doing business in ffv- colombia kick off

Doing business in FFV

EXPORT

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Doing business:

Who is the partner ?

Chain of supply?

Program?

Spot market?

Production under contract?

Chain of Supply

Next link in the chain known

Working in programs

Volumes planned

Eventual price returns fixed

Need from both sides

Program / contract

Obligations from both sides

Thorough planning

Less risk

Penalties for breech of contract

Spot Market

Daily Trade

Good market – High price

Slow market – Low price / No price

High risk

Incoterms:

Ex Works

FOB

CFR

CIF

Who pays for the freight?

Freight collect?

Commercial terms

Fixed Price

Free Consignment

Minimum Guaranteed Price

Profit split

Final payment?

Fixed Price

• Simple

• Clear for both parties

• Limited risk for seller

• Difficult in Europe

• Acceptance at low price

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?

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?

What MGP?

• Production costs?

• Production costs plus margin?

• Minimum or ….. Maximum?

• Expected result?

• Historical figures?

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


Peru

Manifest number: 1





box Amount

Gross Sales:



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





Storage " 340,00





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


Remarks:

Agreed MGP on FOB level of Euro 2,80

Negative result for buyer because of MGP

Payment Terms:

• Common practise in the world of FFV

Financial conditions

Pre-season Advance

Advance on B/L

Advance on arrival

Account of sale ?

Final payment?

Pre-Season Advance

• Helps cash flow producer

• Gives some guarantee

• Not easy to get

• Mostly existing relationships

• Limits flexibility

Advance on B/L

• Helps Cash Flow producer exporter

• Gives some guarantee

• Mostly agreed on copy B/L

• Needs for a strict logistical operation

Advance on Arrival

• Mostly on “good” arrival (who decides?)

• Helps Cash flow exporter / producer

• Big part or total product paid = security

Account of Sale

• Showing sales and costs

• In consignment or partly consignment deals

• Cost chain must be agreed

• Trust or control?

Westlander 67

2636 CX Schipluiden

Holland


Peru

Manifest number: 1





box Amount

Gross Sales:



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





Storage " 340,00





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


Remarks:

Commission deal, loss for the seller

Final Payment

• In case of a consignment or partly consignment deal

• After how many days?

• Per Shipment or program?

Control !

• Investigate client

• Commercial reputation and Financial strength

• Swift confirmation on transfers

• Bill of Lading as security (limited)

• Credit Insurance

Credit Insurance

• Against insolvability

• Not against disputes or claims

• Need to follow strict protocols

• Gives basic judgement on (potential) clients

• Costly premium

Main FFV insurance players

• Coface – France

www.coface.com

• Attradis – Netherlands

www.attradis.com

http://www.coface.com/

http://www.attradis.com/

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

Thank you!

doing business in ffv- colombia kick off

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