1. Agree on import delivery terms with your buyer
Always start with agreeing with your buyer on import terms (also known as Incoterms: international commercial terms), before signing a sales contract. The delivery term chosen usually depends on your buyer’s preference.
Most often, Free On Board (FOB) or Cost, Insurance and Freight (CIF) are used.
FOB means that the buyer pays for shipping and insurance and takes ownership of the cargo at the point of departure from the supplier’s port.
2. Agree on the terms of payment with your buyer
It is key that agreements on payment terms are made before signing any contracts. The most common form of payment in the coffee trade is Cash Against Documents (CAD) thru Letter of Credit (LC) via a reputed bank. The supplier will be paid by the customer via a bank against delivery of required documents (such as the invoice and bill of lading). These documents are delivered to the customer against payment of a bill of exchange.
3. Look into trade financing options
Speciality coffee buyers may be willing to pre-finance your production so that you are able to cover costs related to production and export. If a buyer decides to pre-finance you, the amount can range from 20% to 100% of the costs. The remaining part is paid on arrival in Europe if the coffee is in good condition. Do your own research before deciding on this.
4. Drafting sales contracts
Once you reach an agreement on all terms, you need to draft a sales contract with your buyer. The European Coffee Federation (ECF) provides standard coffee contracts that you can use as guidelines for your own contracts. In most cases, a contract is made up by the European buyer in ‘short form’.
A coffee contract usually states the following:
* Name of buyer and seller
* Name of the coffee bought/sold (Ex.. Indian Robusta Cherry AA)
* Quality (Cup Score)
* Certification (Organic or Fairtrade etc,)
* Volume in bags in kilograms (Ideally 50kgs some prefer 60kgs also please check) for roasted or Instant coffee please check on the type of packing required.
* Price and total amount per pound / kilogram / tonne
* Terms of sales (terms of delivery and payment, and sample approval)
5. Invest in good-quality packaging for storage and transportation
The condition in which your shipment arrives at your buyer’s warehouses will make or break your reputation. As such, you should invest in good-quality packaging to protect your coffee beans during storage and transportation. Poor-quality packaging will negatively impact the quality. Gunny bags or Iljira bags should be lined with a PP bag or an Agriculture bags from companies like Ecotact or Grainpro. For Roasted coffee beans or manufactured coffee please ask your buyer for all specifications before assuming,
6. Organise transport and logistics efficiently
When you do not have sufficient volumes to export Full Container Loads (FCL) of coffee, you must try to find economical logistics solutions to lower your costs. For instance, you can look into transportation options for small ocean freight shipments which allow for Less than Container Loads (LCL). All LCL shipments from India must be packed into pallets and the wood used in pallets must be burnt or Fumigated
7. Meet your country’s export requirements and have export documents ready
8. Make clear agreements on export insurance - Ideally, you can look at Insurance via large companies and also back your credit risks with ECGC
9. Be well informed on import customs procedures - Make sure your buyer knows the import formalities once the goods reach their destination, In some countries, it is mandated to submit all your important documents to customs officials even before it lands in the country,
10. Contact organisations that offer export assistance services - Some companies of repute are always preferred so as to keep your reputation as an exporter in good eyes.
Prashanth Nagaraj is an export consultant and export advisor to coffee in India and you can schedule a 1-to-1 consultation for all your questions on exports.
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