doing business in ffv- colombia kick off
TRANSCRIPT
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
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
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
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
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
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!