Doing business in ffv- Colombia kick off
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This document provides information on various topics related to doing business in fresh fruit and vegetables (FFV) exports, including: - Types of business partnerships such as programs/contracts vs spot markets - Commercial terms like fixed price, free consignment, and minimum guaranteed price - Payment terms such as pre-season advances, advances on bills of lading, and advances on arrival - Account of sale processes and ensuring payment through credit insurance or following strict protocols - Key considerations are managing risks, knowing clients well, using written contracts, and communicating clearly
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Doing business in ffv- Colombia kick off
- 1. Doing business in FFV EXPORT
- 2. Doing business: Who isthepartner? Chain of supply? Program? Spot market? Production undercontract?
- 3. Chain of Supply Next link in thechain known Working in programs Volumesplanned Eventual pricereturnsfixed Need from both sides
- 4. Program /contract Obligationsfrom both sides Thorough planning Lessrisk Penaltiesforbreech of contract
- 5. Spot Market Daily Trade Good market – High price Slow market – Low price/No price High risk
- 7. Commercial terms Fixed Price FreeConsignment Minimum Guaranteed Price Profit split Final payment?
- 8. Fixed Price • Simple • Clear for both parties • Limited risk for seller • Difficult in Europe • Acceptance at low price
- 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. 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. What MGP? • Production costs? • Production costs plus margin? • Minimum or ….. Maximum? • Expected result? • Historical figures?
- 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. 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. Payment Terms: • Common practise in the world of FFV
- 15. Financial conditions Pre-season Advance Advanceon B/L Advanceon arrival Account of sale? Final payment?
- 16. Pre-Season Advance • Helps cash flow producer • Gives some guarantee • Not easy to get • Mostly existing relationships • Limits flexibility
- 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. Advance on Arrival • Mostly on “good” arrival (who decides?) • Helps Cash flow exporter / producer • Big part or total product paid = security
- 19. Account of Sale • Showing sales and costs • In consignment or partly consignment deals • Cost chain must be agreed • Trust or control?
- 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. Final Payment • In case of a consignment or partly consignment deal • After how many days? • Per Shipment or program?
- 22. Control ! • Investigate client • Commercial reputation and Financial strength • Swift confirmation on transfers • Bill of Lading as security (limited) • Credit Insurance
- 23. Credit Insurance • Against insolvability • Not against disputes or claims • Need to follow strict protocols • Gives basic judgement on (potential) clients • Costly premium
- 24. Main FFV insurance players • Coface – France www.coface.com • Attradis – Netherlands www.attradis.com
- 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. Thank you!