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10 tips for organising your coffee export to Europe

Takes 14 minutes to read

Having a good understanding of the practical matters of exporting is crucial to becoming a successful exporter, and to keeping that position. This document provides you with some tips on how to properly export your coffee to buyers on the European market. Realise that organising your export and agreeing upon delivery and payment terms depends on many factors, such as the relationship between you and your buyer, transportation method, type of coffee, as well as the volume and value of the shipment.

1. Agree on import delivery terms with your buyer

Before signing a sales contract, always agree with your buyer on import terms (also known as international commercial terms or incoterms). The delivery term chosen usually depends on your buyer’s preference. In general, Free On Board (FOB) or Cost, Insurance and Freight (CIF) terms are often 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. If goods are damaged in transit, the buyer (or their insurance company) is responsible. As such, this import term is often recommended, as it frees you as an exporter from having to bear costs and responsibility of the shipping and import processes.

Under a CIF delivery term, the seller assumes the costs of shipping and insurance, and is responsible for any loss or damage to the coffee beans during transport. As such, the seller should purchase specific documents, such as export, insurances and inspection licenses. Once the freight loads at the buyer’s chosen port of arrival, the buyer becomes responsible.

CIF can be more expensive and riskier for you as an exporter than FOB. Although CIF is usually not recommended, it also has its advantages. It is a service to your buyer, as you take care of coordinating the shipping and take up more risk. If you decide to ship under CIF terms, you can charge more for your products in relative terms, as you are also providing the buyer with this service.

Cost and Freight (CFR) means that the exporter is responsible for contracting and paying for the transport to the buyer’s destination port. The difference between CIF and CFR is that in the case of CFR the buyer does pay for insurance, though the exporter may still be responsible for any spoilage arising from transportation if the coffee was not properly packaged.

Tips:

  • Make sure you understand the Incoterms, its risks and costs involved. Refer to the International Chamber of Commerce website for further information on Incoterms.
  • Make your own preferences clear to your buyers. Once agreed upon which Incoterms to use, include these terms in your coffee offer.
  • Specify the costs of transportation and the risk of loss and damages before entering into a buyer-seller agreement.
  • Communicate clearly and openly with your buyers. In case you do not understand the delivery terms, do not hesitate to ask for clarifications from your buyers or more experienced exporters.

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). 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, which may be guaranteed by a bank. CAD implies that the party that owns the documents also owns the goods.

Letter of credit (L/C) is another form of payment, where payments will be made from the buyer’s bank to the exporter’s bank against certain documents such as the invoice, bill of lading and certificate of origin and quality. Be aware that L/Cs are the most expensive option and require a lot of paperwork. However, they are the most secure method of payment for an exporter. Given the generally high costs of this payment form, not many traders want to work with letters of credit.

Buyers usually pay for the coffee after it has been inspected and approved upon arrival. It is always useful to give yourself a buffer in the contract regarding the delivery date, as you can often not foresee delays or difficulties in your production processes.

Tips:

  • Should your container be late, always communicate this to your buyer in good time. Warning your client of any problem is always preferred to keeping it quiet. Open and honest communication can mean the difference between your client dropping you or giving you another chance.
  • If you have a reliable track record of high-quality exports, consider giving yourself a distinguishable trademark so importers easily recognise you and your good reputation. Read this blog from Shipping Solutions about intellectual property rights to avoid problems when choosing a trademark.
  • Make sure to agree on payment conditions before signing contracts. Consider your (financial) risks and benefits according to these terms.

3. Look into trade financing options

Specialty 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. The agreements you manage to make will all depend on the nature of your relationship with the buyer, including the mutual level of trust and commitment.

Instead of pre-financing by a buyer, importers will usually want you to work with a bank for trade-finance. Such banks (examples: Rabo Rural Fund or Root Capital) may provide 60 to 70% of the value of a contract signed by you and a (reputable) buyer. Note that these banks will only lend money to you if you have a track record of a few years of successful export, meaning no claims and no financial losses.

Those funds will serve as working capital for your production organisation: you can buy cherries or parchment coffee from your farmers and export. The remainder of the money will be paid to you by the buyer upon receipt of the coffee (or documents), and the amount of the loan will be paid by your buyer to the bank. The bank can then lend it to you again for subsequent containers against other contracts.

Tips:

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 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’.

You need to pay attention to strict contract fulfilment regarding contingencies during export procedures and transport. It is very important to be familiar with both the legal and practical aspects of export terms and responsibilities to prevent disputes.

If there is any doubt about any detail in the contract, the buyer and seller need to agree on a solution and make it clear in the text of the draft before signing the contract. When both parties have signed the contract, the trade agreement is confirmed. Note that the coffee trade in Europe is done in US dollars.

Tips:

  • Use the ECF’s standard contracts for coffee when drafting contracts with buyers.
  • Before signing a contract, make sure to research your buyer’s reputation. You can do so by asking them for bank references, or by simply googling them to see if any particular news comes up.
  • Always deliver on your promises. If changes are inevitable, make sure you communicate properly and discuss with your buyer to find a solution.
  • Refer to the Coffee Buyer’s Glossary of Contract Terms of Perfect Daily Grind to fully understand all terms mentioned in the contract.

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 of your coffee, and therefore damage the faith your buyer has in your company.

The kind of packaging used and who is responsible for the costs of said packaging should be agreed upon in the contract. In all cases, coffee beans should be stored and transported in cool and dry conditions, with proper ventilation. It is not uncommon to send samples of your packaging size, material and design to potential buyers before making a large shipment.

Common packaging options are jute and burlap bags as well as plastic bags. Jute and burlap do not protect against moisture, while plastic bags provide better protection but may still let some moisture in. Hence, specialty coffees are often packed in Grainpro or Videplast before being packed in jute bags. The most exclusive specialty coffees are vacuum-packed to preserve quality. Note that environment-friendly packaging is increasingly appreciated by buyers, so you might consider reusable bags.

Tips:

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 you costs. For instance, you can look into transportation options of small ocean freight shipments which allow for Less than Container Loads (LCL). Realise, however, that containers that are not full are more susceptible to damage during shipment, because bags can move around the container when they are not solidly packed.

As such, we recommended you choose a consolidation solution, which means that a freight forwarder or agent will organise multiple LCL shipments into one container. Finding other lots of coffee with the same destination port may cause delays in your export but will lower the costs significantly. Note that organic coffee cannot be transported in the same container as non-organic coffee because of the risk of cross-contamination.

Tip:

  • If you organise transport and logistics, contact at least three local transport companies in order to get different quotations. Assess their costs against the services they provide, in order to reach the best cost-beneficial deal. Make sure to investigate their reputation and ratings through existing customer reviews on the internet, for example.

7. Meet your country’s export requirements

Exporting your coffee is only possible if you meet your country’s local export requirements. It is crucial for you to know and understand the legal procedures required by your country. You can access the requirements at the website of your Ministry of Trade or on your country’s local trade portal (examples: Rwanda, India and Brazil). If you wish to export your products, you are expected to have the following documents ready: an export license, commercial invoice, certificate of origin, packing list, all required permits, bill of lading and proof of tariff payments.

In addition, the International Coffee Organisation has introduced voluntary targets for minimum quality export standards for Arabica and Robusta under resolution 420. This resolution aims to reduce the export of inferior beans worldwide. Coffee exporters are advised to closely follow this resolution, except for the exports of specialty coffees which can be exempted as long as this is clearly mentioned in the Certificate of Origin.

Tips:

  • Hire an export agent or contact your local chamber of commerce to help you meet the required regulations.
  • Make sure to have copies of all the requested documents and financial transactions.
  • See this article on what to include in an export invoice, and learn how to prepare one.

8. Make clear agreements on export insurance

Marine insurance provides protection against losses of cargo carried on ships and boats. Insurance costs are usually covered by the buyer, who arranges the procedure and relevant paperwork with their insurance company. However, if insurance is the responsibility of the exporter (for instance under a CIF contract), the exporter must provide an insurance certificate which is issued by a reputable insurance company. You can arrange the insurance yourself, or work through a broker.

The insurance certificate must show that insurance has been taken out in accordance with the terms of the sales contract and should enable the buyer to claim any losses directly from the insurance company. Compensation applies as a result of factors such as total loss of cargo, water damage due to a leaking container, damage due to an accident of the vessel or the dropping of a container during loading.

Note that insurance companies will not reimburse costs related to transport problems that result from external factors that cannot be controlled (such as natural disasters, wars, riots, fire, etc.).

Tip:

  • Make sure to comply with all of the relevant insurance company’s requirements to get a possible compensation should your coffee be damaged during transportation or handling.

9. Be well informed on import customs procedures

All goods imported into the EU must be declared to the respective customs authorities by filling out the Single Administrative Document (SAD). Together with the SAD, you must provide authorities with, among others, freight documents, commercial invoice, inspections certificates, proof of origin and customs value declaration (if value of goods exceeds €20,000).

As an exporter you issue the commercial invoice to the buyer in order to charge for the coffee. The invoice should include the following information:

  • Contact details of buyer and supplier (name and address)
  • Date
  • Invoice number
  • Reference to order
  • Invoice value and currency of payment
  • Payment conditions
  • Delivery conditions

The European Union does not apply any tariff on green coffee beans, no matter the country of origin. Tariffs may apply to roasted coffee, as the below table shows. To see if your country belongs to the Generalised Scheme of Preferences (GSP) or Everything But Arms (EBA), refer to the EU Helpdesk and access the current list of beneficiary countries. Refer to this page to see if your country has an Economic Partnership Agreement (EPA) or Free Trade Agreement (FTA) with the EU.

Table 1. EU tariffs for green coffee beans and roasted coffee

Origin

Green coffee, not decaffeinated

Roasted coffee, not decaffeinated (090121)

Any country

0%

7.5%

GSP

0%

2.6%

GSP+

0%

0%

EBA

0%

0%

EPA / FTA

0%

0%

 Source: TARIC Database

Tips:

10. Contact organisations that offer export assistance services

As a coffee exporter you need to deal with many documents, logistics and requirements. There are organisations that specialise in helping you with the technical and/or practical aspects of organising your export.

Customs brokers help you handle import and export customs formalities. They will assist exporters and importers in meeting the European import requirements, taking care of all entry procedures, requirements and valuation. Refer to the member list of the International Federation of Customs Brokers Associations or the member list of CONFIAD Pan European Network to find custom brokers in your target country.

Freight forwarders help you arrange the logistics, transportation and delivery of goods to Europe. Note that many freight forwarders also offer custom brokerage services. Refer to the International Forwarding Association, the European Freight Forwarders Association or this list on Ezilon Europe to find a list of forwarding agents and companies. Make sure to work with someone offering the option of consolidating the shipment, meaning that your order will be transported together with those of others. This may lower the shipping costs.

Tip:

For more practical tips on how to increase your chances and efficiency in becoming and remaining a successful coffee exporter to the European market, refer to our other studies: our Export to Europe Manual, our Tips for Finding Buyers and our Tips for Doing Business.

This study has been carried out on behalf of CBI by ProFound – Advisers In Development.

Please review our market information disclaimer.

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