When U.S. producers were asked how they determined the prices that they charge for CFS paper, responses were varied. Transaction-by-transaction negotiations and set price lists were cited most often. Most responding importers reported the use of transaction-by-transaction negotiations, price lists, or prices that reflect market conditions.
U.S. producers reported that they quote prices of CFS paper both on an f.o.b. basis and on a delivered basis.1 Virtually all responding importers reported that they quote on a delivered basis.
Sales Terms and Discounts
U.S. producers and importers of CFS paper from China, Indonesia, and Korea were asked what shares of their sales were on a (1) long-term contract basis (multiple deliveries for more than 12 months), (2) short-term contract basis, and (3) spot sales basis (for a single delivery) in 2005. Most responding producers and importers reported the use of short-term contracts or spot sales.2 Among producers, five reported that at least half of their sales are on a short-term contract basis, three reported that the sell nearly exclusively on a spot sales basis, and one reported that it sells mostly on a long-term contract basis. Among responding importers, 14 reported that they sell nearly exclusively on a spot sales basis, four reported that they sell exclusively on a short-term contract basis, and two reported that they sell mostly on a long-term contract basis.
For U.S. producers selling on a contract basis, provisions varied from company to company. Short-term contracts are typically for periods of one month to up to one year, while long-term contracts are for periods of one to three years. For both long- and short-term contracts, quantity, but not typically price, is fixed during the contract period. These producer contracts usually do not have a meet-or-release provision. In the case of importers, short-term contracts are typically for periods of three months to up to one year. Most importers reported that price can usually be renegotiated during the contract period. These importer contracts typically do not contain meet-or-release provisions.
Discount policies on sales of CFS paper vary widely. Six responding U.S. producers reported the use of volume discounts. Two producers reported offering discounts to compete with imports. Most importers did not report the use of discounts, although five importers reported the use of discounts while another two reported offering discounts for early payment. Moreover, respondent importers contend that importers’ sales to merchants must incorporate a discount to offset the additional costs of handling imports and the capital expenditures needed to maintain large inventories typically associated with import shipments.3
Four U.S. producers reported quoting on an f.o.b. basis and four reported quoting on a delivered basis.
2 Petitioner contends that the predominance of short-term contracts, as opposed to long-term contracts, allows customers to switch suppliers fairly easily. Petitioner’s postconference brief, p. 8.
Conference transcript, pp. 106 (Anderson) and 109 (Cho). Korean respondents’ postconference brief, p. 30.