• THE-COFFEE-GUIDE.gif 
  • QA 127
    Question:
    What are the different logistics aspects to watch when exporting green coffee?
    Background:
    What are the different logistics steps in the export of green coffee?
    Asked by:
    Logistics student - Mexico
     
    Answer:

    We believe the information you seek is available in the Guide: Chapter 04 of the Guide reviews Standard Coffee Contracts and the execution thereof; Chapter 05 covers Logistics and Insurance; and Chapter 12 deals with Quality Control Issues that are another important aspect of the logistics process. However…

    Mexico is the only coffee exporting country to share a land border with the United States, the largest single consumer market. Therefore, your country exports by both land and sea. In 2005 the US imported some 911,000 bags green coffee and a further 100,000 bags as roasted coffee from Mexico. In addition a substantial amount of soluble coffee was also imported.  (Total 2005 exports were around the two million bags mark).

    Although the basics are the same, obviously there are differences between exporting by land or by sea. The most common transaction basis is: FOB or Free On Board ship; FCA or Free On Carrier; and DAF or Delivered At Frontier. The DAF contract applies to the United States only - Europe does not share any land borders with coffee producing countries and therefore has no DAF contract. Both the US and Europe however have separate FOB and FCA contracts.

    All three contracts require the seller to bring the goods to the point where risk is transferred… 

    FOB: Risk of loss is transferred when the goods cross the ship's rail. Transport by sea only.
    FCA: Risk of loss is transferred when the goods are delivered to the freight carrier at the place of loading. Can apply to both sea and land transport.
    DAF: Risk of loss is transferred when the goods are delivered in the agreed manner to a named point at the border. Land transport only.

    In all cases the seller is obliged to deliver the goods cleared for export. It is therefore important to know the documentary requirements for each method, and the extent of sellers' responsibilities as regards the booking of shipping space or road/rail transport. The different Standard Contracts for coffee, and the responsibilities of both seller and buyer, are fully reviewed in Chapter 04 and will therefore not be commented on further. Except to say though that there are differences between the US and the European FCA contracts when it comes to the treatment of loss in weight.

    Efficient logistics depend on planning: one must know when the goods have to be at the point where risk is transferred. 

    This provides a timeframe during which the goods must be prepared, export bags must be marked and/or empty containers must be ordered, internal transport must be booked, shipping or road/rail space must be reserved, and adequate insurance cover must be arranged! All necessary internal and external export documentation, permits and certificates (weight, consular, phytosanitary etc) must be prepared and/or applied for. Obviously it is important to know the approximate delay that each step in the process may take.

    Logically all these steps and their completion will be plotted in a standard Contract Progress File. Such a file is established as soon as a new contract is concluded, and is only closed once the goods have been exported and payment has been received. An efficient system shows the exact status of each export commitment at any time, with critical control points that kick in when deadlines for certain actions are not met.

    For example, unless the destination is already stated in the contract, the buyer has to declare the destination within the time limits set by the standard contract concerned. If the destination is not known the seller cannot initiate the different logistics phases necessary for him to fulfil the contract. Or, if containers are ordered/received late there may not be time to inspect them and replace any rejects…

    Apart from its internal logistics management function the Contract Progress File also serves another purpose. Should anything go wrong, thereby delaying a shipment, then it is vital to be able to demonstrate that the delay is not the seller's fault, and/or that every effort was made to avoid it. The Contract Progress File provides a record of every stage of the logistics process, including what was communicated to the buyer and when. This can be very helpful when it comes to settling differences as to who caused what.

    Good logistics management means keeping your buyer informed, particularly when unexpected problems arise! Good logistics control means monitoring and recording each and every step in the export process. 

    Posted 06 December 2006.

    Related chapter(s):
    Related Q & A:
    071, 090, 105,