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Partnering with the US Commercial Service to Help US Companies Export |
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The attractiveness of American goods and services to buyers in the euro zone is linked to the exchange rate between the US dollar and the euro, which determines the price when compared to similar products produced within the zone. Of course, shipping terms, custom tariffs (3.3MB file) and value-added tax also play significant roles in arriving at the “Landed Cost”, because buyers must add these amounts at the time of importation. North American companies should consider carefully their export pricing strategies, considering these influences. It should also be considered that Luxembourg enjoys the lowest VAT rate in the EU at 15%. When the euro first began trading on the 1st of January 1999, the opening rate of exchange was $1.1747. In the eight years that followed, as the ECB’s graphical representation shows, the US dollar did not return to its pre-euro lows, making the price of American goods and services more expensive. Since February 2002 there has been a gradual upward trend. December 2003 saw a return to pre-euro lows in the US dollar’s value, making the prices of US goods and services more attractive today than at any time since. (See the ECB’s archives on euro exchange rates.) Consider that the change between the euro’s lowest point of $0.8252 on October 26, 2000, and its rate of $1.35135 on April 16, 2007, is a net change of 63.8%. Simply put, a widget that cost an euro zone importer $100 on October 26, 2000, (then €121.18) cost only €74.00 on February 18th. Every manager knows that it is not just the price of goods and service that should be considered in your business model. US dollar-based companies that have survived through this period have seen their euro zone operating costs increase by this amount during the same period. Conversely, they’ve seen the book values of euro assets on their balance sheet decline by the same percentage when consolidating back to dollar-based GAAP. Serious companies have sought solutions for their shareholders, among them sales outsourcing, to reduce costs, and eliminate assets and overhead costs. |
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Today’s Euro Spot Foreign Exchange Rates & Charts from the European Central Bank |
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US Dollar Exchange Rates |
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Other Daily Forex News Sources: |
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EU Headquarters: AMR S.A., 41 Boulevard Napoléon1er, L-2210 Luxembourg, Grand Duchy of Luxembourg |
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All rights reserved. Copyright © 2001-2010 American Manufacturers’ Representatives S.A. |
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