-grade, tamper-evident packaging with barcodes, batch numbers, and multilingual labels. This can add 5-10% to your product cost.

Not accounting for payment terms. If the buyer demands 60-day credit terms, you are financing the shipment for two months. Factor in the cost of capital — at 12% per annum, 60 days of financing on a Rs 10 lakh shipment costs you Rs 20,000. This is a real cost that belongs in your pricing.

Quoting the same price for all Incoterms. Some exporters quote the same price whether the buyer asks for FOB, CIF, or DDP. Each Incoterm has different cost implications. Always re-calculate your price for each Incoterm requested.

Key Takeaways

• Export pricing starts with a detailed ex-factory cost — include raw materials, labour, overhead, export packaging, and quality testing
• FOB price = Ex-works price + inland transport + CHA charges + port charges + documentation + bank charges + buffer
• CIF price = FOB price + ocean freight + marine insurance
• Always add a 2-3% miscellaneous buffer for unexpected costs
• Factor in government incentives (RoDTEP, duty drawback, IGST refund) to understand your true net realisation
• Hedge your currency risk — even a simple forward contract protects your margin
• Use a detailed costing sheet for every quotation, not mental math
• Benchmark against competitors before finalising your price — use the Market Finder and trade data to understand market rates

Build Your Export Price Now

Here is your action plan:

1. Calculate your ex-factory cost accurately — break down every component
2. Use the HS Code Finder to identify your product's HS code and check applicable duty drawback and RoDTEP rates
3. Get freight quotes from 2-3 shipping lines or freight forwarders for your target route
4. Build a complete costing sheet using the template above
5. Check the Duty Calculator to understand what import duties the buyer will pay at their end — this affects their total landed cost and your competitiveness
6. Read the Incoterms guide to understand exactly which costs fall on you under each pricing term

Your export price is not just a number — it is the foundation of every deal you make. Get it right, and you build a profitable, sustainable export business. Get it wrong, and you either lose orders or lose money. Neither is acceptable.