Download - Doing business in ffv- Colombia kick off
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Doing business:
Who is the partner ?
Chain of supply?
Program?
Spot market?
Production under contract?
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Chain of Supply
Next link in the chain known
Working in programs
Volumes planned
Eventual price returns fixed
Need from both sides
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Program / contract
Obligations from both sides
Thorough planning
Less risk
Penalties for breech of contract
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Spot Market
Daily Trade
Good market – High price
Slow market – Low price / No price
High risk
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Incoterms:
Ex Works
FOB
CFR
CIF
Who pays for the freight?
Freight collect?
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Commercial terms
Fixed Price
Free Consignment
Minimum Guaranteed Price
Profit split
Final payment?
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Fixed Price
• Simple
• Clear for both parties
• Limited risk for seller
• Difficult in Europe
• Acceptance at low price
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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?
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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?
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What MGP?
• Production costs?
• Production costs plus margin?
• Minimum or ….. Maximum?
• Expected result?
• Historical figures?
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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
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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
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Payment Terms:
• Common practise in the world of FFV
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Financial conditions
Pre-season Advance
Advance on B/L
Advance on arrival
Account of sale ?
Final payment?
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Pre-Season Advance
• Helps cash flow producer
• Gives some guarantee
• Not easy to get
• Mostly existing relationships
• Limits flexibility
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Advance on B/L
• Helps Cash Flow producer exporter
• Gives some guarantee
• Mostly agreed on copy B/L
• Needs for a strict logistical operation
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Advance on Arrival
• Mostly on “good” arrival (who decides?)
• Helps Cash flow exporter / producer
• Big part or total product paid = security
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Account of Sale
• Showing sales and costs
• In consignment or partly consignment deals
• Cost chain must be agreed
• Trust or control?
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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
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Final Payment
• In case of a consignment or partly consignment deal
• After how many days?
• Per Shipment or program?
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Control !
• Investigate client
• Commercial reputation and Financial strength
• Swift confirmation on transfers
• Bill of Lading as security (limited)
• Credit Insurance
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Credit Insurance
• Against insolvability
• Not against disputes or claims
• Need to follow strict protocols
• Gives basic judgement on (potential) clients
• Costly premium
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Main FFV insurance players
• Coface – France
www.coface.com
• Attradis – Netherlands
www.attradis.com
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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
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Thank you!