Doing business in ffv- Colombia kick off

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Doing business in ffv- Colombia kick off

  1. 1. Doing business in FFV EXPORT
  2. 2. Doing business: Who isthepartner? Chain of supply? Program? Spot market? Production undercontract?
  3. 3. Chain of Supply Next link in thechain known Working in programs Volumesplanned Eventual pricereturnsfixed Need from both sides
  4. 4. Program /contract Obligationsfrom both sides Thorough planning Lessrisk Penaltiesforbreech of contract
  5. 5. Spot Market Daily Trade Good market – High price Slow market – Low price/No price High risk
  6. 6. Incoterms: ExWorks FOB CFR CIF Who paysfor thefreight? Freight collect?
  7. 7. Commercial terms Fixed Price FreeConsignment Minimum Guaranteed Price Profit split Final payment?
  8. 8. Fixed Price • Simple • Clear for both parties • Limited risk for seller • Difficult in Europe • Acceptance at low price
  9. 9. Free Consignment (commission deal) • Simple (for buyer) • All risk for seller • Follows the market • Trust or Control? • Open ended deal • Negative result possible • Profit / Loss split?
  10. 10. Minimum Guaranteed Price (MGP) • Risk mainly for the buyer • Gives a certain minimum return for the seller • Follows the market • Parameters clearly defined • Trust or Control? • MGP on program or shipment?
  11. 11. What MGP? • Production costs? • Production costs plus margin? • Minimum or ….. Maximum? • Expected result? • Historical figures?
  12. 12. Westlander 67 2636 CX Schipluiden Holland Client name: Agro export Peru Manifest number: 1 Motor Vessel: CSAV Santos Arrival date: 18-1-2009 Arrival port: Rotterdam Terms Commodity Variety Size Volume Price per Currency Total box Amount Gross Sales: (F.O.T. Duty Paid) - Verdi Mango Kent 6 544 4,00 Euro 2.176,00 Mango Kent 7 544 4,00 Euro 2.176,00 Mango Kent 8 1.088 3,00 Euro 3.264,00 Mango Kent 9 2.176 3,00 Euro 6.528,00 Mango Kent 10 1.075 1,50 Euro 1.612,50 Mango Kent 12 13 2,00 Euro 26,00 F.O.T. Duty Paid Total 5.440 2,90 Euro 15.782,50 Costs: Commission Client 8% Euro 1.262,60 Transport to Warehouse " 225,00 Storage " 340,00 Invoice Seafreight incl THC " 4.000,00 Clearing + phyto " 175,00 Laboratory for MRL test " 200,00 F.O.B. port of departure Total 6.202,60 9.579,90 Advance a Euro on copy B/L 1,40 p/b 5544 Euro 7.761,60 Advance a Euro on good arrival 1,40 p/b 5544 7.761,60 Transfer Total (5.943,30) (1,09) Remarks: Commission deal, loss for the seller
  13. 13. Client name: Agro export Peru Manifest number: 1 Motor Vessel: CSAV Santos Arrival date: 18-12-2009 Arrival port: Rotterdam Terms Commodity Variety Size Volume Price per Currency Total box Amount Gross Sales: (F.O.T. Duty Paid) - Verdi Mango Kent 6 544 4,00 Euro 2.176,00 Mango Kent 7 544 4,00 Euro 2.176,00 Mango Kent 8 1.088 3,00 Euro 3.264,00 Mango Kent 9 2.176 3,00 Euro 6.528,00 Mango Kent 10 1.075 1,50 Euro 1.612,50 Mango Kent 12 13 2,00 Euro 26,00 F.O.T. Duty Paid Total 5.440 2,90 Euro 15.782,50 Costs: Commission Client 8% Euro 1.262,60 Transport to Warehouse " 225,00 Storage " 340,00 Invoice Seafreight incl THC " 4.000,00 Clearing + phyto " 175,00 Laboratory for MRL test " 200,00 F.O.B. port of departure Total 6.202,60 9.579,90 MGP Advance a Euro on copy B/L 1,40 p/b 5544 Euro 7.761,60 MGP Advance a Euro on good arrival 1,40 p/b 5544 7.761,60 Transfer Total (5.943,30) (1,09) Remarks: Agreed MGP on FOB level of Euro 2,80 Negative result for buyer because of MGP
  14. 14. Payment Terms: • Common practise in the world of FFV
  15. 15. Financial conditions Pre-season Advance Advanceon B/L Advanceon arrival Account of sale? Final payment?
  16. 16. Pre-Season Advance • Helps cash flow producer • Gives some guarantee • Not easy to get • Mostly existing relationships • Limits flexibility
  17. 17. Advance on B/L • Helps Cash Flow producer exporter • Gives some guarantee • Mostly agreed on copy B/L • Needs for a strict logistical operation
  18. 18. Advance on Arrival • Mostly on “good” arrival (who decides?) • Helps Cash flow exporter / producer • Big part or total product paid = security
  19. 19. Account of Sale • Showing sales and costs • In consignment or partly consignment deals • Cost chain must be agreed • Trust or control?
  20. 20. Westlander 67 2636 CX Schipluiden Holland Client name: Agro export Peru Manifest number: 1 Motor Vessel: CSAV Santos Arrival date: 18-1-2009 Arrival port: Rotterdam Terms Commodity Variety Size Volume Price per Currency Total box Amount Gross Sales: (F.O.T. Duty Paid) - Verdi Mango Kent 6 544 4,00 Euro 2.176,00 Mango Kent 7 544 4,00 Euro 2.176,00 Mango Kent 8 1.088 3,00 Euro 3.264,00 Mango Kent 9 2.176 3,00 Euro 6.528,00 Mango Kent 10 1.075 1,50 Euro 1.612,50 Mango Kent 12 13 2,00 Euro 26,00 F.O.T. Duty Paid Total 5.440 2,90 Euro 15.782,50 Costs: Commission Client 8% Euro 1.262,60 Transport to Warehouse " 225,00 Storage " 340,00 Invoice Seafreight incl THC " 4.000,00 Clearing + phyto " 175,00 Laboratory for MRL test " 200,00 F.O.B. port of departure Total 6.202,60 9.579,90 Advance a Euro on copy B/L 1,40 p/b 5544 Euro 7.761,60 Advance a Euro on good arrival 1,40 p/b 5544 7.761,60 Transfer Total (5.943,30) (1,09) Remarks: Commission deal, loss for the seller
  21. 21. Final Payment • In case of a consignment or partly consignment deal • After how many days? • Per Shipment or program?
  22. 22. Control ! • Investigate client • Commercial reputation and Financial strength • Swift confirmation on transfers • Bill of Lading as security (limited) • Credit Insurance
  23. 23. Credit Insurance • Against insolvability • Not against disputes or claims • Need to follow strict protocols • Gives basic judgement on (potential) clients • Costly premium
  24. 24. Main FFV insurance players • Coface – France www.coface.com • Attradis – Netherlands www.attradis.com
  25. 25. Bottom Line • FFV – Risks unavoidable • Need to know clients • Work with written contracts • Contracts must be simple and workable • Follow protocols and communicate • Juridical Pursue expensive and difficult
  26. 26. Thank you!

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