Participating in the global trade of fruits and other products, we have had to learn some new language and terminology in order to play the game. Below is our first list of some of the words and phrases we come across in order to communicate properly with buyers, logistics providers, customs brokers, and exporters. Please note that these aren't textbook definitions, but rather our own understanding and use of the terminology.
"Reefer" - Refrigerated container. A shipping container that has climate controlled refrigeration in order to keep perishable goods at a desired/required temperature.
"Load" - Full shipping container of product, usually referring to a 40' container, but can refer to a 20' or oversized container.
"CIF" - Cost, Insurance, and Freight. It refers to the shipping terms between a buyer and seller. In CIF the seller maintains responsibility for the cost of the goods in transit, including insurance, and freight charges to the destination chosen by the buyer. From the point of delivery, the buyer agrees to responsibility for unloading the product and any additional shipping domestically. In our experiences, CIF usually refers to when the product arrives to the USA port of entry from the foreign destination.
"FOB" - Free on Board. It refers to the shipping terms between a buyer and seller. In FOB it means that the buyer takes responsibility for the delivery of the goods once the goods leave the suppliers shipping dock. In our experiences, FOB refers to when the container of product is at the shippers domestic port and ready to be exported to the USA.
"EXW" - Ex Works. It refers to the shipping terms between a buyer and seller in which the buyer takes the highest possible obligation and risk of transporting the product from the sellers warehouse location to final destination. In our experiences EXW is the price paid when the supplier/seller has packed the product, and loaded the container. Once the container is loaded at the source, it becomes the sellers responsibility.
"DDP" - Delivered Duty Paid. This is a buyer and seller transaction in which the seller assumes all risk, responsibility, and costs associated with the transport and delivery of the goods until they are received by the buyer at their destination.
"Protection" - Providing a floor or ceiling to the pricing agreement for flexibility to readjust pricing to reflect market conditions to allow buyers to maintain their profit margin. In a market of falling prices, buyers may be reluctant to commit to the sellers price today, since the market place is declining. Prices between buyers and sellers often agreed upon days and sometimes weeks before the goods are received at the final warehouse destination. As such, many buyers don't want to gamble on prices falling. Thus, they can ask for "protection" in which the sellers will adjust their final prices downward to reflect a price that is consistent with the state of the market. In our experience, using protection only works well when there is already a degree of trust between buyers and sellers.
"Open" - Buyers will often ask for 'open' pricing or consignment. This refers to a situation where the buyer is not agreeing to the price of the goods until after the products are received and re-sold. In our experience open pricing is used in several scenarios; when market pricing is unstable and buyers won't risk setting a price, markets are flooded and buyers need the flexibility to offer aggressively priced products to the market, or there is a high level of trust between the buyer and seller with confidence that the buyer will be selling the product at the best possible price. Many of the growers that we work with don't like open pricing since they have been burned in the past by buyers that ended up giving very low prices.
"Shipped / Delivered Green" - Fruits shipped and delivered unripe to buyer. Avocados, bananas and plantains are three fruits that we work with in the "green" state. By shipping green it reduces risk of spoilage and allows the buyer to ripen the product in time for delivery to customers.
#1 vs #2 - When a farmer harvests their crop, the outputs are often separated into two export categories often referred to as #1 and #2. In our experience with avocados, the #2 fruit is exactly the same as the #1 in terms of taste, quality and shelf life. However, the aesthetic issues of the fruit makes it a lower valued fruit on the market. Depending upon market conditions, and other variables the price of a #2 fruit can be slightly or significantly lower than its #1 counterpart.
"FTL" - Full Truckload. When the shipment takes up an entire truck and often goes directly from the pickup point to final destination.
"LTL" - Less Than Truckload. When the shipment takes up less than an entire truck, and space is shared with other customers shipments. The price paid for the shipment will be for the space used by the shipment plus additional fees. LTL shipments can take longer since more stops are often required.