Cost Plus

Cost Plus is a pricing method in international trade where the seller determines the price by adding a certain percentage of profit or markup to the actual cost of the product. Costs typically include production costs, procurement costs, transportation fees, insurance, tariffs, and other direct and indirect expenses. It is commonly used in long-term cooperation, customized products, or transactions with significant cost fluctuations, such as commodities, engineering projects, or processing with supplied materials. Precautions: The cost structure and markup percentage must be clearly defined to avoid disputes arising from unclear cost definitions; the seller should retain cost evidence, and the buyer may require audit rights. Compared with Fixed Price, Cost Plus transfers part of the risk to the buyer, but the seller's profit is guaranteed; unlike Sliding Scale, Cost Plus focuses more on actual costs rather than market indices. Difference: Trade terms such as FOB and CIF mainly stipulate cost and responsibility allocation, while Cost Plus is a pricing mechanism and is often used in combination with these terms.