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9 tips for organising your export of fresh fruit and vegetables to Europe

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When organising your export of fresh fruit and vegetables to Europe, it is important to agree on acceptable payment terms and put agreements in writing. Although the sector is relatively informal, the expectations of buyers are high and the export process must be done with precision. To make sure that your product reaches its destination in a good condition, pay extra attention to packaging and cold chain logistics.

1. Put your agreements in writing

Well-defined agreements and written contracts will protect your business, and give your buyers a sense of reliability and professionalism. Some buyers may be satisfied with a confirmation by email; however, even if your buyer does not need a contract, it is in your interest to have one. Contracts or framework agreements act as a reminder and a record of what needs to be done. They also form the basis of legal proceedings, should either the supplier or the buyer breach the agreement. Though it is not an easy process, contracts can be enforced in Europe.

Check your contract

When negotiating with potential buyers, you must carefully read their purchase conditions (if provided). As a supplier, you are at risk when you lack understanding of the contract and its consequences or when you unintentionally conclude a contract. You must be confident of the company with which you are dealing and understand the commitment that you are making. Do not sign, confirm or verbally agree with a contract that is unclear or incomplete.

Check whether the contract and the general terms and conditions are in line with your previous agreements on the following details:

  • Product specification (quality, size, etc.);
  • Quantity (number of boxes, boxes per pallet and so on);
  • Price agreements;
  • Delivery date or period;
  • Terms of payment;
  • Terms of delivery (see Incoterms below);
  • Fees and/or charges applicable;
  • Insurance;
  • Default procedures;
  • Dispute resolution procedure (governing law; place of jurisdiction; arbitration).
     

Use the COFREUROP code of practice as a basis for your contracts

If your buyer does not have any general purchase conditions, you can ask your buyer to sign your general conditions. Download the COFREUROP rules on the website of the European Fresh Produce Association “Freshfel Europe” and use this code of practice as a basis for your business transactions with European buyers.

The International Arbitration Chamber for Fruits and Vegetables (CAIFL) provides arbitration in national and international disputes, and promotes the COFREUROP code of practice. The COFREUROP rules clearly fix a number of obligations and duties of sellers and buyers in the fresh produce business. They provide a valuable solution in disputes about quality, prices, contract breaches, payments and other issues.

Use your rights as a supplier

When doing business with large, dominant buyers, turn to your rights as a supplier. The European Commission has adopted a Directive to protect small and medium-sized suppliers in the food supply chain from unfair trade practices of economically stronger buyers. The Directive aims to protect farmers, processors, distributors, producer organisations as well as suppliers from outside the European Union.

A number of practices will be prohibited or only allowed when unambiguously agreed. Among the practices that will be prohibited are:

  • Payments later than 30 days for perishable products;
  • Last-minute order cancellations;
  • Refusal to enter into a written contract;
  • Unilateral contract changes;
  • Payments from supplier to buyer that are not related to the sales;
  • Transferring the costs of handling customer complaints to the supplier;
  • Requiring the supplier to pay for the deterioration or loss of agricultural and food products that occurs on the buyer's premises or after ownership has been transferred to the buyer.

Tips:

2. Find access to sustainable credit and trade finance

Being able to finance your international activities is crucial to organising your export. Access to credit and trade finance can help you remain competitive as an exporter. And it is crucial when you do not have sufficient resources to cover the costs of exporting your product.

Short-term loans and working capital financing provide liquidity that is needed in the pre-shipment period, for example for the production, processing and export of fruit and vegetables. This type of financing can be combined with factoring, supply chain finance (reverse factoring) or documentary credit. Also read about export credit insurance below.

Check your options to get working capital or export credit both locally and internationally. Check your local banks or financial agencies. You can also try to find international banks that provide trade finance solutions or a private or social impact investor to finance your business. For example:

  • Rabobank provides corporate banking products for food and agri-businesses in several eastern and southern African countries from their representative office in Kenya.
  • Triodos provides trade finance up to 70% of the value of export contracts to companies with a sustainable certification (such as organic, Fair Trade, Utz, and Rainforest).
  • Root Capital helps with access to finance and makes agricultural companies bankable. They focus on small and growing businesses that are too big for microfinance and too small and risky for commercial banks.
  • Oiko Credit invests in social impact. They provide loans to partners in 33 countries but also invest in equity and capacity building.
  • FMO, a Dutch entrepreneurial development bank, provides loans, private equity or guarantees while supporting the United Nations Sustainable Development Goals (SDGs)
  • If you are starting very small, exporting to Europe may not be your top priority. But you can check if you are eligible for a microloan to help you grow. Find The 50 Top Microfinance Institutions on Forbes.
  • Another option for small companies and farmers are innovative digital finance solutions such as TruTrade or Agri-wallet. Read more about these in CBI’s tips to go digital in the fresh fruit and vegetable sector.

Some of the best trade finance providers 2021 (according to Global Finance magazine) are Citi (best bank for trade finance), Tradeteq (best non-bank for trade finance), Commerzbank (best bank for export finance), Société Générale (best bank for trade finance in emerging markets) and Standard Bank (Best regional bank for Africa)

Include sustainability in your trade finance

The United Nations recognises the importance of trade finance as an important means of implementation of the Sustainable Development Goals (SDGs). For exporters looking for finance, it will become more important to include sustainability in their financial needs. An example brought up by the Fruit Logistica Trend report 2020, is the loan from Rabobank Chile to Hortifrut, one of the world’s largest berry companies. This loan included the commitment to specific environmental and social conditions. For Hortifrut it is a motivation to further pursue their ambition for a high sustainable standard, but it also helps communicate their efforts in a formal setting.

Tip:

  • Compare the services of credit and trade finance providers to get the best deal. If the availability of affordable credit in your country is low, try to find creative alternatives, for example with local investors, non-governmental agencies (NGOs) or crowdfunding platforms.

3. Use payment terms that are acceptable to you and your client

Payment terms will vary according to the supplier-client relationship and the products involved. Payments or partial payments in the fresh fruit and vegetable trade often take place at different moments (see Table 1). The sooner you get paid, the better your cash flow and the more secure your payment will be. However, documentary credit is not a common practice any more in the fresh business and your buyer will most likely pay you after they have physically checked the product after arrival.

Using acceptable payment terms to you and your client is important to keep business going with the least amount of risk. Before agreeing on the payment term, try to investigate your client’s history and creditworthiness; for example, by using export credit agencies (see “Export credit insurance” below). Also make sure that you can fall back on clearly formulated conditions when clients cannot or will not make the payment.

Table 1: Common payment terms in the trade of fresh fruit and vegetables

Common payment terms

Points of attention

Pre-season advances

Only for trusted or long-term suppliers

Pre-shipment

Often a percentage of the total price

Cash Against Documents

Not a common practice (anymore) in fresh fruit and vegetables

After arrival

Collect proof of quality

After sales

Ask for Account of Sales when selling on commission

Open account

Only with trusted or long-term buyers

Pre- and post-payment

In the fresh produce sector, payments can be made at different moments: as pre-season advances (most common for integrated partnerships), prior to shipment, after arrival or after the products are resold and the final price is calculated based on the account of sales. The account of sales includes the final selling price in Europe, and the total costs of product handling, testing, commission and taxes.

A first or second commercial transaction is often made after the arrival of the goods, because buyers want to check the product before making any payment. There is no market for adventurers or amateurs and buyers often avoid doing business with smaller (riskier) suppliers. For this reason, it has become difficult for small and medium-sized suppliers to get into business with serious buyers in Europe. Still, as a small supplier, you should try to negotiate an advance payment to maintain your cash flow and get a commitment from your buyer. Expect lots of paperwork and rejections of potential buyers because they may consider you a liability. Likewise, you should avoid unreliable buyers – in other words, assess your buyer!

Documentary credit

Documentary credits, such as Cash Against Documents (CAD) and Letters of Credit (L/C), are slow and relatively expensive, and do not guarantee that your buyer will receive a quality product. They are therefore not the preferred option in the trade of fresh fruit and vegetables. If you choose to ask for a Letter of Credit, you must understand its costs and process.

Open account selling

You can distinguish yourself as an exporter by using an open account, which means that the transaction is made a certain number of days after the goods have been delivered. This process creates higher risks and pressure on your cash flow. It is therefore only recommended for trusted and established trade relations – and only when your financial situation allows for it. You can also combine it with pre-season advances to get the commitment of your buyer. The advantage of an open account is that it saves you and your buyer the administrative costs of an intermediate bank and documentary credit.

Tips:

4. Choose your export insurance according to your potential trade risk

Export insurance helps you to reduce your economical risks in international trade. The type and usefulness of your insurance depends on the specific risks of your export. When you have a high risk in terms of shipping and payment terms, export credit insurance can be recommendable. The higher the value of your product or the riskier your trade partner or country, the more sense it makes to use export credit insurance and additional insurances such as cargo or currency insurance.

For the export of fresh fruit and vegetables, export credit insurance is among the most common insurances. Remember that insurances do often not cover 100% of your potential loss and their policy costs can make your product more expensive. It is important to understand the limitations of insurance policies and shop around when you are looking for one.

Export credit insurance

Export credit insurance is highly recommendable for open-account business deals. Without a bank guarantee such as a Letter of Credit (L/C), you are exposed to higher financial risks. Export credit insurance protects you against non-payment or default by an importer; for example, due to insolvency. Moreover, it does not only provide you with peace of mind but also improves your access to working capital.

For fresh fruit and vegetables, you would use short-term insurance (repayment period up to 1 year) and you can choose between a single- of multiple-buyer policy. A single-buyer policy is useful to insure only 1 debtor or a one-off risk. Multiple-buyer policies can be more convenient when you have regular shipments to several clients and use a pay-as-you-go service.

Well-known export credit insurance companies are Atradius, Coface and Euler Hermes. Their insurance rates depend on your annual turnover, history in claims and the risk profile of your buyer.

Tips:

Marine and cargo insurance

Whereas marine insurance only covers the liability of a maritime transport company, cargo insurance is used to protect your shipment of products throughout the entire journey to a customer.

Cargo insurance is recommended, especially when potential cargo loss will have a large impact on your business. Depending on the shipping agreement with your buyer (see “Incoterms" below), the cargo insurance is either your or your buyer’s responsibility.

Currency insurance

Most of your contracts with European buyers will be in euros or US dollars. The risk of conversion loss in the trade of fresh fruit and vegetables is often minimal due to the speed of trade. With long-term supply contracts and retail programmes, it can be more relevant to use currency insurance against conversion loss. Credit agencies such as Atradius and banks such as Santander offer currency and foreign exchange risk insurance.

Product liability insurance

In Europe’s fresh fruit and vegetable business, product liability insurance is rare. It could protect you when your product harms consumers if it does not comply with legal standards such as on food safety. However, compensation is subject to the practices and efforts that you have taken to comply with the standards.

Seller's interest or contingency insurance

Insufficient coverage for product damage or loss by your buyer may affect you as an exporter. You can increase your control over the level of insurance of your trading partner and ensure the payment of your goods by adding seller’s interest or contingency insurance. However, this insurance is less common than export credit insurance.

Tips:

5. Check your export documents

In the export of fresh fruit and vegetables, preferential tariffs can influence your competitive position in Europe. However, you must also master the basics of custom procedures, including flawless export documentation. Check and double-check your export documents.

Familiarise yourself with customs procedures in Europe and always check your part of the export documents needed for custom clearance. A small mistake in the documents can result in serious delays. Find a trusted and recognised freight forwarder in your country, using the Freightos guide How to Choose a Freight Forwarder. Make sure that your documents are well made and compete, such as:

  1. Transport documents - Bill of Lading (B/L) or Airway Bill (AWB), packing list
  2. Commercial Invoice - Read how to prepare a commercial export invoice on the Balance Small Business
  3. Documentary proof of origin - Certificate of origin;
  4. Inspections Certificates - Phytosanitary or plant health certificate, certificate of conformity for fruit with specific marketing standards

To make your export process efficient and exchange data with your buyer without mistakes, you can choose to use Electronic Data Interchange (EDI). EDI facilitates the electronic sharing of orders, invoices and other administrative data.

Tip:

6. Find your import tariff and potential restrictions

Import tariffs and preferential trade agreements are a major influence on your competitive advantage. Preferential and autonomous tariff quotas can reduce some of the import tariffs. Imported products that are also common in European cultivation are usually taxed according to the season. For a few fresh products, there are additional quota and tariff rate quotas, such as for bananas and garlic.

The different measures to control European import require planning and calculation from you as a supplier when organising your export to Europe. The TARIC database and My Trade Assistant provide further insights in tariff rates per product. For a summary, see the annex with examples of tariff rates for fresh fruit and vegetables.

Trade preferences

The Generalised Scheme of Preferences (GSP) partly or fully removes the import duties from products coming into the EU market from developing countries. There are 3 types:

  1. Standard GSP: reduces tariffs for low- and lower-middle-income countries.
  2. GSP+: reduces the tariffs to 0% for vulnerable low- and lower-middle-income countries that implement international conventions related to human rights, labour rights, protection of the environment and good governance.
  3. EBA (Everything But Arms): a special arrangement for least-developed countries, providing them with duty-free and quota-free access for all products except arms and ammunition.

If your country is on the list of GSP beneficiary countries, you will enjoy better tariffs than the conventional ones. To obtain these preferential rates, you need to include proof of origin for all fruits and vegetables. For GSP beneficiary countries, you will need a Form A certificate. Other certificates of origin include EUR 1 or a EUR-MED certificate for pan-Euro-Mediterranean preferential rules of origin.

Figure 1: Beneficiary countries of the EU GSP scheme

Beneficiary countries of the EU GSP scheme

Source: European Parliamentary Research Service (EPRS) Briefing: New EU scheme of generalised preferences, based on the consolidated text of the GSP Regulation in force (as of 1 January 2022)

Trade agreements

Trade agreements can also give you access to the European market with preferential tariffs. The EU has specific trade policies for different countries and regions, including several important supply countries of fresh fruit and vegetables; for example:

  1. The Economic Partnership Agreements (EPAs) with African, Caribbean and Pacific (ACP) countries and regions, for example the South African Development Community (SADC), which provides duty- and quota-free access to the EU market for Botswana, Lesotho, Mozambique, Namibia, South Africa and Eswatini;
  2. The Trade Agreement with the Andean Community (Colombia and Peru);
  3. The EU-Mexico Global Agreement;
  4. The Deep and Comprehensive Free Trade Area (DCFTA) between the EU and Morocco;
  5. The new Association Agreement with Central America.

Trade restrictions

For certain countries there are special conditions or increased border controls for the entry into the European Union. A higher frequency of official border controls for fresh fruit and vegetables often has to do with the higher risk of excessive pesticide residues. These controls usually include obligatory payment for laboratory tests for a certain percentage of shipments. For example, 50% of the peppers, aubergines and yardlong beans from the Dominican Republic are subject to a border inspection for pesticide residues. And there is a temporary increase of official controls for 20% of Egyptian peppers and 10% of Kenyan fresh beans. The costs for the inspection and analysis are usually deducted from the final price paid to the exporter.

Tips:

  • Get a complete overview of import tariffs in Regulation (EU) 2018/1602 in Chapter 7 (vegetables), Chapter 8 (fruit) and Annex 2 (all entry prices). For countries with specific tariff preferences, see Regulation (EU) 978/2012 (updated 1-1-2022) Annex II for GSP beneficiary countries, Annex III for GSP+ beneficiary countries and Annex IV for EBA beneficiary countries.
  • Consult the TARIC database and My Trade Assistant for current information on tariffs, requirements and custom procedures for your country. Alternatively, you can use the Market Access Map to analyse your competitive advantage based on applied tariffs and trade preferences. You can learn how to use Market Access Map and other functions from instructional MacMap videos.
  • Check possible additional costs if your country is on the list of stricter import conditions for specific products in Annex I and II of Regulation (EU) 2019/1793 (updated 6-1-2022).
  • Read about Proofs of origin in the European Commission Export Helpdesk for business to see how to obtain and fill in a certificate of Origin Form A.

7. Maintain a perfect cold chain in logistics

Throughout the supply chain, you must make sure that your fresh fruit and vegetables are maintained in perfect conditions. Most important is the cold chain; a temperature-controlled supply chain from harvest to consumption.

Cold chain management and pre-export preparation

As an exporter, you have a large responsibility in maintaining your cold chain, including making sure that the products are properly loaded and cooled before shipping. The Incoterms determine how far your responsibility actually goes.

Beside a perfect cold chain, there are also other logistical aspects that you need to consider.

  1. Fumigation - Shippers may require the cargo to be fumigated, but check beforehand whether this process is accepted by your buyer; for example, fumigants are generally not allowed for organic products.
  2. Loading - Make sure that your container is well loaded with sufficient ventilation and air circulation. For example, read how the reefer shipping line Hamburg Süd handles refrigerated containers and their recommendations in their Reefer Guide. Cardboard boxes for fruit and vegetables also require ventilation holes.
  3. Ethylene - Fruit that generates ethylene should not be shipped with ethylene-sensitive products.
  4. Controlled atmosphere - Explore the possibility of using a controlled atmosphere for warehousing and transporting your fresh product. This option will help products arrive in a good condition. A controlled atmosphere is a storage method in which the concentrations of oxygen, carbon dioxide and nitrogen, as well as the temperature and humidity of a storage room, are regulated. It is estimated that around 20% to 30% of cargo transported in refrigerated cargo ships is now transported under a controlled atmosphere.
  5. Monitoring - Make use of sensor technology to measure temperature during shipment. Check whether your forwarder or shipping line provides such technology.

Incoterms

Common International Commercial Terms or Incoterms for fresh fruit and vegetables are Free on Board (FOB) and Cost Insurance Freight (CIF). The Incoterm 2010 Delivered At Terminal (DAT) is renamed Delivered at Place Unloaded (DPU) in the renewed Incoterms 2020.

Incoterms determine the extent of your responsibility but also your price and contract. For example, if you are trading large quantities of goods, you can get better offers from transport and insurance companies. In this case, the CIF price (Cost, Insurance and Freight) will usually be more competitive for you. If you have little export experience, it is safer to offer a price based on ExWorks or FOB.

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8. Use quality packaging to protect your products and ensure shelf life

Figure 2: Stackable cardboard boxes with plastic trays with physalis

Stackable cardboard boxes

Source: CBI

Figure 3: Individual protection packaging, maracuyá displayed at Fruit Attraction

Individual protection packaging

Source: ICI Business 

Tips:

9. Use support organisations to train yourself in best export practices

There are a number of international organisations that you can use for organising your export. These organisations provide information about the technical aspects of organising your shipment, explain the rules for entering the European market or provide services such as export training.

Tip:

  • Inform whether there are trade support organisations in your home country that offer training or practical advice about your export.

Read our Tips for Finding Buyers and Tips for Doing Business, which can help you further understand how to enter the European market and provide insight into how European buyers think. Use the Exporting to Europe Guide to prepare for export to Europe.

This study has been carried out on behalf of CBI by ICI Business.

Please review our market information disclaimer.

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Efficient logistics for fresh fruit and vegetables is important. Focus on direct routes with short lead times. Airfreight does not meet the general buyer expectation of a sustainable product and is only required for niche markets, premium products and peak demand.

Piet Schotel

Piet Schotel – (Sector Expert at) Fruit Consultancy Europe